Sunday, June 09, 2002

The Lafley method: Face the facts, think like a consumer

By Cliff Peale,
The Cincinnati Enquirer

        Alan George Lafley had worked at Procter & Gamble Co. less than a decade before he started acting like a future chief executive.

        Then a general manager in P&G's laundry division, Mr. Lafley in 1985 started carrying around a list of “10 Things I Believe.”

        Today, that list has gained wide circulation at P&G, where Mr. Lafley is indeed CEO. Since taking charge two years ago to get a struggling P&G back on track, he has restored both $40 billion in market value and the morale of the company's global work force.

A.G. Lafley in 1970s
Lafley in 1980s
        He is part new-age thinker and part bottom-line businessman, the leader of next year's Fine Arts Fund but a frequent visitor at Xavier University basketball games.

        He has cut more than 10,000 jobs and sold icons like Jif and Crisco, but still inspires reverence in all corners of the company.

        To P&G's 106,000 employees, including about 13,500 here, he speaks with a soft voice but a consistent message: Think like a consumer at the store shelves, and execute accordingly.

        “I just believe business leaders who fail don't fail because they don't have a vision or strategy,” Mr. Lafley, 54, said in an interview. “They fail because they can't get it done.”

        It's the same formula for leadership that Mr. Lafley presented in a speech at Xavier University this spring.

        Great leaders, he said, are made, not born. And they share two characteristics, he said: They accept the harshest reality without blinking, and they help create other leaders.

        “One of the biggest things and simplest things I had to do when I came into this job . . . was stare reality in the face, get the mooses out of the closets onto the table,” he said.

        What Mr. Lafley wanted, and got, was all the bad news about the condition of the company in his first 100 days after taking over.

        He will add the chairman's title at the end of June, solidifying his hold on the business and his stature with employees.

        Mr. Lafley's method is relentlessly gentle. He is known for collaborating in a way that his predecessor Durk Jager didn't, but acting decisively in a way that Mr. Jager's predecessor John Pepper wouldn't.

        His colleagues say that he asks for data and opinions about what a particular business can deliver. Then he makes the call and moves on.

    A.G. Lafley's “10 Things I Believe.”
    1. Lead change: Change is inevitable.
    2. The consumer is boss.
    3. Innovation is our lifeblood.
    4. Power of strategy: Where to play and how to win.
    5. Power of execution: Win in the store.
    6. Power of brands.
    7. Power of knowledge and learning.
    8. Power of P&G people: Without us . . . no strategies, no brands, no execution.
    9. Direct, simple and transparent: What you see is what you get.
    10. Take purpose, values and principles seriously.
        “There is very little that A.G. actually dictates,” one colleague on P&G's executive floor said.

        One example: P&G Pharmaceuticals. While stock analysts have long called for P&G to sell the fledgling Mason-based business and focus on core consumer-products brands, Mr. Lafley has remained steady as the unit has reached profitability ahead of its own timetable.

        Mark Collar, president of P&G Pharmaceuticals, said Mr. Lafley studied the business as it proved it could deliver on predicted results.

        “He just brings candor,” Mr. Collar said. “You're very candid with him, you build a high-trust relationship . . . You want to do your best for him.”

        Former Procter CEO John Smale said Mr. Lafley stood out early because of his outstanding business results and his ability to communicate well.

        “I've never seen him not calm,” Mr. Smale said.

        One of Mr. Lafley's main priorities since taking over P&G has been rebuilding its management team. Since 1999, fully half of the company's 30-member Global Leadership Council has changed over.

        The new team, which company chairman Mr. Pepper called the best he has ever seen running P&G in his 39-year career, is younger, more international, more diverse, and more experienced managing brands through fierce competition.

        “They know what it's like to be the newcomer, to have to compete against well-entrenched international and local competitors,” Mr. Lafley told investors in April.

        The heads of P&G's operating businesses and corporate functions now hail from 13 different countries. The new faces include Deb Henretta, head of global baby care; Jim Stengel, global marketing officer; and Fabrizio Freda, head of the global snacks business.

        Overall, the average age of the GLC is down to 49, compared to 54 three years ago, according to a report from Sanford C. Bernstein research.

        Mr. Lafley grew up as a “GE brat'' living in New England during his formative years. He graduated from Hamilton College and spent five years in the U.S. Navy. There he started his retail experience by running the post exchange.

        Mr. Lafley then completed Harvard Business School before joining P&G in 1977.

        He rose mostly through P&G's laundry business before moving to Japan from 1994 to 1998 as head of the Asian division.

        In 1998, he returned home to take over the North American business, then became president of global beauty care when P&G restructured to global business units in 1999.

        In Asia, Mr. Lafley worked through a stubborn Japanese market and helped the company survive the 1995 earthquake in Kobe, Japan.

        He used that crisis as an example of how leaders use simple methods — “transparent” is another favorite word — to galvanize an operation.

        “At the end of the day,” he said, “we would figure what we got done and we figured out what we would do the next day.”

How A. G. Lafley turned Procter around
- The Lafley method: Face the facts, think like a consumer
Up next: Innovation, more cost-cutting
Baldwin now just a fading note
Research needed to find best phone deals
Rug Gallery owners weave skills to build success
Big convenience or Big Brother?
Learn to do it now
Tristate Business Notes
What's the Buzz