Robert McDonald, Obama’s VA nominee, faced own challenges at Procter & Gamble

President Obama announced on Monday his nomination to lead the Department of Veterans Affairs. Obama nominated former P&G chief, Bob McDonald, saying that McDonald "is an expert at making organizations better." (Associated Press)

Robert A. McDonald’s last big challenge was to push a proud, slow-moving and sometimes bureaucratic company to change. He resigned under pressure as chief executive of Procter & Gamble amid criticism from investors and former executives that he wasn’t moving fast enough.

Now McDonald is President Obama’s choice to run the Department of Veterans Affairs. His new job: Push a proud, but battered, slow-moving bureaucracy to change.

McDonald, 61, if confirmed by the Senate, will take over a VA that is still working through one of the biggest scandals in its history. A series of reports have found that the VA is burdened by a “corrosive culture” that sought to cover up months-long waits for veterans seeking care to make VA executives look as though they were meeting their goals.

The massive bureaucracy also faces a shortage of doctors and nurses and a seemingly ever-growing demand for its services from aging Vietnam veterans and troops from later wars who are applying for VA benefits at rates far higher than their predecessors.

“Let me state the obvious,” Obama said in introducing McDonald on Monday. “This is not going to be an easy assignment.”

So far, McDonald, a surprise choice and relative outsider to Washington, has received praise from lawmakers, who said the former chief executive’s focus on consumers at Procter & Gamble could help transform an agency that has often seemed indifferent to the needs of the veterans it is supposed to be serving.

“His management skills as a former CEO make him a good fit to run the department, which has been plagued by mismanagement for years,” said House Veterans’ Affairs Committee Chairman Jeff Miller (R-Fla.). Miller was a dogged critic of the former VA secretary Eric K. Shinseki and his leadership team.

But most of those lawmakers who are now praising McDonald, including Miller, admitted that they don’t know much about his background, which has included donations to Republican candidates. In recent years, most VA secretaries have been known quantities in Washington, their ranks heavy with former generals and politicians.

McDonald is the rare businessman to be nominated to run the VA. He graduated from West Point, did a five-year stint as an Army paratrooper and spent the next 33 years of his life as an executive at Procter & Gamble in Asia, Europe and the United States.

Standing next to Obama in the White House Rose Garden, McDonald cast himself as a businessman with a deep sense of mission.

“My life’s purpose has been to improve the lives of others,” he said. He joined the Army out of a desire “ to help free people who were living in non-free societies,” he said. He signed on at Procter & Gamble in his early 20s and stayed for more than three decades because he wanted “to improve the lives of the world’s consumers.”

The question facing McDonald and the Obama administration is how well those decades of experience selling Tide, Pantene and Pampers translates into helping veterans.

Procter & Gamble, which consists of 127,000 employees and 300 brands sold in more than 180 countries, remains something of a rarity in corporate America. Most of its top executives — known as “Proctoids,” a term of sometimes grudging respect — have spent their entire careers with the company. At P&G, McDonald followed a familiar path to the top: starting on the lowest rung and patiently working his way up the ladder.

“It’s not unlike the military,” said Edwin L. Artzt, who retired as chief executive at P&G two decades ago. “You start at the bottom, and if you are going to be a four-star general, you’re going to have to spend your whole life there. . . . It reflects a desire on the part of management through the ages to have top executives familiar with P&G’s way of handling operations.”

The P&G way includes a heavy emphasis on established processes (and acronyms) that’s not too different from the military or many big U.S. government bureaucracies. P&G executives talk relentlessly about “OGSM: Objectives, Goals, Strategies and Measures.”

“If you say OGSM to anyone from P&G, they will know what you mean immediately,” said Jim Stengel, a former chief of global marketing with the Cincinnati-based company. “It is how we see the world.”

McDonald’s colleagues at P&G described him as a loyal, hard-working, data-driven executive who was known for his steady and calm leadership style. He didn’t give rousing speeches or make bold visionary proclamations, but he was always available to his employees. He was the kind of boss who would regularly reply to a 5 a.m. e-mail just minutes after it was sent.

“He’s a transparent guy,” said Gil Cloyd, who worked with McDonald for 20 years at P&G. “He’s going to spend a lot of time at first saying, ‘I am in student mode. I want to learn.’ ”

McDonald’s friends said he resigned from P&G after he concluded that the intense focus on his performance had become a distraction and was preventing the company from making necessary changes.

The big test for McDonald will be whether his management style can penetrate a seemingly impenetrable VA bureaucracy that has frequently made it hard for top officials in Washington to have any idea what was going on in the field. Shinseki’s failure to realize that he was getting falsified data from VA hospitals ultimately led to his downfall.

McDonald took over at P&G in the midst of a global recession that hit the company hard. P&G’s relatively high-end products proved to be a tough sell to consumers who were looking to save money. McDonald’s critics said he moved too slowly to cut prices on P&G’s inventory, develop new products and find $10 billion worth of cost savings inside the massive company.

Some former P&G executives, frustrated by the company’s flagging stock price, blamed the company’s troubles on McDonald and his leadership team.

“At no time during our employment can any of us recall such intense, widespread concern about the leadership and strategic direction of the Company as is currently being openly expressed,” said a letter written to one of P&G’s directors by Gary Martin, a former president of family care at the company who claimed to have the support of many current and former executives. The 13-page letter, revealed in 2012 by the Wall Street Journal, called on the board to split the chief executive and chairman responsibilities. “None of us has taken any pleasure in pointing out issues with our Company, where for the most part, we have spent our entire careers,” it said.

A hedge fund head, William Ackman, who owned 29 million shares of P&G stock, blamed the company’s problems on its “convoluted” organizational structure — a charge frequently leveled at the VA — and said that McDonald, who served on 21 boards, was too often away from the headquarters and out of touch.

McDonald’s defenders said he tried to make the changes that P&G needed to weather the recession but faced resistance from managers whom he had beaten out for the top job and a corporate culture that had grown somewhat complacent under A.G. Lefley, his legendary and successful predecessor in the job.

“The changes were happening,” said Cloyd, a P&G executive and close friend of McDonald. “They just could have happened more rapidly.”

At his confirmation hearing, lawmakers who are demanding immediate improvements at the VA could examine these and other aspects of McDonald’s tenure at P&G.

White House officials said that McDonald’s experience running a large organization was a big selling point during their search.

“McDonald’s name just kept coming up, at the intersection of having run a large company and being a vet,” said a senior administration official involved in the search process who spoke on the condition of anonymity to discuss internal negotiations.

In contrast to P&G, McDonald would be taking over the VA at a low point in its history. Several top VA officials have been fired or forced into retirement in recent weeks and investigations into widespread misconduct at the VA’s hospitals and clinics are ongoing. The need for rapid change is almost universally accepted.

McDonald also faces a dual challenge in his new position: He must learn about health care — a line of business he didn’t deal with much at P&G — and how to run a big government bureaucracy that often faces staunch resistance from Congress when it tries to shutter underutilized facilities in their districts.

As a newcomer to the troubled agency, McDonald will likely have Congress’s early support as he makes reforms.

“You really need to understand a very complicated landscape that can heavily restrict your ability to make change,” said Steve Preston, a former financial sector executive who took over the Department of Housing and Urban Development with less than two years left in the George W. Bush administration.

Obama cited McDonald’s long history “building and managing one of the world’s most recognized companies” as one of his primary qualifications for the job. But it remains to be seen how much overlap there is between P&G’s mission of putting millions of bars of soap and boxes of laundry detergent on shelves around the world and caring for veterans battered by long wars.

For now, most in Washington are touting McDonald’s experience at P&G listening to the needs of customers.

“That’s really important,” said Max Stier, president of the nonprofit the Partnership for Public Service. “In government, process often becomes king over the customer.”

In his Rose Garden ceremony with the president, McDonald spoke of his family’s long military history, which now includes a father-in-law and an uncle receiving VA care. He also talked about the overlap with his P&G career.

“At Procter & Gamble, we always focus on our customer,” he said. “At the VA, the veteran is our customer and we all must focus all day, every day on getting them the benefits and care that they so earned. That’s the only reason we’re here.”

Juliet Eilperin, Josh Hicks and Julie Tate contributed to this report.

Steven Mufson covers energy and other financial news.
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