What Only the CEO Can Do

Reprint: R0905D

The author combines his nine years’ experience as the CEO of Procter & Gamble with the last writings of the management scholar Peter Drucker to answer the question “What is the work of the CEO?” The chief executive, Lafley says, is held singularly accountable for the performance and results of the company—according not just to its own goals but also to those of diverse and often competing external stakeholders. In other words, he or she is responsible for linking the outside to the inside—a job that consists of four fundamental tasks.

Defining the meaningful outside. At P&G this means emphasizing that the consumer is boss. The company has also worked to change what had been win-lose negotiations into win-win partnerships with retail customers and suppliers.

Deciding what business you are in (or not in). After a thorough analysis of its strengths, current competitive position, and structural conditions, P&G chose to grow from its core—laundry products, baby diapers, feminine care, and hair care—and also to focus more on low-income consumers and developing markets, where sales have grown from 21% to 31% of the total since 2000. The company has exited food and beverages and is selling its pharmaceutical business. Where to compete and where not to compete remain ongoing questions.

Balancing present and future. P&G defines realistic growth targets and uses a flexible budgeting process with complementary short-term, midterm, and long-term goals.

Shaping values and standards. The CEO must interpret the organization’s values in the context of change and competition and define the standards that will guide decisions. Trust at P&G had come to mean that employees could rely on the company for lifetime jobs. Lafley redefined it as consumers’ trust in the company’s brands and shareholders’ trust in its value as a long-term investment.