VIP Speaker Series: A. G. Lafley, Procter & Gamble

bjbj Speaker: Hi everyone. My name's Eva Gulnick and I'm this year's VIP Distinguished Speaker
Series chair, and today we have Dean Thomas Gilligan of the McCombs School of Business
interviewing the chairman, former chairman, president and chief executive officer of Procter
and Gamble, A.G. Lafley. We'll begin tonight with a Q&A between Dean Gilligan and Mr. Lafley,
and then we'll open the floor to Q&A from the audience. As a reminder, today's event
will end promptly at 6:30, so we'd greatly appreciate it if you could refrain from leaving
early. Under Lafley's leadership from 2000 to 2010 Procter and Gamble focused on consumer-driven
innovation and consistent reliable sustainable growth. With Lafley at the helm, sales doubled,
profits quadrupled, and the company's market value increased by over $100 billion making
Procter and Gamble among the most valuable companies in the world. The portfolio of billion
dollar brands like Tide, Pampers, Olay and Gillette grew from 10 to 24. A.G. graduated
from the Hamilton College in 1969 and joined the U.S. Navy, and afterward he got his MBA
from the Harvard Business School and joined P&G in 1977. A.G. has been offered, honored
with some of the highest recognitions in business, including Chief Executive Magazine's CEO of
the year, the Peterson Award for business statesmanship. He also received the prestigious
Edison Achievement Award for innovation. A.G. is co-author of The Game Changer, and he,
which was selected as Business Week's top ten business books in 2010. A.G. also authored
the critically acclaimed article "What Only the CEO Can Do" published by Harvard Business
Review in May 2009. Please help me welcome Dean Gilligan and A.G. Lafley. Dean Gilligan:
Impressive audience. Thank you all for coming. A.G., thank you for coming. It's really an
honor for us to host you here at McCombs A.G. Lafley: My pleasure. Dean Gilligan: **** Texas.
A.G. Lafley: Wow, we have the volume up. Okay? Dean Gilligan: Loud echoes. Are we good, is
everybody good? All right. This conversation is really designed for the benefit of students.
We try to ask a lot of questions to get you to reminisce about some of the great learning
experiences in your life, both successful ones and unsuccessful ones in ways that we
hope our students can learn from it. So feel free to take my leading questions anywhere
you'd like if you would please. Tell us a little bit about some of the early jobs in
your life, some of the jobs that may have established some of the values and characteristics
or strategies that you use for the rest of your life in managing your career. A.G. Lafley:
Lemonade stands Dean Gilligan: Yeah. A.G. Lafley: newspaper delivery routes, you know,
piled up cans of peas at the local Grand Union store. I worked bending metal at a metal working
shop in Cicero, Illinois running punch presses and riveting machines. I loaded freight cars
at the Chicago Burling Saint Quincy Railroad in the night shift, and the one thing I learned
about that job is you already pick the biggest partner. A lot of heavy freight to be loaded
at night. But I think, you know, the point I'm trying to make is, you know, I always
worked and we didn't, I didn't have to work. Dean Gilligan: Mm hmm. A.G. Lafley: Okay?
I worked because I wanted some spending money, I worked for spending money and to pay for
part of my college because my father had four kids to get through, but I learned something
from every one of those jobs. I learned something about I think what I learned the most was,
you know, how to work with and how to work for people. Dean Gilligan: Did you ever get
fired from a job? A.G. Lafley: No, but I should have I'm sure. You know, I definitely should
have. I mean, the group in the class this afternoon asked about failures, and all this
will just be a headline that you may wanna pick up on later. In my view failure is not
the opposite of success. Failure is all about learning, and I would just urge you to fail
a lot, and I certainly did. And I see Gil Floyd in the front row over here. You know,
he knows even when we really got things going on innovation at P&G we were still failing
half the time. Dean Gilligan: Mm hmm. A.G. Lafley: So, you know, private enterprise is
about risk Dean Gilligan: Mm hmm. A.G. Lafley: and risk management, and risk is about failing,
and in my view failing's learning. So get out there, fail a lot and learn a lot. Dean
Gilligan: Since you started talking about P&G, let's segway into that. You had a very
successful run at P&G from as CEO and before that, we'll get into the before. As CEO what
do you think you were able to do that helped P&G outperform their peers during that period
of time and really change the nature of the organization? A.G. Lafley: Well, first of
all, you know, we had a very successful run at P&G and, you know, we was I think when
we started about 98,000 employees around the world and when we finished after the Gillette
acquisition we were probably, you know, north of 130,000 employees so you just don't get
it done in a big enterprise, you know, without every player on the team, you know, performing
every day. And by the way, that's just the P&G team. There were hundreds of thousands
of others in our customer and supplier networks, our partner networks, our innovation networks
etc. that were part of our success. So that's Point No. 1. Point No. 2 is I think we put
together a really good team. It wasn't just the team that was on board when I came on
board in the middle of 2000, but over the course of the next year or two, you know,
the ones that wanted to make the journey together, you know, sort of self-selected or I selected,
and anyway we just had a common vision. We had common goals and we got together and we
made a few choices that served us well, and that's probably the third thing I would mention.
We had a pretty good run because we had a pretty clear and choiceful strategy. We made
three decisions about where we were gonna play. We made two or three decisions about
how we were gonna try to win, and frankly we stuck with that strategy for a decade.
Dean Gilligan: Mm hmm. A.G. Lafley: And in my experience, especially, you know, this
last year working with Clayton Dubelier and Rice in private equity where we have 15 to
20 companies under management, and even at P&G, still many businesses, too many companies,
really don't have a strategy. They really aren't prepared to make a few choices, stick
to those choices and then put all their resources, people and money behind them. Dean Gilligan:
How did you go about selecting your leadership team? Did you have an idea of the three things
you wanna emphasize, and did you try to find leaders who were sympathetic to that or did
you choose A.G. Lafley: No. Well, I guess I'd say yes and yes. Dean Gilligan: Okay.
A.G. Lafley: Okay, to be fair. You know, I've been, I've been working in the company for
22 to 23 years when, you know, I really became the accidental chief executive, and so I had,
I had some idea Dean Gilligan: Mm hmm. A.G. Lafley: about what I thought, you know, would
work in our industry. But no, I wanted, I wanted brain power and leadership. Dean Gilligan:
Mm hmm. A.G. Lafley: And I wanted people with good judgment. Dean Gilligan: Mm hmm. A.G.
Lafley: And I wanted people with a lot of courage. You know, I didn't want yes persons.
Dean Gilligan: Mm hmm. A.G. Lafley: You know, I wanted people that would challenge, you
know, every decision and, and I think we got it and it's really important to have that.
Dean Gilligan: Mm hmm. A.G. Lafley: I think it's a little easier to get when things aren't
going well, and things were definitely not going well for our company in 2000, but it's
harder to get when things are going well and we tried to, you know, tried. I don't know,
you'd have to ask others how successful we were, but we tried to keep a culture of courage
going and we tried to, we tried to understand that the one thing we could count on in the
world was change, and we were either going to anticipate the changes and leave them,
influence them, or we were gonna become victims of the change. Dean Gilligan: Yeah. A.G. Lafley:
And, and I think that was one of the strongest characteristics of the leadership team, courage
and, and willingness to take on change. Dean Gilligan: Could you give us a couple of examples
of how you sustained a culture of courage at P&G 'cause in most organizations, right,
if you come up with a bad idea you get hammered. A.G. Lafley: Yeah, well, that's the first
thing you can't do Dean Gilligan: Yeah. A.G. Lafley: right, is get, you know, I can't think
of a single instance and, you know, maybe Alzheimer's is beginning to set in where,
you know, we fired anyone for failing. Dean Gilligan: Uh huh. A.G. Lafley: Okay, for a
business failure I can sure think of instances where we fired people for ethics issues, okay,
or for performance issues. All right? But we tried very hard to make sure that we learned
from the failures, and one I'll just give you two examples 'cause I think they're really
important. We knew that a big chunk of our growth was gonna be driven organically by
P&G-initiated brand, product and service innovation. That was gonna drive about two thirds to 80
percent of our growth, so we started keeping score. So we kept score of every innovation
and sort of what its batting average was and what its slugging percentage was, so did it,
you know, did it succeed at each stage of the innovation development process and ultimately
was it commercialized, and if it were commercialized how close did it come to creating the value,
you know, that we thought we could get from it. So when you start keeping score and then,
of everything, and you start shining a light on all the data transparently across 20 to
25 different businesses year after year after year, you know, people start to understand,
you know, how we're gonna operate, how we're gonna innovate Dean Gilligan: Mm hmm. A.G.
Lafley: you know, what is success and success is ****. We did exactly the same for acquisitions
and divestitures. We went back to 1970, we examined every acquisition and every divestiture
and we asked ourselves two questions. How many acquisitions delivered the cost of capital
or better, and how many actually delivered the original investment case or better. And
here are the numbers. Fewer than 30 percent of all the acquisitions made over those 30
plus years succeeded, even in the sense of barely delivering the cost of capital, so
70 plus percent failed. And on the innovation side when Gil and I started out, only 10 to
15 percent of the innovation was getting commercialized successfully. We moved that to 50 percent,
so we moved the innovation success rate from an industry average 15 percent to a P&G benchmark
of 50 percent, and we moved the acquisition success rate from under 30 to 60. Now, we
knew we were still gonna have a lot of failures. At 60 percent you're still failing 4 out of
10 times. At 50 percent you're still failing half the time. But that much improvement created
so much more value, and that's what was reflected Dean Gilligan: Mm hmm. A.G. Lafley: you know,
in the revenue numbers, the profit numbers, the cash numbers, and ultimately, you know,
the market capitalization. Dean Gilligan: P&G's one of the great global companies of
our time. You had some formative leadership opportunities in Asia I take it before you
became the CEO there. A.G. Lafley: ****. Dean Gilligan: What, could you say a little bit
about P&G's role in the global consumer markets business, consumer products business, and
can you tell us a little bit about how your experience is as a leader in the Asia market
conditioned the way you thought about running P&G when you became CEO? A.G. Lafley: Well,
I'd say the last two decades were the decades of real globalization for P&G, incredibly
important for the company. Today I'm guessing because I'm retired and I'm not, no longer
an insider, but I'm gonna guess that probably 60 plus percent of the business is done outside
of North America. Dean Gilligan: Mm hmm. A.G. Lafley: We more than doubled the amount of
business that was done in emerging markets in the last decade. We are the clear-cut leader.
I said to the class this afternoon we made a couple of simple choices in emerging markets.
We chose China first and Eastern Europe and Russia second long before anybody was even
talking about **** countries because they opened up all competitors at the same time,
right, the Berlin Wall went down at one time for everybody, **** opened up the **** Province
enterprise zones in 1988 at the same time for everybody, and we have far and away the
leading consumer businesses in those two emerging markets. So you know, longwinded answer but
the net of it is global markets are important because you have to, and our business is driven
by demographics and economics, you have to go where the babies are born, where the households
form, where the incomes are rising and where the economies are growing, and they're growing
a lot faster outside the U.S. and they're growing a lot faster particularly in emerging
markets. Second thing is we learned that our brands are globalizable. We learned that a
lot of consumer needs and wants are, are quite similar. Habits and practices may be different,
but needs and wants are actually quite similar for household products and personal care products,
and we learned that we could innovate successfully around the world and we now have major, you
know, innovation centers in all the major regions of the world. So yeah, global markets
are really important. Dean Gilligan: To segway back to what you were saying before, how much
of the global presence of P&G accounts for what you were able to do in terms of wrapping
up the rate of commercialization or the A.G. Lafley: Yeah. Dean Gilligan: success rates
in innovation? A.G. Lafley: These are gonna be a little bit out of date, but I think in
2010 I took the board through sort of a snapshot of the decade. Virtually all the growth, so
that doubling of sales, okay, quadrupling of profit, etc., it came in, it came from
three sources and they were all strategic choices. So about 30 percent of it came from
growth in our established core businesses. Dean Gilligan: Mm hmm. A.G. Lafley: Okay,
businesses, exciting businesses like laundry detergents and feminine hygiene and, you know,
hair care and businesses like that, so really core businesses. That was about a third of
it. Another about 30 percent came from our move into beauty and personal care. About
half of that was acquired and about half of it was organic, okay, acquired meaning, you
know, the acquisition of Clairol and Wella and Gillette, okay? Organic meaning we, you
know, built the Olay business ten times in that decade from 250 million to 2 billion.
And then the last chunk which was about 40 percent came from the move into emerging markets.
Dean Gilligan: Mm hmm. A.G. Lafley: So the beauty was the three were the play choices
we had made right from the core Dean Gilligan: Mm hmm. A.G. Lafley: extend into beauty and
personal care, accelerate into emerging markets starting with China, Russia and Eastern Europe
first, all ended up explaining all of the growth for the decade. Dean Gilligan: Did
your peers adopt similar strategic positions, 'cause they didn't have the same performance
over that decade. A.G. Lafley: Peers competitors? Dean Gilligan: Yeah. A.G. Lafley: Actually,
two of our competitors did quite well over that same decade. I think we were one of the
three top competitors out of 20 to 25 in our industry. Dean Gilligan: Mm hmm. A.G. Lafley:
But Reckitt Benckiser did very well. Dean Gilligan: Mm hmm. A.G. Lafley: And they were
actually on a different strategy. They were a smaller company that consolidated a couple
of acquisitions and then drove a lot of growth with acquisition in health and personal care
and then expanding some of their household care products globally. And the other company
that did quite well was Arm and Hammer, which is a small primarily U.S.-based primarily
North American company, and what they benefited from was the economy, right, so they sell
for the most product economy or value priced Dean Gilligan: Right. A.G. Lafley: you know,
brands and products and very basic industries, and that part of the category grew and they
grew with it. Dean Gilligan: In the latter part of the decade because A.G. Lafley: Those
were mostly in the second half of the decade. Dean Gilligan: I see, got it. A.G. Lafley:
Mostly in the second half of the decade. I mean, obviously the first, the commodity **** was
in 7, 8, but global financial crisis hit in 8. Dean Gilligan: Yeah. A.G. Lafley: Then
the global recession in 9, 10, so it was a good time to be in the economy part, in the
value part of the industry. Dean Gilligan: Yeah. What you were at P&G a long time? A.G.
Lafley: Thirty-three years almost. Dean Gilligan: Yeah. How did you between the time you started
and the time you left, how did, how would you characterize the chief evolution of the
company? How was it different when you left from what it was when you came? A.G. Lafley:
The company I joined in the mid-'70s was I think maybe $5 billion in sales. It was primarily
a U.S. and Canadian company. We had a small business in the UK, we had a small business
in the Philippines, we had a small business in Mexico, so it was a U.S.-based company.
The entire management team could easily fit around one table. The board could easily fit
around one table, they'd all have lunch together. Dean Gilligan: Mm hmm. A.G. Lafley: I mean,
it was, it was a relatively small company. It wasn't that long before I got there that
they would take a train to Chicago and the train to New York, you know, to visit the
advertising agency. Dean Gilligan: That's right. A.G. Lafley: So and sort of like when
I was a kid I went to school, walked uphill both ways for the snow, you know, that kind
of thing. But it was a very different, very different company. Dean Gilligan: Right. A.G.
Lafley: All of the management looked like me. Dean Gilligan: Mm hmm. A.G. Lafley: White
American male. Today the company looks like this audience. Dean Gilligan: Mm hmm. A.G.
Lafley: Okay? More than half the management is, doesn't carry a U.S. passport. Dean Gilligan:
Mm hmm. A.G. Lafley: I was telling the group earlier we lowered the median age of the management
by more than a decade Dean Gilligan: Mm hmm. A.G. Lafley: by simply moving aggressively
into emerging markets and by moving into the beauty and personal care industries, which
are much younger, younger industries than the industries that we were in, so a tremendous
amount of change. And by the way, I think, you know, you asked before what characterized
the leadership team, and I really do think it was, it was courage and it was openness
Dean Gilligan: Mm hmm. A.G. Lafley: and willingness to change, and I believe if you just go back
and look at a timeline from 2000 to 2010, you would be amazed at the events. I mean,
9/11, Enron, MCI WorldCom, Arthur Anderson disappears. When I got out of school there
was a big 8, today there's a big 4. Okay? I mean, you wouldn't believe the number of
companies that were just obliterated in this decade, the number of natural disasters in
this decade, okay, the number of fairly serious conflicts around the world in this decade.
So I don't think that's gonna change, and I think if you're a global company you're
gonna see a tremendous amount of change. You're gonna see more volatility, not less volatility.
You're gonna see more uncertainty, not less uncertainty. So you're going to have to be
very clear about what business you're in, where you're gonna play, where you're not
gonna play, how you're gonna win and not. You're gonna really have to build, build a
leadership in an organization that's very agile, very adaptable Dean Gilligan: Mm hmm.
A.G. Lafley: very close to the marketplace. Dean Gilligan: Yeah, I understand. It seems
to me the one thing that happened over your career at P&G is that expectations of corporate
performance with respect to responsibility, ethics, integrity and those things have grown
dramatically. How did you think about that when you were CEO of P&G? How did you think
about the corporate social responsibility of the company A.G. Lafley: Yeah. Dean Gilligan:
and how you managed that part of the ****? A.G. Lafley: I think one of the, one of the great
things about being at P&G is we are a purpose and values driven institution. The company
was run for the first 93 years by Procter or Gamble, so it was run by the family. The
family was very values oriented. In the '80s and again in the '90s, you know, my predecessors
sort of distilled the purpose down into I would say its simplest form as, you know,
all we do is create everyday household and personal care brands and products and services
that make everyday life a little bit better, you know, for women and now men and their
families. So you know, we knew our role. We thought our role was meaningful. We thought
we could help. We kept track of the number of households that we served and how well
we served them. And then we had five core values, integrity and trust, ownership and
leadership, passion for service and winning, and everybody knows them. You know them from
the day you recruit, you know them from the day you walk in the door. They're all over
the place, you talk about them. Dean Gilligan: Mm hmm. A.G. Lafley: And I can't tell you
how important that the trust in the ownership and the leadership are because you're working
with a lot of people who you don't really know. They're on your team but they're someplace
else in the world, so you know, you know the name Dean Gilligan: Mm hmm. A.G. Lafley: but
you've never met the person face to face, and when you're working on a project or an
initiative or an innovation or a piece of execution, you've gotta trust. It's like throwing
a blind pass in football or basketball. You can't see who's receiving the pass Dean Gilligan:
Mm hmm. A.G. Lafley: but it's gotta be a good pass 'cause then they've gotta, gotta do something
with it, and I think that's a really important part of our culture, the high trust level.
And then I think the ownership really matters. We are all owners. We don't have pensions.
We had the first profit sharing trust, so whether you are, you know, a new hourly worker
at one of our manufacturing sites, whether you're a technician, whether you're a supervisor
or a manager or whether you're an executive, you know, everybody is paid a significant
amount of their total compensation over a career in P&G stock. So you're very concerned
about how the company does. It's more of an ownership position. I think one of the reasons
why Warren Buffett was always comfortable being a leading shareholder is he knew we
were all owners. And then the last thing is this leadership culture. You know, we really
do expect the individual closest to the action to make, to take the decision Dean Gilligan:
Mm hmm. A.G. Lafley: and act with integrity Dean Gilligan: Right. A.G. Lafley: which simply
means doing the right thing. Dean Gilligan: Yeah. Has it been harder to spread these common
values or enforce these integrity standards? Has the leadership of the company and the
company itself become more geographically diverse? Does integrity mean the same thing
in all A.G. Lafley: Yeah. It's, the biggest challenge this is a great question and we
talked about it a little bit again earlier this afternoon. The basic human values transcend
cultures and countries and races and religions and languages, but you do have to have the
discussion about what does it mean, and you know, some cultures, you know, need, how shall
I say, more precision, okay, would prefer we don't have any policies about integrity.
Dean Gilligan: Mm hmm. A.G. Lafley: But everybody knows integrity means doing the right thing.
Everybody knows when the earthquake struck or the tsunami struck the first thing you
do is you take care of employees and their families, the second thing you do is you take
care of your customers and your suppliers, and the third thing you do is go out in the
community and take care of your fellow man. Dean Gilligan: Mm hmm. A.G. Lafley: Everybody
knows that. It just happens. We don't send nobody in Cincinnati says earthquake in, you
know, **** today, here's what you do. Dean Gilligan: Mm hmm. A.G. Lafley: And I remember,
I remember being interviewed by the Japanese media several times during the early stages.
They couldn't believe that we just started to move, you know, because it's so alien to
the way they work, you know, they would have to, you know, they would have to think it
through, have the policy in place and start to work it. Now, I will say I am really happy
that we had the Japanese culture. We had to put two or three manufacturing sites back
together, one of which was hit dead center Dean Gilligan: Mm hmm. A.G. Lafley: by the
earthquake, and it looked like nothing was happening in the first 30 days and we were
intricately planning every single move, so when those 20 or so paper machines got reinstalled,
you know, they went in like clockwork. So we try to build on the strengths of each culture,
but we try to build on the strengths of each culture around a common purpose and around
a common set of values. And yeah, it probably is a little, a little more work with a highly
diversified company, but I think the benefits are you get the richness of experience, the
richness of background, and frankly if you're gonna be an innovative company you've gotta
have the diversity or you won't get the innovation. Dean Gilligan: Yeah. I know in some of your
writings you've expressed some strong views about executive compensation. Can you share
some of those views and A.G. Lafley: Well, I'm on record in the Harvard Business Review.
I guess the simplest, without going into any of the gory details, and I was writing about
publicly held companies, okay? Dean Gilligan: Mm hmm. A.G. Lafley: Like our own. Yeah, I
think, I think the simplest way to think about it is they ought to be fair and reasonable,
they ought to be performance based, you ought to be paid over time, and you ought to be
paid like an owner. So that means that probably 90 to 95 percent of everything I earned in
33 years at P&G will be paid to me over the next 15 years in some form of P&G equity,
so I'm very much dependent on how well the company does over time. So I, you know, I'm
not managing for the quarter, I'm not managing for the year, I'm managing for the institution
to succeed, you know, long after I'm gone. And that's, that's the same way, you know,
everybody on the team managed. Dean Gilligan: Yeah. What's the best advice you were ever
given? A.G. Lafley: Wow. You know, I can't say it was explicit, but it was at least implicit
from my parents and it was, and we talked about this earlier, it was be yourself. Dean
Gilligan: Mm hmm. A.G. Lafley: And I would add to that the first step, which is know
yourself, really know yourself, and get comfortable with who you are and then, you know, commit
to make a difference, however you wanna make a difference, and then, and then have the
courage to be yourself. You will change, you know, every day of your life from now until
the day you die I hope and grow every one of those days, but the better you know yourself
I think the more comfortable you'll be with yourself and, you know, most people do a lot
better when they, when they play from who they are and their own value system and their
own strengths. Dean Gilligan: Yeah. What makes a person stand out to you? A.G. Lafley: Well,
in our, in our culture, which I think is Meritocracy, you know, you stand out by your contributions
and your results. Dean Gilligan: Mm hmm. A.G. Lafley: And the other thing that I'm, I have
to hasten to add, we're very much a team-oriented culture. When I was recruiting I would always
say if you're a bratty singles tennis player and you throw your racquet and cuss at the
referee, go work for somebody else. You know, you're not, it's not gonna work with us. You
can be a great individual, you can be Michael Jordan. Dean Gilligan: Mm hmm. A.G. Lafley:
Great individual player but also a great team player who's willing to play defense, whatever
it takes to win a championship. That's what we need. But there are very few jobs, very
few jobs in our company that are solo acts, so you've gotta be very comfortable, you've
gotta be very comfortable in a team setting, and you've gotta be very comfortable you're
gonna play on a lot of different teams Dean Gilligan: Mm hmm. A.G. Lafley: you know, over
the course of your development and growth. Dean Gilligan: Got it. Well, A.G., now is
the dangerous time, time for A.G. Lafley: Now we'll have some fun. Dean Gilligan: **** the
students are gonna ask some questions. If you have any questions, just cue up on one
of the microphones, there are microphones on either aisle, and just ask a question.
It will take a while for people to think of questions here. A.G. Lafley: Here we go. Do
you get a free beer if you ask Dean Gilligan: Yeah. A.G. Lafley: the first question or something
like that? Next Speaker: Yeah, obviously I'm first. My name's Jeff. I'm a fifth year MPA
student here. A.G. Lafley: Yeah. Next Speaker: My question is, as a McComb student there's
a pretty obvious encouragement to develop leadership skills here. You've been quoted
as saying keep it Sesame Street simple in terms of leadership methods. What are a few
tips that you have for us as we go through college and start our careers? A.G. Lafley:
Okay. Well, I think it's great that, that you are encouraged, okay, to I would argue
the way leadership develops is you get committed to something or you care about something and
you get involved and you wanna make a difference, you wanna make something a little better than
it is. And it generally starts out as relatively small things in your, you know, family, community,
school, whatever, neighborhood, and you sort of get the bug, you know, you realize that
you can add a little value and you can make a difference. Look, I think leaders come in
all different shapes, all different forms. I can't stand when I read articles or books
about style, it makes me crazy, okay? You know, I got feedback in my early years at
P&G that I wasn't, you know, I wasn't aggressive enough, I wasn't authoritative enough, I wasn't
one guy, this is no lie, who I, whom I really respect and I will not mention his name because
I understand we are recorded, but this is, this is I was six or seven years in the company
and I'm sitting at his desk one day and we're talking about something on the business, and
he reaches over and grabs my tie and, you know, pulls me like halfway across the desk
and says I wish you were meaner and tougher. And I said if you don't take your hand off
my tie, okay, and he let go of my tie, and so we talked for about an hour and I said
what do you care, why do you care how it gets done? Don't you just, what don't you like
about the results, you know, tell me what you don't like about the results, tell me
what you don't like about my performance. Don't tell me about my hairstyle, don't tell
me about how I dress, you know, don't tell me about any of that other stuff, it doesn't
matter. So the first thing I would say, I think that goes back to being yourself. Second
thing I will say is I really do believe leadership can be learned. We try to teach it, okay,
in our general manager college a bit and in executive leadership. It's not rocket science.
We think there are sort of five elements. I'm happy to share them with you, they aren't
a great secret, okay, but you can think about them conceptually and think about whether
they make sense. But if you think about leaders, whether you think about political leaders
or, you know, military leaders or, you know, leaders in music or leaders wherever, they
tend to be good when, and this will be easy to remember, it's a pneumonic with five Es,
okay, they tend to be good at envisioning, so they tend to be able to see things that
others don't see or see things in a way that's a little bit different, okay, that's motivational
and inspirational. They tend to be able to empower and enable, and that's different.
Empower is sort of about motivation, enable is about giving the people the capabilities
and skills they need, more like teaching and training. They tend to engage, okay, so it's
hard to be a hermit, okay, and be an effective leader. Okay? And lastly, they execute. You
know, they don't just talk about it, they get it done. Okay? One of the things I learned
from Steven Cubby was this whole idea about if you really wanna learn something it's called
three person or three-step learning, you know, you, you, you, you demonstrate that you understand
it, which is mostly what you do in class, then you demonstrate that you can teach it,
okay, that's the next phase, and lastly you demonstrate that you can do it. Okay? And
that's the ultimate. So, you know, sort of a longwinded way of saying, you know, stay
at it if you're listen, if I had to say there was what's the biggest shortage over the last
ten years? Leadership. You know, look around. Do we have a more obvious fiscal budget crisis?
Hey, you guys are gonna get stuck with this thing. It's my generation that's gonna eat
up all of that Social Security and Medicare money, right? So, and there's some, and we
just had two incredibly talented commissions go away and come back and pretty much recommend
the same set of initiatives, and nobody's moving on it. I mean, we can't all be asleep
here. This is the biggest moose on the table I've ever seen, but and it will be interesting
to see if we come to grips with it, and I certainly hope we do. That's the end. I will
not make any other political comments. By the way, that's not a political comment. There's
a lack of leadership to go around on all sides of that one. Dean Gilligan: Good question.
A.G. Lafley: Yes sir? The blue shirts are active here early. Next Speaker: Hi there.
Thanks for coming again. My name is Joe and I'm a senior **** management major. A.G. Lafley:
Yeah. Next Speaker: I wanted to ask you about your rise to CEO. Did you always aspire to
be it or did it just happen? A.G. Lafley: No, it just happened. That's the truth. I
was not if we had had a normal cycle, there is no way I would have been the chief executive
of the Procter and Gamble company, which is probably, you know, I just, I just sent an
article in to the Harvard Business Review on succession and leadership development,
and one of the things I believe that a strong institution has people ready to go. You know,
if we had had a crisis, if, you know, God forbid a plane had gone down with several
of us on it, and it could have, okay, that, within 60 seconds of the announcement of our
death, okay, our successors were identified and ready to go. You know, we really tried
to set up a system where we were three deep at every major position, and we didn't start
out there. We didn't start out there, but that's where we're trying to get. But no,
you, I never even thought about the next job before somebody was talking to me about the
next job. What I mean by that is I was always still trying to figure out how to improve,
okay, the business I was responsible for when somebody came to me and said hey would you
do, you know, whatever next. So I can honestly say I was always, I was always surprised that
they were moving me, you know, I still felt like I had plenty to do, you know, in the
job I was sitting in. Dean Gilligan: That's interesting you said. We had **** here about
six months ago and she flat out gave the following advice, do your current job, don't worry about
the next job, you know, it will all come to you. Next Speaker: My name is ****. I would
like you to ask two related questions. Dean Gilligan: Sure. Next Speaker: The first one
is in your opinion what's, what's success in life, and secondly, what's the key for
that success? A.G. Lafley: Wow. Dean Gilligan: We could start chanting. A.G. Lafley: I think
there are two elements, okay, for me. One is that whatever I did, okay, I was going
to be a teacher at one time, okay, I even thought about, believe it or not, being a
basketball coach at one time. So whatever I did I wanted to make a meaningful I wanted
to be, I wanted to become a master at it and I wanted to make a meaningful contribution,
however that's measured. Okay? So that's Point No. 1. And then I think the other part of
it, the other two parts of it are I wanted to, I always wanted to feel like I didn't
hold anything back, that I left it all, you know, I left it all in the game. All right?
That's just the kind of person I am, all right, so I'm only answering for me, all right? But
if I'd been in a situation where we didn't do as well as I had hoped or thought we could,
and then if I looked in the mirror and said, you know, maybe you didn't give it your all
or you didn't do everything that you could have, then I would feel bad. And then the
last thing is you have to find something, I think, that you really enjoy doing. I mean,
I never, I never thought about, you know, I don't know, I was always eager to get to
work to get into the work, to get involved in the work, to be with the people that I
worked with, whether they were inside or outside the company. So for me, honestly 33 years
went by like that, I mean, just like that. So those would be, you know, the things that
but it wasn't, it was never about the title or the position. It was certainly never about
the money. When I got out of college I thought $20,000.00 would be one hell of a salary.
I'm serious, okay, and that was in 1969. You know, you can't even pay for your Starbucks
and your game toys for $20,000.00 these days. So it really was never about the money. You
know, I always felt like the company, you know, overpaid me. So I really think it had
to do with I wanted to make, I wanted to be part of a team that was a winning team that
made a meaningful contribution. I wanted to give it my all and I wanted to be really,
I wanted to have fun doing it. Okay? That's it, that's me. The blue shirts are now leading
3-0. Dean Gilligan: Another one. A.G. Lafley: Here we go. Dean Gilligan: It's kind of dark
blue. Next Speaker: Well, it's 3-1 for black. Okay. So my name is Billy, I'm a freshman
business major. I was just wondering, you said at the very beginning that we should
fail as much as possible, and so I was wondering what was your biggest failure and how did
you sort of bounce back? A.G. Lafley: Yeah, yeah. I had so many, where do we begin. I'll
go backwards in time, all right? On the business side I would say the biggest failure probably
I think we missed one acquisition and I think we missed another swap that would have been
really big for P&G. You know, we got Gillette, which was far and away the most transformational
acquisition in our history, but we missed another one where I was very much involved
in the negotiation. We had the majority shareholder verbally committed, but we had two minority
shareholders and we could not get ironically the smallest shareholder on side, and you
know, at the end, so it was incredibly ironic because we had enough shares to carry the
deal if we wanted to go hostile, which we don't like to do, okay, and we didn't do.
But that was a shame, okay, that was a shame because we had the majority shareholder, we
had the second biggest shareholder probably at best neutral, and it was a minority shareholder
who upset the deal, and we would have had another major global business, okay, overnight
that we would have, would have been a platform for innovation for us. The second one also
in the acquisition vein and, you know, Gil will probably remember this one, but we were
trying to build a healthcare business. We were trying to build a prescription drug business,
an over-the-counter drug business and a non-regulated consumer healthcare product business, and,
and we had a chance to we had, sorry, we had successfully switched Aleve as an analgesic
a decade or so prior and were successful. We had just switched Prilosec, okay, which
ended up being the second biggest over-the-counter switch ever after only Tylenol. And we had
a chance at another prescription drug that was switching, but the owner of the product
didn't want to just sell it outright or license it outright. They wanted to swap for other
assets, and so we proposed trading a prescription drug that was in the final stages of qualification
called Phase 3 trials, and without going into all the gory details and being a Monday morning
quarterback so I know how it came out, that prescription, that switch would have been
the third most successful switch in U.S. history, and we would have done better than the company
that switched it. And the prescription drug made it through the Phase 3 trial, but it
ended up being a smaller asset than we were hoping for at the time. But we had an incredibly
spirited debate between all of the relevant and important players inside P&G, so the people
in the healthcare business, Gil and the R&D team, members of the board, and we decided
in the end, you know, not to do the switch. So those were two. In the book The Game Changer
there's a whole page, 11, there were hundreds I was involved in, but the 11 biggest failures.
Some of them lost over $50 million, Fit, Fruit and Vegetable Wash, Dry Owl, you know, at
home in the dryer dry cleaning, you know, on, on, on. I'm not gonna mention names, but
I made a lot of mistakes, you know, with people, you know, so you don't always put the right
person in the right position, and it's not his or her fault. You know, you have been
playing out of position or for whatever reason they did really well in the last assignment
and they don't, you know, they don't make the turn to the next one. And you know, on
the personal side, you know, my, I got married at 22 after four months in graduate school,
and that marriage lasted 36 years and then my wife took off. No more P&G, no more CEO,
no more nothing, okay, so that's a fairly big personal failure in life, right? I have
a great relationship with my two boys and, you know, I've put my personal life back together
and I have a great relationship, you know, now with another woman who's my partner, okay?
But when you're in the middle of everything that I was in the middle of and all of a sudden
somebody you've been with for that long, you know, decides you're not the right guy, it's
a little tough, you know, and you start looking at, you know, what did you do, what could
you have done differently. You know, to the question that I got earlier, you know, I was
doing a lot of Monday morning quarterbacking of, you know, what could have I done differently
or better. So yeah, those are, those are just a few. You want me to keep going? I have a
lot of others. Next Speaker: That's okay. A.G. Lafley: I never became the college basketball
player I wanted to become. I was too small, too slow. Next Speaker: All right. Thank you.
A.G. Lafley: Okay. Yes? Next Speaker: My name is Bargov. I'm a third year finance student
at UT. A.G. Lafley: Yeah. Next Speaker: So my question for you is how specifically would,
in the past decade with Procter and Gamble, did you go about managing change for products
that had a certain brand equity in the U.S. and then when P&G decided to push very big
in globalization had to assume a different brand equity in different countries and how
you managed those products, how you managed people to create different brand equities
for those products. A.G. Lafley: Yeah. Do you have a specific brand or category in mind
or is this Next Speaker: I was A.G. Lafley: a general que because the reason why I ask
is you, you ask an incredibly important question about branding, and I guess maybe if I could
try it this way. The brands we were most interested in developing and growing were the ones where
the equity translated and transferred across countries and cultures, okay? And some of
those are, you know, Pampers, Pantene, Olay interestingly, okay. Some of the other businesses
we were able to grow actually had more local and regional brands. Not surprisingly, the
laundry detergent industry is an industry of local brands, okay, a lot of very country-specific
brands. So our strategy there was we were defacto, you know, with about roughly a 30
plus worldwide share. We were defacto, the leader of the worldwide laundry detergent
business. So we took the assets we had, the brand assets we had, the equities we had,
we sort of separated out the strongest ones, and then we tried to run our global product
technology and innovation program, you know, as much as we could on a global basis so we'd
share the new material science, we'd share the new formulations, we'd share the new,
the new product design, the new packaging design, but we might execute and leverage
it through the **** brand in Europe, the Tide brand in the U.S., and another brand in Latin
America for example, okay? But clearly, for a company like Procter and Gamble, a brand
business has to have a certain size and scale for it really to make sense, for it really
to make sense. When we were a $5 billion company, that size and scale was smaller than when
you're an $80 billion company. That's why it was so important to create and build those
franchises that were $1 to $8 billion, you know, in revenue. Does that begin to get at
your question? Next Speaker: Yeah, and I was actually thinking specifically of detergent,
so A.G. Lafley: Yeah. Next Speaker: that really got it. Thanks. A.G. Lafley: Okay, good. Thank
you. Yes sir. Next Speaker: Hi. My name is Jay, I'm a freshman business major. A.G. Lafley:
Yeah. Next Speaker: You talk a lot about innovation and I think innovation and change kind of
goes hand in hand, so how do you identify the need for change and innovation and then
how do you execute upon that? A.G. Lafley: Okay. Very broad questions. I think, I think
what well, there are sort of three sources, you know, broadly of innovation. There's,
you know, an idea, what if, right, what if we could do this, what if it were possible
to do this. There's a new technology that doesn't have current industry application
that you wanna see if it has, you know, industry application. And then there's what I would
call an unmet consumer need or a job, you know, to use Clayton Christianson's language,
a job to be done that's not getting done, okay, for a customer or consumer. And I think
one of the things that distinguished our research and development team, frankly our consumer
research, design research and development and marketing teams, was that we did a pretty
good job of connecting all three. So we could take as a starting point the unmet consumer
need or the job to be done that wasn't getting done, or we could take as a starting point,
you know, what if we could do this technically, or we could take as a starting point a new
technology. But we never had a commercial success until we, we connected that consumer
need with what I would call the innovation what's possible side of it, and that's, you
know, that's what we made a living on. You know, we made a living on understanding that,
you know, little but important things, you know, we made a living on, you know, understanding
about hair care. We were nowhere in the hair care business and the breakthrough, the initial
breakthrough for us was the ability to condition and treat in a shampoo, in one product, and
then, you know, we built out technologies on both sides of that. We, you know, we started
out in laundry detergents when the market moved from soap-based products to synthetic-based
products. When the market moved to automatic washing machines, you know, we formulated
for the technology changes and we sort of rode, you know, rode the change all the way.
So you know, you're right, change and innovation, you know, go together. It's easy to say it's
an easy conceptual link, but it's extraordinarily hard to do to find those unmet needs because
a lot of times they're not articulated. You know, you can't tell me what you want. I wish
you could. I really wish you could. If we give you a stimulus, if we put some type of
prototype, if we put an idea in front of you, you can say oh, yeah, I'd like to try that,
but you can't tell me what you want. So a lot of times where we're struggling to discern
unarticulated needs and we're struggling to put together technologies and formulations
that sort of have never been done before 'cause that's where the real breakthroughs come from.
Dean Gilligan: Time for one more question. Gary? Next Speaker: I'm Gary Hoover. I've
been following your company since I was 12 years old in 1963. A.G. Lafley: That's longer
than I have. Next Speaker: I know. I've been at it a while. Anyhow, and it was great to
see you bring the company back over that time period, but there have been times when it
didn't do so great. If I was gonna be concerned about something about Procter and Gamble going
forward, what are the risks, what might, you know, cause this great company to come off
the track again? A.G. Lafley: Well, I think that, I think on the positive side when you're,
let's see, when we were founded in 1837, it's now 2011, so one of the financial wizards
can do the math for us real quickly here, but that's, you know Next Speaker: It's a
long time. A.G. Lafley: It's a long time, right? It's, and through a lot of words and
a lot of external volatility and all the rest of it, I think on the positive side we have
a pretty good track record for resilience, okay? And I think on the positive side the
combination of on the one hand staying purpose and values focused, understanding our core
strengths and staying focused on our core strengths, consumer understanding, innovation
and branding, the way we work with partners and go to market and then our global scale
have served us well. I think on the risk side, you know, one of the biggest risks of success
is success, and you know, the leadership team knows this. Somebody mentioned that, earlier
that they saw my last talk to the leadership council. You know, what I talked about was,
you know, be careful, you know, when you're successful because you start to get internally
focused, you start to not pay as careful and close attention to your consumers, your customers
and suppliers, your partners, your competitors, your critics, okay? And all of those outside
stakeholders are giving you gifts every day, and the gift often comes in a form that's
not that pleasant. You know, I have far more out of reading consumer complaints than I
ever did out of reading consumer testimonials, you know. I got far more out of a conversation
with a customer who was upset with us, whose expectations we weren't meeting, than I did
with a customer who wanted to tell me that everything was great. I got far more, you
know, out of a conversation, you know, with a Chinese or an Indian or a Brazilian or whatever
regulator or government official who wanted us to do better. So I think that's, that's
always the risk when things are going well is that you get a little too comfortable.
You might get, I hope not, complacent. You might get a little too internally focused
and you don't stay connected to all the change that's going on with the external stakeholders
that you're trying to create value with. Next Speaker: All right. Thank you. Dean Gilligan:
I have to call Eva back up for a short presentation. Next Speaker: Thank you, Dean Gilligan, and
thank you, Mr. Lafley. I know all of us very much appreciate the time that you took to
come here today, and we all have something, we were all probably able to take something
from what you've told us. So now as a token of our appreciation we'd like to present you
with this personalized Stetson cowboy hat from the Undergraduates Business Council.
A.G. Lafley: Oh my goodness. ****. Next Speaker: **** picture. A.G. Lafley: All right, I'll
do it. All right. You know, I never was the guy in the black hat. Next Speaker: Well,
now you can be. A.G. Lafley: Until now. Thank you very much. Next Speaker: Yes, thank you.
A.G. Lafley: Thank you so much. Next Speaker: So we'd also like to thank the Undergraduate
Business Council, the Office of Student Life, and the Procter and Gamble team for making
this event possible. And our next VIP speaker will be Ann Mulcahey of the former chairwoman
and CEO of Xerox, and that will be on March 1. Then we have John Mackey, the CEO of Whole
Foods on March 24. And lastly, we will be joined by Mr. T. Boone Pickens on April 18.
So all of this information can be found on texasbusinesscouncil.com in the McCombs web
site. Thank you. A.G. Lafley: Thank you. SpeakWrite www.speak-write.com Job Number: 11048-001
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