Miller is highly critical of the rules used to determine corporate average fuel economy for automakers in the U.S., and the ways they have been distorted through lobbying: Mileage is determined with the air conditioning off, for example, deterring work on more efficient cooling systems. Miller says that if he were energy czar, he would add a dollar or two in taxes to the price of a gallon of gas as a way of stimulating adaptive change.
Short of a national emergency — a political version of Chapter 11 — this is unlikely to happen. But Miller’s success at getting companies to focus on what makes them successful only underlines the fact that it is not a lack of good ideas that hinders a nation’s ability to develop and implement coherent public policy, but an inability to get things done.
A Close Shave
James M. Kilts, the former chairman and CEO of Gillette Company, together with two former business associates, John F. Manfredi and Robert L. Lorber, has melded business autobiography with management advice in Doing What Matters: How to Get Results That Make a Difference — The Revolutionary Old-school Approach. Kilts’s career in the U.S. consumer goods industry, starting at firms such as General Foods and culminating with stints as CEO, first of Kraft Foods Inc. and then of Nabisco, seems to have been the ideal preparation for his spectacular turnaround of Gillette between 2001 and 2005. After a career spent in this quintessentially American industry, he clearly understands its priorities.
A conceptual framework consisting of four elements provides the structure on which the book’s stories are hung. These elements, according to Kilts, are the ones that matter for business success: fundamentals, attitudes, and people; leadership; the future; and doing the right things. This is an effective way of organizing the book, but a problem arises because the overall story is one of unalloyed success. Kilts seems never to have made any mistakes (except when he was very young), and as a result he comes across as a curiously flat figure.
It is true that the turnaround Kilts executed at Gillette is stunning. When he was appointed CEO in 2001, the first outsider to run the firm in 70 years, Gillette had missed its earnings forecasts for 15 straight quarters and entered what Kilts calls the “circle of doom.” This is a vicious circle in which management, beguiled by Wall Street, issues unsustainable growth forecasts, overspends on capital and overhead, and then, when the unrealistic sales fail to materialize, hikes prices, cuts marketing expenses, and stuffs the trade channel with special offers. Trade customers swiftly learn to game this system by delaying their orders until the end of the financial period, which further hammers margins, disrupts production schedules, and sucks up working capital to fund large inventories and bloated receivables. Insiders are usually helpless to escape the system in whose design they have been complicit, and it takes an outsider like Kilts to break the cycle. Kilts did: By 2005, he and his team had created more than US$26 billion in value for shareholders; he then sold the company to Procter & Gamble Company. Kilts prospered, too. He earned more than $160 million for four years’ work.
There is a vicarious thrill to reading Doing What Matters and following along as a manager with deep industry knowledge and competencies recharts the course of one of America’s iconic marketing companies. But how applicable to other situations are the lessons here? At some level, like Steve Miller’s lessons, they are nothing but applied common sense. The larger challenge for many managers is to be able to get into situations where they have carte blanche to act, as Kilts and Miller did. Even then, there may be only a few businesses where such rapid transformations are possible.