In turmoil around bid for P&G seat, Peltz challenges risk-adverse culture
Editor's Note: The following is a guest post from Phil Kafarakis, president of the Specialty Food Association.
As it plays out, the story of Nelson Peltz and Procter & Gamble promises to be a hot tamale. The plot does thicken, as it’s still not confirmed that Peltz has really won the seat he allegedly spent $25 million to win — to P&G’s $35 million to keep him from winning.
While most of the business community will be reviewing his analysis and talking about the financial implications for P&G — essentially focusing on the minutia — I believe it goes deeper than that. This story is about a much larger sweep of cultural change in the food industry and others toward CEO departures, entrepreneurialism and risk taking.
Though Peltz has a website and a campaign to get his point across on the detailed changes he envisions at P&G, his vision is very different from the foundations on which P&G was built over the last 180 years. His vision is one of transformational cultural change, and of revitalizing how P&G thinks about innovation and the aggressive, competitive, quick thinking they need to deploy beyond their own in-house, homegrown processes.
His point is that they cannot continue to use the same methodical, paralyzed-by-analysis protocols, with thousands of layers of decision-making needed to bring something to market. Given the dynamics in the global marketplace — this goes well beyond consumer shifts in the U.S. — this approach is way too insular for Peltz.
If he gets his way, the changes will be significant — even if he’s soft-pedaling them for now. P&G claims they have made organizational structure changes that are focused on accountability and productivity improvements that produced $20 billion in savings the last two years, but these are not enough for Peltz. His beef is not just with the current changes — it’s at least as much about P&G leaders on the front line making decisions and delivering results. These execs are all insiders who have been climbing the P&G ladder for decades. All you have to do is look at the 31 senior leaders’ biographies on P&G’s website and count how many have been there since 1984. Peltz wants new eyes and new perspectives, from a dynamic world that is spinning so fast the P&G mindset cannot fathom it.
Turning around a 180-year-old philosophy and mindset is like not just getting the Titanic to miss the iceberg, but having her weave through the moving iceberg field she entered. It will take generations to make these cultural changes if P&G stays with the same leadership team. Peltz is asking for a long slate of items they will not be able to execute on, and sustained practices that will challenge their long-term financial outlook. The company’s stock did go up 3% just hours after the headlines came out tentatively announcing his win… so maybe Peltz is looking for the mere cosmetic appearance of short-term change that will break a 180-year tradition.
Peltz is also pushing for more joint venture and acquisition work — current industry necessities that take P&G away from their internal and insular comfort zone. Again, reaching outside the culture to form partnerships with other, probably smaller and more specialized entities is critically important, in light of the other ideas Peltz has outlined. If P&G can’t put the right leadership in place, with a more dynamic and entrepreneurial approach, everything else he is suggesting will fail miserably. Isn’t it ironic that a Wall Street raider is deploying new social media tactics to get what he wants from a company that is the very icon of traditional CPG branding? It appears that the “win in digital” principle that Peltz has put forth is what may carry him onto that board and force a massive cultural shift.