Thursday, May 20, 2004

In year four, a shift at P&G

In inner circle, a successor to the successful?

By Cliff Peale
The Cincinnati Enquirer

Like a basketball coach building his bench strength, A.G. Lafley has found a way to promote two of Procter & Gamble Co.'s most productive executives, Susan Arnold and Bob McDonald.

Susan Arnold
Title: Vice chairman/global beauty care
Annual group sales: About $15 billion
Major products: Pantene, Olay, Always
Age: 50
Performance highlight: Has transformed P&G's personal beauty-care business into the growth engine.

Kerry Clark
Title: Vice chairman/global health, baby and health care
Annual group sales: About $15 billion
Major products: Pampers, Iams, Crest, Bounty, Actonel, Charmin
Age: 52
Performance highlight: Refined global market development groups.

Bruce Byrnes
Title: Vice chairman/global household care
Annual group sales: About $15 billion
Major products: Tide, Downy, Ariel, Folgers, Pringles
Age: 56
Performance highlight: Has headed global health and beauty care.

Bob McDonald
Title: Vice chairman/global operations
Major mission: Leads groups that handle world sales and distribution.
Age: 51
Performance highlight: Coaxed healthy sales and profit growth out of venerable brands such as Tide and Dawn.
He also found a way to start talk about his successor.

The reshuffling into three business units and one global operations division, announced Wednesday, will streamline P&G's business into three roughly equal companies, each with $15 billion in annual sales. It's another step in the evolution of P&G since Lafley took over four years ago.

It also establishes Arnold, McDonald and colleagues Kerry Clark and Bruce Byrnes as the lead candidates for the CEO role should Lafley step back.

Some Procter-watchers tabbed Clark and Arnold as the favorites.

"I don't think A.G. Lafley is going anyplace tomorrow, but I think it's pretty clear who the front-runners are," said Gary Stibel, a former P&G executive and president of the New England Consulting Group in Westport, Conn.

Arnold will head the beauty care division, and McDonald will take over a new global operations unit, with each earning a vice chair title.

They will join Clark, who will head a reorganized health care, baby care and family care unit, and Byrnes, who will lead a new household care division, as vice chairmen.

Along with the retirement of five senior executives and the reshuffling or promoting of eight more, it's the biggest single management turnover under Lafley. It echoes the mantras of diversity, global competition and transparency that he has espoused at P&G.

"I think these folks were always the bench. This is the recognition," said Ann Gillin of Wall Street investment house Lehman Brothers. "I've always felt like Susan was doing great things there, as was Kerry. And don't count out Bob McDonald."

Arnold, whose first boss at P&G in 1980 was Lafley on the Ivory Snow brand, is renowned in P&G for her aggressive growth strategy in beauty care, turning brands such as Olay into billion-dollar powerhouses. Beauty care has become P&G's growth engine, and setting it apart only burnishes that reputation.

She's also the first woman at P&G to hold the vice-chair title.

Clark already has earned some CEO consideration, reportedly on the list earlier this year for the job at Coca-Cola Co. that since was filled by Neville Isdell. He has led P&G's global market development groups and now will head a major business unit that includes powerhouse brands such as Pampers, Actonel and Crest.

Stibel said all four of the vice chairs "would be CEOs anywhere except P&G."

Lafley said the shuffling helps strengthen "one of the most talented senior management groups in the history of the company."

Since taking over as CEO in June 2000, Lafley has cut thousands of workers from P&G's global payroll; sold noncore brands including Jif peanut butter and Crisco shortening; and engineered P&G's two biggest acquisitions, hair-care giants Clairol and Wella AG.

When Lafley took over, the company's stock was trading at around $60 per share. His initiatives restored the stock price to its traditional levels. On Wednesday, it closed at $105.48. Indeed, finances are bright enough that P&G recently gave every one of its 90,000 global employees two free vacation days or the cash equivalent.

Other moves announced Wednesday include:

• Werner Geissler will become group president Central and Eastern Europe, Middle East and Africa.

• Dimitri Panayotopoulos will become group president of global fabric care.

• Ravi Chaturvedi will become president of Northeast Asia.

• Christopher de Lapuente will become president of global hair care.

• Jorge Uribe will become president of Latin America.

• Fillippo Passerini will become chief information and global services officer.

Five executives will retire between now and next summer: Steve David, chief information officer; Mike Griffith, president of global beverages; Mark Ketchum, president of global baby and family care; Jorge Montoya, president of global snacks and beverages and Latin America; and Martin Nuechtern, president of global hair care.

The management changeover is a continuation of Lafley's strategy, Stibel said.

"I think it's a very predictable transition or realignment to further simplify their business," he said. "They have been on this track since Lafley took over."


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