CEO Rejuvenates Procter & Gamble

Two years ago, Alan G. “A.G.” Lafley, a long-time Procter and Gamble Co. executive, received a surprise phone call asking him to take the helm of the company.

At the time, Procter and Gamble’s stock was plummeting. Between 1990 and 2000, the company had failed to double its sales—a goal that it had met every previous decade since 1940.

By 2002—Lafley’s second year on the job—Procter and Gamble’s stock had nearly doubled, rising from $57 per share to about $90 per share.

The turnaround Lafley engineered at Procter and Gamble won him a national reputation, something the modest and somewhat non-descript 56-year-old says came as somewhat of a shock.

“I never thought about being a CEO,” he said. “Was I expecting it? Not at all.”

Lafley’s growing personal reputation also landed him the prestigious speaking engagement at Harvard Business School (HBS), from which he graduated in 1977.

Erin E. Russell who chaired the search committee that chose HBS’s class day speaker, said Lafley’s experience with transforming a struggling company makes him an appropriate speaker at a time when business school graduates face a moribund economy.

“We wanted someone who would be able to speak to managing a difficult situation and coming out on top and Lafley fits that model exactly. He does have that experience,” says Russell. “He was at the top of our list because he managed and engineered an amazingly impressive turnaround at Procter and Gamble.”

Turning A Company Around

When Lafley took over, Procter and Gamble was in desperate need of new leadership.

His predecessor, Durk I. Jager, had pioneered ambitious new products in hopes of finding a blockbuster for the company, but never did. With investor confidence slipping, Procter and Gamble’s board removed Jager, an unusual act for the 166-year-old company.

Lafley, instead of focusing on researching new products, set out to build the company around its proven brands, such as Tide, Pamper, Crest and Bounty paper towels.

In September of 2002, Fortune Magazine called Lafley’s approach “straightforward” and “back-to-basics.”

“He has been trying to think of new ways to bring business and to extract value from what they are good at” says David J. Reibstein, a professor in marketing at the Wharton School.

Lafley has channeled the company’s energy towards studying and catering to the needs of the everyday consumer, rather than developing cutting-edge technology.

“The only reason Procter and Gamble is in business, and has been for 166 years, is because we create, manufacture and sell branded products that make yours and my life better daily. We are focused on serving families, particularly women, around the world,” he said.

In his more than 25 years at Procter and Gamble, Lafley has worked his way up the company ranks.

Joining Procter and Gamble’s marketing division after his HBS graduation in 1977, Lafley originally planned to stay at Procter and Gamble for about five years.

But Lafley’s hard work and low-key approach to management kept earning him new assignments.

“Procter and Gamble kept challenging me, stretching me, giving me exciting and fun things to do,” he says.

In 1995, Lafley took over Procter and Gamble’s operations in Asia, building revenues in China from $90 million to nearly $1 billion, according to the company’s website.  He faced adversity in Asia as well, dealing with the economic upheavals that swept much of Asia in the late 1990’s.

But while Lafley continued to succeed in Procter and Gamble, he says he wouldn’t necessarily recommend sticking with one company to today’s business school graduates.

“I am in a small minority,” he says, recognizing that many of his classmates have switched corporate jobs frequently.

Gaining experience at many different companies is perfectly acceptable, maybe even preferable, Lafley says.

“One may choose to change and that is fine too,” he says.

“At end of every assignment I step back and reflect on what I am accomplishing. I reflect holistically,” he says.

A native of Keene, New Hampshire, Lafley graduated from Hamilton College with a B.A. in History before studying at HBS. Before joining Procter and Gamble, Lafley also served in the U.S. Navy for five years as a supply officer during the Vietnam War.

A Team Player

As recent scandals have resulted in a declining trust of chief executives, Lafley’s soft-spoken, direct manner and his back-to-basics approach have boosted his reputation in the business world.

“He is known for running a value driven and highly principled organization, which is fairly unique,” Russell said of Lafley.

Dubbed by Fortune magazine as the “un-CEO,” Lafley says he believes this title “was probably right.”

“I am not by any stretch of the imagination, the celebrity CEO and I am not interested in being the celebrity CEO. I am serving my stakeholders: consumers, customers, shareholders, employees,” he said. “That has worked for me and that’s the way I like it.”

When recalling his experience at HBS, Lafley says he prefers to remember his achievements as part of a team.

Lafley specifically remembers his sports days. While he says he was “not a great player” he competed on the football and basketball teams.

“We played all the sports together and we, the section B football team, beat a Harvard undergraduate team in the championship,” he recalled.

As a student, Lafley says he frequently found himself in embarrassing situations. In one particular instance, he says he was left stuttering when called on to answer a difficult question during his second semester at HBS.

“I was not prepared. I fumbled my way through the basic background of the case and hoped my professor would move on to the next person and that one of my fellow classmates would raise their hand,” he said.

Despite what he calls his occasional shortcomings as a student, Lafley says his Harvard background served him well when he ventured into the world of business.

“I went to Harvard because I believe and still believe it is the best for operating managers and general managers,” he says.

—Staff writer Faryl W. Ury can be reached at ury@fas.harvard.edu