In the midst of one of the toughest economic periods in decades, Procter & Gamble Co.’s 13-member board on Tuesday elected Robert McDonald president and chief executive officer, succeeding A.G. Lafley, who will remain as chairman. McDonald, P&G’s chief operating officer, will begin his new role July 1.
In a conference call Wednesday with the investment community, Lafley expressed his confidence in the board’s decision saying, “We are obviously in the midst of a challenging time, but I believe it is the right time for a change….Bob is the right leader at the right time.”
McDonald said he is focused on preserving the core strategies at the firm, spelling out six points in particular. The first is filling white space where there are opportunities, such as Beauty & Grooming, a $250 billion industry, one where P&G’s market share is 15 percent.
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Second is building upon the firm’s 27 various $1 billion brands, with a goal to end the decade with 30 or more of them. Growing in emerging markets was a third point, where McDonald explained that P&G is serving a little more than three billion of the six billion people in these regions, and that if P&G could increase spending levels in China and India to match those of Mexico, it would generate an increase of $40 billion in annual sales. The firm had $83.5 billion in sales for its latest fiscal year.
The fourth point was continuing with “big, disruptive innovation,” followed by improving productivity, and continuing to invest in P&G employees.
McDonald said next year will be a year of investing to grow value share and one that reflects “continuity with change.” For example, a focus will remain on “winning with the consumer,” but now it will apply more strongly to emerging markets.
Lafley added that the appointment has been a disciplined process, spanning years and led by the board, beginning as far back as 2000, when he was named ceo.
A combination of character, integrity and values, along with strong business results, organization-building skills and breadth and depth of experience made McDonald the obvious choice, Lafley said.
Additional criteria included tapping a leader who had lived and worked outside of the U.S. (Lafley noted McDonald had lived and worked around the world), had led frontline operations and had experience in all aspects of the business. P&G also wanted someone who brought balance, temperament and inspiration, as well as the courage to make hard calls. “He meets every one of the criteria,” Lafley said, explaining that McDonald spent most of the Nineties in the Philippines, Japan and Korea, running P&G’s Beauty business in Japan and hair care in Asia. According to a biography of McDonald on P&G’s Web site, he joined P&G in 1980 and has been an officer since 1999. From 2004 to 2007 he served as vice chairman of Global Operations, prior to which he was president of Global Fabric & Home Care from 2001 to 2004.
Lafley painted a picture of their relationship as one that has seen the two “working side by side” for a decade. Most recently, he said, McDonald has been very involved in 2010 financial plans, and that the past year had been about moving “the next generation” into a number of roles “to deliver a strong second decade.”
In March, Susan Arnold, president of global business units, announced her retirement. Arnold had been seen as a top contender for the ceo slot, too. About a month after Arnold’s announcement to leave, Hartwig Langer, president of P&G’s Global Prestige Products Division, said he would step down as division president on July 1. He will be succeeded by Patrice Louvet, 44, who for the last nine months has been vice president of strategy and growth for the division. Also this year was the naming of Clayton Daley as vice chairman on special assignment; Daley had previously been vice chair and chief financial officer, a post succeeded by Jon Moeller. In August 2008, Marc Pritchard was named global market officer; and in June of that year Bruce Brown was named chief technology officer, succeeding G. Gilbert Cloyd, who retired. Just last week, P&G announced another organizational change, with the consumer and market knowledge, design, brand external relations and marketing units coming together to form an integrated Brand Building Organization, effective July 1, under the leadership of Pritchard, who will also maintain marketing leadership responsibilities.
During Wednesday’s call, Lafley stressed he would continue to be involved in the business just as John Pepper was with his succession, and that his role as full-time chairman will include providing advice and counsel, joining in at reviews and representing the company in external matters.
Lafley added that he will be “fully engaged” in his chairman’s role and around “as long as the board and Bob can tolerate me.”