By Serena Ng, Joann S. Lublin and Ellen Byron
For the second time in six years, Procter & Gamble Co.
directors are replacing Chief Executive A.G. Lafley with an insider
whom he groomed. This time, they need to make sure the change
sticks.
P&G on Tuesday said 35-year company veteran David Taylor
will take over as CEO on Nov. 1, with Mr. Lafley shifting to the
role of executive chairman. The Wall Street Journal had earlier
reported on the expected change.
In an interview, Mr. Lafley said he would jointly run P&G
with Mr. Taylor for as long as necessary.
"This is structured and organized the way it is so that we'll
have two of us, full on against the business. It's open ended, and
I am going to be here long enough to have an outstanding
transition," Mr. Lafley said. "Two heads are going to be better
than one."
Under the new arrangement, Mr. Taylor will run P&G's
operations as CEO, and Mr. Lafley will advise on matters such as
strategy, innovation and mergers and acquisitions. Mr. Lafley said
he would also help assess talent and will continue to coach and
mentor Mr. Taylor, whom he has worked with for more than 20
years.
The world's largest consumer-products company has long spawned
scores of executives who left and became successful CEOs at
companies such as Unilever PLC, Microsoft Corp. and Estée Lauder
Cos. But when it comes to its own succession, P&G has had a
checkered record. The coming leadership change will again test its
promote-from-within culture.
The company has gone through three CEOs in 15 years, including
two who held the job for far less than the 10 years or so that
P&G generally likes its leaders to serve. Durk Jager was CEO
for just 17 months before the board ousted him in 2000. Robert
McDonald held the post for less than four years before retiring
amid shareholder and employee discontent in 2013.
As Mr. Lafley prepares to relinquish the CEO post he has now
held for more than 11 years, P&G is tapping another company
veteran to revive its fortunes. Mr. Taylor is a former
manufacturing-plant manager who switched to brand management and
worked his way up P&G's ranks. The Charlotte, N.C., native has
also worked in Asia and Europe and marketed a wide range of
products from diapers to shampoos.
Widely viewed by colleagues and the investment community as a
safe pick, the 57-year-old Mr. Taylor has a record of expanding
some of P&G's core household brands and overseeing divestitures
of underperforming businesses. He made his mark expanding products
including air-freshener line Febreze, which hit $1 billion in sales
in 2011, and he led decisions to exit brands like Iams and Eukanuba
pet food, which P&G sold last year for over $3 billion. In his
current role overseeing P&G's sprawling beauty and grooming
business, Mr. Taylor was involved in the recent $13 billion deal to
shed 43 beauty brands that made up nearly a third of the
beautydivision.
Like Mr. Lafley, Mr. Taylor maneuvers easily within P&G's
insular culture, which favors calm and modest demeanors, current
and former colleagues say. "He's got the trust of the people in the
company," said Mr. McDonald, now U.S. Secretary of Veterans
Affairs. That trust "gives him the ability to be direct," Mr.
McDonald added.
Analysts expect the 68-year-old Mr. Lafley to remain chairman
for one to two years rather than the six months he held the role
after handing Mr. McDonald the reins in 2009. Company executives,
in meetings with investors and analysts, have been trying to assure
them the succession will be handled better this time round. P&G
is "very aware of its poor transition history," April Scee, an
analyst at Sterne Agee CRT, wrote in a report this month.
Mr. Taylor faces pressure to avoid missteps that resulted in the
failure of certain predecessors, who abruptly lost support of
employees and investors. Mr. Jager overhauled P&G's
organizational structure shortly after starting the job, and
P&G stock plunged after it badly missed earnings forecasts,
which led to his ouster. Mr. McDonald, meanwhile, inherited a
cost-heavy and bloated business and tried to expand it aggressively
abroad while its U.S. operation was still reeling from the
recession. P&G's performance suffered, and pressure from
activist investor Bill Ackman helped lead to Mr. McDonald's
departure.
Mr. Taylor is taking over P&G after it has undergone an
overhaul in the past few years, cutting thousands of jobs,
redrawing its supply chain and axing 100 brands to simplify its
business. A cost-cutting program that began in 2012 is nearly
completed, giving the incoming CEO a relatively clean slate. Still,
P&G's sales growth has decelerated further in the past two
years, and its stock has underperformed the broader market.
Some leadership experts contend that P&G's management model
is broken at the CEO level. The issue is whether the company's
promote-from-within culture has effectively pushed out talented
executives once they were passed over for the top job or groomed
individuals who may be ill-equipped to handle new challenges
because they have never worked anywhere else. When companies rely
exclusively on veteran insiders for their next CEO, "the gene pool
becomes too inbred," said David Dotlich, head of Pivot Leadership,
a unit of recruiters Korn/Ferry International.
P&G spokesman Paul Fox said the company has "a track record
of building world-class business leaders" and its leadership
programs "are designed to grow leaders at every level of the
business." While some executives have left the company to run other
corporations, he said the vast majority of leaders P&G has
groomed remain in the firm.
Still, Mr. Taylor's promotion could spur the departures of some
senior executives with CEO ambitions, as has been the case in
previous leadership transitions. Earlier this month, Melanie
Healey, a top P&G executive once seen as a CEO candidate,
retired from the company at age 54. She previously oversaw
P&G's North American business, which struggled to grow
consistently in the wake of the recession.
Other current P&G executives who have been considered CEO
candidates include Giovanni Ciserani, who leads P&G's fabric
and home care businesses and Martin Riant, head of the baby care
business. Patrice Louvet, a well-regarded beauty division
executive, meanwhile, could be a CEO contender the next time
P&G looks to change leaders. Mr. Ciserani turned 53 this month.
Mr. Riant is 56 while Mr. Louvet will have his 51st birthday in
September. P&G's Mr. Fox said these individuals "are fully
focused on their businesses."
Mr. Louvet is a strong ally of Mr. Taylor, who is currently his
boss, according to a recruiter familiar with P&G. "He is a
keeper," the recruiter said.
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