By Serena Ng
Procter & Gamble Co. (PG) is moving away from the General
Electric (GE) approach to running one of its biggest units.
The maker of Pampers diapers and Tide detergent has been
struggling to grow its $20 billion beauty business, which has been
hurt by sagging sales of Pantene shampoo and Olay skin creams in
recent years. On Thursday, P&G Chief Executive A.G. Lafley told
an investment conference in Florida that the company is looking to
change how the business is run by putting a premium on experience
and looking outside for talent.
That is a shift from a view of management development that was
popularized by GE: Good managers were good managers, and they
should be developed by spending a few years in each of the
company's businesses. P&G also used the approach, for years
rotating employees through its fabric care, baby care and oral care
businesses, among others.
The problem is it broke down in beauty.
"We had maybe half a dozen leaders in that business in four
years...many of them had never spent a minute in the industry," Mr.
Lafley said. "We were enamored with the GE and P&G development
assumption that general management is fungible and functional
management gets developed by moving around every two or three
years."
Some analysts had criticized the management approach, arguing
that marketing household staples such as laundry detergent and
toothpaste is markedly different from selling shampoo and skin
creams, where consumers have more brands to choose from and
sometimes attach more value to a brand's image than product
efficacy.
Mr. Lafley, who expanded the company's beauty business greatly
during his first stint as P&G's CEO from 2000 to 2009, conceded
that cycling managers through the beauty business hasn't worked
well. "That wasn't how we had success" in beauty in the past, prior
to the broad economic and industry slowdown that started in 2007,
he said.
Instead, P&G previously did well "by building continuity, by
partnering with people outside, and by selectively bringing in
people who really knew the industry," he said. The company is now
looking to "put that back together" again by bringing in key
players and experts in the business, and looking for "outside
assistance" where needed, Mr. Lafley said.
GE, which in effect popularized the management philosophy of
grooming leaders by exposing them to different parts of the
conglomerate every few years, also has been shifting toward leaving
some managers in business units longer than it used to, so that
they can develop deeper industry knowledge.
From 2000 to 2007, P&G's beauty operations grew from a $7
billion business into a $22 billion portfolio, a growth rate Mr.
Lafley said mirrored that of Apple Inc. (AAPL) over the same time
frame. Since then, Apple's annual revenue has soared past $170
billion. Meanwhile, P&G's aggregate beauty sales have stalled
since the recession, even though a segment of the business--selling
high-end skin creams and designer perfumes--has tripled its
sales.
Mr. Lafley said P&G isn't looking to buy more beauty brands
and is focused on increasing sales of Pantene, its hair-care brand.
Fixing the beauty business "is not a quick hit; we're turning a fly
wheel," he said. "We have got to get back to the strategy that
works for us."
Write to Serena Ng at serena.ng@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires