Corporate diversity and a passion for proactively changing lives inspires Procter & Gamble’s Bob McDonald to achieve new levels of success. That sense of personal purpose and passion is the primary differentiator between those who get to the top and those who don’t, said the chairman, president and CEO during a one-on-one interview with DiversityInc CEO Luke Visconti. Procter & Gamble is No. 5 in The 2012 DiversityInc Top 50 Companies for Diversity.

Success, according to McDonald, is dependent on being a proactive catalyst of positive change. For him, that includes running a profitable global business that improves people’s lives. In this exclusive interview, he reveals how a firm commitment to empathy and foundational values helps the company bridge cultural gaps, promote corporate diversity and innovate products that directly satisfy customer needs.

LUKE VISCONTI: Tell me about Procter & Gamble’s emphasis on values, what they mean to the organization and how you conduct business globally.

BOB MCDONALD: Procter & Gamble was founded with a purpose: improving people’s lives. During the Civil War, people shipped short-weighted products or clothing that didn’t last very long. This company said, “We’re not going to do that. We’re going to be known as the company that prides in high-quality products.”

It wasn’t until the mid-1980s when John Smale, our CEO, asked John Pepper, our president at that time, to lead a group of leaders to write down the values that we were trying to lead. It was serendipitous and necessary—at that time we were globalizing very quickly. As you move in to another culture, the difficulty is bringing your values with you.

We ascribe to keep the purpose and the values of the company consistent globally, but you have to be willing to change to stay relevant to your consumer and grow. We formulated the purpose about touching and improving lives and giving back to the communities in which we live and work.

Five values—leadership, integrity, ownership, passion for winning and trust—are critical to the success of the company. Leaders can personalize those values by bringing the experiences they had in life that cause them to form different beliefs. We teach people how to do that so that they can share that with their organizations and be introspective as leaders.

Creating Experience & Empathy Through Corporate Diversity

We’ve discovered that people join this company because their personal purpose is about improving lives. It gives them a way to execute that purpose on a bigger stage with more resources. This purpose is what provides meaning to their lives. That means if I as a leader can tie every behavior the person has back to that purpose, their life would be fulfilled.

You don’t compartmentalize that. The more pervasive we make our purpose of improving lives, the more fulfilled the people are and the better the business results. What we’re really trying to show is the virtuous cycle, where companies do well financially and do good at the same time.

What you should do as a company is provide opportunities for employees to do community service—through that, they become more fulfilled. They improve lives but they also have an experience.

We sent a team of people to Mexico to build homes for Habitat for Humanity. We sponsored the trip. People came back totally fulfilled—a life-changing experience. They learned about low-income consumers in Mexico. When we go to hire people around the world, we need to give them opportunities to learn how the majority of the world lives.

LUKE VISCONTI: You’re leading the diversity council personally. Why is this important to you and your corporate-diversity goals?

BOB MCDONALD: It’s so fundamental with everything that we do. If your purpose is to improve lives, you’ve got to have the leadership, the strategies, the system and the cultures to do that. You can’t ignore diversity.

Diversity for us is a strategy. If I’m trying to improve someone’s life, wouldn’t I be better off having somebody in the organization who is of that representation so they can help the company be empathetic to the consumer? Consumers can never tell us exactly what they need. We’re trying to find the unarticulated need. That’s where we develop our best products.

We believe that we have five strengths: consumer knowledge, innovation, branding, go-to-market and global scale. That innovation strength is the primary way we improve lives. The more diverse your organization, the better your innovation. We try to be very deliberate about setting up diverse teams of people in order to accelerate the innovation that comes from them.

I’m a big believer in the work of a fellow named James Burke, who wrote a book called “American Connections” and a TV show called “Connections.” He says the greatest innovations in the history of the world have never happened in a linear way. Alexander Graham Bell invented the telephone to help hearing-impaired people; [Guglielmo] Marconi invented the radio for two ships to communicate at sea; Tom Watson said someday the United States might only need two or three computers.

How do we create conditions that allow people to bring their diversity to work and have their diversity become the modes that provide the potential for these innovative connections? That’s what we’re really trying to do.

Trust: A Synergistic Effect

LUKE VISCONTI: What do you expect out of your diversity council? 

BOB MCDONALD: A much more deliberate goal, objectives, strategies. We’ve done that. We’ve put together a scorecard. The other thing that comes out is insights.

Procter & Gamble always cared about diversity. But why haven’t we achieved the results? We did a deep dive on the advancement of women as an example. Everybody was well intended but we weren’t happy with the results.

We promote from within, and in any company, leaders tend to attract individuals that they know to work for them. We’d always insist that you get a diversity candidate. Unsurprisingly, the diversity candidate wasn’t selected enough because people didn’t know the candidate. We had to put in place a much more deliberate system of making sure the diversity candidates get exposure.

Secondly, we had to join hands as a leadership team, saying, “I trust you. I’m going to take a risk on this person because you know them and I don’t.” The way to do that is to bring people together and create that trust.

LUKE VISCONTI: A synergistic effect by having everybody in the room? Do you think that it adds to not only awareness but accountability for corporate diversity?

BOB MCDONALD: There’s nothing stronger than accountability. In a combat situation, people perform heroically; they don’t think they’re heroes. They say, “I did this because I didn’t want to let my buddies down.” The same thing happens in a corporation.

I’ve seen attitudes totally shift. I’ve seen individuals who were skeptical of diversity become the biggest advocates. I don’t think it’s simply because of a feeling of hierarchy and me being in the room. I do think it’s the group dynamic. Everybody has good intentions, but it takes more than that.

Connecting With Consumers

LUKE VISCONTI: How have you seen this connection manifest between this diversity council, more disciplined corporate-diversity efforts and your successes around the world?

BOB MCDONALD: We are in the fast-moving consumer goods of business. We have no alternative but being empathetic to consumers; no alternative but to have a diverse workforce that represents those consumers.

We talk a lot about the importance of knowing the culture, knowing the language. In my own experience, it gives you an empathy that you couldn’t otherwise get.

LUKE VISCONTI: How are you leveraging this empathy? What are you structurally doing to make sure that you’re not making mistakes when you go into a place?

BOB MCDONALD: The challenge for us is we have to innovate for everybody on the economic pyramid. We don’t just innovate for the people on the top and dilute that product for the people on the bottom.

For example, in the Philippines, people really want clean clothes. They wash by hand and use soap suds as a surrogate for cleanliness. It takes the average Filipino five buckets of water to rinse their clothes.

Water in the Philippines is very expensive. Water runs by your house generally 30 minutes a day. You have a high horse-powered pump on the street; you pump the water into your water tank. If you miss that 30 minutes, you don’t have water.

We developed a product called Downy Single Rinse. It sequesters the suds and allows you to rinse with one bucket of water, an innovation particularly designed for people at the bottom of the economic pyramid.

Finding Purpose, Improving Lives

LUKE VISCONTI: What do you expect to flow through at the end of the day—the tangibles to the bottom line of the business?

BOB MCDONALD: It’s developing and delivering sustainable, outstanding business results, being in the top third of our peer group and total shareholder return sustainability, and doing that through a workforce that represents the consumers we’re trying to serve, the lives we’re trying to improve. Importantly, people are performing at their peak.

For people to perform at their peak, we’ve got to be empathetic to their needs and improving employees’ lives while we’re working to improve the lives of the world’s people.

If you ask me what success is, every person in the world uses a Procter & Gamble product. It’s every employee reporting to us, that they’re working at their full potential and that we’re helping provide meaning in their lives.

I love Viktor Frankl’s “Man’s Search for Meaning.” He wrote the book right after World War II. He was in the Auschwitz concentration camp and what he discovered was a new school of psychology.

Freud was all about looking in the past and basing your future behavior on what happened in the past. Frankl was about developing a vision of the future, recognizing the control you have over that vision. He would convince people in Auschwitz that how they reacted to those guards was in their control, that they could have a positive vision of the future that would determine the positive nature of their future.

I believe what we do in this company in improving lives is giving people meaning in their lives. I went to West Point because I wanted to free the people who were living in un-free societies. I joined P&G because I wanted to make a difference in the world.

When I go to college campuses today, the students tell us they want to work for a company where they can have meaning, where they can make a difference. I think that’s the opportunity we provide.

LUKE VISCONTI: In your bio, there’s a long list of organizations that you serve. Can you talk about how important that is to you?

BOB MCDONALD: I’m trying to help people understand what their individual purpose is in life. I have a set of 10 leadership beliefs: No. 1 is living a life driven by a purpose, compared with simply meandering through life without direction. With technology the way it is today, everyone is time starved. It’s possible to go through life reacting to external forces.

I’ve given this speech maybe 300 different times, maybe every college campus almost in the world. For me, it’s a calling. If I can help students understand how to make a difference in the lives of others and if that is a higher purpose, then they should set that purpose now rather than simply reacting to what affects them.

The point is people like to do what they’re good at, and they’re good at what they like to do. We naturally gravitate to certain things, and that may lift the veil a bit on what your purpose is.

It’s the No. 1 thing, in my opinion, that differentiates those who succeed at Procter & Gamble versus those who don’t, or those who succeed in life versus those who don’t. It’s maintaining the ability to learn.

I often tell people, “When you graduate, you’re not done learning. That’s the beginning of the learning journey.” No one can predict the future with certainty, particularly in today’s world which we at P&G call a VUCA world (volatile, uncertain, complex and ambiguous). How do we prepare ourselves for that future to make the right decisions in real time? The way to do that is to continue the ability to learn.

The leadership challenge today is so different with so many generations that are so diverse. The people complain about not text messaging and other things like that, which is all true.

What is going to be the analogy for the young person today? Twenty or 30 years from now, they’re going to face the same challenge. The older you get, the harder it is to learn new things. Reverse mentoring becomes a very powerful concept: forcing yourself to learn things that are new or very difficult is a powerful concept. If we don’t do that, we won’t get the most out of life.