BM-Procter & Gamble: The return of A.G.

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Procter & Gamble


The return of A.G.


May 24th 2013, 14:00 by M.B. | NEW YORK




LAST November, Bob McDonald, the embattled boss of Procter & Gamble, invited three of his predecessors, Alan Lafley, John Pepper and Ed Artzt, to address a gathering of 250 senior managers as they wrestled with the challenges facing the world’s biggest consumer-goods company. In some respects, that was a remarkable act of self-confidence by an incumbent chief executive fighting for his job, who joined in the standing ovation that each man got after talking about the “enduring qualities of P&G” and sharing his own experiences of leading the firm through difficult times. With hindsight, however, it may simply have served to remind P&G’s top people of someone they missed.

Mr McDonald never seemed entirely comfortable in the leading role he accepted in 2009 at the firm where he had worked for three decades, especially as growth slowed and an activist hedge-fund run by Bill Ackman started to lobby for management change. On May 23rd it was announced that Mr McDonald will retire at the end of June, to be replaced by the man who groomed him for the top job, Mr Lafley (above), still affectionately referred to within the firm by his first two initials, A.G.


Ironically, since dropping to below $60 last June, P&G’s share price had risen by one third, which for a while encouraged Mr McDonald’s supporters to think that he had weathered the storm. He had started to refocus on achieving stronger results in rich countries, markets that some investors felt had been neglected as P&G successfully pursued (initially less lucrative) growth in emerging economies. Some vigorous job-cutting had started to improve profit margins. Yet the return of Mr Lafley suggests that there remains much to be done to make the firm great again.

Since “retiring” in 2009, Mr Lafley has served on the board of General Electric and worked as a partner at Clayton, Dubilier & Rice, a private-equity firm. He also teamed up with his old pal Roger Martin, a consultant turned business-school professor, to write “Playing to Win”, a best-selling book on corporate strategy illustrated with success stories from his first stint in charge of P&G, when in ten years he roughly doubled its sales while increasing profit margins. These successes included transforming the fortunes of familiar brands such as Pampers, Tide and Olay and the profitable acquisition of Gillette.

Whether Mr Lafley can reproduce his old magic remains to be seen. Second acts by returning chief executives have a decidedly mixed record. Steve Jobs did better the second time at Apple than the first, and Howard Schultz has confounded those who thought he should not have returned to Starbucks. Michael Dell’s homecoming to the computer-maker he founded has not gone so well, and he is now hoping that taking the company private will finally do the trick.

Indeed, there is an ominously long list of disastrous second-act chief executives. Kenneth Lay's return ended with the bankruptcy of Enron, his trial for fraud and early death. Ted Waitt could not revive Gateway, the computer-maker he founded, after he took up the reins again in 2001. Paul Allaire, who successfully ran Xerox during the 1990s, lasted only 15 months the second time around. After the applause greeting his return to the P&G stage dies down, Mr Lafley will have to show that he still knows how to play to win, rather than merely how to write about it.



Source: www.economist.com