NEW YORK – Kimberly-Clark Corp. CEO Thomas Falk did things most executives ran from during the recession: He plunged money into innovation and marketing, and raised prices.
Those were risky strategies for a consumer products company during an economic downturn the likes of which hadn’t been seen since the Great Depression.
They paid off. Third-quarter profit for the maker of Huggies diapers and Kleenex tissue jumped 41 percent from a year ago, although the company on Friday reporter lower fourth-quarter profit than analysts expected.
During his 26 years at Kimberly-Clark, Falk had many jobs – worked as an auditor, ran a diaper plant, headed the infant and child care lines. But he had never encountered anything like this recession.
“You’ve had a whole generation of business leaders who have never been through a tough economy,” said Falk, 51, who has been CEO since 2002. “We all knew how to manage when things were getting progressively better every year, but there weren’t many people who had been through a difficult recession.”
Like many corporate rivals, Falk cut costs and staff – 1,600 of the company’s 53,000 workers. But he also launched products at premium prices, including Scott Naturals bath tissues and towels and Huggies Pure & Natural diapers.
Kimberly-Clark, based in Dallas, raised marketing spending by $95 million during the first nine months of 2009 and tried to impress on consumers that its products offered quality and more value for their money.
Here are excerpts from an Associated Press interview in New York with Falk.
Q. What has the recession taught you about shopper behavior when times are tough?
A. (Consumers) were more sensitive around absolute price point and dollar outlay. And I think we even saw that change during a month. Where at the beginning of the month when your paycheck is in the bank, you feel like you can buy the better value per unit, so you might buy the big bundle pack at the super center or the large discount store. But at the end of the month, if you are out of a paycheck, you buy the quantity you can afford and still buy the other things you need to take care of your family.
The mix was shifting more during the month than it usually would. We would want to stock large packs at the beginning of the month more than ever and make sure that retailers stocked the smaller packs late in the month.
Q. You said that a lot of consumers are focusing on value right now. How do you convey the message of value to them?
A. I was in the Philippines not long ago, where we do some advertising to consumers on how a Huggies diaper would last 10 hours. A mom who was buying a very low-tier diaper in a market like that would know that a private-label or a low-tier brand wouldn’t last 10 hours. You communicate it that way as a perception of value.
If you look at marketers around the world across all categories, you see more marketing dialing up value messaging. We are all trying to communicate to the consumer that we are a good value relative to their other alternatives.
Q: Kimberly-Clark is a company built on developing and marketing consumer products. You started as an auditor. How did you get on the management track?
A: I wanted to develop as a general manager, so I went to work at a diaper plant. It was a great learning experience because it forced me to manage outside of my home discipline. I knew a lot about finance, and I could make a lot of decisions in finance easily. But in an environment working with engineers and operators running processes, it forced me to lead in another way.
It taught me that your job (as a manager) is setting objectives, making sure you have the right talent on your team, and that they all know what they are trying to accomplish. You have to remove obstacles from them being successful, and then have them take responsibility for their results.
Q: Even though Kimberly-Clark’s profits have surged over last year, the weak economy had to hurt morale. How did you keep your workforce motivated?
A: We communicated a lot and said don’t panic, stay calm and take care of yourself. This is a marathon, not a sprint. We told them to make sure you are getting enough sleep, exercise and do things that will help you sustain yourself through this process.
We also treated people as adults. We needed to cut travel expenses by at least 25 percent. Initially, we thought we would tell people exactly how they should travel.
Then we decided to give them the tools to help them buy their travel better so they can get the best deal. Guess what? They will cut travel by close to 40 percent because they were empowered and weren’t micromanaged.
Q: You’ve made it to the top. What advice would you give someone who just entered the ranks?
A: I tell them that you are the CEO of your career and a good CEO has to do three things. First, you have to deliver results. Then you need a plan. You don’t need your whole career planned, but what you want to do for the next four of five years.
You also need to know how to build capability. As you assess what you are good at and what you need to get better at to get the role that you want, be thinking about where you need to build capacity. Do you need to go back to school to get an advanced degree? Do you need to get a different job experience?
If you do those three things, you will do well.
