P&G Looks for Steve Jobs-Like Sequel by Recalling ex-CEO

P&G Looks for Steve Jobs-Like Sequel by Recalling ex-CEO

Much like turning to Star Trek and Iron Man sequels for a safe way to ensure box-office sales, recalling popular former leaders has become a reliable corporate script in times of crisis.

“It’s about confidence,” said James Post, a professor at Boston University School of Management. “People have the confidence that they understand the challenges. They can put their reputation on the table and help stabilize the ship.”Procter & Gamble Co. (PG)’s decision yesterday to bring back former Chief Executive Officer A.G. Lafley to replace his successor echoes a now-familiar path epitomized by Steve Jobs at Apple Inc. (AAPL) Another successful comeback was Howard Schultz at Starbucks Corp. (SBUX), while Michael Dell struggled amid declining personal-computer sales after his return. Myron Ullman’s second act at J.C. Penney Co. is yet to be tested: he came back last month.

Returning CEOs carry a sense of obligation to the companies that a newcomer might not have, Post said.

“They are coming in to repair damage done to the company,” he said. “They can more quickly assure people inside the company and placate unhappy investors outside.”

The late Steve Jobs returned to Apple in 1997, a dozen years after he was ousted, as the company he co-founded in 1976 fought for survival. Under his second reign, Cupertino, California-based Apple (AAPL) developed the iPhone and iPad and became the world’s most valuable technology company.

Schultz’s Comeback

Schultz, 59, returned as CEO at Starbucks in January 2008, eight years after he stepped aside, as the the Seattle-based coffee chain reported its first quarterly drop in U.S. visits. Investors have done well since his comeback: The shares have risen more than eightfold from a 2008 low of $7.17.

Michael Dell has faced an industry slump since he replaced his handpicked successor in 2007, three years after stepping down, as consumers turned to tablets and smartphones. The 48-year-old founder, who predicts a worsening outlook for the industry, has offered to take the Round Rock, Texas-based company private with Silver Lake Management LLC in a leveraged buyout.

“Bringing back a CEO doesn’t always work, but in P&G’s case it will,” said Douglas Ehrenkranz, a recruiter at Boyden in Houston who worked at P&G for about 15 years, including under Lafley. “AG is not only iconic, but completely gets the changed world we live in. This is a company that badly needs a win, and they just got one.”

Ackman’s Activism

Last year, then-CEO Bob McDonald embarked on a turnaround plan at P&G, the maker of Gillette razors and Tide detergent, to cut $10 billion in costs through 2016 and focus on its leading businesses after losing market share to such rivals as Unilever. Several months later activist investor Bill Ackman bought a stake then valued at $1.8 billion and pushed to replace McDonald.

P&G’s decision to bring back Lafley sent the shares up as much as 4.6 percent today. Lafley, who started working at the company in 1977, was president and CEO from 2000 to 2009 and handpicked McDonald as his successor. McDonald, 59, will retire on June 30 after 33 years, P&G said yesterday.

While Dell, Jobs and Schultz are all company founders, neither Lafley nor J.C. Penney’s Ullman are. Lafley, 65, will also be more like Ullman, 66, in that he isn’t going to run the company for an extended time, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware in Newark.

“The companies want someone whom the employees know, who is trusted by the vendors and can bring confidence to the market and stabilize the shares,” he said.

Lack of Successor

Ullman, who was J.C. Penney CEO from November 2011 to February 2012, was brought back in April after the retailer forced out his replacement, former Apple and Target Corp. (TGT) executive Ron Johnson. In a twist, it was Ackman, also a J.C. Penney board member, who lobbied for Johnson to replace Ullman.

Johnson overhauled Plano, Texas-based J.C. Penney’s logo, pricing, merchandise and store layouts, alienating existing customers while failing to attract the younger shoppers he was trying to lure.

Investors shouldn’t lose sight of the fact that in most cases, even successful ones, bringing back a former CEO means the board has failed to groom a solid successor, said Jay Lorsch, a professor at Harvard Business School in Boston who has studied boards and management for 25 years.

“It’s always an emergency when this happens,” he said. “You don’t go back to the old guy unless you made a mistake and it means you didn’t have another candidate ready to go.”

Politics, Sports

The phenomenon isn’t confined to the U.S., nor to the corporate world. Japanese Prime Minister Shinzo Abe returned to the job in December, the seventh prime minister in six years. Abe held that post for a year ending in 2007, when he quit, citing a stomach ailment. In sports, George Steinbrenner, former owner of the New York Yankees baseball team, hired and fired manager Billy Martin five times over a 14-year period.

Johann Rupert had three stints as CEO of Geneva-based luxury-goods maker Cie. Financiere Richemont SA. He was CEO for 14 years after founding the company in 1988, returned to manage the owner of the Cartier brand in 2003 as the SARS crisis dented sales in Asia and again in 2010 when then-CEO Norbert Platt resigned for medical reasons.

At Air France-KLM Group, Jean-Cyril Spinetta, 69, returned in 2011 to replace Pierre-Henri Gourgeon, who had succeeded him as CEO in 2008 and who was slated to stay in the post until 2013. Spinetta, who had run Air France from 1998 and through the 2004 merger with KLM that created Europe’s biggest carrier, was brought back amid declining earnings and a safety analysis that concluded pilot training was a factor in a 2009 crash that killed 228 people. He will step down again on July 1.

In the end it’s about calming down the crisis both inside and outside the company, said Boston University’s Post.

“When Lafley walks down the hall, people will feel better,” he said. “He has a great reputation for what he did before. That’s a lot like how people felt about Jobs and Schultz and other CEOs who came back.”

To contact the reporter on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net