On July 1, A.G. Lafley woke up at 6 a.m., worked out,
showered, and headed to the office in downtown Cincinnati,
just as he had for nearly a decade. But this was the first
morning in more than 3,000 days that he was no longer the
chief executive of Procter & Gamble.
He walked through the main entrance, passed by the café in
the lobby, pressed his key card against the metal scanner, and
... nothing. Lafley felt a momentary shiver. He'd stepped down
as CEO the night before, turning the reins over to longtime P&Ger Robert "Bob"
McDonald, 56, but he still had a job as an active chairman, didn't he?
It turned out to be just a technology glitch, but once Lafley, 62, talked his way
inside, he went not to the 11th floor an openair
suite of offices he had created to
encourage more interaction among the top executive team but instead to the
second floor, into a musty, oakpaneled
office that was a vestige of the preLafley
The previous evening he had unobtrusively moved his belongings downstairs. It
was a symbolic gesture, but an important one: Lafley wanted to be sure that on
day one; McDonald could walk in and sit at the CEO's desk.
A few days later, at the Global Leadership Council meeting (a weekly session for
the top 42 execs), Lafley arrived early and chose a chair far from the one he'd sat
in for the past decade. He was now a supporting cast member, and his physical
location underscored the point: All eyes, he says, turned to McDonald as soon as
he sat down. "It felt exactly like it was intended to," he told me later. "The king is
dead. Long live the king!"
It is something strange in this era of failed leadership, abysmal succession
planning, and dueling egos: a transition atop one of the world's largest and most
successful companies that is notable for what's gone right.
Like just a handful of other companies, including PepsiCo and General Electric,
P&G has seen its ability to groom top talent as a competitive advantage as much
of one as its trademark on Tide or patent on Pampers. Although the company is
172 years old, it has had only 12 chief executives, all insiders, and among them
two family members.
Most companies that take succession seriously shroud their process in secrecy.
Some, such as GE under Jack Welch, publicize the horse race itself believing
that it will spur the candidates to work harder. Others, such as Bank of America
whose board was forced to convene an "emergency succession committee" when
CEO Ken Lewis said he was leaving, seem to deal with it only under duress.
But now that P&G's transition is complete, the company has allowed others a rare
look inside the process, unveiling everything from the topsecret
blue binder that
tracks every highlevel
prospect, to a whirlwind tour of Moscow with McDonald, to
the board's deliberations. The result is an unusual picture of a company where
leadership development and succession planning permeate not just the corner
office but the entire company.
P&G's openness is particularly surprising because the handover
comes at a
precarious time. Yes, in his near decade as CEO, Lafley transformed P&G from an
unfocused collection of famous brands into an innovation machine that got most
of its ideas not from the eggheads in R&D but
rather from the consumer.
With his relaxed demeanor, Lafley projected
an image antithetical to the charismatic
command and control CEO so in vogue in his
time. And with huge acquisitions, including
the $57 billion deal for Gillette, he gave P&G
a global reach that goes beyond most
Yet the company has fared worse than others in the massive market meltdown,
in part because of the decision, despite $4 billion in negative currency
fluctuations, to stick to its relatively high pricing while competitors cut theirs.
And Lafley had pushed hard to introduce premiumpriced
products such as highend
versions of Tide and Bounty, which worked in a boom but not so well in a
bust. In the past two years the stock has lagged behind rivals such as ColgatePalmolive,
falling 14% compared with Colgate's 6% rise.
While the timing may not be ideal, what Lafley and McDonald have going for
them is a bond that is very hard to find in corporate America. In a joint interview
they finish each other's sentences, rip each other about the military, and say
things like, "Remember that time we were together in the Egyptian delta?"
Lafley is still working at the company as executive chairman, speaking at least
weekly with McDonald, chairing the board, and offering advice. That might be
threatening to some new bosses, but not McDonald. "A.G. is a giant," he says.
"And I'm thrilled to stand on his shoulders."