Risky life at Procter & Gamble

After 22 years at Procter & Gamble, Alan Lafley has been promoted to the most dangerous position at the giant consumer products company - president and chief executive.

The board of the Cincinnati, Ohio-based company that makes everything from soap to soap operas gave its last chief executive officer a mere 18 months at the top following a 30-year tenure with the company.

"We are living in a world where patience has left the American lexicon. It is endemic, not only to investors but particularly in the board room," says Mr Marvin Roffman of Roffman Miller Associates, a Philadelphia-based money management company. "In today's environment, you can't come up with more than two or three disappointments. If Lafley doesn't do any better, it will be off with his head too."

It was not for a lack of trying that Mr Durk Jager, Mr Lafley's hot-tempered predecessor, was unsuccessful.

Analysts say the 57-year-old tried to do too much and had unrealistic expectations in his quest to turn around a company suffering from being part of a mature, increasingly unprofitable business.

Even Mr Lafley made that point the day Procter & Gamble announced his promotion.

"The magnitude and pace of change we undertook this fiscal year is a major factor in our results. In hindsight, it's clear we changed too much too fast."

At the same time as announcing its management reshuffle, Procter & Gamble said it expected its fourth quarter net earnings to remain unchanged from a year ago, compared to its previous estimate of a 15 to 17 per cent increase.

Mr Lafley, who gained a solid reputation within the company and among analysts since his start as a brand assistant 22 years ago, said he hopes to achieve steady growth by concentrating the company on its core products.

But increasing operating earnings at a company such as Procter & Gamble will be difficult, analysts say. Coming up with new products, finding new markets to sell into and boosting productivity - the three basic ways to increase earnings - is a challenge for a company that already has 300 brands selling in more than 140 countries.

But the New Hampshire-born Harvard Business School graduate, who spent five years in the Navy before going to Procter & Gamble, is well aware that he has a big boat to turn around.

During his long tenure at Procter & Gamble, the 52-year-old, who is known within the company as A.G., has shown innovative skills as well as an ability to increase business in other countries.

Mr Lafley is credited with the development of the liquid form of the company's Tide laundry detergent while vice-president of the company's laundry and cleaning division in the early 1990s, as well as building up the company's business in China while executive vice-president for Asia in the mid-1990s.

Analysts were not surprised that Procter & Gamble chose Mr Lafley, who is known for being tough but also for building consensus within the company and with outside players such as retailers.

"It is not surprising that they promoted from within, as that has been their practice and as they have a very capable leader in A.G. Lafley," says Ms Sally Dessloch, analyst at JP Morgan.

Ms Dessloch added, however, that the company might benefit from some "new blood" in other positions.

But the main question now is whether Procter & Gamble's board will give Mr Lafley enough time to get his arms around the behemoth he must now lead - and whether investors can accept more reasonable growth projections for a company in a mature business.