BATAVIA, Ohio (AdAge.com) -- The face of competition has a decidedly familiar look these days to Procter & Gamble Co., as the sight of former company executives at the helm of key competitors and brands has become increasingly commonplace.
Indeed, all but one of P&G's major global competitors has a VP-level executive or above who came from the company, many of them directly. That's a recent shift, considering that even a decade ago, P&G executives rarely jumped to the competition, and when they did, they sometimes got slapped with lawsuits. P&G executives often went on to become CEOs, but in different industries far removed from P&G, such as Microsoft's Steve Ballmer or former eBay CEO and current California gubernatorial candidate Meg Whitman.
But in the latest sign of how much things have changed, former Chairman-CEO A.G. Lafley's recently announced retirement job as partner of a private-equity firm Clayton Dubilier & Rice is with a company whose holdings include a 46% stake in SCJohnson's Diversey, acquired late last year, which competes with P&G's institutional-cleaning business. The firm also owns a stake in Culligan, which competes with P&G's Pur water-filtration brand.
Mr. Lafley is far from alone in consorting with competitors. P&G archrival Unilever is headed by Paul Polman, who left P&G fewer than five years ago and came via another competitor with less overlap, Nestle. Estee Lauder brought Fabrizio Freda, head of P&G's snack-food business, in as CEO two years ago.
They followed in the footsteps of LVMH CEO Tony Belloni, who left P&G for that post in 2001. CEOs of Reckitt Benckiser and Clorox Co. also started their careers at P&G though they left long ago or had other posts with non-competitors in the interim.
On down the line
And that's just at the CEO level; in other areas there are a lot more examples. The growing prevalence of P&G talent at direct competitors, combined with P&G advancing managers who came from Gillette, makes for a scenario that would have seemed bizarre only a few years ago. The CEOs of Unilever, Estee Lauder, LVMH and Coty, the head of international operations for Shiseido and the head of U.S. operations for Henkel are all P&G alums, often with decades of service at P&G. But the head of P&G's global beauty and grooming business, Ed Shirley, spent more than two decades at Gillette before joining P&G via acquisition in 2005.
It all raises one question: Would P&G's beauty business, which began lagging behind most of its global competitors on the top line in 2006 until recently, have benefited from keeping some of that talent at home?
"It's a good question," said Deutsche Bank analyst Bill Schmitz. But he thinks the bigger challenge for P&G's beauty business has been concentration in the U.S. and Central and Eastern Europe, which have had bigger growth challenges than other places, and noted that most of the P&G-alum beauty CEOs weren't working directly on its beauty business when they left.
One thing is certain: Competitive intelligence should be a lot better both for P&G and its competitors. In an industry where it's been common over the years for competitors to run war-game-style simulations to plan strategy, both P&G and its competitors now have a more intimate understanding of the generals on the other side than they did years ago.
Another oddity in a market where stock options are ostensibly meant to encourage executives to build long-term value for their fellow shareholders: Many executives at P&G's fiercest competitors are holding a lot of its stock and options, including Unilever's Mr. Polman.
Theories on why P&Gers are more often ending up in key positions at competitors vary, ranging from competitors developing a bigger appetite for P&G's talent to P&G relaxing efforts to prevent the moves.
Viewed positively, as P&G likes to look at it, the trend signals a recognition that the company has strong management talent. "We're one of the primary business-leadership engines in the world," said spokesman Paul Fox. "So it's more a testament to how we build leaders, and a testament to the fact that many former P&Gers now are either senior individuals or running major companies."
Another reason may be that Mr. Lafley opened P&G up more to the outside world in many ways, including working with competitors such as Unicharm or Clorox Co. (with which P&G now has a 20% stake in the Glad business), said recruiter Barbara Pickens.
"When I was younger with P&G, you really had no official contact outside the company with other companies," said Rob DeMartini, now CEO of New Balance, who left P&G in 2002 from heading the snack division to join Gillette, then rejoined following the 2005 acquisition. "The company didn't participate in industry groups and share groups. In some ways it was a confidentiality thing, and in others it was an attitude of 'What can we learn from anybody else?' I think that's changed a bit. And I think they've done a much better job at the senior level of frank discussion, telling people no matter how good you are here, you're lined up in such a way that you're not going to accomplish [your career goals]."
Another factor may just be how the world is changing broadly, said Cincinnati recruiter and P&G alum David Wiser. "There's less loyalty from employees toward companies," he said, "and less from companies to employees."
"An awful lot of [P&G's] programs are encouraging people out now," said another P&G alum now at a direct competitor. The company has become "level bound," the alum said, with many employees it would like to promote blocked by a lack of job openings, "so they want people to go, and they either look the other way or agree."
P&G hasn't really changed its policies, said another former senior executive, but may be applying more realism. "Some of our restrictions were either difficult to enforce or viewed as patently unfair internally."
The company doesn't have employment contracts, but it does enforce "no- conflict-of-interest" rules through provisions in stock options, restricted stock and other retirement programs. But realistically, when P&G was more prone to sue executives headed for the competition in the 1990s and early last decade, it seldom if ever prevailed.
Recruiter Jim Mead said it's become common for senior P&G executives to negotiate separation packages six months to a year prior to their departure and get a list of five or so key competitors they're not free to join, leaving them open to join any others. The growing prevalence of P&G executives at competitors can create a snowball effect, Mr. Mead said. "People tend to hire in their own image," he said.
Larry Allgaier's move from VP in P&G's North American baby-care business to head Novartis' global over-the-counter-drug business in 2004, a position he's since left, helped usher in a wave of more than 10 other P&G marketers and executives to Novartis OTC in subsequent years.
Realistically, P&G's growth has made it increasingly hard for its executives to find jobs relevant to their experience that don't have competitive overlaps. P&G's acquisitions of Clairol, Wella and Gillette, and efforts to move some of the acquired employees from the East or West coasts to Cincinnati also has led to some departures, often to competitors. Still, it's not a slam dunk that every move gets approved. According to P&G alums and recruiters, a lot can depend on how much P&G wants to keep the departing employee.
To be sure, P&G isn't the only company with executives working for competitors. Unilever, L'Oréal, J&J, Clorox and SCJ have all made hires from one another in recent years, too. But going to work for direct competitors is relatively rare today in some other hotly contested marketing wars, such as Coke vs. Pepsi, and for good reason, said Dave Gallagher, chairman of the recruiting firm Oxygen.
Mr. Gallagher made the leap from Pepsi to Coke years ago at a time when the success of the Pepsi Challenge in the early 1980s had Coke looking to its rival for talent, answers and revenge. "From a personal perspective, it was emotionally a lot tougher than I thought it would be," he said. "And from an organizational perspective, it's tough on morale when someone comes in from a direct competitor in a senior role. People in the organizations sit back and say, 'Were we not that good? And was the other guy better?'"