Sometimes business leaders just get confused.
The fundamental “purpose” of any business is to generate a superior economic return for its shareholders; to do that it needs to satisfy many other groups of people who have some skin in the game, not least of which being its customers. To claim that Procter & Gamble’s Purpose is to “touch and improve the lives of more consumers, in more parts of the world, more completely” makes me rather doubt the business judgement of the person who said it. Sadly, until recently at least when it became clear that just repeating this prayer to the gods of commercial success hadn’t worked, this has been the mantra of P&G’s CEO of the last three years, Bob McDonald. It baffles me how such a silly statement can help anyone to do anything to sell more products, win market share, align the organisation, or stimulate innovation. What is the purpose of a Purpose anyway, outside of business schools?
The last couple of years of direction by Mr McDonald have seen this vast business lose market share to its biggest rivals, Unilever and Colgate-Palmolive, so its share price has been a bit sad too, although last quarter it reported results that were better than anticipated and perhaps things are now beginning to improve. Under pressure from a little shareholder activism, the Purpose has been overtaken by a little more reality; management now seem focussed on more mundane things, like making this hugely political and bureaucratic company work better, and also come up with some new things to sell. P&G is the world’s largest consumer group by sales with revenues of $84bn last year,
P&G makes Pampers nappies, Olay skin cream, Gillette razors and Head & Shoulders shampoo, amongst other things, so you might think it should aspire to be the best consumer brand management company in the world, which it may well be already; a purpose like that may make a little more sense. Mr McDonald was once an army officer and in that capacity “leadership” may have been more important than deciding what battles to fight, which I guess was someone else’s job. In P&G he not only needs to be able to lead his loyal commercial warriors into brand wars but he has to come up with his own ideas about how to win each battle and the war too. He is apparently an acolyte of a management guru called John Kotter; perhaps by the time you get a business like P&G to play with you need to be able to work things out for yourself.
So, with the last quarter’s good results under his belt, maybe Mr McDonald has now found a way of making meaningful changes at P&G, which will allow it to win back market share from more nimble competitors – we will have to see. To lead such a big, diverse and complex organisation requires someone who is very clear about which way he wants the business to go from here and be able to get the rest of the P&G guys and girls to follow him without too much fuss. Whilst the Purpose is no more there must still be some doubts about the man who came up with it and whether he is right for this job; or even if anyone is. Maybe P&G is just too complicated to grow and it should be split up into more meaningful and manageable business units that might do a better job on their own? There is, after all, a precedent of sorts in Kraft.
Leadership is essential in a CEO, but so is: commercial nous; market knowledge that allows them to anticipate and take a bold market position ahead of the competition; great timing; and a little luck. Appearing to be confused by management speak is rather less helpful.
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