Leader to Leader Reflections
November 5, 2008
The Leader of the Future Celebration (2008)
Acceptance Remarks by A.G. Lafley, Chairman of the Board and Chief Executive Officer
The Procter & Gamble Company
Thank you, Frances Hesselbein and Manfred Altstadt, and thank you, ladies and gentlemen. At P&G, leadership is a team sport. We are one team with one dream. My fellow P&Gers are the inspirational leaders who make all the difference at our Company. It's on their behalf that I accept this recognition, which means a lot to me because it honors the spirit and values of Peter Drucker.
Peter had tremendous insight into the challenges and responsibilities, the ins and outs, the ups and downs of being a leader. He valued leadership in every sector of our society, and at every level. To be recognized as a leader in the Drucker mold is a great honor, indeed, and I thank you again.
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The need for leadership is arguably greater today than at any time in history. The challenges facing our planet...our society... our country... and our individual organizations... are more complex and more demanding than any we've known in our lifetimes.
And yet, while the need is great, leadership is remarkably scarce.
Joe Maciariello ? a longtime friend and colleague of Peter Drucker's ? noted once that Peter spent his career focusing on three simple but powerful questions:
- How do we create a society that functions? Peter believed the answer is that we must create institutions and organizations that perform.
- How do we create institutions and organizations that perform? The answer is that we must cultivate generation after generation of leaders who strengthen, sustain and grow effective institutions and organizations.
Which leads to the third question... the question I'd like to talk briefly about tonight:
- How do we develop leaders who create, manage and inspire organizations to perform?
I'm a big believer that leaders are made, not born. They choose to lead. They step up and ? over time ? stand out. They learn to get comfortable with uncertainty and to embrace change. They develop the courage and the judgment to see things as they are and to make tough decisions. And they understand that command-and-control management is not the right approach with knowledge workers ? who need to be inspired and focused, not managed and directed.
This was a topic Peter and I talked about every time we saw each other. We met in 1999. I had asked for an hour of his time and we met at his modest home in Claremont. The first hour quickly turned into two, and then three and four. We had a wide ranging conversation. It was like drinking out of a fire hose ? and everyone here who ever spent time with Peter knows what I'm talking about!
He responded to every one of my questions with at least two of his own ? and that's the way it was in every conversation that followed. I made the pilgrimage out to Claremont at least once a year until Peter died ? and when I look back on those conversations, I can see clearly that every subject we discussed was ultimately a discussion about leadership.
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What strikes me today is that the characteristics that defined Peter himself are the traits we need to develop in 21st century leaders.
First and foremost, we need leaders who embrace the simple but fundamental importance of serving customers. As Peter liked to say, "the purpose of a business is to create and serve a customer." Plain and simple. Clarifying which customers are most important to an institution's success ? and then inspiring the organization to meet their needs and wants and aspirations ? is the most fundamental job of leadership. I believe this is just as true for public and non-governmental organizations as it is for private business.
At P&G, we've translated this principle into respect for the consumer as boss. Consumer-driven strategy, consumer-driven innovation and consumer-inspired leadership are cornerstones of P&G's success, and a reflection of the influence Peter had on our Company.
The second characteristic is a pragmatic insistence on the practice of leadership AND the power of ideas. Peter had little patience for theory or abstractions. He wrote that "plans are only good intentions unless they immediately degenerate into hard work." It's so true. Execution is the only strategy P&G's customers or competitors ever see, and leadership cannot be separated from execution. In fact, leaders are responsible for execution. Execution is where the buck stops.
But ideas matter, too. Peter's counsel was to "Follow effective action with quiet reflection. From quiet reflection will come even more effective action."
It was his ability to balance action and reflection that made Peter's ideas so practical and so enduring. As leaders, we need to strike a similar balance if we're to be effective over the long term.
The third characteristic that made Peter extraordinary was his gift for reducing complexity to simplicity. This is a critical responsibility of leaders. The tendency of most organizations is to grow more complex as they grow larger. The only solution is to match complexity with simplicity.
Simplicity begins with clear choices. Peter liked to say that "Management is doing things right; leadership is doing the right things." Choosing the few right things ... what to do and what not to do ... is the responsibility of leaders.
At P&G, we've focused since the beginning of this decade on our core ? core businesses and brands, core strengths, core technologies ? and on faster-growing, higher-margin businesses like beauty and health care. We've expanded and invested in developing markets where demographics drive economic growth and the consumption of household and personal care products.
At the same time, we've made tough, clear choices about which businesses to exit and which activities to stop or simplify. For example, we've divested businesses like Folgers, Jif and Crisco that were a better fit for other companies, and we've simplified critical activities like decision-making. Doing right things right has been and remains the top responsibility of P&G leaders.
Peter's fourth defining strength was his belief that results exist only on the outside. Those who lead organizations are "the link between the inside, where there are only costs, and the outside, which is where results are."
This is a particularly important role for leaders to play, at every level of an organization. It's our job to bring the outside in and to keep organizations, large or small, focused on contributions that ultimately benefit customers ? whoever they may be ? on the outside. This is an endless challenge. Organizations inevitably turn inwards. It's human nature. Leaders have to resist this tendency and keep people focused on and inspired by the outside.
We work hard to stay focused on the outside at P&G by reminding ourselves every day that the consumer is boss ? not me, not a general manager or a director, not shareholders. The most important boss is the consumer, without whom we have no business.
The simple reality is that P&G brands must win day after day at two critical moments of truth. The first moment of truth occurs at the store shelf, when consumers choose which brand to buy. The second moment of truth happens at home, when consumers use the products and decide whether they lived up to their brand promise. If we don't win at the first moment of truth, we don't get a chance to compete at the second. And if we fail at the second, we often don't get another chance to win at the first.
As a result, P&G's relationships with employees, retailers, suppliers and other stakeholders are critical ? but not primary. Every relationship the Company has is subordinate to the relationships we have with consumers. For P&G, the consumer is what Peter called the "meaningful outside."
"The consumer is boss" has become much more than a slogan or rallying cry for us. It's a simple, inclusive declaration of our shared Purpose. Every P&G employee and P&G partner can see how his or her work contributes to improving consumers' lives. Everyone can understand how unnecessary costs or complexity erode consumer value and detracts from our Purpose.
We place consumers at the heart of everything we do. Our strategies are focused on the consumer. P&G innovation is driven by deep understanding of consumer needs ? including their needs for value, which challenges us to eliminate costs consumers shouldn't have to pay for. Our go-to-market activities focus sharply on the experience consumers have in stores, as shoppers. In literally every part of the Company, P&Gers look for ways to bring the consumer into their work. And it has made a transformative difference.
The fifth and most important of Peter's many attributes was his humanity. He believed in treating people with respect. He said "management is about human beings. Its task is to make people capable of joint performance, to make their strengths effective and their weaknesses irrelevant."
He argued that leaders have the responsibility to ensure jobs are fulfilling and that individuals are able to contribute as fully as they can. I agree. The most important thing I do as CEO is to develop leaders and to unleash the creativity and productivity of P&G's 138,000 knowledge workers.
To be effective, leaders need a balance of intellectual skills and empathic skills ? a good blend of "IQ" and "EQ." We have to develop the intuition to appreciate and understand people's motivations and aspirations. We need to be in touch with their feelings and frustrations.
To be in-touch is to be a listener... and an observer... to be connected and collaborative... to practice and to believe passionately in diversity and inclusion.
We must embrace the humanity in ourselves ... in those we work and collaborate with ... and in those we serve. Peter showed us this, above all else.
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I believe these five traits are enduring characteristics that will define great leaders in the 21st century:
- Passion for serving customers
- Balancing the practice of leadership and the power of ideas
- Reducing complexity to simplicity
- Bringing the outside in
- Embracing the humanity of leadership.
Every one of these traits was embedded in Peter Drucker's character and values and teaching, and it's with his example in mind that I accept this award and challenge us all to become and to help develop the leaders of the future.
