During his time at Gillette, Jim Kilts cemented his reputation as one of the most talented CEOs in America—a reputation that had already been well-established during Kilts' tenure at the helm of Kraft/Nabisco—by turning around a once-great company that had lost its edge. Before Kilts joined Gillette, the company's sales had been flat for 4 years. Under his leadership, Gillette rejoined the top ranks of consumer products companies as sales increased an average of 9% each year. His new book Doing What Matters
provides a fascinating glimpse into the philosophy of a legendary CEO. Mr. Kilts recently spoke with Edgewise
, AMA's new podcast series, about the management approach that has guided his career. You can hear the full interview here
Q: Your book is called “Doing What Matters,” a phrase that you say has been the guiding principle of your management philosophy since early in your career. What exactly does “doing what matters” mean to you?
Jim Kilts: In brief, doing what matters means identifying and tracking only the important things and ignoring all the rest. I use the example of my first days at Gillette to illustrate how I identified what matters in turning around the company. I was getting advice from everyone about everything, even about the building we were headquartered in. The book describes the different principles and techniques we used to take the company back to the top position in the consumer products sector. And it was all about doing what matters.
Q: When you came to Gillette, you were faced with a dizzying amount of options about how to improve performance. One of the courses that a lot of people were suggesting that you take was to sell the Duracell business, which was badly underperforming at the time. You used a system you called the “fast track quick screen elimination process” to evaluate each of your options. Tell us how the process works in general, and in particular how it worked when you were deciding whether or not to divest Duracell.
Kilts: Well, the fast track quick screen elimination process works in many different situations, and I’ve applied it in many different situations. And it was especially valuable in assessing Duracell. Essentially, quick screen requires that you reduce a problem or an issue to its simplest elements and strip out all the extraneous factors. Then you ask fact-based questions that require fact-based answers. These must be simple and clear, and enable you to decide whether you need more analysis or if you can just review what you have and screen out the nonstarters and also-rans right off the top, and be confident at the end that you’ve identified the best options.
At Duracell we had made a number of strategic and executional mistakes, and we had taken a business that was arguably one of the best performing consumer product companies of the past two decades, and we had made it a problem child. During the quick screen process we focused on the essentials the market position, the brand equity, growth prospects, cost-elimination potential, and other factors. And we reached the conclusion that Duracell was a keeper and it ultimately became a key part of our turnaround at Gillette.
Q: One of your biggest challenges at Gillette was instilling a cost cutting discipline that had long been absent from the company’s culture. But you didn’t want the company just to grudgingly accept the need for cross cutting. You wanted them to enthusiastically embrace it. How did you get your managers excited about cost cutting, which is usually something that managers dread?
Kilts: You’re right. It’s usually something managers dread. I’m a big believer in the importance of communication; it’s important for CEOs, but it’s also important regardless of your level in a company or an organization. You must make people understand what you want to do and why you want to do it. If you gain their understanding and support, great results are possible, and we certainly got great results at Gillette.
And that’s what you must do in creating a cost cutting culture. People must know that the primary purpose of eliminating unnecessary cost is to improve products, market them better, increase sales, and in general make the company healthier. They must also know they can be part of the process. We created a phrase called “building total brand value,” and we describe that as satisfying our customers and consumers faster, better, and more completely than our competition. That was a key part in capturing the hearts and minds of our employees.
Q: You say that knowing when to stop analyzing and when to act has been one of the keys to your success, and that as a guide to knowing when to act, there are four principles in particular that you rely on. What are those principles?
Kilts: One of the hardest things is to get organizations to take action because taking action involves taking risk and the courage to take on criticism. In many companies there is an inertia that rewards inaction. So, you need a strong force and firm direction that encourages action.
I identify four times when it’s imperative to act in the book first, to overcome a state of ongoing protracted analysis. A good illustration is Gillette. We had about 21,000 different product varieties, and for a company of our size, that was just excessive. And when I asked my senior staff what we were doing about reducing that number, my key logistics person raised his hand and said, “I’m leading a team that’s addressing this issue. We have an interdisciplinary task force that’s working on it. In fact, we’ve been working on it over a year. We have an outside consultant that’s helping us, and we feel we’re making great progress.” And I said, “Well, that’s terrific. In the year and a half that we’ve been working on this, how many stock keeping units have we taken out of the system?” Silence in the room. Finally somebody speaks up and says, “Well, we haven't taken any out yet.”
So I gave them a simple option. They could either finally get moving on reducing that number, or they could bring me a red magic marker and a computer printout that had the 21,000 items listed on it, and I’d start cutting it down. We made tremendous progress after that; in fact, we got it down in short order to 7,000.
The second time when it’s imperative to act is to break through inertia. When I took over at Nabisco, the sales force had been reorganized. Everybody in the organization knew that this reorganization that had just been completed was not working, but nobody wanted to take action. In this case, we came up with an action plan that really reinvigorated the Nabisco sales force.
The third time it’s imperative to act is to secure a first-to-market advantage. We launched DiGiorno rising crust pizza while I was at Kraft without as much consumer information as we needed or would like to have to normally make a decision. But we saw that we had a superior technology and we knew competition was going to be on our tail. And, again, we took action and broke through and made a significant difference with a huge product success in DiGiorno.
The fourth time to act is to invest in brand building equities. In many of the companies that I’ve been associated with, one of the key challenges coming into these turnaround situations was that great brands had been starved for advertising promotion support. So, what we did was began to invest in brand building, both at Nabisco and at Gillette, and those things significantly turned around the trends that were in the business.
Q: You emphasize the importance of setting the right tone the first day on the job as a CEO. That’s something you did at Gillette from the very beginning. Do you think that applies equally to leaders and managers at all levels of the organization, or should mid-level managers be a little more gradual in their approach so as not to alienate their people?
Kilts: I don't think you’ll alienate your people if you are straightforward and tell them, first of all, your own management philosophy, how you like to work, your habits, your beliefs about how you manage, and then what you expect of them. I think it’s part of the communication process. And the best thing a manager can do is take uncertainty out of an organization. It’s true for CEOs, and it’s true for new managers. At first, people are apprehensive. They don’t know what to expect. The more you can tell them the first day about what to expect, what your philosophy is, what you expect from them, how you run a management process, how you’ll give them feedback, the better off you are because it creates that communication and that alignment that’s so important in achieving results.