Can Lafley Succeed Where McDonald Failed At P&G?
The world’s largest consumer-products maker Proctor & Gamble (NYSE:PG) has replaced Chief Executive Officer Robert McDonald with his predecessor A.G. Lafley.
The decision ends McDonald’s four-year battle to help the company adapt to growing global competition and more frugal customers. McDonald has been under scrutiny from investors, who accused him of not doing enough to reduce P&G’s cost structure.
Lafley, who started working at P&G in 1977 and was CEO of the company from 2000 to 2009, will start immediately and plans to continue McDonald’s turnaround plan designed to cut $10 billion in costs through 2016. Lafley is looking forward to reprising his role as CEO, saying, “The board called me and asked me if I would come back, and frankly, duty called. I’m back. I’m full on, I’m engaged, and I’m ready to get into the business.”
Lafley built a legacy at P&G through his involvement in the Tide laundry division of the company, pushing for liquid and concentrated Tide detergents at different points in his career. He made a reputation as a prolific deal-maker when he spearheaded P&G’s $57 billion purchase of Gillette in 2005.
McDonald was Lafley’s handpicked successor, but P&G has struggled under his leadership after the financial crisis. McDonald shifted P&G’s focus from premium brands to lower-cost products in response to a more frugal customer base, but it hasn’t been enough to expand sales or maintain P&G’s market share.
Investor activist Bill Ackman has been pushing for McDonald’s replacement since buying a $1.8 billion stake in the company last year. When asked if McDonald was fired, P&G responded that, “Bob McDonald has chosen to retire from Procter & Gamble after 33 years of service.” In recent interviews, McDonald showed no sign of an impending departure, speaking about upcoming plans to visit P&G consumers.
The board denied that Ackman had any role in the decision to replace McDonald, and went on to say, “The Board is confident that A.G. Lafley is the right leader to build on P&G’s momentum and continue to improve the Company’s results.”