A.G. LAFLEY ON LEADERSHIP: LESSONS FROM PROCTER GAMBLE'S SUPERSTAR CEO

By Mike DuBose and Blake DuBose

Fueled by a passion for learning the ins and outs of successful leadership, we have studied, researched, and interviewed many great leaders over the years. We have found that, although each has their own style and strategies, leaders often share common traits like humility and a dedication to executing ideas. One such leader is Alan George Lafley (known as “A.G.”), who joined Procter and Gamble upon graduating from Harvard Business School in 1977. He became P&G’s CEO, a position he held for ten years before stepping down in 2009. In 2008, Lafley also co-authored the bestselling book The Game Changer with fellow business expert Ram Charan.

In May 2013, Lafley’s replacement at P&G, Robert McDonald, resigned amidst declining sales and investor complaints. The corporate board invited Lafley back in an attempt to stabilize the faltering Fortune 500 Company, a consumer goods giant that employs more than 120,000 employees worldwide and owns 300 well-known brands such as Pampers, Tide, Bounty, Crest, Gillette, and Dawn.

What makes A.G. Lafley such a great leader that P&G was compelled to call him out of retirement? For one thing, he gets results. As the Wall Street Journal reported, he more than doubled sales to nearly $84 billion while CEO of P&G, partially through smart acquisitions like Gillette and other premium and beauty brands. In fact, when Lafley retired, P&G boasted 23 brands each earning $1 billion or more in sales, according to USA Today. Publications such as Business Insider magazine laud him as “one of the most successful executives in the history of the 176-year-old company.”

We had the exciting opportunity to meet with Lafley as part of a small group in New York City. To our surprise, the 2006 Chief Executive magazine CEO of the Year showed up in blue jeans, and his responses to our questions were not only thoughtful, but also phrased in simple, understandable language. You would never know that the man with whom we spoke is tasked with leading one of the most important companies in the world!

Interestingly, Lafley began the conversation by stressing the importance of “productive paranoia,” noting that every leader and employee should “always think about things that can hit you.” This phrase resonated with us, especially since it echoes a philosophy we have in our family of companies to always “hope for the best and plan for the worst!” He then noted that great organizations maintain their success and sustain growth by emphasizing seven key areas: leadership, culture, purpose and values, goals, strategies, structure, and systems. (We have illustrated these key areas in the accompanying graphic, which is similar to one Lafley and Charan use in The Game Changer). To reach maximum success and sustain growth, all seven areas must row in unison towards the same destination. Let’s examine each in greater depth.

Purpose and Values: When Lafley asked the group about our companies’ purpose, few leaders could say that their businesses had one other than making money. When we said that our purpose was “to create opportunities to improve lives,” Lafley responded that such higher purposes are good for engaging staff, an important factor in success. He agreed that every leader must build a sense of ownership for all employees so they feel like the company is part of them. Lafley asserted, though, that the overarching purpose of a business should be “to create and serve a customer with value,” an idea also present in the work of Peter Drucker. In fact, talking with Lafley, one can sense that his management style draws deeply from Drucker’s teachings. (Business Week has called Drucker “the man who invented management,” and his philosophy has influenced organizations across all sectors of society, including not only P&G, but also General Electric, IBM, Intel, Girl Scouts of the USA, The Salvation Army, Red Cross, United Farm Workers, and several presidential administrations.)

Goals: Every organization should have strategic short-, medium-, and long-range goals. Like Jack Welch, Lafley emphasizes “winning” and the need to know when you are winning (which is impossible without specific goal-setting). Lafley feels that companies that strive to be the best can eventually become number one. Accordingly, P&G has established the long-term goal of being in the top 1/3 of the most successful companies in every decade.

Strategies: Lafley defined strategy as the “choices to win.” For example, companies must define the geographical area and the type of clients they want to serve. Most important, he said, is that organizations grow from their core business and play to their strengths. When they chase ventures outside their core services, resources, and expertise, they run into trouble and quality diminishes.

Structure: Lafley stated that it’s important to be crystal clear on how the structure—the way a business is organized to deliver the strategy—will be implemented. However, not even Lafley has found an exact business structure that works 100% of the time, so it’s important for businesses to remain flexible and  experiment with different structures. He once referred to P&G as being like an amoeba that is constantly changing its shape to eat and survive. Like Lafley, business leaders must be willing to change quickly when they see opportunities. Jack Welch told us the same thing, saying, “Successful companies have to be ready to change direction on a dime!”

System: This concept refers to the resources needed by the structure to get work done. Like Larry Bossidy and Jack Welch (both successful former leaders of General Electric), Lafley does not believe that businesses should develop detailed budgets and plans more than two years in advance. We agree; the economy and technology are rapidly changing and there are many variables that come into play over time (although, as Jack Welch and Lafley suggested, it’s ok to dream ahead 5 to 10 years in general terms). At the human resource level, P&G spends a lot of time on talent and professional development to keep its employees and leaders engaged and challenged.

Leadership: While employing the right, outstanding employees is very important, businesses cannot achieve success without creative leaders to develop and implement the vision. Strong leadership is instrumental in learning from the past and guiding organizations into the future.

“Shaping values and standards and then living them is critical,” Lafley said. “If the leader doesn’t set the standards, it won’t happen. Employees watch every move you make and don’t make. If you don’t truly live the values and standards, you won’t have them!”

Leaders must also explain the “whats” with the “whys.” That often means making sense of outside variables and translating them into language understandable to both consumers and employees. Of course, the leader’s main goal is to get everyone pulling together towards a common mission that adheres to the organization’s core values and business. One common mistake is chasing too many projects instead of doing fewer things really well. Instead, successful companies practice the “Hedgehog Principle” explained in Jim Collins’s book Good to Great, focusing on their passions, their areas of expertise, and the activities that are most profitable to them. Lafley warned that many leaders fail because they want quick fixes. It takes time to get the right people on the train and excited to head toward a common destination!

Culture: If organizations become too big, too successful, and too slow, they often lose contact with the customer, Lafley said. Every organization should be customer-focused, and leaders must stay in close contact with the employees who are out in the trenches. This allows the organization to change as customer needs evolve (a problem for some businesses, including 100-year-old Rhodes Furniture, which went bankrupt because it failed to listen to front-line staff). We talked a good bit with Lafley about addressing customer desires, and he commented that businesses cannot wait for the consumer to express a need, but rather should predict needs before the customer even realizes them. One great example of this strategy is Apple under visionary leader Steve Jobs, which did a great job of generating products ahead of their time, such as iPods, iPads, and iPhones.

Lafley encourages employees to learn as much about the customer as possible. He even had some P&G staff live with consumers for a while to directly witness their interactions with products. They experienced firsthand how the customers used them and what needed to be changed! Lafley has also created labs where consumers are invited to come in and provide input. However, as he noted to us, customers sometimes have difficulty articulating why they do or don’t like a product, and it’s a leader’s job to seek this information out. With a culture of open communication and receptiveness to ideas, leaders can glean valuable information from staff and customer feedback.

Lafley also said that ideas are generally not the problem; rather, companies often have difficulties taking an idea from start to finish. We’ve often experienced the same problem in our companies—get a small group of creative individuals in a room and you can have lots of great ideas, but the most important thing is being able to actually do them! Thus, cultures must also have an execution element.

According to Lafley, a leader’s most pressing challenge is to get everyone working in the same direction in all of his seven key areas. When we asked what advice he would give today’s leaders to help them accomplish this goal, he said, “You have to see things as they are and not what you want them to be. You have to be transparent and open to suggestions and criticism. And the most important aspect of effective leaders is to LISTEN, LISTEN, and LISTEN.” We apply these wise words to our family of companies, and we believe that others can benefit from doing the same!

The bottom line: A.G. Lafley’s powerful leadership style incorporates both his own expertise and ideas shared with other business greats, and leaders in any organization can learn a great deal from him. To sum up what he believes are the keys to success, in a 2008 Forbes magazine article, Lafley said, “I believe that if we take care of our customers, if we create more customers, if we create loyal customers, and if we inspire our employees, the results are going to be fine.”

About the Authors: Our corporate and personal purpose is to “create opportunities to improve lives” by sharing our knowledge, experience, success, research, and mistakes.

Blake DuBose graduated from Newberry College Schools of Business and Psychology and is president of DuBose Web Group. View our published articles at www.duboseweb.com.

Mike DuBose has been in business since 1981, authored The Art of Building a Great Business, and is a field instructor with USC’s graduate school. He is the owner of four debt-free corporations, including Columbia Conference Center, Research Associates, and The Evaluation Group. Visit his nonprofit website www.mikedubose.com for a free copy of his book and other useful articles.

Katie Beck serves as Director of Communications for the DuBose family of companies. She graduated from the USC School of Journalism and Honors College.