Leadership in Finance: Unilever’s Jim Lawrence

How Unilever has benefited from being relatively un-levered.

I think the challenge is to get the right balance between empowering people and giving them freedom and the chance to fail, and your responsibility for the books, performance, and similar things.  Finding that golden mean between the two is a big challenge.

Do you keep somebody in a job he does very, very well but in which he may not be growing anymore? Or do you take him out and give it to some other person who won’t do as well to begin with but will learn and grow in the job?  Leaving the status quo is clearly better for the company in the short term, but not better in the long term because it’s preventing the company from growing new people.

Under current conditions, that must be even trickier. Is there a temptation now to keep people in positions they’re doing well at, even though you run the risk that they’ll start to feel stagnant and bolt when things get better?

I think that nobody’s focused on when times get better.  I think everyone is focused on the bad times now.  Whatever that golden mean is, it’s probably gone to the side of you’re hands on, you’re doing it yourself, you’re keeping people where they are. You’re worried a lot more about what’s happening in the today.

Your ability to resist the pressure to leverage up your balance sheet in the middle of a bubble seems to have helped you during the current downturn. How did you resist it?

There was a period of time when the view was that you should take on leverage and buy back stock and that it was good for the shareholder.  And it was, considering that this notion came about during a time when everybody was taking more leverage. 

Money was plentiful and it was not terribly expensive. A lot of the reason we didn’t follow that advice was that it had historically been Unilever’s view that we were to stay at a high-quality debt rating. That momentum prevailed. At one point the company was AAA.

Then [in 2000] it bought Best Foods in a giant $20 billion raw-cash deal deal, and it took on a lot of debt to do that.  Obviously, that changed the ratios, and the company then said to the rating agencies: we aren’t going back to AAA, but we will get back to A .  So they focused on paying down a lot of debt, and they got back to A .  And the company concluded that that was a reasonable place to be.

By the time I came to the company in 2007, people were asking, why stop at A ?  Why not go to A or go to BBB ? By the end of 2007 there was no more pressure. But for the first couple of months I was here people were asking me that since I had come from a company that was BBB [General Mills], why wouldn’t I be comfortable with that here.   It’s certainly a reasonable question to ask.  Part of the questions may have stemmed from the fact that Unilever went from triple A to A , whereas General Mills went from A to BBB .


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