Turning the Tide at P&G
How's this for the KISS principle of leadership? "The consumer is boss," Procter & Gamble Chief Executive A. G. Lafley says simply of the business mantra he endlessly repeats to his employees.
It might seem a fool's errand to try to boil down the marching orders for 138,000 workers in more than 80 countries to a simple cliché. But those four words-which might as well be tattooed on Lafley's forehead-speak volumes about his keep-it-simple strategy for leading the world's largest consumer products company: Find out what the consumer wants, and give it to her.
It's an approach straight from the playbook of Lafley's mentor, Peter Drucker, the late management guru who argued that companies tend to overcomplicate their businesses, creating too many products, hiring too many employees, and generally distracting themselves from what made them successful in the first place: pleasing their customers.
That was precisely what Lafley concluded when he was promoted to the top job at P&G in 2000. With sales growth slowing, market share shrinking, and the next big thing nowhere in sight, his predecessor, Durk Jager, had tried to turn the company around, in part, by pushing dozens of new products through the R&D pipeline, while at the same time pursuing an "if it ain't broke, break it" reorganization to shake up P&G's famously insular culture.
The result, however, was sinking morale, escalating costs, and an earnings shortfall that soon cut the company's stock price in half.
Lafley, a 59-year-old P&G lifer who had first made his mark simplifying life in the laundry room (he led the launch of Liquid Tide), instead applied Drucker's back-to-basics approach to clean up P&G's house. He narrowed the company's focus on its top-selling brands, threw out more than a dozen others, and stocked the shelves with bigger, better ones, like those from P&G's recent $57 billion acquisition of Gillette.
Meanwhile, he de-emphasized traditional R&D spending in favor of product ideas culled from outside the company. He slashed the number of projects under development by two thirds, increased collaborations with outside partners, and outsourced what were once thought to be core operations, like the manufacturing of Ivory bar soap, P&G's oldest brand.
He did much the same with P&G's workforce: reorganizing its divisions to encourage more collaboration, targeting top-priority countries, and eliminating about 20,000 jobs, including more than half of P&G's top brass.
All who remain are focused squarely on the goal of winning what Lafley calls the "two consumer moments of truth"-first, buying P&G products and then, liking them so much that it's "memorable-at least satisfying and ideally delighting."
Repeat after me. If that sounds simplistic, Lafley is the first to admit that it is. Yet in a company where more than half the employees don't speak English as their first language, he says his Sesame Street- simple slogans, repeated over and over, keep everyone trained on what's important. Human beings "don't want to stay focused," he says. "So my job is to get them to focus their creativity around the focus; focus their productivity around the focus; focus their efficiency or effectiveness around the focus."