Falk, Thomas J. 1958–

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Thomas J. Falk
1958–

Chairman and chief executive officer, Kimberly-Clark Corporation

Nationality: American.

Born: 1958, in Waterloo, Iowa.

Education: University of Wisconsin–Madison, BBA, 1980, Stanford University, MS, 1988.

Family: Married Karen (maiden name unknown); children: one.

Career: Alexander Grant & Company, 1980–1983, accountant; Kimberly-Clark Corporation, 1983–1984, internal audit staff; 1984–1986, senior auditor; 1986–1987, senior financial analyst; 1987–1989, director of corporate strategic analysis; 1989–1990, operations manager; 1990–1991, vice president of operations analysis and control; 1991–1993, senior vice president of analysis and administration; 1993–1995, group president of infant and child care; 1995–1998, group president of North American consumer products; 1998–1999, group president of global tissue and paper; 1999–2002, president and COO; 2002–2003, CEO; 2003–, chairman and CEO.

Awards: Distinguished Accounting Alumnus, Department of Accounting and Information Systems, University of Wisconsin–Madison, 2002; Patrick Henry Award, National Guard Association of the United States, 2003.

Address: Kimberly-Clark Corporation, 351 Phelps Drive, Irving, Texas 77038; http://www.kimberly-clark.com.

■ In 2004 Thomas J. Falk was chairman of the board of directors and chief executive officer of Kimberly-Clark Corporation. He worked for Kimberly-Clark beginning in 1983, gradually attaining positions of greater responsibility and authority over the years. As a result of his efforts Kimberly-Clark and Scott Paper operations were successfully combined following the merger that occurred in 1995. Falk was the mastermind behind the structuring of Kimberly-Clark's global operations and its Go-To-Market project, which improved the manufacturing, distribution, promotion, and sales processes.

KIMBERLY-CLARK

In the mid-2000s Kimberly-Clark was the leading global manufacturer of tissue, personal care, and health-care products, also producing premium business, correspondence, and technical papers. The company marketed products with such globally recognized brand names as Cottonelle, Kleenex, Scott, Huggies, Pull-Ups, Kotex, Depend, Tecnol, Kimwipes, and WypAll. Other brands well known outside the United States included Andrex, Scottex, Page, Popee, and Kimbies. The company ran manufacturing operations in 40 countries and sold its products in more than 150 countries. In 2004 Falk directed the realignment of the company's North American and European operations and established a unit to boost sales in emerging foreign markets. He also gave consideration to the possibility of spinning off the company's paper, pulp, and timber operations to form a separate company.

ADVANCING CAREER

Before joining the internal audit staff of Kimberly-Clark in Neenah, Wisconsin, in 1983, Falk worked for the accounting firm of Alexander Grant & Company as a certified public accountant. Falk became senior auditor at Kimberly-Clark in 1984 and senior financial analyst in 1986. He was advanced in rank in 1987 to director of corporate strategic analysis. In 1988, under Kimberly-Clark sponsorship, Falk earned a master's of science degree in management as a Sloan Fellow at the Stanford University Graduate School of Business. Following his graduation in 1989 Falk became operations manager for infant care at Kimberly-Clark's Beech Island, South Carolina, diaper plant.

Falk was elected vice president of operations analysis and control in 1990. In this role he negotiated a rigorous set of business transactions that resulted in the sale of Spruce Falls Power and Paper, a newsprint subsidiary jointly owned by Kimberly-Clark and the New York Times, which transferred ownership control to employees. Falk was elected senior vice president of analysis and administration in 1991, reporting to the chairman and chief executive officer Wayne R. Sanders.

In 1993 Falk was elected group president of infant and child care with responsibility for Huggies diapers, the company's best-selling product, and Pull-Ups training pants. He became group president of North American consumer products in early 1995. In this role Falk led the company's consumer and professional-tissue businesses, U.S. consumer-business services, and U.S. consumer sales. In 1996 Falk took charge of the company's pulp and newsprint operations as well as the premium and correspondence-papers businesses, the wetwipes business, and the staff-related operations of human resources and environment and energy.

Falk was named group president with regards to global tissue and paper in 1998, adding global supervision for the company's consumer and professional-tissue and wet-wipes businesses to his existing responsibilities. As such Falk was responsible for the company's worldwide consumer and away-from-home tissue, wet wipes, and premium and correspondence-papers businesses.

AS PRESIDENT AND CHIEF OPERATING OFFICER

Falk was elected president, chief operating officer, and member of the company's board of directors in 1999. As president and chief operating officer he was responsible for running Kimberly-Clark's daily operations. At this time chairman Sanders said of Falk, "Tom is a proven leader and has been instrumental in transforming Kimberly-Clark into one of the world's leading consumer-products companies. He was the driver behind the successful integration of Kimberly-Clark and Scott Paper, an outstanding acquisition that has created a tremendous platform for continued profitable growth. Operating profit and cash from operations have roughly tripled versus pre-merger rates. In addition, operating margin at almost 18 percent and return on equity at 34 percent have improved by more than 50 percent" (November 17, 1999). While president and COO Falk played a key role in the turnaround of the company's European operations, the improvements of which added more than $200 million in operating profit to the company's annual revenues.

Falk was responsible for Kimberly-Clark's global organizational structure and its highly successful Go-To-Market initiatives. By removing unnecessary costs from the company's supply chain, Falk was able to save more than $400 million between 1997 and 2000. Sanders continued to praise Falk for these efforts: "Through his leadership and his team's benchmarking efforts, the tissue business has dramatically improved its cost position. Moreover, Tom is a strong advocate of investing in technologies and brands to deliver consumer-preferred products" (November 17, 1999).

AS CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Falk was elected chief executive officer in 2002 and additionally became chairman of the board of directors in 2003. He had dealt with the company's daily operations since 1999, while Sanders had concentrated on communicating with Wall Street analysts and investors about financial affairs. This arrangement worked well because Falk was seen as a more serious counterpart to Sanders, who was comfortable with investors and had a relaxed, clever manner; Falk had a reputation as a financial genius but lacked some of Sanders's social graces. Over the 1990s the company more than doubled its revenue, to $14.5 billion in 2001 from $6.8 billion in 1991. Most of that growth was attributed to the 1995 acquisition of Scott Paper Company, in which Falk's participation was instrumental.

However positive Kimberly-Clark's earnings had been from 1991 to 2001, Falk inherited a company with three major weaknesses. First, it had an industry identity as no more than a paper company, in a time when paper products were seen as having low growth potential. Second, the company had yet to resolve a decades-long rivalry with the consumer-products giant Procter & Gamble Company. Finally, a group of impatient Kimberly-Clark investors were troubled by (and sometimes angry over) a series of missed earnings projections.

MOVING AWAY FROM PAPER

At his new position Falk continued to emphasize his dedication and commitment to developing a global organization that delivered high-quality products and high-quality sales and earnings growth. However, he decided to move the company away from paper products and toward health and hygiene products. He wanted to identify Kimberly-Clark as a consumer-products company rather than a paper-products company—as Wall Street analysts continued to believe (and report) even after Kimberly-Clark had clearly shifted its operations. For many years Kimberly-Clark had been sharpening its focus on higher-value products and moving away from the paper-making industry, which had suffered from poor demand and overabundant supply.

At the beginning of 2004 Falk announced that the company was further distancing itself from papermaking, in order to increase focus on consumer products, by spinning off its paper, pulp, and timber operations, including Neenah Paper and Technical Paper, along with the Nova Scotia pulp mill Pictou and the Ontario pulp mill Terrace Bay.

K-C VERSUS P&G

For a long time, Falk and Kimberly-Clark were mired in a bitter rivalry with chief executive officer Alan Lafley of the Cincinnati, Ohio–based Proctor & Gamble Company (P&G). Competition between the two men and their companies increased in the 2000s as price wars intensified, generic brands grew in popularity, and prospects for new growth diminished. In order to satisfy investors' curiosity about his ability to produce consistent growth within the company, Falk led the company to offer diapers, toilet papers, and paper towels that consumers would be willing to buy at premium prices. Falk had consistently and to a large degree successfully invested in technical innovations such as elastic leg openings to help diapers fit better. With $3 billion in global sales, much of which were within the United States, Kimberly-Clark's Huggies diapers accounted for roughly 22 percent of its annual revenue.

DIAPER WARS

Even though Kimberly-Clark had long dominated the diaper market, which carried higher prices and profits margins, the company had less success in other sectors. For instance, Falk tried to innovate with wet toilet paper, but consumers did not like the idea. However, Falk continued to stress new research and development with the hope that new technology would make more absorbent paper a success with consumers.

The P&G leader Lafley made the company's Pampers diapers a top priority in 2000 with a promise to focus on the company's biggest brands. P&G invested heavily in upgrading its diapers, adding features such as stretchy sides and overlapping fasteners that could adjust sizes. It also moved to develop premium pull-up diapers, or training pants, for toilet-training toddlers. Between Falk and Kimberly-Clark on one side and Lafley and P&G on the other side, both fought back and forth for the greater market share of diapers by lowering and raising prices, increasing and decreasing the number of diapers per packages, and implementing other strategies. At one point lawyers for Kimberly-Clark sued Proctor & Gamble for false advertising (on television and in other media sources), asserting that P&G advertisers misrepresented Kimberly-Clark's new Huggies' Pull-Ups in saying that two-year-olds could easily remove them.

P&G did not limit its aggressiveness to diapers. When Lafley was promoted to chief executive officer at P&G, the company was often relying on price increases to reach its quarterly earnings targets. At Kimberly-Clark, Falk could not afford such measures because his smaller company had fewer products and no high-end business, such as P&G's beauty-care unit, to insulate the company from market fluctuations.

MISSED EARNINGS PROJECTIONS

Falk made some advances in minimizing Kimberly-Clark's identity as a pulp maker, but as of 2004 investors still doubted the company's ability to continue to grow. Inherent in Falk's problem was the lack of money available to the company to spend on its brands. In 2003 Colgate-Palmolive Company, another rival, spent about four cents for every dollar of sales on capital expenditures; P&G spent about five cents. Kimberly Clark spent nearly eight cents, leaving less money for advertising and other investments. Falk was unable to invest in Kimberly-Clark's brands as fully as his more diversified competitors were.

OTHER FUNCTIONS

Falk served as a director of Centex Corporation in Dallas, Texas, and as a member on the Dallas Regional Advisory Board for JP Morgan Chase. In addition he was a National Trustee of the Boys and Girls Clubs of America. Falk was a member of the Dean's Advisory Board of the University of Wisconsin–Madison School of Business from 1997 to 2001.

See also entry on Kimberly-Clark Corporation in International Directory of Company Histories.