Today, Mr. Lafley is chief executive of the 23rd-largest company in the U.S. It has about $40 billion in annual sales, 110,000 employees and operations in 70 countries. Compared with the outfit he worked for all those years ago, he says this one is "a much more diverse, much more culturally different, much more global company."
It also happens to be the same company: Procter & Gamble Co., the 164-year-old consumer-products giant based in Cincinnati.
Big companies were supposed to be history by now. Once seen as mighty engines of America's industrial growth, they have been routinely assaulted since the early days of Mr. Lafley's career as too slow, not innovative, indifferent to shareholders, inefficient and generally unmanageable, especially in a nimble, computer-driven age.
New Behemoths
Yet the giants have just kept growing. During the past decade, merger mania gave birth to new behemoths such as DaimlerChrysler AG and Citigroup Inc. Older companies like Nortel Networks Corp. and Kimberly-Clark Corp. bulked up on acquisitions, overseas markets and new products. So did upstarts that either didn't exist or were little-known 20 years ago, such as Cisco Systems Inc. and Wal-Mart Stores Inc.
By 1999, the average annual revenue of the 50 largest public companies in the U.S., about $50.8 billion, was 70% higher than it had been just 15 years earlier, even taking inflation into account. More than 50 public companies currently employ more than 100,000 workers; in the mid-1980s, only 18 did.
The question facing Mr. Lafley and his counterparts is: Can anyone run these monsters? During boom times, with revenue and share prices going up and up, the answer for most big companies was an emphatic yes. But with the economy stuttering, growth is slowing even at powerhouses like Cisco, which recently fell short of Wall Street expectations. Other giants, such as General Motors Corp., are trying to implement huge makeovers against internal resistance.
Megamergers Struggle
Many of the new behemoths created by mergers, meanwhile, are floundering. DaimlerChrysler is cutting 26,000 jobs at its Chrysler unit, or about 20% of the work force, in an attempt to return the unit to profitability. Acquisitive banks like Bank of America Corp. and Bank One Corp. have struggled with high costs. WorldCom Inc., hailed as the dominating new giant on the block after its 1998 acquisition of MCI, has seen sluggish revenue growth and narrowing profit margins and is expected to announce soon that it is cutting 10% to 15% of its 77,000-strong work force. Its plan to split off slower-growing businesses into a separate tracking stock will essentially undo much of the MCI merger.
For all big companies, meanwhile, the world has grown far more complicated. CEOs say bigness has become a battle with a new kind of complexity and a new degree of turmoil. Capital whips around the globe, economies gyrate and consumer tastes turn on a dime. Information travels almost instantaneously, be it an earnings forecast or a nasty rumor.
Dumb moves or stumbles are subject to much greater scrutiny. Decisions must be made quickly, with limited information. Vastly expanded overseas operations can make simple everyday functions, like communicating with employees, increasingly difficult.
'A Different Game'
"Everything is under a magnifying glass," says Rick Wagoner, president and CEO of GM. "Being big and being global means something different today than it did in the past. It's a different game."
The management challenge is forcing CEOs to delegate the surge of daily tasks to lieutenants and create a new role for themselves. Looking more like heads of state than captains of industry, they glide from long-range planning sessions to public appearances to contacts with investors and the media.
Skeptics doubt that any manager, even with these sorts of adjustments, can manage today's colossi.
"Devotees of bigness are really fighting against all the forces that are at work in the economic world," says James W. Brock, professor of economics at Miami University in Oxford, Ohio, and a co-author of "The Bigness Complex," a 1986 critique that he has been revising for a new era. Among such forces, he includes the power that computers can put in a worker's hands, as well as the rising need for speed in business. Both factors are fueling a surge in small start-ups, which can be more efficient, more innovative and more globally competitive.
By contrast, large organizations "become hidebound and muscle-bound and rule-bound and bureaucratic-bound, [and] lose touch with what's going on in the world and markets and so forth. You get layers and layers of people and management," Prof. Brock says. "It is a challenge to try to manage it, and I think it's an insuperable challenge beyond a certain size."
In many minds, the counterargument to Prof. Brock is General Electric Co., the vast conglomerate whose businesses include power generation, medical equipment, aircraft engines, the NBC television network and the GE Capital financial-services units.
Under Chairman and Chief Executive John F. Welch Jr., it has focused its attention on businesses where it could use size to dominate the market, while getting out of those industries where it couldn't compete effectively. In most businesses, GE uses its muscle to win concessions from suppliers and its deep pockets to finance acquisitions and new technologies. Over the past decade, GE's growth has soared, with revenue now about $130 billion and a market capitalization around $470 billion, the largest of any U.S. company.
GE is so confident that it has a system that can accommodate continued growth that President and Chairman-elect Jeffrey R. Immelt, who is scheduled to succeed Mr. Welch later this year, said at the news conference at which he was introduced last fall, "I really don't think the rules of size apply to GE."
Still, many managers on the front lines don't entirely disagree with the critiques of bigness. Mr. Lafley of P&G acknowledges the temptation for big companies to become "too self-satisfied" and lose touch. Too often, he adds, "big is slow."
To many critics, P&G itself seems a poster boy for what Prof. Brock is talking about. In recent years, it suffered through slowing sales and a long restructuring. Its vaunted product-development process, which decades ago brought to market such innovations as Tide laundry detergent, Crest toothpaste and Pampers diapers, now seemed to take too long to develop new products, and they often fell short of expectations.
Mr. Lafley's predecessor, Durk I. Jager, launched a massive overhaul but succeeded mostly in upsetting his managers, who complained the disruption was too much, too fast. Under pressure, Mr. Jager stepped down last June after just 17 months.
Mr. Lafley concedes that P&G can move too slowly, especially in the early stages of decision-making, but he insists that it can change while preserving the best of its unique culture. He has tried to inject some stability, easing up on job cuts and shifting managers around less often, while also cutting layers and pushing managers to speed up and focus on P&G's core businesses. He is conducting some product-testing on the Internet to save costs and time.
Moreover, he argues that bigness has plenty of virtues. While he was running the company's Asian operations in early 1995, the earthquake in Kobe, Japan, knocked out a key plant and displaced the families of 1,000 employees. Within hours, Mr. Lafley undertook a massive operation to lease new space, move workers, find housing and raise money for victims, while P&G shipped in goods from around the world. "I could have never done that if I hadn't been part of a big global company," he says.
Stress on Communication
Mr. Wagoner, who became CEO of GM last summer, has made improving communications around the globe a priority. Where overseas units once were more like free-standing islands largely left alone, he regularly touches base with them to keep tabs on Brazil's economy, South Korea's political situation and the euro's progress. He started a quarterly telecast on earnings and new products that travels globally and is working on a better e-mail system, including simultaneous translation into other languages. He regularly holds a teleconference with about 20 of the executives around the world who report directly to him, many of whom would rarely have dealt with one another before.
In his office, he keeps his Internet connection on all day, reads six daily newspapers and skims an array of magazines from around the world. "You've gotta know what the hell is going on in your business," Mr. Wagoner says. "If you've got a problem in China, you've gotta get into it and make sure that it's getting fixed. You've got to be on top of your business enough to know where are the problems, where are the opportunities."
Many other CEOs say communication has become a much bigger part of their job. At Boeing Co., Chairman and CEO Philip M. Condit says he has found himself giving more and more speeches and having less time to just schmooze with his workers as Boeing has grown, especially with the 1997 acquisition of longtime rival McDonnell Douglas Corp. So he has refined his basic message to a few simple precepts: run healthy core businesses, leverage strengths into new products, and open new frontiers.
"Every single Boeing group I talk to, that's in the speech, every single one," he says. "And I try to do it with exactly the same words every time so that you don't produce a lot of, 'Last time you said this, this time you said that.' You've got to say the same thing over and over and over."
Mr. Condit, 59, also has become a devotee of e-mail and other technological tools to take the pulse of his company. He periodically sends an e-mail to all 160,000 Boeing employees who have computer access (30,000 don't), soliciting feedback. Because the CEO can get isolated, he says, his approach stresses "using every data source you've got to try to assess where the organization is, where you are, where the company is."
Don't Be a Dinosaur
John Chambers, president and CEO of fast-growing Cisco, argues that not only will big companies become increasingly dependent on technological tools, but they can grow larger than ever before because of them. "A CEO who cannot use systems is a dinosaur. If you don't have the ability to interface with customers, employees and suppliers, you can't manage your business," Mr. Chambers says.
At Cisco, which is only 15 years old but has about 40,000 employees and annual sales of about $20 billion, information systems monitor, among other things, sales, number of workers, profit margins and productivity every day. The company constantly surveys customers whose feedback goes straight to Mr. Chambers. He estimates that at least 90% of his communication with most employees is through e-mail and voice-mail - tools that didn't exist a few years ago. Taken together, he says, they help Cisco move quickly when the market changes or the company makes an acquisition.
Some skeptics wonder if Cisco can keep growing at a torrid pace - its results reported this week showed its revenue growth slowing - let alone stay nimble as it gets bigger. Mr. Chambers says: "I don't think there's anything super complex about managing size. I would argue that size, given the right market opportunities, is easier to manage than being too small." With size, he says, a fast-moving company with resources can sweep into new markets or acquisitions and quickly compete.
At one of Cisco's biggest rivals, Nortel Networks, the key to managing size has been regular housecleaning to reduce some of the complexity that comes with bigness, says CEO John Roth. In recent years, under Mr. Roth, Nortel has grown rapidly through more than $30 billion in acquisitions, transforming itself from essentially an all-purpose telecom-equipment manufacturer to a cutting-edge maker of fiber optics, optical Internet gear and wireless-phone networks. Employment has grown to 94,500 from 62,000 in 1996, while revenue rose to $30.3 billion in 2000 from $11.9 billion in 1996. Mr. Roth expects revenue and net income per share to grow more than 30% again this year.
During the same period, Nortel has sold billions of dollars of assets that were only a small part of its operations. "Companies start off and they start building something and they create assets, which give them a competitive advantage," Mr. Roth says. "One day you wake up and those assets are a liability. You're using barge canals and the railroad appears. The next day you're at a disadvantage because you have public roads coming up. You become captive to assets."
CEO's Office Gets Big
The frenzied pace of such deal-making in itself has changed the nature of being a CEO at a big company. Mr. Roth and others say they devote so much time to strategic planning and meeting customers that they can't immerse themselves in the details of day-to-day operations. That has spurred an expansion of the CEO's office at many places.
Michael Dell, for instance, loves to recount how he started Dell Computer Corp. in his college dormitory room. But now his annual sales have topped $30 billion and they are still growing. "I don't think you could do it with one person," he says. "It would kill him. There's way too much to be done."
Mr. Dell, who remains chairman and CEO, has added two vice chairmen in recent years: Kevin B. Rollins in 1997 and James T. Vanderslice in late 1999. They handle most day-to-day tasks, he says, while Mr. Dell meets customers and sets strategic goals. But, he adds, "we don't really have hard lines. We bounce ideas off each other, and at the end of the day if we say who did this, the only right answer is we all did. Three heads are better than one."
Kimberly-Clark Chairman and CEO Wayne R. Sanders decided to name a No. 2, Thomas J. Falk, in late 1999, to help handle some of his load. Thanks to growth in global markets and several big acquisitions, especially the $9.4 billion purchase of Scott Paper Co. in 1995, the Dallas-based consumer-products company has seen sales roughly double, to about $14 billion, while the number of employees has grown to about 55,000 from 42,900 in 1992. Kimberly-Clark also has facilities in 40 countries and sells products in more than 150.
"The growth in global businesses is one of the toughest things for CEOs to contend with," he says, especially for a company like his that gets most of its growth outside the U.S. Not long ago, his company's global network consisted mostly of local, autonomous businesses that sold goods in their home countries with patchy results. Now, he says, Kimberly-Clark has a tight network of sales forces that sell branded products on a regional basis, looking at all of Europe rather than just Italy, for instance. With most of Kimberly-Clark's growth coming overseas, those operations are core to growth, not just sidelines.
"The workweek is really a blurry thing now," says Mr. Sanders. "It had gotten so I would take some international trip, come back and try to work ridiculous hours to try to catch up."
A turning point came on the first day of a 15-day swing through Asia, when he found himself in bed at 1 a.m., unable to sleep, reading a book, eating a Snickers bar and thinking, "Oh, I'm in trouble."
Now much of that travel load falls on Mr. Falk, who logged 160,000 miles last year. Mr. Sanders has used his extra time to refocus the CEO's role. "My predecessor spent very, very little time on public relations and investor relations," he says. "When I took the CEO job, I probably spent one day a month on [them]. Now it's one day a week. That's a function of the bull market, and TV networks and investor expectations." Large investors, he says, now "want access permanently. It has become accepted that you will give access and that you will talk to major shareholders."
The two talk often and share many decisions. But to accommodate his company's growth Mr. Sanders says he has given up much of what he liked in managing.
"Tom runs the day-to-day business," he says. "I don't."
