Procter & Gambleâs Succession Management Slip-Up
Consumer products giant Procter & Gamble made headlinesrecently when CEO Robert McDonald retired and was replaced withformer CEO A. G. Lafl ey. McDonaldâs retirement was not a surprise,because P&G had struggled to recover since the recent recessiondampened sales of P&Gâs premium brands such as Tide detergentand Pampers diapers. What did surprise observers was that thecompany brought back a former CEOâimplying it had not preparedanyone to move into the CEOâs position. Lafl ey previously servedas CEO from 2000 to 2009, during which time he gained a reputationfor promoting innovation and for leading a successful internationalexpansion. He mentored McDonald, who was chief operating offi cerwhen Lafl ey retired. However, McDonald did not hold positions thatgave him practice in setting strategy or leading organizationalchange; he focused on managing operations.Expectations are thatLafl ey will stay for a few years and make grooming a replacementone of his main goals. This would be in keeping with Lafl eyâsbehavior during his previous tenure as CEO, when he directed theboard to begin thinking about his successor just six months afterhe took the position. Lafl eyâs return raised questions about whyP&G had no one ready to fi ll McDonaldâs shoes. Some observerspointed to the departures of several leading executives duringMcDonaldâs tenure. Still, at a struggling company,the board ofdirectors (which is responsible for finding a replacement) wouldknow it will need a replacement at the top in the near future. Thisfailure in succession planning was surprising to many becauseP&G has been known for its strong development program. Givenits vast size and global scope, it offers many opportunities formanagement development through job experiences, and topexecutivesusually are promoted to their jobs from within thecompany. P&Gâs learning team has a mission of developing anemployee over 30 or 40 years through formal learning and varied jobexperiences. Each employeeâs career development aims at goalsspelled out in a development contract agreed upon by the employeeand his or her
manager. P&G also has a sophisticated computer system formanaging its succession planning. Despite the departures of somekey executives, some who remain may have potential to become thenext CEO. Examples include Melanie Healey, group president of NorthAmerica; Deb Henretta, group president of the global beauty carebusiness unit;
Martin Riant, group president of global baby care; and DavidTaylor, group president of global health and grooming. Otherpossible candidates are executives who left P&G to run otherbusinesses, including Estee Lauder Companies and the private-equityfirm Carlyle Group.
Questions
1. Although the board of directors is responsible for filling theCEO position, how could HR managers support the board with asuccession management program?
2. Based on the information given, what developmental approacheswere part of McDonaldâs career development? What approaches wouldyou recommend for preparing P&Gâs next top executives?
Procter & Gambleâs Succession Management Slip-Up
Consumer products giant Procter & Gamble made headlinesrecently when CEO Robert McDonald retired and was replaced withformer CEO A. G. Lafl ey. McDonaldâs retirement was not a surprise,because P&G had struggled to recover since the recent recessiondampened sales of P&Gâs premium brands such as Tide detergentand Pampers diapers. What did surprise observers was that thecompany brought back a former CEOâimplying it had not preparedanyone to move into the CEOâs position. Lafl ey previously servedas CEO from 2000 to 2009, during which time he gained a reputationfor promoting innovation and for leading a successful internationalexpansion. He mentored McDonald, who was chief operating offi cerwhen Lafl ey retired. However, McDonald did not hold positions thatgave him practice in setting strategy or leading organizationalchange; he focused on managing operations.Expectations are thatLafl ey will stay for a few years and make grooming a replacementone of his main goals. This would be in keeping with Lafl eyâsbehavior during his previous tenure as CEO, when he directed theboard to begin thinking about his successor just six months afterhe took the position. Lafl eyâs return raised questions about whyP&G had no one ready to fi ll McDonaldâs shoes. Some observerspointed to the departures of several leading executives duringMcDonaldâs tenure. Still, at a struggling company,the board ofdirectors (which is responsible for finding a replacement) wouldknow it will need a replacement at the top in the near future. Thisfailure in succession planning was surprising to many becauseP&G has been known for its strong development program. Givenits vast size and global scope, it offers many opportunities formanagement development through job experiences, and topexecutivesusually are promoted to their jobs from within thecompany. P&Gâs learning team has a mission of developing anemployee over 30 or 40 years through formal learning and varied jobexperiences. Each employeeâs career development aims at goalsspelled out in a development contract agreed upon by the employeeand his or her
manager. P&G also has a sophisticated computer system formanaging its succession planning. Despite the departures of somekey executives, some who remain may have potential to become thenext CEO. Examples include Melanie Healey, group president of NorthAmerica; Deb Henretta, group president of the global beauty carebusiness unit;
Martin Riant, group president of global baby care; and DavidTaylor, group president of global health and grooming. Otherpossible candidates are executives who left P&G to run otherbusinesses, including Estee Lauder Companies and the private-equityfirm Carlyle Group.
Questions
1. Although the board of directors is responsible for filling theCEO position, how could HR managers support the board with asuccession management program?
2. Based on the information given, what developmental approacheswere part of McDonaldâs career development? What approaches wouldyou recommend for preparing P&Gâs next top executives?
