The New Face of P&G

What can we expect from Procter & Gamble’s new CEO Robert McDonald?

The world’s largest advertiser’s surprise announcement last week that its CEO of nine years, A.G. Lafley, was stepping down, has shifted the focus to his successor, who is known for, among other things, his tireless ability to listen to customers and colleagues and a focus on wringing cost efficiences. McDonald, 56, takes the reins as the company itself is making greater efforts to cut costs and further increase marketing efficiency.

McDonald confirmed as much during a  call with analysts last week in which he revealed plans to “create a simpler, flatter and more agile organization.” What that means for P&G and its agencies—a roster that includes Saatchi & Saatchi, Grey and Wieden & Kennedy, among many others—is unclear.

McDonald takes over perhaps a bit ahead of schedule. His predecessor, A.G. Lafley, was one year shy of the usual P&G CEO tenure of 10 years and back in December had poo-poohed speculation of a management transition by saying, “Rumors of my passing are greatly exaggerated.” Lafley had also previously spoken of “delivering a decade” for P&G.

Like Lafley, though, McDonald moves in at a key era in the company’s history. In 2000, Procter was missing earnings and many of its brands—even giants like Tide—were struggling. Lafley is credited with turning the company around partially via its numerous acquisitions, most notably the $57 billion takeover of Gillette in 2005.

While Lafley came to P&G at a time when its wounds seemed largely self-inflicted—after all, the company’s troubles came when the economy was booming—now many of the company’s issues appear to be externally driven. Thanks to competition from private label, P&G is projecting just a 1 percent to 3 percent jump in organic growth in its next fiscal year, which starts July 1.

McDonald has already shown signs that the company under his leadership will be a leaner, less bureaucratic operation. According to reports, McDonald announced he was planning to take the title of president and wouldn’t assign someone to his previous job, chief operating officer, eliminating two top executive positions.  He also plans to reduce the number of positions between top executive levels to seven from the current nine.

A former Army captain and graduate of West Point, McDonald is also likely to insist on a fervor for one the major assets Lafley brought to the company—the ability to get into a consumer’s skin.

While Lafley is credited with expanding the use of ethnography at P&G, McDonald is known for teaching himself Japanese when he worked for various P&G brands in that country. “He did this on his own so he could better understand what the consumers’ challenges were and how to help them better understand how to use a product, or what [P&G] needed to do to refine a product for more efficient use by the consumer,” said Marc Gunnels, a fellow 1977 West Point graduate.

That open-mindedness extends to colleagues as well. Jim Stengel, P&G’s former global marketing officer, who retired from his position last fall, recalled how McDonald would always end his meetings with “How can I help?” and would frequently respond to e-mails at 5 a.m.

Gary Stibel, president of The New England Consulting Group, which counts P&G among many of its clients, said McDonald is uniquely suited for a leaner P&G. Stibel, who worked with at P&G in the 1980s, observed that McDonald is a very aggressive brand builder, but “he’s done it the old fashioned way, not by throwing money solely at advertising or inefficient events. He spends money very efficiently and he’s very much focused on ROI…It’s not cost cutting, it’s cost efficiency.”