A. G. Lafley
1947–

President, chief executive officer, and chairman, Procter & Gamble

Nationality: American.

Born: June 13, 1947, in Keene, New Hampshire.

Education: Hamilton College, BA, 1969; Harvard Business School, MBA, 1977.

Family: Married Margaret (maiden name unknown); children: two.

Career: Procter & Gamble (P&G), 1977–1978, brand assistant for Joy; 1978–1980, assistant brand manager for Tide; 1980–1981, brand manager for Dawn and Ivory Snow; 1981–1982, brand manager on special assignment and for Ivory Snow; 1982–1983, brand manager for Cheer; 1983–1986, associate advertising manager for PS&D Division; 1986–1988, advertising manager for PS&D Division; 1988–1991, general manager of laundry products for PS&D Division; 1991–1992, vice president for laundry and cleaning products; 1992–1994, group vice president for P&G and president of laundry and cleaning products; 1994–1995, group vice president and president of P&G Asia; 1995–1998, executive vice president of P&G and president of P&G Asia; 1998–1999, executive vice president of P&G and president of P&G North America; 1999–2000, president of Global Beauty Care and P&G North America; 2000–2002, president and chief executive officer; 2002–, president, chief executive officer, and chairman.

Awards: Public Service Award, Advertising Council of New York, 2003.

Address: Procter & Gamble Company, 1 Procter and Gamble Plaza, Cincinnati, Ohio 45202–3315; http://www.pg.com.

■ Few observers were surprised when Alan G. Lafley—known as "A.G."–was named president and chief executive officer of the Procter & Gamble Company (P&G) in June 2000. Like most P&G executives, Lafley had spent his entire career working his way up the corporate ladder at the largest household- and consumer-products company in the United States.

He was heir apparent to CEO Durk Jager, whose tenure as company head lasted only 17 months. Jager's shake-up of the huge, stodgy conglomerate had alienated employees and led to falling profits and share price. As CEO, Lafley revolutionized P&G to a much greater extent than Jager had intended. Lafley restored the company's financial health by means of his simple, back-to-basics management.

LEARNED MARKETING IN THE NAVY

Alan George Lafley was born on June 13, 1947, in Keene, New Hampshire, where his French-Canadian ancestors had settled in the mid-nineteenth century. Lafley's father was a human resources manager at General Electric and Chase Manhattan Bank. His mother was a housewife devoted to raising Lafley and his three sisters. Lafley graduated from Hamilton College, in upstate New York, in 1969, after having spent his junior year at the Sorbonne in Paris. He began doctoral work in medieval and Renaissance history at the University of Virginia, leaving after only one semester to join the U.S. Navy in order to avoid being drafted into the army.

Between 1970 and 1975 Lafley worked as a naval-supply officer, running a department store for military personnel in Japan during the Vietnam War. He later credited his navy experience with teaching him that no matter how complex a business appeared to be, it had a core unit that was responsible for most of the cash and most of the profits. Following his discharge, Lafley earned an MBA at Harvard Business School.

JOINED P&G

When Lafley entered marketing at P&G in 1977 as a brand assistant for Joy dishwashing liquid, he was worried. An ambitious man, he hoped to make it to the top of the company, but he was starting at an older age than most of his colleagues.

P&G—founded in 1837 by William Procter, a candle maker, and James Gamble, a soap maker—was an integral part of American culture. In the 1880s it was the first company to advertise nationwide. In the 1930s P&G invented the radio soap opera as an advertising vehicle. The company produced a multitude of consumer goods, from beauty and personal care products to household cleansers and food. It had a brand-name management structure, with teams representing each brand competing against one another. Headquartered in the relatively small city of Cincinnati, P&G had a closed and insular corporate structure that always promoted from within the company. Most "proctoids" spent their entire careers with P&G.

Although Lafley earned steady promotions, as did his coworkers, he eventually wanted to run a company. During the 1980s Lafley quit P&G twice in one year, only to be talked into coming back. According to a BusinessWeek story (July 7, 2003), on the second occasion Lafley had accepted a consulting job in Connecticut. John Smale, then CEO of P&G, made no promises but told Lafley that "we thought there was no limit on where he was going to go."

MADE HIS NAME WITH LIQUID TIDE

Lafley's successful launch of Liquid Tide and Tide with Bleach, which became two of P&G's biggest products, enabled him to deliver record sales and profits. He also oversaw the failed launch of Physique, an expensive shampoo. During the 1990s Lafley headed P&G's Asian operations. It was a period of major currency and economic upheaval in the region. Nevertheless, Lafley increased P&G's Chinese business from $90 million to almost $1 billion and revived its Japanese cosmetics market. Some observers viewed his actions in the wake of the 1994 Kobe earthquake as near-heroic.

While living in Japan, Lafley came to realize that P&G truly was insulated and out of touch with its global markets. He told Forbes (July 8, 2002): "Executives in the U.S. were buried under consumer research data…. I don't think the answers are just in numbers. You have to get out and look." Since there was almost no reliable Japanese market research, Lafley began visiting stores and homes. He discovered that Japanese women hated P&G's Max Factor brand, finding it foreign and brash. So he refocused P&G's Japanese business on cosmetics and turned SK-II, a $150 skin-care cream, into Japan's number-one brand.

When Lafley returned to Cincinnati in 1999 as president of Global Beauty Care and of P&G's North American marketing organization, many observers believed that he was being groomed for the top job. Lafley laid down a new strategy for building the global beauty business. Under his direction the North American business achieved record net sales.

BACK TO BASICS

Until the 1990s P&G had doubled in size every decade. However, it took $400 million in new sales to grow a $40 billion company by just 1 percent. P&G brands were losing market share, and the company's stock dropped sharply. When the tough and aggressive Jager became CEO in 1998, he had orders to turn the company around. The speed with which he tried to implement change worsened the situation. Profits and employee morale plummeted. The board quickly replaced Jager with Lafley.

For years Lafley had been thinking about how to fix P&G. He had worked closely with Jager to refashion the company, and he continued to implement many of the major changes that Jager had initiated. To a large extent, the difference was one of personal style. Conceding that they had moved too fast under Jager, Lafley's first priority was to restore morale and putan end to the internal chaos. He told Katrina Brooker of Fortune (September 16, 2002): "I had to come up with something quickly to get people focused. I didn't want everyone sitting around worrying that our stock price had dropped in half."

Lafley's amazingly simple plan was ready in just days. P&G would return to what it had always done best: sell more of its popular brands, like Tide and Pampers disposable diapers. This contrasted with the turn-of-the-century corporate world's focus on new products, acquisitions, and mergers. P&G's 10 best-selling products became Lafley's priority. Individually, these products accounted for over $1 billion in annual sales, and collectively they represented more than half of P&G's total revenues.

FOCUSED ON MARKETING

P&G had been thinking up new ways to sell Tide since 1946. Lafley promoted successful "new and improved" versions of classic P&G brands, including Tide, Charmin toilet paper, and Folgers coffee. Product packaging changed dramatically. Lafley worked closely with large chains, such as Wal Mart, on eye-catching store displays.

Lafley told managers in the struggling hair-care products division to concentrate on Pantene, P&G's major shampoo brand. The types of shampoo were redirected toward the appearance of hair, such as curly or straight, rather than oily, normal, or dry hair. The bottle's shape and cap changed, and each formulation got its own bottle color. P&G persuaded retailers to group the shampoos together, and new marketing materials were added to store shelves. Pantene's sales increased by 8 percent in the fiscal year ending June 2002.

P&G marketers distributed to sweating commuters in sub way stations, airports, and other venues free samples of Olay Daily Facial cleansing cloths. The cosmetics division introduced Tiny Tries, small samples that cost teenagers just over $1. The company set up bone-density screenings in chain stores to market Actonel, a prescription medicine for osteoporosis. Lafley promoted brand-name extensions, including Pampers baby clothes and Old Spice body spray. By reducing test-marketing, Lafley cut the average time from laboratory to market from three years to 18 months. He also lowered the price of some name-brand products.

Within one year P&G was hit with four false-advertising complaints from competitors. It was sued by Georgia-Pacific (G-P) for unfair comparisons between P&G's Bounty and G-P's Brawny paper towels. A U.S. District Court in New York ordered P&G to modify its advertisements for Prilosec, its over-the-counter (OTC) heartburn medication.

Many analysts believed that Lafley's ethnographic approach to market research was a major factor in his success. Borrowing anthropological techniques, his researchers conducted on-site interviews with consumers and spent hours observing how P&G products were used. The 2002 Forbes story described Lafley's home visits, in which he introduced himself as Alan George and said he worked for a product-research company. He sometimes stayed for hours, making friendly conversation and asking consumers where they shopped and what they bought. Lafley told Forbes : "Too much time was being spent inside Procter & Gamble and not enough outside…. I am a broken record when it comes to saying, 'We have to focus on the consumer.'" Such methods began to change P&G's image from insular and arrogant to responsive to consumers' needs.

BOUGHT INNOVATION

Lafley cut Jager's list of products under development from more than 50 to 12. He wanted to find and push the few products that would become best sellers. In the past P&G had always developed its own products. In 2004 Lafley increased outside product innovation from 10 to 35 percent. He reacted to Kimberly-Clark's introduction of moist toilet paper by buying a company that produced a similar product. Lafley told Patricia Sellers at Fortune (May 31, 2004): "Inventors are evenly distributed in the population, and we're as likely to find invention in a garage as in our labs."

Lafley took on P&G's competitors, including Clorox, Kimberly-Clark, Gillette, and Colgate-Palmolive. Crest oral hygiene products and Iams pet foods joined P&G's billion-dollar list. Four inventors at a small Cleveland-area company developed a battery-operated toothbrush that could be sold at a profit for $6 at a time when most electric toothbrushes cost at least $50. Lafley bought the company for $1.5 million. The new Crest Spinbrush generated $200 million in annual sales. The introduction of teeth-brightening Whitestrips also proved a great success for Crest. Lafley decided to introduce a less expensive Crest toothpaste formula for sale in China.

Lafley moved Iams, previously sold only in pet food stores and through veterinarians, into 25,000 mass-retail outlets in one night, increasing its distribution by almost 50 percent. Subsequently, the company developed numerous new Iams products, all aimed at increasing pets' life spans. Iams became the number-one brand of pet food and moved into magnetic resonance imaging (MRI) for pets as well as pet health insurance.

MOVED INTO BEAUTY PRODUCTS AND PHARMACEUTICALS

Lafley moved P&G into the high-margin—but risky—beauty products and pharmaceutical businesses. Although some analysts were skeptical, others approved, since these markets grew at a much faster rate than such commodities as diapers or laundry detergent.

Olay cleansing cloths and Regenerist antiaging creams turned the brand into a billion-dollar business. Within a year of its introduction, Olay Regenerist was the number-one antiaging moisturizer in the country. The U.S. introduction of SK-II, sold exclusively at Saks department stores, moved P&G into high-end cosmetics.

Lafley paid $5 billion for Clairol's hair-care business, with its huge global teenage market for hair coloring. Representing P&G's largest acquisition, in March 2003 Lafley bought Wella—a rapidly growing German hair-care and beauty products company—for $6.9 billion, with plans to market its products globally.

Some analysts believed that Lafley's entrance into the pharmaceutical market—with a relatively small, billion-dollar business—was risky, since the product cycles for drugs were very different from consumer-product cycles. They believed that Lafley should have stuck with OTC remedies and helped bigger pharmaceutical companies launch OTC versions of their drugs, as he had done with Astra Zeneca's Prilosec. However, other analysts estimated that by 2010 health care and beauty products might account for 40 percent of P&G's annual sales.

COST-CUTTING AND RESTRUCTURING

Lafley turned P&G into a much more flexible company. He licensed out some of its technological innovations and formed a partnership with Clorox—the first time that P&G had ever worked with a competitor.

Under Jager, costs at P&G had spun out of control. Lafley eliminated 9,600 jobs, shut down unpromising projects, and pulled failures from the market. He sold off Jif peanut butter and Crisco shortening. These measures saved P&G $2 billion. He also cut capital and R&D spending back to the levels of P&G's competitors.

Lafley outsourced $1 billion a year in services. In April 2003 he outsourced all bar soap production—including Ivory, P&G's longest-surviving brand—to a Canadian contractor. In May 2003 he outsourced P&G's information-technology operations to Hewlett-Packard. The majority of outsourced P&G employees moved to the new contractors. Lafley accelerated the corporate restructuring begun under Jager. P&G was reconfigured from a country- and region-based organization into five global product divisions: fabric and home care; baby, feminine, and family care; health care; food and beverage; and beauty products.

Lafley told BusinessWeek (July 7, 2003): "I am worried that I will ask the organization to change ahead of its understanding, capability, and commitment." Although he retained P&G's promote-from-within policy, many of Lafley's new managers came from overseas units. He moved women into top positions, passing over men with more seniority. He fired underperformers, turning over almost half of P&G's top management in his first two years. Lafley also was the first P&G CEO to grant access to the press.

MANAGEMENT STYLE

Lafley claimed that P&G's over 100,000 employees in more than 80 countries accepted his changes because the company was in a crisis. Others credited Lafley's personality for his success. He was soft-spoken, easygoing, and down-to-earth. He was calm and quiet, direct, decisive, and tough. Lafley made decisions by asking lots of questions and listening attentively, and he stuck to his decisions once he had made them. Where Jager had bullied, Lafley was soothing and persuasive. He was a hands-on manager who walked the aisles of super-stores, studying the shelves and asking detailed questions. He was approachable, giving everyone a fair hearing, and not averse to receiving bad news.

Fortune (September 16, 2002) characterized Lafley as "Un-CEO"-like—at least for the turn of the 21st century. He did not present visions or promise more than he could deliver. He thought of himself as a company employee. Katrina Brooker wrote in Fortune : "He's the type of guy who gets excited in the mop aisle of a grocery store." Patricia Sellers, also writing in Fortune (May 31, 2004), called him "a low-key guy with a Mister Rogers demeanor."

Lafley had a long-standing reputation for delegating responsibility. In the past, every move by a P&G manager had to be described in a one-page memo. According to BusinessWeek, (July 7, 2002), Lafley preferred slogans such as "the consumer is boss." "The first moment of truth" occurred when the consumer saw the product on the store shelf. "The second moment of truth" occurred when the consumer used the product at home. Lafley told BusinessWeek : "A lot of what we have done is make things simple because the difficulty is making sure everybody knows what the goal is and how to get there." Lafley told Sellers at Fortune : "There is a lot of jargon. But we have to find things that are simple for 100,000 people to understand. And more than half my organization doesn't have English as a first language. So it's intentional."

Lafley was known as a consensus builder. When P&G began considering outsourcing, Lafley had various teams come before the board to vigorously debate the issue. Some company insiders said that Lafley created a team culture at a company known for executive rivalry, while others maintained that for the first time he fostered competition within P&G's staid corporate culture. At quarterly meetings, called the Global Leadership Council, Lafley revealed the financial results of each senior manager to everyone present. He told Fortune (September 16, 2002): "In the Navy they compete on everything. They'd make you do push-ups and rank you by who did the most. It's very effective: They always pushed you to do better…. It mo tivates people who are performance-oriented. For the few people that it doesn't motivate, we are probably not the right place." Lafley spent most Sunday evenings with the head of human resources, analyzing managerial performance, and he was known for nurturing talented executives.

RENOVATED CORPORATE HEADQUARTERS

Lafley's decision to renovate P&G's executive offices came to symbolize the company's transformation. The oak-paneled walls and executive dining room were removed; the 19th-century oil paintings were donated to Cincinnati's art museum. He sent 11 division heads back to their teams. Half of the floor was turned into open office space for Lafley and his top executives. The remainder became a leadership-training center for P&G managers from around the world.

In the midst of a worldwide economic slowdown and after a $320-million loss in the fiscal year ending June 2001, Lafley turned P&G around. Between 2002 and 2004, in an industry in which half of all new products failed within a year, P&G increased its hit rate for new products (those with returns greater than capital costs) from 70 to 90 percent. By 2004 P&G was experiencing its largest net-profit growth in years. Net earnings were up almost 52 percent over the previous year. P&G's stock price and dividends also were up. His successes earned Lafley directorships at General Motors and General Electric.

Lafley told Brooker at Fortune: "What I'm trying to build into this organization is something that will last long after I'm gone. This is a company that aspires to be around for 1,000 years."

See also entry on Proctor & Gamble Company in International Directory of Company Histories.

sources for further information

"A. G. Lafley," Newsmakers, issue 4, Detroit: Gale Group, 2003.

Berner, Robert, "P&G New and Improved; How A. G. Lafley Is Revolutionizing a Bastion of Corporate Conservatism," BusinessWeek, July 7, 2003, p. 52.

Brooker, Katrina, and Julie Schlosser, "The Un-CEO: A. G. Lafley Doesn't Overpromise. He Doesn't Believe in the Vision Thing. All He's Done Is Turn Around P&G in 27 Months," Fortune, September 16, 2002, p. 88.

Eisenberg, Daniel, "A Healthy Gamble: How Did A. G. Lafley Turn Procter & Gamble's Old Brands into Hot Items? Here's the Beauty of It," Time, September 16, 2002, p. 46.

Kroll, Luisa, "A Fresh Face," Forbes, July 8, 2002.

"Mr. Lafley's Makeover: Consumer Goods," Economist, March 22, 2003.

Neff, Jack, "P&G Profits by Paradox: Seemingly Contradictory Moves by CEO Lafley Have Restored the Giant Marketer's Leadership Status," Advertising Age, February 23, 2004, p. 18.

Sellers, Patricia, "P&G: Teaching an Old Dog New Tricks," Fortune, May 31, 2004, pp. 166–172.

—Margaret Alic