No More Mr. Nice Guy At P&G Not By A Long ShotZachary Schiller
Standing at the dais, Procter & Gamble Co. Chairman Edwin L. Artzt surveyed the huge crowd below. The scene was a management dinner in P&G's hometown of Cincinnati, and Artzt wanted his top executives to stand for a moment so they could be introduced to their fellow managers. Finally he spotted Executive Vice-President B. Jurgen Hintz, responsible for P&G's struggling food and beverage operations, in the back of the room. Leaning into the microphone, Artzt quipped: "I guess you can tell people's business results by where they're sitting."
Hintz, who left P&G last June, laughs off the incident. But to other P&G executives, the joke seemed surprisingly sharp-tipped. By now, though, they know that P&G's chairman doesn't play by the same genteel rules as his predecessors. Gone for the moment is the notion of low-profile, gray-suited leadership at the consumer-products giant. Artzt wants results. If he thinks he'll get them by tweaking you in front of your peers, prepare to be tweaked.
Artzt aims to build a tougher, faster, more global P&G. To do so, he is promoting individual accountability--turning back the clock from the "team approach" of recent years. He has overhauled P&G's corporate-training program in favor of a squash-the-competition version. He has revamped its recently restructured sales force. And he is demanding that managers consistently beat the competition to market with the latest detergents, face creams, and diapers. He sees lightning-quick reflexes as essential at a time when P&G's rivals, too, are globalizing, streamlining, and investing in innovation. Vows Artzt: "We are going to make a quantum leap in the quality and speed of our execution."
Nowhere is Artzt's relentless drive for rapid, forceful marketing maneuvers more apparent than in P&G's overseas business. To make the company more of a world power, Artzt, the company's international chief for nine years, is pushing it to plan on a truly global basis. It will have its latest diaper innovation, Pampers Phases, on the shelf in 90 countries in fewer than 12 months, compared with the 27 it took the last time Pampers was reworked. Meanwhile, Artzt is lining up foreign joint ventures and investing huge amounts in acquisitions and new production capacity all over the world. P&G is posting double-digit unit gains abroad.
COFFEE RUSH. Artzt, 61, felt the U.S. operation needed shaking up even before he became CEO back in January, 1990. Although its earnings and stock soared that year, as they had in 1989, the company found itself increasingly embroiled in competitive battles at home. In coffee, Nestle is giving P&G's Folger's a run for its money with the expansion of its Hills Bros. brand into new markets. In bar soap, Lever Brothers Co. is showering its Lever 2000 with ad dollars, soaking P&G's Safeguard. And while Procter has plunged ahead with a bevy of new products such as concentrated detergents, the recession is dampening consumption of P&G staples. In the first quarter, ended Sept. 30, earnings fell 3%, to $536 million. It was the first decline in six years.
Most of Artzt's strategies for dealing with these competitive pressures make sense even to his critics. But many inside the company think he is pushing his agenda too hard--and in a most un-P&G-like fashion. Some top employees have left in the past year, and many who remain "feel their behavior is being changed, but their heart isn't being changed," says one P&G manager. "They don't feel enrolled in the vision."
Many staffers worry that Artzt and U.S. Chief Durk I. Jager view employees as mere replaceable cogs. "The thing I sense more than anything is a real fear," says one manager. It's a far cry from the recent past. Not only were the late 1980s a tremendously profitable period, but they were also a time when P&G began to reinvent itself. Critics argue that Artzt is abandoning many of the progressive changes of that era, which brought a more questioning, multifunctional, people-oriented approach to the business.
"Unfortunately, many of those critics and change agents responsible have either been silenced or have left the company," says Louis A. Pritchett, who retired as sales vice-president shortly before Artzt took over. Artzt calls the notion "laughable." The charge that he is operating without regard for his people, he adds, is "totally wrong."
FRESH WORRIES. Some of Artzt's fearsome reputation is no doubt unwarranted. His focus on financial results makes some see him as short-term-oriented, yet P&G is spending $400 million this fiscal year on new products, up 50% from the recent yearly average. Its $2 billion in capital spending is nearly double that of fiscal 1989.
Yet several bursts of bad news tarnished the early days of Artzt's tenure and added to the uneasy feeling that the new CEO may be a little too aggressive. Last April, the Food & Drug Administration seized 2,400 cases of P&G's Citrus Hill Fresh Choice orange juice, saying "fresh" was a misnomer. In June, Hintz became the highest-ranking executive to resign from the company in almost 20 years. The most embarrassing incident came last summer: Desperate to track down a leak to a reporter, P&G asked for an investigation that led the Cincinnati police to search the phone records of 800,000 people. Artzt first defended the search, but in the end he apologized to employees.
Working under Artzt clearly is not for the fainthearted. While he can turn on the charm, says one retired executive, "he'll take you apart limb from limb" in an argument. Another former P&Ger recalls watching Artzt "just ridicule the U.S. business performance" right in front of President John E. Pepper and others. Pepper had just become international chief after overseeing the U.S. operations for years.
Artzt agrees that his emphatic style needs some toning down. "I've developed a greater awareness of my impact on people," he says. If employees have been afraid of him, Artzt says, "I'm making a real effort to fix that." Lately he has been lunching with more middle managers to exchange opinions.
A 38-year P&G veteran, Artzt inherited a company already in the throes of change. His predecessor, John G. Smale, had approved a drastic revamping of the way it sells. Instead of having salespeople for each division tripping over one another, Smale consolidated its sales organization so that far fewer reps called on stores and their owners. The goal: to become more efficient and work more closely with customers. P&G brought in specialists from finance, information, and logistics, for instance, to work directly with their counterparts at Wal-Mart Stores Inc. Such teamwork produced major savings in inventory and better service for a number of P&G's biggest retail customers. The restructuring also cut P&G's costs and allowed it to get new products on the shelf faster.
SPLINTERED TEAMS. Good as that teamwork sounds, the restructuring had serious organizational problems that Artzt had to solve. And he saw a drawback in having sales reps with such a strong emphasis on building ties to retailers. "The natural inclination is to focus on getting aligned, on partnering, making sure the relationship is working--and perhaps not focusing as fiercely on building volume and profit," he says. So last April, Artzt stepped back from the more radical consolidation. Instead of giving the real clout to someone who would represent all of P&G, he is now relying most on salespeople who represent a sector such as soap or food.
Many retailers, though uncomfortable with some P&G marketing moves, remain enthusiastic about the company because it has become easier to work with over the past few years. But some P&G insiders argue that it will be impossible to realize the considerable potential of partnerships if Artzt forces P&G to return to separate sales forces for each product sector. Efforts to streamline invoices and other systems, for instance, may be stymied by differing practices in each sector.
P&G's "team" approach to decision-making could also get reworked. While creating business teams helped the company rebound from its problems of the mid-1980s by getting representatives from various departments to work together, Artzt has been irritated by the sometimes fuzzy lines of authority in the team approach. "In some cases, he got frustrated by results that weren't as good as he liked and because he couldn't get down to where the accountability was," says A.G. Lafley, vice-president for laundry and cleaning products. Artzt also objects to teams that endlessly contemplate P&G's internal structures rather than develop new products.
Although he insists he is a proponent of teams, Artzt wants them to have explicit missions and clearer goals for individual team members. Still, some insiders argue that any backing away from the team approach is a big mistake. "Most of the complex issues we deal with in business are way beyond the capability of an individual function to come up with," complains one ad-department alumnus.
DAMAGE CONTROL. One of the most sensitive issues Artzt must deal with is work-force diversity. Some key women and blacks have left within the past year, in some cases frustrated with what they describe as the slow pace of progress. Last summer, P&G had to wage a major damage-control effort when a group vice-president suggested to interns that P&G in the past had lowered its standards to hire some minority managers.
Artzt has begun trying to improve the company's record in this arena--and success here could do a lot to soften his unfeeling image. Company officials say women and minorities have been rising as fast as or slightly faster than whites and men hired at the same time. Last year, in a first, P&G named five women as vice-presidents, out of 69 who got the title. Still, Artzt concedes P&G needs to make more progress. He has instituted a system to track minority employees' advancement and hold managers accountable for their progress. P&G claims to be retaining more valued managers by mandating annual career-path discussions. Still, skepticism remains. "We're saying all the right things," says one black manager. "The frustration is, we haven't seen those translate into results yet. And given the bottom-line orientation, I don't know if we will."
Yet Artzt is upbeat. He maintains that his restyled personal approach is winning over employees. He says his focus on global planning and improved execution is beginning to pay off. Unit volume is up, and P&G is increasing U.S. market share in most categories. "I feel good about what's going on in the company," Artzt says. "When all the smoke clears, people are going to say, `Pretty damned good result."' He may be right. But in the meantime, the smoke at P&G is getting pretty thick.