Procter & Gamble Co. brought back A.G. Lafley two years ago
to pull the company out of a protracted slump. This week, P&G
is poised to announce his replacement.
Pending a P&G board meeting Tuesday, the company is expected
to announce as early as Thursday that company veteran David Taylor
will be made chief executive, according to a person familiar with
the matter. Mr. Lafley is expected to remain as chairman to help
with the leadership transition.
After thousands of job cuts and more than $20 billion in
announced divestitures under Mr. Lafley's second go-round as CEO,
P&G is still suffering tepid sales growth, a sluggish share
price and limp market-share gains.
The 56-year-old Mr. Taylor, long the frontrunner for the job,
emerged as P&G's heir apparent in January when he was named the
leader of the beauty, grooming and health-care businesses, which
together accounted for close to half of P&G's annual sales.
An electrical engineer by training, Mr. Taylor started his
P&G career in 1980 as a production manager in a Greenville,
N.C., factory that made adult diapers and sanitary napkins. His
35-year career through P&G ranks brought him to company
outposts in Asia and Europe marketing products ranging from diapers
to air fresheners to pet food.
He will be tasked with sparking meaningful sales growth,
something Mr. Lafley has struggled with in the past two years. Much
of Mr. Lafley's strategic plan is now in place, but results at the
maker of Tide detergent, Gillette razors and Pampers diapers
haven't dramatically improved.
Mr. Lafley, 68, has been a much different leader on his second
tour of the Cincinnati-based company, according to current and
former executives. Known during his first CEO tenure for his
affable personality and frequent employee interaction, Mr. Lafley
has been more reticent during his second tour, traveling less
frequently to P&G's operations outside the U.S. and impatient
with the company's slow-moving culture, these people said. This has
earned him the nickname of "Lafley 2.0" among some staffers.
Mr. Lafley, in a private meeting with a small group of analysts
and investors last month, said his goal this time around has been
to leave P&G in better shape than where he found it. He noted
that while the company has slashed costs and changed its
organizational structure, it has "frustratingly fallen short on the
revenue line," according to a research note from Deutsche Bank
analyst William Schmitz, who attended.
The company reports full-year results Thursday. Wall Street is
expecting a weak showing as growth in many divisions remains
sluggish, and the stronger dollar saps gains in overseas sales. The
company, which had $83 billion in sales for its previous fiscal
year, is struggling with frugal consumers around the globe and
heightened competition.
"Organic" sales growth, a closely watched measure that excludes
the impact of acquisitions, divestments and currency moves, is
forecast to have slowed to around 2% in the year ended in June.
That compares with annual organic-growth rates of 3% to 4% under
Mr. Lafley's predecessor, Robert McDonald, who ran P&G from
2009 to 2013 and retired earlier than expected amid investor
discontent.
Since Mr. Lafley came back, P&G's stock has returned 9%,
including dividends, below the 32% return of the broad Standard
& Poor's 500 stock index, according to data from FactSet. While
Mr. McDonald was CEO, the stock's return topped 71%, though that
also fell short of the broader market's 94% return.
During Mr. Lafley's first CEO stint, he more than doubled
P&G's revenue and market value, and far outperformed the
broader market, helped by some sizable acquisitions.
Paul Fox, a P&G spokesman, says Mr. Lafley in his second
term "has been very focused on eliminating the barriers to growth."
He adds that compared with Mr. Lafley's first CEO tenure, where he
built and grew P&G's business over nine years, the business and
macroeconomic environment have been very different this time,
making him focus his attention on specific issues.
The CEO has prioritized cost cutting and shed close to 100
brands to focus on core offerings like Tide, Gillette and Olay
beauty creams. Earlier this month, P&G said it reached a $13
billion deal to sell 43 beauty brands, essentially reaching its
goal of announcing all its brand exits in less than a year. When
the divestments are completed by the end of 2017, P&G's
workforce will have shrunk roughly 25% from the 129,000 employee
base it had in 2011, the year before it implemented a wide-ranging
productivity and cost-cutting plan that has so far eliminated more
than 17,000 jobs.
After his first retirement, Mr. Lafley mostly kept his distance.
He settled into a new lifestyle in Florida with his second wife,
wrote a business strategy book, and kept his board seat at General
Electric Co. (He stepped down from the GE board shortly before he
returned to P&G.) He also joined private-equity firm Clayton,
Dubilier & Rice, where he shared an office with former GE CEO
Jack Welch. The two conducted periodic reviews of companies in the
firm's portfolio and advised on how to improve their operating
performance.
P&G brought Mr. Lafley back in May 2013 after Mr. McDonald
came under scrutiny by investors and the board for failing to
generate consistent sales and pare back costs.
Mr. Lafley came back to Cincinnati changed, some say. He was
impatient with the company's bloated operations, its long and
numerous meetings and its top-heavy management structure, current
and former colleagues say.
Business divisions were given cost-cutting and headcount targets
to hit, and management discussions focused heavily on how to rein
in spending and drive efficiencies.
That was a contrast with his approach during his first run, when
business meetings were largely about how to invest to grow sales
amid a different economic climate, according to former
executives.
Mr. Lafley's outsider experience, meanwhile, gave him clarity
when deciding which P&G businesses to slash, particularly in
the beauty division he helped build. The recent deal with Coty Inc.
included salon hair-care brands Wella and Clairol, which the
company had acquired under Mr. Lafley's first CEO stint.
P&G's rank and file employees were eager to once again rally
around Mr. Lafley, who previously had a strong presence across the
company. But this time around, Mr. Lafley didn't seem as visible in
some parts of the company, and in meetings, he felt distant at
times, say former executives. Wall Street analysts and investors
anticipated Mr. Lafley's straightforward, seemingly unscripted
commentary on quarterly conference calls discussing earnings as he
did during his first stint. But And in the last two years, Mr.
Lafley has so far participated in only one earnings call each year,
the next being this Thursday.
P&G spokesman Mr. Fox said Mr. Lafley meets frequently with
investors, attends analyst conferences, and still holds regular
town-hall meetings with business units and regions. He also attends
business meetings at P&G offices around the world like in
Geneva and China and hosts regular lunches with mid-level managers,
Mr. Fox says. P&G's videoconferencing system connects its major
offices, so "the need to travel to various locations to attend
meetings has dramatically reduced," he said.
Rather than re-establish a permanent home in Cincinnati, Mr.
Lafley lives at an extended-stay hotel by P&G's headquarters,
commuting most weekends back to Sarasota, Fla., with the company
paying $200,000 annually to cover the cost of his temporary abode
and another $606,080 for his use of the company's private jet when
he commutes back and forth and flies to other board meetings.
Write to Ellen Byron at ellen.byron@wsj.com, Serena Ng at
serena.ng@wsj.com and Joann S. Lublin at joann.lublin@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires