The Student of History

A. G. Lafley's senior thesis at Hamilton was on the trial of the Templars. He explains: "In the 14th century, Philip the Fair of France basically emasculated and expropriated the Templars -- the order of knights who had fought throughout the Crusades and become, more importantly, the bankers for kings in Europe.

"It was tough to get primary sources. I used the New York Public Library and the Library of Congress in Washington to get eyewitness accounts of the trial and testimony in either Latin or French. (This was not the kind of research project one could do in the stacks of the James Library.) As I recall, Digger rewarded me with an 'A' or 'A-' on the thesis, but regretted that I didn't run down sources from Paris libraries."

Thirty-four years later, the yarn of the Templars still engages Lafley. No, he's not about to circle back to la Sorbonne to polish up his research, but the story of "expropriated" financiers seems particularly relevant in 2003.

Besides, you never can tell when a practical knowledge of history can come in handy. Fortune told the story of a Lafley evening in Athens. The scene is simple: P&G's Greece operation has just closed out a strong year. And businesspeople are doing what they do when they have good news -- they're celebrating. They're drinking retsina; they're eating grilled octopus. The general manager of the company's Greek unit stands to offer a toast and present a gift -- a biography of Alexander the Great. "We thought this would be appropriate," the executive announced. "As you know, Alexander was a great general who built a great empire."

Fortune picked up the narrative: "The speech is a big hit. The group is laughing, and then Lafley asks a question: 'What happened to Alexander's empire after he died?' The Greek manager tells him happily that it 'lasted for many hundreds of years.' Lafley smiles, thanks him for the gift, and says nothing more. Later, Lafley -- reveals the real story: After Alexander's death, his generals fought among themselves and tore up the empire. 'That's not what I want to happen here,' he says quietly. 'What I'm trying to build into this organization is something that will last long after I'm gone. This is a company that aspires to be around for 1,000 years.' "

Another piece of history: In 1887, two recent Hamilton graduates decided to take a flyer on a business that was about to go under. William McLaren Bristol and John Ripley Myers coughed up $5,000 to breathe second life into Clinton Pharmaceutical Company, located in the village of Clinton.

The investment paid off, both for the two investors and their alma mater. Bristol-Myers Squibb today is an international pharmaceutical company, ranked number 98 on the Fortune 500 list, and the Bristol family has been one of Hamilton's most loyal and generous.

And here's the irony of A.G. Lafley's ascension to the front offices of Procter & Gamble: For years -- really, until the last decade or so -- P&G had no fiercer rival than Bristol-Myers. The two companies went head-to-head in shampoos, toothpaste and household cleaners. The very idea of someone from Hamilton directing the fortunes of Procter & Gamble was as unthinkable as a Gimbel running Macy's. Until A.G. Lafley came along.

Step 1 on the Lafley presidential agenda was stabilizing P&G's core operations and reinforcing its best brands -- its Tides, its Pampers, its Bounty paper towels and its Crests. Step 2 was to bring the company back into the acquisition market -- not necessarily with an opened-ended, hit-and-miss program that was the style of previous administrations, but with a deliberate program that would reinforce the strategy of going with core categories and category leaders.

In 2001, Lafley's team targeted the hair-care category. Its initial move was to acquire Clairol, a household name that had both strong brand recognition and market upside. With P&G resources behind the product line, within two years profits had increased 19 percent, while sales rose 18 percent. The company that had relinquished Clairol? Bristol-Myers Squibb.

Last March, to buttress its global hair-care position, P&G purchased the majority of shares in German-based Wella. If, as expected, the company completes the acquisition, it will be the largest such transaction in company history. Step 2 of the Lafley presidential agenda seems to be on firm footing.

How firm? Jeffrey Sonnenfeld is the associate dean for executive programs at the Yale School of Management. When he's not in New Haven, he serves as president/ceo of The Chief Executive Leadership Institute in Atlanta. No one spends as much time thinking about executive leadership as Sonnenfeld. His take on the first three years of Lafley at P&G: "Despite his doing nothing to create it, a sudden mythology has grown up around him that's almost Jack Welch-like." Added Fortune, "Lafley's unassuming mien, openness, and authenticity have endeared him to Wall Street and employees alike."

Last June, talking to the graduates of the latest class at the Harvard Business School, A.G. Lafley implicitly nodded to former Hamilton mentors Digger Graves, David Millar and Ed Lee when he advised his audience, "Read the works of military historians as well as those of modern business gurus. Strategic choices provide direction, but it's execution that delivers results."

Once again, the problem was "a catastrophe" of architecture that inhibited day-to-day performance. This time, instead of cinder-block-walled dorm rooms, the object of Lafley's affliction was a pampered executive compound on the 11th floor of the corporate P&G headquarters. Since the 1950s, this oak-paneled suite was the place where management could retreat, seemingly far from day-to-day business concerns.

It's a familiar story: Lafley puts pen to paper.

But this time, nearly 35 years later, something happens.

The walls come down. The 19th-century paintings that hung on their walls are on loan to a local museum. Five divisional presidents who kept each other company for a half century now sit on the same floors as their staffs. The remaining officers -- including Lafley -- now share open offices on one part of the floor. The rest of the space has been turned over to an employee-learning center.

"I have made a lot of symbolic, very physical changes," Lafley noted, "so people understand we're in the business of leading change."

And we're left only to imagine what life on College Hill would have been like if he'd had the same success when he tried to tear down the walls of Dunham.

• Be clear about your values: "People will watch and judge what you do. To succeed in life and in business, it's essential that you earn -- every day -- the trust of those around you."

• Understand that change is inevitable, pervasive, accelerating and increasingly unpredictable: "Change is the only constant in life. Those who embrace change will win decisively and disproportionately."

• Balance management and mastery: "When I joined P&G, I decided I was going to become a master marketer, and be the best damn 'brand man' I could be. Later in my career, I became a student of leadership."

• Let your leadership make a difference: "Your success and legacy will not be determined by what you do. It will be reflected in what the leaders you develop go on to do."