GILLETTE

Jim Kilts Is an Old-School Curmudgeon

Nothing could be better for Gillette.

By Katrina Brooker

"I'd rather be in my living room smoking a cigar," sighs Jim Kilts one dreary November night, standing on stage at the Copley Theatre in Boston. Propping his elbows on a large wooden podium, the chairman and CEO of Gillette blinks against a glare of bright stage lights. The 800 or so seats in front of him are empty except for a scattering of people--a stage manager, some Gillette public-relations people, a technician. Behind him a large screen projects a slide titled "The Circle of Doom." Kilts stares down at a teleprompter at the foot of the stage and grimaces: "I've gone through this so many times I'm starting to bore myself."

Kilts is here to rehearse a state-of-the-company speech he plans to give in the morning to 450 Gillette executives. He's been at it now for several hours--going through every line, every gesture, every pause. No detail is too small to be addressed. As he runs through his slides, he notices that the border around one labeled "best capabilities" is blue; it should be red. On another, he wants to change the word "choose" to "balance." He's got one joke in the speech, and he practices it three times to make sure it will go over well.

At one point a PR rep tries to persuade him to get out from behind the podium and walk around--to give his speech more, well, oomph. Kilts takes a few awkward steps, then stops and shakes his head. "I don't know. I'll have to think about it."

Standing on stage, under the bright lights, Kilts looks as he always does: crisp and tidy. His dress shirt is starched, his navy tie neatly knotted at his neck despite the late hour. But he's clearly getting tired. He's been up since 5 a.m. His eyes are bleary, his shoulders are starting to droop--and so is his mood. When the PR man suggests he use some hand gestures in his speech, Kilts replies testily, "I don't feel like gestures." He turns back to the teleprompter with a tight-lipped smile. "Good morning," Kilts begins for the fourth time that night. "It's great to be here ..."

Watching this spectacle tells you two important things about Jim Kilts: (1) He's a stickler for detail; and (2) He never shows up unprepared. That, one could argue, is what makes him so good at his job--fixing businesses on the brink.

When he took over Gillette in February 2001, Kilts inherited one of the biggest headaches in consumer products. The once highflying company, the maker of Mach3 razors, Duracell batteries, and Oral-B toothbrushes, had missed its earnings for 14 consecutive quarters. Neither sales nor earnings had grown in five years. Two-thirds of Gillette's products were losing share. Once a hot stock, the Boston company had become a pariah, seeing a 30% drop in its value between 1997 and 2000. "Management had let the company go haywire," says Wendy Nicholson, an analyst with Salomon Smith Barney.

It was a problem tailor-made for Kilts. When it comes to turning around troubled businesses, few managers are as experienced or as successful as he is. At 54, he's been involved in more than a dozen turnarounds. Starting back in the 1970s as a product development manager, he helped revive then-struggling Kool-Aid. In the '80s and '90s at Kraft--where he eventually became CEO--he got Post cereal and Kraft's cheese group out of their respective troubles. Then, as CEO of floundering Nabisco, he returned Oreos and Chips Ahoy to their former glory. So when Gillette's board went looking for someone who could turn the place around, they chose Kilts.

"It was a natural move," recalls Warren Buffett, a Gillette board member who controls 9% of its stock. He made up his mind about hiring Kilts--the first outside CEO Gillette has had in 70 years--after just one meeting. "He made as much sense in terms of talking about business in general as anybody I've ever talked to. If you listen to Jim analyze a business situation, you get absolutely no baloney. And frankly, finding someone like that is a rarity." In October, Buffett announced his plans to leave Gillette's board by this spring. The move sparked talk that he was unhappy with Kilts's performance. Not so, says Buffett. "I feel good about this investment; it's because I'm happy that I can leave. In the past I wouldn't have felt right leaving the board--I was needed. Now Jim's back there. If you've got the right person running the business, you don't need me." Buffett told FORTUNE that he has no intention of selling any portion of his Gillette stake.

What has Buffett so happy about Gillette is clear: This year sales are expected to grow 5%, to $8.4 billion. Earnings per share last quarter grew 18%, to 33 cents; for the year they are forecast to grow 15%, to $1.14. "Here's a company that has been mismanaged for years, and lo and behold, Jim Kilts comes along. He has really cleaned things up," says Salomon's Nicholson, who upgraded the stock in November. "The turnaround is happening," says Neal Goldner, a buy-side analyst at State Street Global Advisors who covers consumer products.

Over the course of his 30-year career, Kilts has developed something of a blueprint for fixing troubled businesses. In an exclusive series of interviews with FORTUNE, Kilts talked candidly about his formula and how he's applying it to Gillette. It's not rocket science, as Kilts himself readily admits. But it is a meticulous and exacting process nonetheless. Instead of dreaming up grand visions for Gillette's future, Kilts stays up at night worrying about whether he should sell batteries in packages of six or eight. Rather than rally the troops with big speeches on how Gillette can change the world, Kilts presents slides on how their SG&A (Selling, General & Administrative) expenses compare with those of competitors. It's not glamorous; it's not sexy; it's a buttoned-up, old-school approach to business. And it works.

"This is the most missed runway in the U.S.," Kilts says stonily, as the Hawker 800 jet approaches Boston's Logan Airport. His lanky, 6-foot 4-inch frame looks oversized inside the jet's cramped cabin, and he shifts in his seat uncomfortably. It's a rainy night, and Kilts is peering out the window at the airport lights just barely blinking through the fog. The plane hits some turbulence, and he grips his armrest, his knuckles whitening with the pressure. Kilts hates to fly. "I don't like the feeling of being out of control," he says.

The insight is dead-on. Everything about Kilts--his consistently stern expression, his neatly combed white hair, his pressed dark suit--gives off the whiff of a man who likes to be in control. Even the tone of his voice feels controlled. Whether talking about the world's deadliest runways or Duracell's market share, Kilts remains unflustered, unemotional. "He's not the life of the party," concedes Bob Morrison, former CEO of Quaker Oats, vice chairman of PepsiCo, and a friend for more than 20 years. "There's no small talk with Jim, it's all about business," says Alan Lacy, CEO of Sears, who has known Kilts for ten years and used to work with him at Kraft.

One thing that did get Kilts animated, even emotional, was talking about an incident that took place some 30 years ago: the day he almost got fired. "It was my first crisis," he says, almost wistfully. Kilts, then 23 years old, was putting himself through business school by working at a General Foods manufacturing plant in Chicago. He was responsible for ordering supplies; one week he simply forgot to order some cartons for a particular food line. "They called me at home, and my mother took the call," recalls Kilts, who lived with his parents until he was 26. "She said, 'You know, it's the foreman from the plant; they're out of all this stock, and they are shutting down a line.' And my mother said, 'Oh, my God, they are going to fire you.' " In terror of losing his job, he desperately called a salesman from the supplier's company at home that night and begged him for extra cartons. That same night he loaded a truck and got them over to the plant. The factory line started up again, and Kilts saved his job. It was a lesson on problem solving he's never forgotten: Step one--make the problem yours.

"You have to have accountability," he explains the day after his bumpy plane ride, now seated safely in his office on the 48th floor of Gillette's headquarters in Boston's Prudential Tower. With his hands neatly folded on the table in front of him and his stern expression, Kilts reminds you of a grammar school principal. "People always like to say, 'Management made me do it.' Well, we all are management." His very first day at Gillette he tried to drive that point home. At a meeting with all his division chiefs, he asked for a show of hands: "How many of you think our costs are too high?" Everyone in the room immediately raised his hand. Then he asked, "How many of you think costs are too high in your department?" Not a single arm went up. According to Kilts, it is a common response among managers of companies in trouble: Everyone knows there's a problem, it's just that nobody thinks it's his problem. And that's where Kilts comes in: He'll make it his problem--and yours, if you plan on keeping your job.

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