February 23, 2004 | Advertising Age | 18 REPORTP&G P&G profits by paradox Seemingly contradictory moves by CEO Lafley have restored the giant marketer’s leadership status SALES, DEALS & SHARES A look at what Procter & Gamble Co. sells, what it’s bought as the millenni- vocated a return to P&G’s “good old- it’s sometimes necessary. and how its stock performs. COMPANY um began it fashioned discipline,” embodied by “The questions I get the most OVERVIEW seemed Procter use of “proven volume-building ve- from all levels in the organization SHOPPING CART BY JACK & Gamble had hicles” such as TV and “comprehen- are about consistency,” he said. NEFF managed to turn sive assumption testing,” including “One of my smiling rejoinders is Where P&G gets its sales...... and profits itself from Ad- copy tests and data to back almost that consistency is the hobgoblin of vertising Age’s every decision. little minds. And we don’t have little “Marketer of the Century” to a stum- Despite what might appear at minds at P&G. bling, bumbling leviathan. Just four times to be mixed messages, Mr. years later the juggernaut once more Lafley has drummed hard on three CONNECTING THE DOTS looks unstoppable, having trans- simple rules that have become some- “But once I get through that throw- formed itself into the very model of a thing of a modern P&G catechism: away, I try to connect the dots for marketing-driven global powerhouse. “The Consumer is Boss,” and the them. Because what might seem It may seem paradoxical that a boss speaks during the “two mo- paradoxical or inconsistent really is- 167-year-old bastion of American ments of truth,” when consumers de- n’t. We’re doing what we need to do marketing could so quickly go from cide whether to buy a P&G product in to serve the consumer … to work feast to famine to feast. But paradox is the store and when they use it. with the retailer … to win against the name of the game at the P&G of Beyond such simplicity lie nu- the competitor. … So I think that’s A.G. Lafley. merous paradoxes that have helped part of being flexible and practical.”

The new millennium started omi- P&G navigate an increasingly com- P&G often wasn’t those things Estimate for year ending June 30, 2004 nously. Amid a massive global re- plex marketing world. Under Mr. when he took over, Mr. Lafley said. Source: Credit Suisse First Boston vamp, P&G missed two quarterly Lafley, the company has become: “I knew we had to be faster and earnings numbers in early 2000, cut- More attuned to creativity, more flexible and more practical … ting its stock price in half and hasten- thanks in part to last year’s trip to the less theoretical,” he said. “Durk and I SHOPPING LIST ing Chairman-CEO Durk Jager out International Advertising Festival in worked on a lot of this stuff togeth- the door. Mr. Lafley took over a com- Cannes by Global Marketing Officer er—the whole idea of make a little, Selected Procter & Gamble Co. acquisitions since 1980 pany bleeding talent to dot-coms and James Stengel. Yet it also uses com- sell a little, learn a lot. … But if you re- YEAR COMPANY market share to competitors. parative demos as much as ever and ally looked at what we did, it was still 1982 Norwich Eaton Pharmaceuticals Prescription, OTC drugs Today, P&G’s sales and profits are stepped up use of no-frills direct-re- pretty slow.” 1985 Richardson-Vicks Vicks, Oil of , growing by double digits and its stock sponse TV. Another reason P&G may not al- 1987 Blendax Blend-a-med, Blendax is back in triple digits. Some of its ri- Bigger and stronger, but with a ways appear to be moving in lockstep toothpaste vals are missing numbers, changing group of senior managers who often is a far more diverse management and managements and rearranging orga- bring a fighter mentality from years less of a “command and control” style. 1989 Noxell Cover Girl, Noxzema, Clarion nization charts. A reorganization that as underdogs in such overseas mar- When managing in Japan and Chi- 1990 Shulton’s Old Spice looked like it might wreck P&G ended kets as India, Greece or Turkey where na starting in 1993, Mr. Lafley said, 1991 Max Factor and Betrix Cosmetics, fragrances up saving it—one of many paradoxes P&G is weaker. dealing with younger executive ranks 1994 VP Schickedanz Tissue and towel behind this remarkable comeback. than he had in the U.S. changed his Giorgio Beverly Hills Fine fragrance outlook on management. “I was total- 1996 Baby Fresh Baby wipes THE NEW PARADOX ly convinced,” he said, “that whether Lavan San, Magia Blanca Household cleaner, bleach The man most responsible for P&G’s Focus on you’re in Asia or the U.S. or Europe, 1997 Tambrands Loreto y Pena Tissue turnaround, Mr. Lafley, is as complex Procter & Gamble Co.’s Generation X and Generation Y were as the reasons for his success. ad and marketing services not going to respond to command and 1999 Iams Co. Pet food He has been, on one hand, a radi- agencies, which include: control. So the choice I made [upon Recovery Engineering Pur 2000 Dr. John’s Spinbrush Spinbrush cal-for-P&G change agent. Along Publicis Groupe units Saatchi & becoming CEO, was a style called] ‘fo- with Global Human Resources Offi- cus and unleash.’ The strategy choices 2001 Moist Mates Moist toilet paper Saatchi, Leo Burnett Co., iLeo, Bristol-Myers Squibb Co.’s Clairol Clairol cer Dick Antoine and Global External Kaplan Thaler Group, Starcom we made were very focused … and Relations Officer Charlotte Otto, Mr. MediaVest Group, Frankel, then [I] turned everybody else loose ... 2003 Wella Hair care Lafley championed dismantling Publicis Dialog and Manning, to figure out the hows.” W.L. Gore & Associates’ Glide Glide dental floss P&G’s 11th floor executive suites. He Selvage & Lee. Source: Credit Suisse First Boston sent most line bosses to bivouac with Grey Global Group units Grey UNDERDOGS AND OVERDOGS their subordinates in business units. Worldwide, MediaCom, Grey Mr. Lafley also worked to shake up He remade half the executive floor Interactive, Wing Latino Group, P&G’s executive ranks without doing VOTE OF APPROVAL Alliance, J. Brown Agency, GCI into a state-of-the art training room and Beyond Interactive. away with its steadfast promote- and the rest into a modern, open area from-within culture. More than half Procter & Gamble Co. stock has been a market leader since A.G. Lafley mainly for functional chiefs who re- Dentsu in Japan. of the top 50 managers are new to became CEO in June 2000. How much you’d have now if you invested port directly to him. their jobs since Mr. Lafley took $100 in each of the following when he took over: Most other senior managers charge; many loyalists of both Mr. weren’t keen on the remodeling, Mr. Reliant on a cadre of top man- Jager and his chairman-CEO prede- Antoine said during a tour of the new agers who first met Mr. Lafley in cessor, John Pepper, have left. space in December. “But A.G.,” he P&G’s detergent marketing group, Of P&G’s top 200 managers, 65% said, “had more votes than the rest of yet increasingly focused on beauty now are from outside the U.S., Mr. us combined.” and healthcare. Antoine said. And of the top 50, about Yet, while shaking things up, Mr. A bigger spender on advertising half are from outside the U.S. The Lafley also has been as disciplined a than it has been in years both ab- goal, he said, is for two-thirds of the P&G manager as there ever was. He solutely and as a percent of sales, but top 50 to come from overseas as well. has for years kept notes and clippings also far more willing to go tactical While P&G’s long history of tap- outlining and supporting his most against competitors with promotion. ping Canadian management talent fundamental business philosophy in a Such management by paradox is- accounts for some of the number, the

manila folder labeled “AGL Beliefs.” n’t necessarily intentional, Mr. Lafley company also increasingly turns to Based on Feb. 19 prices Soon after becoming CEO, he ad- said in an interview with Ad Age. But managers from Europe, Asia and Source: Advertising Age analysis