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After an unusually long 23-year tenure as chief executive, Reuben Mark, who is still chairman of Colgate-Palmolive, sees corporate leadership like a baseball game that is won, not by spectacular homeruns, but by singles and doubles.
In a recent Wharton leadership lecture titled, “The Essence of Colgate’s Leadership Training,“ Mark said effective leadership at the $12.2 billion consumer products company pays off in incremental and consistent gains. “The essence of leadership is the idea of continuous improvement. No matter what, you can always coach people to do a little better, and if everyone does that, the whole organization moves up.”
Colgate-Palmolive, headquartered in New York City, is the world’s leader in oral care products with its flagship Colgate toothpaste, but it also sells soaps (including dish soap), pet food and household cleaners such as Ajax. The company’s stable of consumer brands has delivered steady growth throughout the past two decades. Since the end of 1983, total return for the Standard & Poor’s 500 Index was 1555% while Colgate-Palmolive’s peer group of companies returned 2932%. Total return for Colgate-Palmolive during the same period was 4204%. Its after-tax return on capital from 2002 to 2007 was 33% compared to 18.5% at peer companies.
Mark said business leaders should look at their company’s performance like a bell curve. The left side of the curve represents very bad results, and the right side, excellence. The bulk of a company’s activities will fall in the thickest part of the bell curve in the middle. Management’s job is to gradually implement and nurture improvements that will move the entire curve toward the right, Mark suggested: “It’s not romantic and not revolutionary or headline-getting, but over time, that’s what generates success.”
On a First-name Basis
For example, Colgate management worked for several years to get all 35,000 Colgate-Palmolive employees to wear identification badges with their first names in large, highly visible type. The nametags, he said, make it easier for top executives visiting plants and offices around the world to connect more quickly with employees by using first names. “All these efforts at cultural change help to get people to believe and move the curve. The job of the major leaders in the organization centers around culture.”
Colgate-Palmolive was founded in New York in 1806 as a candle and soap company. One of its early innovations was packaging dental cream — at that time sold in jars — into squeezable tubes. Today, the company operates in 223 countries and is the leading toothpaste brand in most of the world. (In the U.S., it faces heavy competition from Crest.) Mark, 68, joined the company in 1963 and went on to serve as its vice president for Far East operations, president, and then chief executive in 1984. This summer, in keeping with Colgate-Palmolive’s succession plan, Ian Cook, Colgate’s chief operating officer, took over as chief executive. Mark will continue as chairman through 2008.
He stressed that focus is an important element of leadership at Colgate-Palmolive. The company has limited the number of product lines in its portfolio to focus only on those in which the company can maintain a strong position. For example, the company never followed competitors into pharmaceuticals. “In our case, we decided 25 years ago we couldn’t compete with some organizations, like Procter & Gamble, on all fronts. We had to select a limited number of product areas where we could compete.”
Indeed, he said, Colgate-Palmolive would have liked to add the Listerine brand to its oral care division in 2006, when Pfizer announced it was selling the mouthwash along with its consumer healthcare division. However, the deal would have included products that did not fit into Colgate-Palmolive’s core groups, including Nicorette, the stop-smoking patch, and over-the-counter drugs like Sudafed, Neosporin, Zantac and Benadryl. Colgate-Palmolive walked away from the acquisition and Johnson & Johnson went on to buy the Pfizer brands for $16.6 billion. Mark said that while it was difficult not to buy a strong brand like Listerine, it was more important to remain focused on the company’s guiding strategy. “When somebody says this is the deal of a lifetime and you can’t pass it up, you almost have to run in the other direction,” he added.
Financial discipline is another simple strategy that has led to constant improvement at Colgate-Palmolive, according to Mark. Company managers at Colgate-Palmolive constantly look to reduce overhead and plow savings back into marketing and new product development. As a result, the company’s margins have grown from 37.9% in 1984 to 56.4% in 2006, he said.
Mark then went on to describe personal characteristics that are important in successful leaders. “In leadership, some traits come naturally [while others] must be learned,” he noted. He emphasized integrity first. “That goes without saying. However, in recent years — especially in business — taking integrity for granted has been a mistake. A lot of people got into a lot of trouble because the people at the top of the organization did not demonstrate integrity.”
He pointed to former Tyco chief executive Dennis Kozlowski, who agreed to pay restitution for tax evasion after he was caught in a scheme to avoid paying taxes on artwork purchased in Manhattan. Empty cartons supposedly holding the art were shipped to a Tyco facility in New Hampshire for tax purposes, but the paintings were actually sent to Kozlowski’s New York apartment.
Mark asked his audience to think about the impact on a worker in the New Hampshire plant, earning $22 an hour, seeing the crates coming to his plant. “He knows that the boss is cheating on taxes. How can you really expect that warehouseman to be honest in his job when the example he’s getting is just the opposite? With everything you do as a leader, you’ve got to think not only, ‘Is it the right thing for me to do?’ but, ‘Is it right for the organization?'”
Coping with Ambiguity
Common sense is another critical trait of good leaders. “That’s what business pays big bucks for. That’s what makes a success — seeing the situation and simplifying it so everyone can understand and come up with a common-sense solution that will move the business forward.” Strong leaders are able to cope with ambiguity, he added. “If everything were black and white, everyone could do it, but most things in business at any level are gray. The ability to parse out what is on one side and what is on another — and present those sides well and come to a conclusion — is important.”
Clarity in communications is also vital, said Mark. “You can’t expect people to do what you want them to do and to get better each day unless there is clarity.” He is often amazed to find himself sitting in a meeting, listening carefully as misunderstandings develop. To prevent this, the top 500 people at Colgate-Palmolive gather twice a year to hear presentations about initiatives within the company. They then must return to their divisions and facilities to make sure the information they received from the very top cascades throughout the rest of the company.
Mark then discussed the use of power by corporate leaders. “The more power you have, the less you need to use it.” If top management has fostered the right culture, everyone is aligned and voluntarily moving toward the same goals. In that kind of company, bosses don’t need to wield their power. He also emphasized the “human touch.” First, he said, leaders must create a caring environment. “Love is a better motivator than fear, I believe, and our company believes.” Finally, he added, strong leaders value the contributions of everyone in the organization, manage with respect and often use humor as a powerful tool to get around problems and disarm people who may be inclined to hamper progress.
He was then asked which of the personal traits of good leaders come naturally and which need to be developed. Many of the “human touch” characteristics, he said, can be learned, if necessary — “It comes down to manifesting an interest in people” — while the ability to handle ambiguity is something that must be learned with experience. Integrity, however, cannot be learned. Even if a leader has integrity, that is not enough. “It’s manifesting integrity to set the example. Even when something comes intuitively, you still have to work to develop it, to move your own personal curve in the right direction.”
He told of visiting a new bank headquarters in the Midwest on a rainy day. The building was constructed in such a way that employees and visitors were soaked by the time they entered the bank. Mark was certain the chief executive had used another entrance and thus avoided arriving in the office dripping wet. It was a sign, he suspected, that management did not care much for its employees and investors. Indeed, a short time later, the chief executive was fired and the stock plummeted. “You see it time after time,” said Mark. “It’s all about how you treat your ‘family.'”
Finally, Mark stressed that despite the importance of focus in business, it is also crucial to maintain balance. “You will be a far better professional in all respects if your life is balanced.” When asked about his unusually long time as a chief executive, he said his case was not typical. Younger executives need to find a way to the top at companies, he said, and added that he was surprised to learn that he likes retirement. “I was probably in the job too long.”