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Robert McDonald: Can the Procter & Gamble CEO Clean Up the VA?

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Robert McDonald, Chairman, President and CEO of Procter & Gamble, speaks at the Clinton Global Initiative 2012 (CGI) in New York, September 23, 2012. Andrew Burton / Reuters file

As a young man, Robert McDonald studied war and trained as a paratrooper to help wage it. Now, as the White House prepares to nominate him for secretary of Veterans Affairs, he’ll turn his mind to the aftermath of conflict and the 9 million former American service people enrolled for care.

If confirmed by the Senate, he’ll succeed Eric Shinseki, a retired general who resigned last month amid explosive charges of mismanagement, falsification of records and a toxic culture that left patients waiting indefinitely for treatment. Earlier this month, the acting head of the agency confirmed that 35 veterans left off a list died before seeing a doctor, perhaps as result of the delay.

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While McDonald’s selection was praised in Washington, it’s unclear what in his background prepares him to fix the woes of such a far-flung bureaucracy as the VA. After all, critics say, he failed to fix the woes of the last far-flung bureaucracy he oversaw — Procter & Gamble, where he served as CEO between 2009 and 2013. Besides, on the face of it, selling diapers, detergents, and razors has nothing in common with managing the country’s largest integrated healthcare system.

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So why McDonald?

He’s a military man, and he’s a devoted one.

As a boy he read biographies of great generals. When he was still in middle school, in Chicago, he was so sure he wanted to be a soldier that he wrote to his congressman — future secretary of defense Donald Rumsfeld — and asked for a recommendation to West Point, according to the Wall Street Journal.

Years later, he actually became a soldier. He went to West Point, where he fell for the battle strategies of Napoleon and graduated near the top of his class. He then spent five years as a paratrooper, mostly with the 82nd Airborne Division. Although he left for corporate life, he remained involved with military affairs, including as a mentor for cadets today.

What did McDonald do for Procter & Gamble?

Everything.

McDonald, 61, retired from Procter & Gamble last June — a career that began with an entry level position and ended with him in charge of 120,000 employees in 180 countries.

His first job was as the brand assistant on a now defunct line of regional laundry detergent. That was 1980, and by the end of the decade he ran laundry products for all of Canada. He spent most of the 1990s in Asia, where he taught himself Japanese and sold enough soap to become a vice president of the region.

The new millennium brought lean times, as P&G cut more than 15 percent of its workforce between 2001 and 2005, but McDonald continued to flourish and soon the company did too. Between 2000 and 2009, sales doubled to $83.5 million.

Then McDonald took over as CEO.

How did McDonald do as CEO?

Not so well.

He took over in July 2009, during the Great Recession, as consumers worldwide sought the penny-savings in generic brand consumer products. Profits fell 18 percent in his first quarter, and while the numbers rebounded somewhat, annual growth slowed and seemed perilously close to disappearing.

As part of a turnaround plan, McDonald cut prices and added customers, but profits lagged to the point of revolt. “P&G isn't delivering," said Citigroup analyst Wendy Nicholson in a conference call with McDonald in April of 2012. “There's so many excuses,” she continued, “And I just say to myself, God, where is the mea culpa?"

McDonald took responsibility for the halting progress. “It’s my fault,” he said. But other analysts made similar remarks, according to the Wall Street Journal, shattering the country club decorum of most earnings calls.

A month later an activist hedge fund investor added his heavy shoulder to the push for reforms, buying nearly two billion dollars’ worth of P&G shares. The following year McDonald retired.

So why might he do better at the VA?

In a series of reports, the VA has emerged as an organization plagued by low employee morale, inefficient and aloof management, a broken feedback loop, widespread distrust among its customers (the veterans themselves), and a budget at once large — $154 billion — but stretched thin from coast to coast.

McDonald is a leader with high marks in addressing each of these areas.

When he took over Procter & Gamble, he pledged “to create a simpler, flatter, and more agile organization,” which, despite lackluster sales, he did. He also ran meetings in a genuinely open, talk-to-me manner, and often ended his remarks with the same question: “How can I help?” The style so empowered younger managers that P&G was praised during his tenure as one of the best companies for leaders.

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It was also known for its efficiency and accountability. Under McDonald, 48 of the company’s manufacturing sites achieved what he called “a zero waste profile,” which meant “nothing leaves the plant and goes to waste.” Under his regime, he boasted, 96 percent of what entered P&G plants leaves the plant in the product. Another 3 percent is recycled. The final percent is more creatively deployed.

“In the cadet prayer, they say choose the harder right instead of the easier wrong.”

“Sometimes we take diaper scraps to make parking barriers,” he said at a Fortune conference in 2013. “In Mexico we create roof tiles from some of our paper refuse.”

He created a scorecard to make sure suppliers were as efficient as he was at P&G. It wasn’t easy, and addressing the woes of the VA won’t be either. But friends say he’s got the backbone for the job.

“There’s an honor code up here,” Col. Robert McClure, CEO of the West Point alumni association, told Reuters in 2009. “In the cadet prayer, they say choose the harder right instead of the easier wrong.”