Lafley's reign at P&G officially over

11 June 2009

CINCINNATI: Procter & Gamble has confirmed the appointment of Robert McDonald, its chief operating officer, to the dual position of chief executive and president, replacing AG Lafley, who will remain at the consumer goods giant in the role of chairman after nine years in his previous post.

As P&G's share price has declined by 14% this year, and as the company has forecast that organic sales growth will fall to between 1% and 3% in 2009, compared with previous annual targets in the 4% to 6% range, reports emerged earlier this week that a change in leadership was imminent.

McDonald, who has been employed by P&G for almost 30 years, will assume his new responsibilities on July 1, at which point Lafley will move "full time" into his role as chairman.

His previous duties have included leading the Cincinnati-based firm's global fabric and homecare arm, its biggest and "most mature" unit.

Other credits include playing a major part in the development of its "low-cost business model", which has "helped drive developing markets to more than 30% of company sales."

Prior to this, McDonald managed P&G's operations in Asia, and headed its Japanese beauty division.

Procter & Gamble stated that his appointment followed a "rigorous, disciplined and multi-year succession process."

McDonald said his aim is to "create a simpler, flatter and more agile organization," which is "a priority because simplification reduces cost, improves productivity and enhances employee satisfaction."

He added that P&G's other objectives will include focusing "even more on winning with consumers in emerging markets."

"We're serving about 3.5 billion people of nearly 7 billion people on the planet today, and I'm confident we can reach at least another billion or more in the decade ahead," he said.

Lafley said of his successor that "he believes in P&G's Purpose and P&G people to his core", "thinks strategically and operates systemically" and has "my complete confidence and support."

Speaking about Lafley himself, a company statement read that since taking over in June 2000, the out-going president/ceo had "refocused P&G on consumer-driven innovation and consistent, reliable sustainable growth."

His other achievements included increasing the number of brands in the company's portfolio that generate over $1 billion (€714m; £611m) in annual sales from ten to 23.

Organic sales have also risen by an average of 5% year-on-year during his tenure, with earnings per share also growing by 12% on this measure.

As a result, Procter & Gamble has emerged as "one of the five most valuable companies in the US and among the ten most valuable companies in the world."

Jim McNerney, presiding director of the company's board, said Lafley has "led the transformation of P&G over the past nine years," making it "a far more consumer-driven, externally focused and innovative company than it was a decade ago."

This appraisal was strikingly similar to Lafley's own assessment of his role earlier of this year, when he argued in the Harvard Business Review that he had endeavoured to "hammer home" a customer-centric focus and build "trust in P&G brands."

Data sourced from Procter & Gamble; additional content by WARC staff