Laxman Narasimhan, CEO of Reckitt Benckiser, on corporate purpose during a crisis

In this episode of the Inside the Strategy Room podcast, senior partner Celia Huber speaks with Laxman Narasimhan, the CEO of Reckitt Benckiser. The UK-based global consumer-goods company focuses on products in health, hygiene, and nutrition categories, many of which saw massive demand spikes during the height of the pandemic. Before joining the company, Narasimhan held various senior roles at PepsiCo, most recently that of global chief commercial officer. He is also a former McKinsey senior partner. In this interview, recorded in early July, he shares his perspective on maintaining resilience through the COVID-19 crisis, staying connected while working remotely, and how the company’s purpose helped it navigate the pandemic. This is an edited transcript of the discussion. You can listen to the episode on Apple Podcasts, Spotify, or Google Podcasts.

Celia Huber: Laxman, welcome. Can you tell us a little about Reckitt Benckiser’s corporate purpose and how you arrived at it?

Laxman Narasimhan: Sure. I became CEO the first of September last year. At the time, there were questions about the company’s future, and I decided that I would take six months to lay out what I thought the company should be and where we should go. As part of that, I spent a lot of time in our markets. I sold with our salespeople and met with customers. I immersed myself in our R&D. And I remember sitting in our big microbiology lab in Montvale, New Jersey, looking at a map of the world. I realized that there are ever more pathogens and they are getting bigger and stronger. It became clear to me that we were really in the business of protecting, healing, and nurturing our customers.

We articulated that purpose in October and tested it with customers, then with our employees. Some of our younger people said, “That’s great, but we also want to include a ‘fight.’” They meant a fight for access to high-quality products, for availability, and for information that guides behavior change. And that’s how we got to our purpose: to protect, heal, and nurture in the relentless pursuit of a cleaner and healthier world. At the end of February, that was the purpose we announced to the world.

Celia Huber: So it was right around the time when COVID-19 was starting to make news around the world.

Laxman Narasimhan: Yes. January 15th, I remember getting a call from China. We have a factory 200 kilometers outside of Wuhan, one of the largest Dettol factories (Lysol in the US), and we went into hyperdrive. By the end of February, it was clear something was happening that was bigger than all of us, but it was also an important time for the company to stand up and be counted.

Celia Huber: You created a series of social media videos for the Dettol Hand Wash Challenge to spread awareness of hand washing in India as a way to combat the coronavirus. In aggregate, these videos have been viewed more than 100 billion times. How did this idea come about?

Laxman Narasimhan: The video idea came to me as a proposal. The song is a bit of an ear worm and we thought we might get a billion views. What is remarkable is that the viewership we got was much larger than the videos of many public-health institutions. We had used our consumer insights as brand marketers and we brought those to the world of public health.

Celia Huber: How has your purpose guided your approach to the COVID-19 crisis?

Laxman Narasimhan: Our purpose has been further solidified. You can see it on the factory floors among the people who make Lysol, who feel proud that is what they’re doing. You see it among salespeople in China who feel energized. One thing the board and I have talked about is how to ensure we make a real difference, so we are giving away 1 percent of our operating profit. We gave money to the front lines in Wuhan, to HIV-AIDS stations in Africa, to various health agencies. We also funded joint ads with public-health institutions in various countries.

Celia Huber: What role did you, as CEO, play in embedding the purpose in the organization?

Laxman Narasimhan: As CEO, I have to embody the purpose. But 58 percent of the company are millennials and it is important that they embrace it too. I start every communication with our purpose, and we dial our decisions back to the company’s values, which we also reset in February. We try to live that every single day. It is not just me but my senior leadership team, how we hire, how we promote, the behaviors we encourage. For example, we decided that our staff could use the money they had saved on travel during COVID-19 to support local organizations that fit with our purpose, and their conversations with their colleagues about the donations further reinforced the purpose.

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Celia Huber: How do you see your corporate purpose tying into environmental, social, and governance issues, or ESG, that are so much in the spotlight these days?

Laxman Narasimhan: People do not discriminate enough between E, S, and G. It’s not one block of things. Take plastics: some big global companies could change plastics supply chains by simply saying, “We will process things differently.” If there is a plastics supply-chain coalition, Reckitt Benckiser will be part of it, but we cannot shape it because we are not big enough. On the social dimension, it’s very different. If you look at [condom brand] Durex and what we do with HIV-AIDS awareness, we are absolutely going to lead. If you look at what we are doing in hygiene, we absolutely play a role. In the 1900s, people thought hygiene was a lesser science. In moments like this pandemic, before antivirals or vaccines are available, hygiene is the foundation of health. That is a big deal for us. On governance, we have to be absolutely at the top. Our board, if you look at the nonexecutive directors, is majority women. If you count me as a visible minority, we have a board where minorities are a majority. But between E and S, we choose S because, clearly, on S we have to lead. If we don’t, who else will?

Celia Huber: I’d like to switch gears and talk about your transition to the chief executive role. You came to Reckitt Benckiser as an outside CEO from PepsiCo. What was that like?

Laxman Narasimhan: As an outside CEO, you do not come in because the direction of the company is what the board wants. In this case, I had been at Pepsi for seven years and that experience gave me an opportunity to learn how to be a CEO, because I ran Latin America and then Latin America, Europe, and Africa before taking on the commercial role. I learned how to meet people, set direction, deliver performance. But as a public-company CEO, there are additional muscles you have to exercise. You meet with investors, you need to learn about governance and how to manage the board, and you are the person who makes the final call. So, I recognized I needed to be humble about it and take some time to set an agenda.

Celia Huber: The lockdowns came in shortly after you announced the new strategy. How did you handle the crisis as a CEO transitioning into this new role? How did you build relationships with your team?

Laxman Narasimhan: After two weeks on the investor road show, I went straight into lockdown. While I recruited my CFO and brought him on board, I have not been in a room with him. We have a new transformation lead and he is working remotely. So is the supply chain lead. COVID-19 has driven a very different dynamic around not just team composition but how you build the team. My job, at this point, is to ensure they mold into a team. I talk to my head of HR four times a day. I speak with my CFO and head of HR together once a week. There is no agenda. We just spend an hour calibrating what we are hearing. What holistic picture is forming about our business, our people, the challenges we face? This informal, unstructured time is a way for us to begin to understand how each of us operates, and I find that we are beginning to read each other well.

Celia Huber: What have you found most challenging about leading the company remotely during the past months?

As CEO, the hardest part about operating remotely is that you have a smaller set of patterns to rely on and your judgment is based on fewer qualitative bits of information.

Laxman Narasimhan: As CEO, you are a pattern recognizer. You go to a market, you see what is happening in a store, a customer or an employee says something or you see something in the newspaper, and you put it all together and say, “I think that is an issue and an opportunity.” In a similar way, you judge. When someone puts a proposal in front of you, particularly for capital, you make a judgment based on what you see and what the person is saying. You connect it to the patterns you have seen before. There is a little bit of chemistry that goes into making a decision. The hardest part about operating remotely is that you have a smaller set of patterns to rely on and your judgment is based on fewer qualitative bits of information. When you make bets, you need to have multiple people calibrating them.

Celia Huber: With these constraints around pattern recognition, how do you go about identifying and reacting to new consumer trends?

Laxman Narasimhan: We do a lot of social listening. We have consumer insight capabilities. I watch daily sales. I talk to customers. I talk to CEOs in ancillary industries and they give me a bit of a read on what is going on. The behavior changes we are seeing are not surprising. The level of anxiety around hygiene is up and data shows both penetration and frequency changes. We have brands that people bought a lot at the start of the pandemic and have stayed with them.

Celia Huber: Are you seeing any shifts in talent recruitment and retention?

Laxman Narasimhan: When I started, there was so much uncertainty and speculation in the press that it was hard to attract people. I had dinner or breakfast with somebody every single day and the first part was selling them on the vision. Once they got excited about the vision, I interviewed them. Today, I am not selling them the vision. They are interested and our conversation is very much around the role, the fit. It has become easier for me, even though it is remote, partly because people know what the company stands for. We have elevated the reason we exist and that makes the sell much easier.

Celia Huber: Let’s turn to resilience. With so much uncertainty about the future, how are you planning inventory, staffing, and other elements?

Laxman Narasimhan: The first thing you need to do is take away the continuity risk and ensure you are well capitalized. We did a bond issue around May, it was a good rate and duration, so from a balance sheet standpoint we felt a lot better. Planning is much more complicated because when you have demand soaring in some parts of the company and not in others, you have to manage in a flexible manner. In July, we produced 20 times the amount of sanitizer we had done last year—just a massive increase.

Agility is at the heart of this. We have a few scenarios, but my real focus has been on flexibility. We have been ruthless about eliminating complexity. In some factories, 80 percent of the SKUs are gone because part of the way to deal with uncertainty is to simplify. Our operations have been simplified to the point where we can move very quickly.

Celia Huber: That leads me to the next question. How do you think about managing a global supply chain these days?

We have been ruthless about eliminating complexity. In some factories, 80 percent of the SKUs are gone because part of the way to deal with uncertainty is to simplify.

Laxman Narasimhan: In some categories, we do have global supply chains. Where we don’t, we need to ensure we have the right capacity and the right flexibility. Part of capital allocation is assuming certain risks that you have to manage. Sometimes, individual managers in a country cannot take on a certain risk and you, as CEO, have to decide what kind of risk portfolio you want for the company and how to manage that in a way that is simple for people to deal with. We have been looking at how to ensure we have the right capacity investments to meet the volume demand in different scenarios while at the same time having the flexibility to respond to demand through multiple levels of the supply chain—from inventory in a manufacturing plant all the way to raw materials. The level of risk in each of them is quite different.

Celia Huber: What about your personal resilience and experience? You described how your working life has changed. What did you do to keep your energy up during the lockdowns?

Laxman Narasimhan: I was in the middle of a move to the UK when the pandemic hit. I have my 80-year-old mother here in a small apartment, so I am hyper-careful about COVID-19 exposure. I consider it a blessing that I have the chance to have dinner with her every day, but some days have been taxing. She might choose to come in while I am on a board call and say, “You have to take out the rubbish.” I remember I was on an investor call and she had a point of view that she was choosing to express right at that moment.

Celia Huber: Has the experience of leading through the COVID-19 crisis changed you in any way, both personally and as a CEO?

Laxman Narasimhan: You get much more reflective. This period has helped me understand what goes on inside the lives of the people who work for me. We have a thing where we open up the camera. I do these “Zoom-ins” with young talent and I turn the camera around so they are virtually sitting in my living room, and they love that. In this way, I have been in people’s homes in Saudi Arabia and Pakistan and Brazil, where I have never been in person, and they take me around the house and introduce me to their families. Understanding what they are going through has been helpful. I’m also walking. London is a great city to walk. The other day, I did a 21-kilometer walk to Wimbledon and back. It has been a way for me to learn the history of this place.

Celia Huber: Have you made any major changes to your strategy as a result of the crisis?

Laxman Narasimhan: We have a growth model that is very straightforward. I am looking a lot at penetration, what is happening in households and with individual consumers. We look at market share and at new places our brand will go. We did a deal with Hilton in the US, together with the Mayo Clinic, that is largely around a standard of care for hotels. That gives you a sense of where things might go. The base business is actually doing better than before, but not everything has benefitted. We wrote off a £5-billion business we had bought and that was not easy. With our portfolio, we are obviously well-placed in a world like this. The big question for me is what balls we can afford to drop and how do we ensure there are no safety or quality issues. Then there are certain balls we are going to pick up and take way down the line. The choice is hard, because you are taking money away from some things and allowing some capability not to get built while you build something else.

Celia Huber: We have talked about challenges but let’s end on an optimistic note. What excites you about the future?

Laxman Narasimhan: I am excited about the power of possibility. So many rules are getting thrown out. People said there is no way you can move online in six days—and in six days, we were online. There is no way we can work remotely for more than two months. Well, here we are. Every single day, I try to find one idea from somewhere in the world, in art or culture or science or business, that is super positive, because we have to be inspired by what is happening. When all this ends, we will see things emerge that we never thought were possible. There is a renaissance under way, it is just not visible yet.

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