Wednesday, June 20, 2012

Procter & Gamble Cuts Costs and Maybe Its CEO, Too

The public and private sector ways of doing things always present an interesting contrast.

Along those lines, today's downbeat news from Procter & Gamble is further proof of just how different the two worlds approach their leadership responsibilities and financial problems.

P&G Cuts Earnings Forecast has the story:

"Procter & Gamble on Wednesday lowered its earnings guidance for the current quarter as well as for the 2013 fiscal year, citing market-share softness in developed markets and a negative impact from foreign-exchange rates.

Chief Executive Bob McDonald also gave details on his program to refocus the group on more profitable businesses, reiterating its cost-saving program while citing short-term headwinds such as pension expenses, foreign exchange and policy changes in Venezuela and Argentina.

The lowered guidance came after the world's largest consumer-products company reported weak results in April, fueling investor worries and expectations of an overhaul as the Cincinnati-based company seeks to recoup ground lost to competitors . . . .

"We must and we will improve," Mr. McDonald said. "We need to be more efficient and more productive." He said P&G's cost-saving plan had made "good progress."

P&G targets cost savings of $10 billion by 2016, with about 5,700 nonmanufacturing job cuts by the end of the 2013 fiscal year. This program includes $6 billion of savings in cost of goods sold, $1 billion from marketing efficiencies and $3 billion from nonmanufacturing overhead.

"We are working to instill a much greater focus on productivity and cost savings throughout our organization to fuel investments in growth while becoming a faster, more agile company," Mr. McDonald said. . . .

Wall Street is growing increasingly frustrated, with analysts openly criticizing Mr. McDonald on the April earnings call.

On Monday, Bernstein Research analyst Ali Dibadj said in a research note that the company should name a successor to Mr. McDonald if its performance doesn't improve."

My Take

This is just another example of a private sector company being forced to emphasize cost competitiveness and customer focus in order to assure its future viability and business strength.

Of course, this sense of urgency and focus is unlike what we too often observe in public sector leadership.

The irony is that while the private sector creates all the wealth that the public sector then redistributes, it's the private sector that seems to be serving the public sector. In my view, we have our priorities completely backward.

Hopefully, the idea of cost competitiveness and customer focus will  soon come to the fore throughout the public sector.

As the taxpayers, We the People are the "shareholders" and "lenders" of U.S.A. Inc.

After all, it's our country and we should start acting that way. If we did, perhaps our "public servants" would as well.

But for now it's the same old story of private sector MOM and its direct opposite, public sector OPM.

For sure, private sector "owners" seem to be getting a better deal for their money than are public sector "owners."

That's not fair, because taxpayer owners are clearly risk takers, too.

In that regard, Pogo said it all.

Thanks. Bob.

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