Procter & Gamble brings back a chief who knows the organisation inside and out.
It’s not unique for the head of a company to return to the C-suite after stepping down – but it is unusual.
Think of Howard Schultz’s reunion with Starbucks, Michael Dell’s return to Dell or Steve Jobs’ legendary second bite at Apple.
In the wake of poor performance and shareholder unease, this is exactly what has happened at Procter & Gamble, where A.G. Lafley – after a four-year break – resumed his role as CEO at the company’s Cincinnati HQ in May, taking over from Bob McDonald, Lafley’s chosen successor.
In some quarters, bringing back a former CEO may smack of desperation. “On the face of it, it looks like failed succession planning,” says Varya Davidson, partner for people and change at Booz & Company in Sydney.
“On the other hand, with a comeback CEO you have the best of both worlds. You get an injection of fresh thinking and new ideas and at the same time someone who deeply understands the company.”
Nevertheless, analysts in the US have remarked on the lack of other candidates for the position.
Jeffrey Sonnenfeld, a Yale professor, expert on organisational culture and author of The Hero’s Farewell: What Happens When CEOs Retire, says the danger is that a returning CEO can lead to an exodus of talent. “If there are great people in senior roles, there could be morale issues further down the ranks.”
Lafley seems to have thought of this.
He’s promoted long-serving senior executives to head four new product divisions, which puts them in contention to succeed him in what US analysts predict will be a year or two. Lafley is 66.
Whoever takes over, Lafley has extra incentive to get it right this time, says Sonnenfeld. “He’s on a mission to prove himself. Lafley can see that his legacy was imperiled because of the successor having stumbled,” he told Cincinnati.com news in P&G’s home base.
First time around, Lafley was widely viewed as the ailing company’s saviour.
He brought it back to health after its stock price fell by nearly half.
The acquisition of Gillette in 2005 for US$57 billion and an emphasis on a “consumer is king” philosophy all added to his reputation.
However, the consumer has changed since Lafley was CEO and the world’s largest household products manufacturer has had a slump in growth since the financial crisis as cost-conscious consumers shied away from P&G’s high-end products.
Its expansion into emerging markets has also been slow and P&G lost ground to competitors Colgate-Palmolive and Unilever.
P&G’s response, initiated under McDonald and continued by Lafley, has been to cut costs and reduce staff, aiming to save US$10 billion by 2016.
While analysts have noted that some of P&G’s problems began on Lafley’s first watch, no major shift strategy has been announced.
“In P&G’s predicament,” says Davidson, “for the board to know that they have a CEO who understands their market and can act quickly is reassuring – while it gives them time to figure out a long-term strategy.”
This article is from the October 2013 issue of INTHEBLACK magazine.