How Don Knauss ties corporate responsibility to financial success at The Clorox Co.

Don Knauss, chairman and CEO, The Clorox Co.

Don Knauss has built a career transforming new brands into household names, from debuting Simply Orange at the Minute Maid Co., Coca-Cola Zero as president of Coca-Cola North America or launching Green Works — one of the most successful new products in consumer packaged goods in the last decade — as chairman and CEO of The Clorox Co.

While the road hasn’t always been easy, Knauss says there’s one characteristic that will never change when it comes to what makes brands successful: People trust them. “At the end of the day, a brand is a promise of performance,” says Knauss, who joined Clorox in 2006. “It really is about creating trust with the consumer.”

Advances in technology have only magnified the role trust plays in consumer decision-making, Knauss says. Before people even set foot in a store to buy a product, they can research user reviews, look up product information and find out what other people think about the best practices of the brand as well as the company that makes it.

Coming on as the new CEO, Knauss quickly realized that Clorox, a company with products in more than 100 countries, needed to meet consumers’ need for trust and transparency if it was going to continue to get their vote as customers.

Here’s how Knauss created a corporate responsibility strategy at Clorox that’s not just good for consumers; it’s also good for business.

Make it a priority

One of the most important steps in the success of Clorox’s corporate responsibility initiatives dates back to 2006, when Knauss and his executive leadership team first formalized the company’s commitment to corporate responsibility (CR).

What began with a meeting about Clorox’s centennial business strategy — the company turns 100 in 2013 — quickly turned into a call to action as the group examined four “megatrends” going on in the business world, including health and wellness, sustainability, multicultural shifts and, of course, affordability. As Knauss and his team dove into the causes behind each trend, they kept coming back to the issue of corporate responsibility.

“Consumers were not only evaluating brands on strictly the performance of that brand, but they were also evaluating it on who was providing the brand to them,” Knauss says. “Was it a company they trusted? Was it a company that had the same core values that they espoused? And was it somebody that they wanted to do business with?”

Over the years, Clorox has grown from its trademark bleach and cleaning products to manufacturing and selling everything from salad dressing to water filters, cat litter and trash bags. And like many other brand-driven enterprises, it’s spent years focusing on its commitment to build trust with its customers.

But in that meeting, Knauss and his team realized that it was time to take the extra step. They needed to make the company’s commitment to corporate responsibility a formal strategy with clear metrics and goals.

“It was that insight to seeing the connection consumers were making between brands and companies that made us even drive it harder,” Knauss says.

“As an offshoot of health and wellness and sustainability, it really got us doubling down on our corporate responsibility of what do we want to stand for?”

They narrowed Clorox’s focus to five pillars of corporate responsibility: performance, planet, people, products and purpose. And they went about setting goals for each pillar. Some of these included making sustainability improvements to 25 percent of the product portfolio by 2013, reducing waste and moving to more sustainable product materials.

They also structured the goals in phases — annual goals as well as a three-year plan — allowing the leaders to adapt the strategy over time as consumer or economic trends play out. As you build a foundation for CR in your organization, the most important thing to consider is whether the goals you set are realistic, so that people internally and externally will take them seriously, Knauss says.

“If you set unrealistic goals, you can create some pretty bad behavior throughout the organization,” he says.

“So we thought it was a combination of getting the strategy right, getting the strategy focused on trends, sustainability being one of those trends, and then linking that to how do we do a better job from a corporate responsibility standpoint against the planet, against our people, against the purpose of the company.”

Build alignment

Creating a formal CR strategy gave Clorox the foundation it needed to drive the commitment throughout the organization. From there, Knauss says it was up to the company’s leadership to build alignment on the strategy, or “tone at the top.”

“It starts with the top,” he says. “So a CEO or COO really has to drive this thing if you’re going to get traction with the rest of the company, and then get traction with outside constituents.

“You have to keep people informed. So it’s not just me talking to the executive committee. It’s me sending out voice mails, emails, connecting with the rest of the organization on the kind of progress we’re making.”

As a leader, Knauss says he utilizes a piece of business advice he received from Don Keough, the former president of the Coca-Cola Co., when he’s trying to get buy-in from stakeholders.

“When I took over as president of Coca-Cola North America, I asked him, ‘Don, what kind of advice would you give me?’” Knauss says. “And he said, ‘Don’t act like a big shot.’

“One of the things I’ve learned is that as you move up in an organization, you’re given more power. The less you use that power, the more authority you’re given by people — in the sense that power is the ability to compel people to do things. Authority is really more about persuading people to do things.”

To get buy-in from shareholders about the CR strategy, Knauss simply reminded them how the integrity of the company that produces a brand translates into a consumer’s buying decisions, and therefore, profitability.

“Everyone understands the evolution of the consumer over time and how the consumer isn’t just evaluating the brand but the company that provides that brand — and is it somebody they really want to do business with,” Knauss says. “I think people intellectually get that. They get that intuitively. It’s just reminding them how important it is that our values and the focus on our corporate responsibility align with the values of our consumers.

“It was easy to make the leap from building trust with consumers — anchored in the performance of the brands — to building trust with investors by anchoring the trust in the performance of the stock and the company’s ability to deliver shareholder returns.”

Increase engagement

Having a strong CR strategy means nothing if you don’t accomplish any of the goals you set out to achieve. So to keep your organization accountable for progress, you need to find ways to keep them engaged in the goals and focused on their success.

One way to do this is by tying those goals to monetary incentives.

Because Knauss knew he would rely heavily on his executive committee to communicate and lead progress on CR initiatives, he decided to pay the company’s senior executives part of their annual compensation based on Clorox’s ability to deliver against its environment goals, such as for greenhouse gas emissions, wastewater reduction, energy use and solid waste.

“If you really want to get traction, you not only have to measure it, you have to pay people on it,” Knauss says. “So it’s first, getting the focus right, including defining the metrics that you want to measure progress with, second, getting alignment throughout the organization that these are the right pillars and the right metrics, and then lastly, the discipline — putting the routines in place to monitor the progress against those on a quarterly basis, at least.”

In addition, people throughout the organization need to understand how important CR programs are to the consumers you sell your brands to, Knauss says.

So to help people see this link between CR and company performance, the organization released its first official corporate responsibility report in 2010. It also highlighted its CR strategy throughout the 2011 annual report, titled “Think Outside the Bottle.” In both instances, Clorox emphasized how CR ties into the company’s vision and mission for employees and consumers.

Building this kind of high-level engagement with employees is important short-term because it drives progress on your goals and long-term because it also helps you attract and retain the best talent, Knauss says.

“That’s what it’s all about, is the best talent,” he says. “So when you look at what we’re trying to do from a business standpoint and not what we’re trying to do from a corporate responsibility standpoint, all of that together really drives a high level of engagement with our employees. At the end of the day, that’s how you win.”

Overshare

The No. 1 way to stay accountable to your CR progress is probably the most obvious. Because CR also reflects corporate values, you need to also link the goals and programs back to the wants and needs of consumers.

With the increasing availability of information, many companies have, at times,  suffered financially because of their lack of transparency in corporate practices — think Wal-Mart, British Petroleum and Nike.

Demonstrating transparency with consumers is increasingly important for companies who want to prove that their commitment to the customer is genuine.

“It’s so fundamentally different in terms of the consumer’s access to information — the ability to really say, ‘Look, I want to do business with people whose values align with my own,’” Knauss says.

“You’re really putting your brands at risk if those brands and the company don’t connect and communicate this sense of value.”

Instead of going on the defense, Clorox has used the transparency of digital and social media as a way to increase the amount of information it shares with its consumers.

For example, when Knauss and his team saw that consumers across segments were showing more concern about what kind of ingredients were in products, and especially cleaning products, they implemented an initiative to disclose all of the preservatives, dyes and fragrance ingredients in the company’s U.S. and Canadian cleaning, disinfecting and laundry products.

Although the company was the first in its industry to do so, it eventually became a leader in ingredient disclosure as other businesses followed suit.

“A consumer can go on our website, pull up any one of our brands, and it will give full disclosure of whatever ingredients are in there,” Knauss says. “So it’s an example of the transparency that we’re not only trying to bring to the financial side … but to the consumer side of the company by letting consumers know exactly what they’re buying.”

Another example is the website for its brand Green Works, which offers users tips on how to create a greener lifestyle and features a sustainability blog called “Green Mommy in a Plastic World,” with posts such as “Seven things to do with your kids’ artwork.”

Because the ability to connect and get feedback is now so immediate, most companies can only benefit from policies such as increased transparency, communication and disclosure, Knauss says.

“There are just so many different ways of connecting, so you’ve got to be where the consumer is,” Knauss says. “So I think everybody intuitively gets that. But we’ve certainly seen a big payout.”

In addition, many initiatives that have helped Clorox reduce its environmental footprint, such as using greener packaging, have also reduced cost. Today, all of its segments have bounced back from recession lows, bringing the company to $5.2 billion sales last year. And the fact that 90 percent of Clorox brands are No. 1 or No. 2 in the spaces that they compete in is just further proof that corporate responsibility and profitability can — and do — go hand in hand.

“If you don’t have a solid strategy around corporate responsibility and articulate that strategy to people in a compelling way, you’re missing half of the demand creation equation,” Knauss says. <<

 

How to reach: The Clorox Co., (510) 271-7000 or www.thecloroxcompany.com

Takeaways

  • Create a formal commitment.
  • Get key groups on board.
  • Find ways to raise engagement.

 

The Knauss File

Don Knauss
Chairman and CEO
The Clorox Co.

Born: Highland, Ind.

Education:  Indiana University

First job: Officer in the United States Marine Corps

What is one part of your daily routine that you wouldn’t change?
Senior corporate jobs are very demanding, not only mentally but physically, particularly given the extensive travel needed. I work out six to seven days a week. That physical exercise is a great release, and a high level of fitness is critical to being able to execute my job with excellence. I highly recommend a vigorous exercise program for everyone, but especially for those in high-pressure jobs.

If you could have dinner with one person you’ve never met, who would it be and why?
Margaret Thatcher. She was an incredibly effective prime minister during a very tumultuous time. I would like to understand her approach to leadership — the traits she valued the most in people for them to be truly effective and drive real progress whatever their role in life.

What is your favorite part of your job?
The aspect of my job I most enjoy is helping to define and sustain the values of our culture. The CEO must set a ‘tone at the top’ to win in the marketplace and, importantly, to win in the right way. It is extremely important to define the traits you expect from your leadership team and your entire company. I believe a values-based culture anchored in integrity, optimism, compassion, humility and curiosity will attract and keep the best people engaged.