John G. Smale: He rebuilt P&G - and city, too
By Barry M. Horstman, Post staff reporter
The Procter & Gamble Co., Cincinnati's homegrown corporate behemoth, has a reputation as being so straight-laced, so insular - with battalions of white-shirted, promoted-from-within executives who started there right out of college - that it seems a ready-made home for the proverbial organization man in the gray flannel suit.
So, who sounds like the most likely candidate to be chief executive of the consumer products giant: an immigrant who began his career elsewhere, someone who showed he knows how to loosen up and have a good time by authoring a book entitled ''Party 'Em Up,'' or a self-described ''dull fellow'' given to wearing mainstream navy blue suits who can quote orange juice commodity prices and listens to recordings of the company's toll-free customer hotline in his car?
If the executive in question is John G. Smale, all three descriptions fit.
P&G's seventh chief executive in its first 150 years, Smale presided over the firm in the 1980s during years of tremendous growth and record sales, restructuring the tradition-laden company by blending old-fashioned values like loyalty and steadfastness with occasional bursts of boldness.
Smale took a mega-corporation long dominant in detergents, toothpastes and disposable diapers into the nation's medicine cabinets and dressing tables through daring acquisitions of pharmaceutical and cosmetics companies - positioning P&G for the 1990s and beyond. By spending more than $3 billion on purchases and equity stakes in more than a dozen companies around the world, Smale broadened P&G's horizons to the point that, by the late 1980s, nearly 40 percent of the company's sales came from international operations.
It is estimated that there is a P&G product in 95 percent of the homes in America. But, even if one could find the rare Cincinnatian who doesn't wash clothes with Tide, brush his teeth with Crest, shampoo with Pert Plus, eat Pringles, take Vicks cough medicine, use Oil of Olay face cream or any of the dozens of other P&G products, Smale still reached that person and every single Cincinnatian through another of his most durable contributions to the city.
In the late 1980s, he chaired the Cincinnati Infrastructure Commission, enlisting the aid of other local corporate heavyweights to examine ways to make critically needed improvements in the city's deteriorating streets, bridges, sidewalks, sanitation systems and parks. The year-long study - known as the Smale Commission Report - became the city's blueprint for revitalizing those facilities and persuaded voters to approve a ballot measure increasing the local earnings tax to finance the upgrades.
A recent city report indicates that the overall condition of Cincinnati's streets has actually worsened in the 12 years since the Smale Report was released - a situation city officials blame largely on dollars diverted to renovating Fort Washington Way and other riverfront projects. But there is little doubt that the deterioration would be far worse today if Smale's group had not sounded the alarm in 1987.
''He did a job when the city needed it,'' said former Cincinnati Mayor Charles Luken, who convinced Smale to head the infrastructure panel. ''I don't think you could measure the cost of the contributions John Smale made.''
Smale was born in August 1927 in the small town of Listowel, Ontario. During the Depression, his parents moved to Illinois, where his working career got an early start in jobs as a paper boy, in a grocery store and at a novelty company.
He entered Miami University in Oxford intending to become a doctor, but one year of college chemistry persuaded him to switch his major to business. His college education was financed in part by the money that he earned writing two pamphlets on how to throw a party: ''Party 'Em Up'' and its sequel, ''Party 'Em Up Some More.''
If those titles hardly sound like the volumes one would expect to find on the book shelves in a company where drinking alcohol at lunch is taboo, Smale also was a rarity among P&G executives in that he actually worked elsewhere before joining the company.
After graduating from Miami in 1949, he worked in sales for the Vicks Chemical Co. He later got into the nose-drop business, handling marketing for a fledgling company called Bio-Research. But when the company came on hard times in 1952 and Smale's paychecks began to bounce, he realized it was time to move on - quickly. After answering a P&G ad in the Chicago Tribune, the 25-year-old Smale came to Cincinnati as an assistant brand manager in the toilet- goods division.
One of his first projects was a new toothpaste called Gleem, which he helped build to a 20 percent market share over six years. He made an even bigger impression as an up-and-comer among his superiors in the early 1960s whe n, as an associate advertising manager, he gained the American Dental Association's recommendation of Crest toothpaste and its cavity-fighting ad claims.
He moved through positions of greater authority in the toilet-goods division - which in the 1960s launched new brands such as Head & Shoulders shampoo, Scope mouthwash and Pampers disposable diapers - and by 1967 was division vice president. Smale's progress became steadier after he caught the eye of P&G chairman and chief executive Edward Harness, who decided to help this ''very bright young man'' climb the ladder with him. In 1972, he was elected to P&G's board of directors, then two years later became president and in 1981 assumed the role of chief executive. He added chairman to his list of titles in 1986, serving in that capacity until 1990.
Under his stewardship, the 1980s were a decade of revitalization and achievement at P&G - inspired in part by the painful lessons learned from a very uncharacteristic setback.
In 1985, P&G posted its first annual earnings drop since 1952, the year Smale had joined the company - a 29 percent decline to $635 million. Mainstays such as Crest and Pampers were getting hammered by the competition, and efforts to get a foothold in lucrative foreign markets such as Japan were a debacle bleeding hundreds of millions of dollars.
Without losing P&G's basic values or being panicked into short-term thinking, Smale made a series of aggressive moves that combined P&G's strengths - its vaunted consumer research, focus on the long-term and commitment to product innovation - with changes born of the recognition that, in a global marketplace, no company could any longer do everything in-house.
That admission was a rather bitter one for a company that - with good reason - had long displayed a corporate confidence bordering on arrogance, a belief that the P&G way was not simply the best way, but the only way. So, while P&G remained willing to spend decades developing and perfecting new products like the fat substitute Olestra, Smale's acquisition of companies such as Richardson-Vicks International, the Noxell Corp. and Norwich Eaton Pharmaceuticals Inc. instantly brought it famous products that included Pepto-Bismal, Cover Girl cosmetics, Vidal Sassoon shampoo, Clearasil facial cleanser and Metamucil.
He also tinkered with other sacred cows. Even while defending P&G's methodical style - ''Speed isn't always a virtue,'' he said of a process in which a simple repackaging plan might pass through a half dozen management layers - he and his top lieutenants acknowledged that it was not necessarily a sin, either. To expedite decisions, an $805 million reorganization brought decision-making down into lower management levels, closer to the customer. Toward the same end, teams of P&G sales and marketing representatives moved to the headquarter towns of major accounts such as Wal-Mart to work more closely with retailers.
Smale even changed P&G's coveted brand management system - in which its products directly competed with one another - to a broader category management concept intended to prevent self-cannibalization. Under the new management scheme, instead of Tide and Cheer battling it out, a P&G manager would oversee both brands to coordinate advertising and sales.
And in Japan, the world's second largest consumer products market, Smale repositioned P&G products through personnel changes - Japanese managers were hired, and those from the U.S. were required to study the language and culture - that helped the company recover from its early stumbles, such as dubbed commercials that offended Japanese women.
When Smale stepped down as chief executive in 1990, P&G's annual sales had grown from $17 billion to $24 billion during his tenure, and the company had expanded from 25 to 39 product categories, owning the leading brand in most of them.
His decision to relinquish the reins of authority at 62 was a revealing insight into Smale the man. Showing that wielding power was never a consuming passion, he decided that rather than spend three more years as the head of a multi-national corporation - with all the prestige and financial rewards that go with it - he chose to spend more time with his family, walking with his wife around their Hyde Park neighborhood and fly-fishing.
Several years earlier, Smale's leadership of the infrastructure committee - coming as he was still deeply enmeshed in P&G's restructuring - was an equally unselfish gesture. Assisted by many of his fellow local CEOs and nearly 200 volunteers overall, Smale undertook the most comprehensive assessment of the city's infrastructure in its history. Its conclusion was a glum one, no less so for the fact that proof had been plainly visible for years to anyone driving Cincinnati's streets or using its public facilities.
''The city's physical assets have become worn, and in some cases visibly shabby, due largely to neglect caused by budget restrictions year after year,'' the Smale Commission said in its 56-page report to City Council. Its 100 recommendations on how to reduce costs and make necessary improvements included a call for a one-tenth of a percent increase in the city's earnings tax, to 2.1 percent - a proposal that voters passed the next year.
The long hours that Smale committed to that project demonstrated anew that he was, in the words of Clement Buenger - then head of Fifth Third Bank and who himself headed a similar review of the fiscal needs of the city's aging schools - a ''get-it-done sort of guy,'' whether the task was figuring out how to boost P&G's earnings, repair more potholes or chair a $100 million capital fund-raising
campaign for his alma mater, Miami University.
Hercules Segalas, a Drexel Burnham Lambert director and veteran P&G watcher, ranks Smale, who retired from the company's board in 1995, among its top three chief executives over the past half century - a visionary who recognized that, with American markets for its diapers and detergents maturing, P&G needed a ''new locomotive for future growth.''
As tens of thousands of grateful P&G stockholders can attest, with John Smale in the corporate suite, the locomotive was definitely being driven by the right engineer.
Publication date: 10-11-99