Procter & Gamble's Reorganization Signals No CEO Successor Yet

Decision Not to Replace Vice Chairman Steele Speaks Volumes

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A correction has been made in this story. See below for details.

BATAVIA, Ohio (AdAge.com) -- Procter & Gamble Co.'s re-organization in the wake of the impending departure of Vice Chairman Rob Steele doesn't make much difference in day-to-day operations, but how it was handled says some significant things about the future of the company and Mr. Steele.

Put briefly, the move opens the door for Mr. Steele to more easily pursue a CEO post elsewhere. And not filling his job, besides making P&G a little leaner, signals the company isn't ready to anoint a future CEO just yet.

Mr. Steele, 55, is set to retire Sept. 1, P&G said Feb. 1. In the meantime, he'll serve as vice chairman-global health strategy as the company continues to seek a way to tap a market from which it made a partial retreat with the divestiture of its prescription-drug business in 2009.

"I've been at P&G for 35 years, and my goal is to be CEO," Mr. Steele said in an interview. "That's not going to happen at P&G. And I thought it was smart to help with the transition. But I thought if I'm ever going to be a CEO at another company, I should make the attempt now."

The move takes Mr. Steele away from day-to-day responsibility for businesses that were under him, including personal health care (Crest and Vicks), feminine care (Always and Tampax) and snacks and pet care (Pringles and Iams).

Even before, Mr. Steele was often seen as a candidate for a CEO post outside P&G. The CEO post at Kellogg Co., to which it ultimately elevated Chief Operating Officer John Bryant, was one that industry watchers once believed Mr. Steele had a shot at. He's also a possible candidate to replace another P&G alum, Mark Ketchum, as CEO of Newell Rubbermaid after the latter announced earlier this month he's retiring. Mr. Steele declined to comment on any specific company.

Only two years younger than current Chairman-CEO Bob McDonald, Mr. Steele wasn't seen as a likely candidate to become CEO of P&G. And stepping away from direct duties now starts the clock ticking earlier toward him avoiding conflict issues should he take a post that competes with P&G in businesses he formerly oversaw, including food.

Mr. Steele's units go to two remaining vice chairs. Dimitri Panayotopoulos, 59, vice chairman-global household care, takes over health care, snacks and pet care. Ed Shirley, 54, takes over oral care and feminine care.

Mr. Panaytopoulos is two years older than Mr. McDonald and thus unlikely to become CEO. Mr. Shirley, 54, a Gillette veteran, is young enough to be in the running, depending on how long Mr. McDonald decides to stay. Werner Geisler, 57, vice chairman of global operations, is the same age as Mr. McDonald, and thus also unlikely to succeed him.

To be clear, it's way too early to speculate on successors to Mr. McDonald, only 19 months into his tenure as CEO. Even P&G, with one of the most intricate succession planning systems anywhere, signaled by not filling Mr. Steele's post that it's not ready to anoint any frontrunners just yet. That would have been the case had it elevated one of its group presidents, particularly any of the fast risers still in their late 40s.

That group includes Deb Henretta, 49, group president-Asia; Melanie Healey, 49, group president-North America; Jorge Mesquita, 49, group president-global fabric care; and Gina Drosos, 47, group president-global female beauty. Another former member of this group, Chris Delapuente, 49, who was group president-global hair care, left P&G last year as Ms. Drosos rose to group president and added hair care to her skin-care and cosmetics duties.

Other group presidents in their 50s, and still potential candidates to move up, include Chip Bergh, 53, group president-male grooming; David Taylor, 52, group president-family care; Martin Riant, 51, group president-global baby care; and Mary Lynn Ferguson-McHugh, 51, group president-global family care.

Another two -- Group President Global Oral Care Charles Pierce, 54, and Group President-Central and Eastern Europe and Middle East Laurent Philippe, 59 -- are the same age or older as the vice chairs and Mr. McDonald, thus unlikely to rise further at P&G.

Mr. McDonald recently said he personally mentors group presidents seen as candidates to become vice chairmen -- though he didn't say which.

The businesses Mr. Steele leaves behind are mostly in good shape. They include brands doing very well -- such as Crest -- and ones doing very poorly, specifically Iams and Eukanuba. Double-digit sales declines the past two quarters for the pet-food brands stemmed from what the company in October called a "temporary supply disruption, driven by supply-chain restructuring and process improvements and by voluntary product recall impacts."

Iams and Eukanuba recalled several products last spring and summer due to potential bacterial contamination. Even before that, the brands never fully recovered share lost when they were among the most affected by industrywide product recalls due to tainted gluten that killed dozens of pets, which occurred just after Mr. Steele took charge of the business.

"Most of the past three years on pet have actually been terrific years," Mr. Steele said. "The last two quarters have not been good because of the recall. But for most of the past three years the pet business has done quite well."

All the other businesses he's overseen as vice chairman have been gaining share and doing well of late, he said.

P&G's vice chairs operate at a fairly high strategic level mostly. They're responsible, among other things, for Mr. McDonald's charge to develop truly new categories and game-changing innovation. They've also been key in better coordinating efforts by P&G's global and regional units to enter new countries, price tiers and retail channels and -- in an uncannily frank admission at its analyst meeting in December -- coordinate plans to make life harder for key competitors.

Mr. Steele's departure means one fewer person working on such things. But splitting his units among two other vice chairs shouldn't make much difference in how those units operate.

As P&G pointed out in detailed if fleetingly displayed spreadsheets in December, the long-term game plan the vice chairs have been working on is complete. Now comes the hard part left largely to others lower on the org chart -- implementing it.

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CORRECTION: An earlier version of the article incorrectly said P&G's family-care unit moved as a result of the restructuring, but it was already under Vice Chairman Dimitri Panayotopoulos. Only a portion of P&G's health-care unit, oral care, goes to Vice Chairman Ed Shirley's group, with the rest (including Vicks and Prilosec OTC) going to Mr. Panayotopoulos's group.

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