President Obama's pick of former Procter & Gamble CEO Bob McDonald to lead the scandal-plagued Veterans Affairs agency is an unusual choice, to say the least.
For one, though McDonald is a West Point grad and served five years in the Army, he is not a military general, as many recent VA leaders have been. His experience leading P&G, a company that makes consumer products from diapers to detergent, also isn't quite akin to running a benefits or health-care organization.
And unlike other CEOs who later turned to cabinet posts, McDonald is not riding into Washington at the height of his business career. Hank Paulson, the former Treasury secretary, was lured to the job after a hugely profitable period at the helm of Goldman Sachs, which he took public while CEO. The first chief executive George W. Bush selected for that Treasury job, Paul O'Neill, had presided over a stunning transformation at Alcoa that included a five-fold increase in sales.
McDonald, meanwhile, resigned from P&G after a four-year tenure in which he struggled to grow the company's sales, maintain market share, and deal with an activist investor who clamored for a change. The abrupt move last May brought the company's iconic CEO, A.G. Lafley, back as leader.
Many would say McDonald, a 33-year P&G veteran, had been dealt a tough hand. He became CEO in 2009 amid a financial crisis and the worst recession in decades. Even before that, says Sanford C. Bernstein analyst Ali Dibadj, P&G had already been suffering from bloated costs and a reliance on North American consumers' propensity to trade up to higher priced items. "That didn’t work for the new consumer environment," Dibadj says. "So they had to readjust an old model."
Dibadj was one of several analysts who, during an April 2012 earnings call, garnered attention for firing off a barrage of tough questions to McDonald following the quarter's weak results. "How much patience," Dibadj asked, "does the board have?" Two years later, he says his biggest complaint was the slow speed of decision-making at the top, a problem that preceded McDonald's tenure.
"I think what happened for him is his leadership style wasn’t one to rock the boat," Dibadj says. "He was consensus driven. ... People wanted him to be more visionary."
This past criticism is relevant as McDonald is considered to lead VA, given the need for a leader who can overhaul what's been called a "corrosive culture." Yet there are other aspects of his time at P&G that could pay off at the top of VA, according to Dibadj. McDonald had to deal with many different stakeholders, including plenty who disagreed with him — something he would surely face as the leader of an embattled agency under fire from both sides on Capitol Hill. His outsider status and his experience with P&G's very process-driven culture could also be an asset. "When you bring a private sector person into a public [agency] that has a process problem, usually it helps," Dibadj says.
After all, a 175-year-old company and a sprawling government agency with an entrenched culture are not without their parallels. Scott Anthony, who has advised P&G in the past in his role as managing partner of the firm Innosight, describes P&G's culture as one where managers are deliberate in their thinking, yet where the downside is that things can move slowly. The company also has long been known to promote from within and encourage employee loyalty (prompting workers to be called "Proctoids"). Cultures that strong "can be powerful," Anthony says. "But they can also be very difficult to change."
In other ways, of course, the two positions are very different. At P&G, McDonald had the unenviable job of succeeding a corporate legend: Lafley was praised as one of the best CEOs of his generation. At VA, his job, while perhaps still unenviable, would be to succeed a respected general whose management of the agency ended in a fall from grace.
"When you follow an icon, it's like you're walking on eggshells," Anthony says. Leaders who follow someone who's been shown the door have a lot more freedom to shake things up, he says, and don't second-guess themselves as much.
If McDonald is confirmed, one thing VA employees will have to look forward to is a leader whom Anthony calls "the most responsive person I've ever seen in a senior leadership position." Whenever Anthony wrote a new article or book and would e-mail the news to a group of people that included McDonald — the type of email that had no call for a response — "he would always write back within 24 hours," Anthony says. "Even if it was just a short response, it was an acknowledgement. He is somebody who is going to be very present."
And McDonald, it appears, has taken a lesson from those criticisms that he should have moved more quickly at the helm of P&G. "As I look back," he told Fortune in the months preceding his resignation, "I wish I'd had the benefit of hindsight and done the things we've done recently earlier." That's a good sign, because an agency in need of immediate change should have a leader adept at moving fast.