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Procter & Gamble CEO A.G. Lafley offered his views on leadership during a Sept. 20 visit to the Kellogg School.

New wrap for packaged goods titan

Teaching and courage key to effective leadership, which in turn drives critical innovations, says Procter & Gamble CEO; Lafley shares details of firm’s success

By Romi Herron

9/21/2006 - Good leadership is hard to find, according to a top executive who is himself considered exemplary for revitalizing his company.

“Great leaders create conditions that get people organized to attack problems. They help others learn how to think, how to exercise judgment and how to take action,” said A.G. Lafley, chairman, president and CEO of Procter & Gamble, during a Sept. 20 presentation at the James L. Allen Center in Evanston.

The event attracted hundreds of enthusiastic Kellogg School faculty, staff and students who listened as the former U.S. Navy interpreter explained how to alleviate the leadership shortage by being willing to teach others and by having the courage to handle tough decisions.

Introduced by Kellogg School Dean Dipak C. Jain as “an icon of global leadership,” Lafley, a man who never thought he would end up in business and planned instead to become a teacher and basketball coach, shared his experiences leading P&G’s 130,000 employees in 100 countries to support what he has long believed to be true: “Effective leaders have a serious commitment to teaching. It’s in everything they do.”

Since Lafley became CEO in 2001, Jain noted, Procter & Gamble’s stock has almost doubled. In addition, Lafley serves on the boards of GE and Dell Inc. and volunteers with the Cincinnati Symphony Orchestra, among other civic endeavors.

A Harvard Business School graduate who discovered his interests in consumer branding during his Navy stint, Lafley discussed his strategies to bring the corporation, which he joined 30 years ago, out of its ailing state in June 2000, when he was director.

“P&G had a crisis. Major businesses were underperforming, the company over-invested and brands weren’t delivering superior consumer value,” he said. Addressing those issues required making choices to change organizational behavior to produce positive results.

“We reduced our costs and reset our goals by issuing a third earnings warning and taking a stock hit,” said Lafley. “We determined it would take three years to get back on track.”

To do so, the company focused on innovation and the consumer. Core categories that include leading brands such as Tide, Crest, Olay, Dawn and IAMS were part of the new corporate strategy, which also entailed resizing the organization, “a necessary but emotionally draining decision,” admitted Lafley, but one that ultimately led to progress. In 2000, the company had 10 billion-dollar brands; today that figure has risen to 17, he said.

Consumer satisfaction largely has driven Procter & Gamble’s success against global competitors, including retailer brands, local entrepreneurs and national businesses through what Lafley calls the most effective advertising avenue available: word of mouth. Innovations, which he regards as P&G’s “lifeblood,” also have made an impact through new products. The Tide-to-Go pen, for instance, adapts to customers’ active lives to deliver more value and generate consumer loyalty.

Lafley said such innovations, in part, arise from P&G’s diversity, since valuable insights and ideas often result from the organization’s extensive networks. In fact, he said that people are one of two “intangible assets” his company relies on. The other asset? Its brands.

“To me, brand equity is defined by how strong the bond is between the consumer and the brand,” Lafley said, adding that consumers hold more power than even big marketers because Internet technology enables shoppers to compare products, services and price with almost unlimited accessibility to merchants worldwide. These tools demand that corporations, to remain competitive against a host of global players, deliver consistent excellence through innovations that offer superior value.

“The pace of change is not going to slow. This is not a boring time,” Lafley said.

He also offered Kellogg students some specific ideas to consider as they move forward into their professional journey, many eager to achieve senior roles in their organizations.

Effective leaders know when to lead, support or follow at the appropriate times, said Lafley. They embrace change and constantly challenge the status quo, striving “continuously to transform organizations to win in the face of intense … competition. They share stories of actual experiences in teachable moments.”

True to his words, Lafley shared eight considerations he says help executives lead teams to success: Know yourself, accept that change is inevitable, see things as they are, respect your customer as boss, understand the power of choices in strategy and execution, develop and select co-leaders, communicate, and be comfortable and confident with who you are.

He also emphasized that global competition has made it necessary for leaders to work effectively across cultures and encouraged students to follow their passions throughout their careers.

“The only way you’re going to make diversity work is to be comfortable with who you are and celebrate it. Go where you want to make a difference,” he said.

Those heading into leadership roles should also give themselves time to develop along with their corporation’s values.

“Leaders are made, not born. P&G finds people with potential and helps them grow and develop into great leaders,” said Lafley, encouraging audience members to broaden their experiences and define and articulate their values and beliefs.

“Leadership is about instinct and judgment. The more diverse your experiences are, the better your instincts and judgment will be.”