If You Had to Change Procter & Gamble....

Most would agree that one of the most difficult things to get lawyers to do is to change, and that changing a law firm itself is an order of magnitude more difficult.  Many managing partners I know, some of whom arrived on the scene of "a burning platform," have recounted that the only time change meets relatively little resistance is when it's self-evident to all that drastic action has to be taken.  Even then, tragic examples such as Brobeck and Coudert instruct us that there are no guarantees.

But unless your firm is organized and performing optimally in all regards—in which case please call or email me because I want to nominate you for some kind of heroic award—change is often in order.   What can we say about how to make it happen?  What, in other words, is entailed in "leading change?"

An excellent example comes from McKinsey's analysis of the first five years of Alan G. Lafley's tenure as CEO of Procter & Gamble, the world's leading consumer products company.   Recall if you will that when he took the helm from Dirk Jager in 2000, P&G had issued three profit warnings in four months and its stock had just slid 30% on a single day.  Worse (from his perspective anyway), as a company insider with 25 years under his belt, Lafley wasn't viewed by Wall Street as the white knight riding in to save things, and the stock slide a few more points the day his selection was announced.

But fast-forward to five years later and Lafley's results speak for themselves:  Revenues up 30% and profits up 70% (to $51-billion and $9.8-billion, respectively).

How did he do it?  Perhaps surprisingly, he, famously in league with Lou Gerstner at IBM, refused to announce "a vision."  His focus was strictly on execution.  Well, great, but what does that mean?  For Lafley, the key ingredients were:

• Forcing managers to challenge their assumptions as a means of uprooting complacency and forcing them to make strategic decisions.  This also entailed setting some aspirational goals.  Too many of P&G's product lines and brand managers had fallen into a pattern of looking for another 1% incremental growth year over year, and had lost sight of the possibility of transforming markets.  "You can get used to being a player without being a winner.  There's a big difference between the two."  Does this sound like any practice groups you know?
• Again, forcing managers to make strategic choices:  In other words, you can't have, or do, everything.  As Lafley puts it:  "Most human beings and most companies don't like to make choices.  And they particularly don't like to make a few choices that they really have to live with.  They argue, 'It's much better to have lots of options, right?'"
• This in turn leads to creating "Not-Do" lists, as in "this is something we're not going to do."  And if somebody runs off the rails and starts doing it, they receive zero funding, which tends to make them reconsider.
• But tough love must be tempered with mercy, and during any transformation a genuine risk is that people will become either so overwhelmed by the task at hand or so frightened of making mistakes that they'll freeze, and all will grind to a halt.  To counter this a leader needs to draw attention to the positive, reward small gains, and reinforce morale.  So, by contrast to his predecessor, Lafley never criticized the P&G "culture."  Rather, he stood by the firm's core values and reaffirmed them:  "To improve the everyday lives of people around the world [with] products that deliver better performance, quality, and value.  That's not going to change."  What is your firm's comparable mission statement in a dozen words?

The focus on execution has another implication, one Lafley quite self-consciously realizes:  Contrary to Wall Street's initial skepticism, his 25 years in operations at P&G meant he had an intimate knowledge of the company, with this tremendous benefit:  "The more deeply you understand something, the more willing you are to take risks and the more intelligent those risks are....  I knew how and when we could take risks and stretch ourselves to go for peak performance—without breaking down."

P&G has 100,000 people in over 100 countries, and English is a second language for many employees.  Now tell me it's too hard for you to change an Anglo-American law firm where—face it—there is tremendous commonality of background, experience, and purpose among your people?