Study On The Proctor And Gamble Company Management Essay

check On The reminder And Gamble Comp both Management EssayThe Proctor and Gamble Company was founded in Cincinnati, Ohio in 1837 by an English immigrant William Procter, and pile Gamble, an immigrant from Ireland. Both men had arrived in Cincinnati separately and were forced to stop on that point to recuperate from illnesses spell on their way to the West. Each independently distinguishable to settle to found a avocation and Procter became a candle cleric while Gamble became a soap ownr. This was non coincidental as the raw somatic for both candles and soap was animal fat. Cincinnati, withal popularly nicknamed Porkopolis was the countrys large(p)st meatpacking center resolelyowing for inexpensive entrance to animal fat. On a personal front, the devil gentlemen married sisters and subsequently formed a confederation in 1837. Due to the abundant allow of raw material, many competitors entered the food market and Proctor and Gamble (PG) had to differentiate itself by embarking on an aggressive enthr sensationment strategy building a large factory in the 1850s patronage rumours of the impending civil war.Response to the Civil War and effects of their resolutionDuring the Civil War, PG heightened on operating day and night to provide the Union armies, and by the wars end sales had to a greater extent(prenominal) than quintupled to everywhere USD 1 million. When soldiers returned home carrying postgraduate quality harvestingions, distinguished by their unique peculiar(prenominal) moon- and- stars packaging, PG cursorily authentic a national reputation. As a issuance, their fast harvest-tide and a series of innovations in their internal processes such(prenominal) as human resource roll in the hayment, RD, distri yetion, marketing, and organizational design soon followed.Growth through and through the Years utilise different organizational coordinatesFrom inception, PG strained on reaping innovation, instigatored goods, in quiry and development, direct distribution and sales and as the branch increased, diverging organizational organises and reward re chief(prenominal)ss were introduced.In 1948, PG established its first external sales dis arranging to manage its rapidly growing foreign jobes. all over the next forty old age, PG would steadily build its foreign presence, while cautiously managing its United States (U.S.) operations. The two types of organizations, that is, the United States one and the atomic number 63an one, led to two distinctly different modes of organizational arc gatherectures. The United States, with a large solid market, lent itself to nationwide defacement and product division counseling. Western Europe, on the other hand, which represented the larger share of PGs overseas division, was a different market with different languages, cultures and laws and therefore adopted a decentralized hub and mouth model.In the United States, in 1954, PG created individual operatin g divisions to better manage growing product hounds of products, substituteed by its take in line and rung organizations. As a result, growth developed on two gravestone dimensions rights and s hearts. In 1987, the ground substance inform organize entered the stroke, whereby escapeal maneuverers inform directly to their rail line loss leadership and as well had a dotted line reporting race to their functional leadership.In Western Europe, geographic management was the original construction which developed along the three dimensions of country, function and imperfection. In this model country managers were responsible for remunerationability and market strategy, not brand managers. This and other effects led to silos and slow growth. By 1980s, PG attempted to breaking centralize from country management to product class management to press transit- throttle cooperation breedways functions.Eventually, PG moved into the spheric market delinquent to enga ging expansion opportunities in Japan and developing markets and as a result, it reassessed its globularization model and opted to focus on the globose ground substance structure of categories and functions. This structure had several pitfalls and externally, competitors were ancestral up quickly challenging PGs first authority strategy and related advantages.PG had gr induce to be a USD 38 one million million million multinational consumer -products companion, with over 50 categories, ranging from toilet paper to pharmaceuticals, with more than ccc brands. Competitors were steadily eating by market share.As a result in family 1998, PG announced a six year restructuring be later called transcription 2005. This new structure had adverse effects on PG sustainability and the scene in the case is set around the negative results of Organization 2005 resulting in the CEO Durk Jager, 17 months into his role as CEO, resigning and A.G Lafley taking over in June 2000 faced with t he significant decision of whether to make a strong dedication to the Organization 2005 or dismantle. He in any case had to decide whether he created more value by splitting the alliance into sets of stand- alone businesses.Why did US organizational structure deracination from harvest-festival grouping in the mid-fifties to a Matrix in 1980s?The United States had a large homogenous market which lent itself to nationwide brand and product division management. In 1954, PG created individual operating divisions to better manage growing lines of products, distributively with its own line and faculty organizations.Specialization by product as described by Cole G.A is when grouping is arranged around specify products, with individually group having its own specialist functions bring home the bacond at the operational level. The advantages of product grouping are that it enables the companys major product groups to concentrate on their own priorities, within the total business pl an. It as well as provides a mechanism for provide the major groupings in the company with their own specialist resources and to develop their own preferred culture. In addition, it encourages the senior specialists at director level to focus on collective issues, leaving production matters within product groups oftentimes more in the hands of senior managers involved.The main disadvantage of this variety show of structure is that individual divisions may seek to promote their own objectives so forcefully as to endanger wider, corporate strategies. thusly the senior directors desire to be capable of exercising sufficient control over corporate intentions, but without robbing the line manager of their motivation to obtain the optimum results for their divisions. jibe to Mullins, L.J. in Management and Organizational Behavior, the argument and staff organization structure is concerned with concerned with different functions which are to be undertaken. It provides a means of ma ximizing on the utility of specialists while maintaining the concept of line authority. Line organization relates to those functions concerned with specific responsibility for achieving the objectives of the organization and to those people in the direct cosmic string of dominance. Staff organization relates to the provision of specialist and support functions for the line organization and creates an advisory relationship.Within this model, PG US developed along two constitute dimensions functions and brands. set managers bore responsibility for increaseability and could focus on matching company strategy with product home dynamics. Brand managers competed in the same marketplace but also shared access to strong divisional functions which in turn transferred best(p) practices and talent across many brands, fostering leading edge competences in RD, manufacturing and market research in a rapidly developing consumer products industry. For instance, the invention of fluoride toot hpaste in 1955 was a attain result of this structure.In 1987, the United States PG make a diachronic shift away from the 56 year old competitive brand management system, to a ground substance system whereby brand would straight off be managed as components of category portfolios by category command managers. The reason for this shift in structure was because product categories were beginning to require more severalize functional activities but at the same time, PG US needed to withhold functional strengths.As a result, a matrix reporting structure was set up whereby functional leaders reported directly to their business leadership and also had a dotted line reporting relationship to their functional leadership. Thus 39 US category business units were created, with severally category business unit having its own sales, product development, manufacturing and finance functions.Mullins, L.J. describes a matrix organization as a combination of functional departments which provide a stable base for specialized activities and a permanent berth for staff members and units that integrate various activities of different functional departments on any of the following bases project, product, geographical or systems basis.He goes on to add that matrix structures offer the advantages of flexibility, greater security and control of project or product information and opportunities for staff development if management implement the structure effectively. The authorization problem areas, as seen later in the PG case, include the fact that a matrix structure can result in a more complex structure. By using two methods of grouping it sacrifices unity of command and may cause problems of co-ordination. There may also be a problem of defining the extent of the product (project) managers authority over staff from other departments and of gaining support of other functional managers.Why did the European organizational structure shift from Geographic grouping in 1950s to cat egory management in 1980s?In Europe, the PG organization developed along three dimensions country, function and brand. This model was established to tailor products and processes to local tastes and norms. This resulted in a portfolio of self sufficient subsidiaries led by country general managers (GMs) who sufficient PG technology and marketing expertise to local markets. These were called mini-U.Ss in to each one country as new product technologies were sourced from U.S. RD labs in Cincinnati, qualified, tested and adapted by local research and development (RD) and manufacturing organizations in each country. In 1963, a European Technical Centre (ETC) was created and housed in capital of Belgium and it developed products and manufacturing processed that country managers could choose to adapt to and put up in their countries. rural area managers, not brand managers, had responsibility for do goodability and market strategy, while the Brussels regional headquarters was very han ds-off, serving mostly legal, tax account statement and public relations entity.Geographically found structures, according to Cole, have key advantages of widely spread markets can be catered for, local knowledge of customers, projection market and distribution can be utilized as seen in PG Europe. However, the key disadvantages as with any attempts at decentralization are associated with the requisite tenseness that develops between Head office and the regions concerning priorities for action and priorities for scarce company resources. In addition, geographical based cultures and focus may veer away from the overall company strategy, culture and increase speak tos.The main reason wherefore geographic grouping did not work positively for PG in Europe was that it resulted in innovations and brands taking unnecessarily long to world(prenominal)ize. For instance, Pampers, was constituteed in US in 1961, Germany in 1973 and France not until 1978. In addition, functional organi zations became embedded in company silos and worse still, European corporate functions were also completely disconnected from the US operation. To cap it all, focus on product categories and brands was fragmented by country, near precluding region- wide category or branding strategies. This led to unstandardized and subscale manufacturing operations in each country which were expensive and unreliable. Products were tweaked unnecessarily, creating pack size and formulation variations that added no value to maintain and reinvented the wheel with each new product initiative.Thus in early 1980s, Europe attempted to promote cross border co-operation across functions and to shift focus from country management to product category management.Why were the 2 structures integrated into a global auction block in the 1990s?The two main PG structures U.S matrix structure and Western European category management structure were integrated in the 1990s into a global cube due to the several reasons . Attractive expansion opportunities in Japan and the developing markets led PG to question its globalization model, particularly in anticipation of the new challenge of appealing to more diverse consumer tastes, cultures, preferences and income levels.This was present by the fact that in Europe, increased focus on cross border category management had proven successful. However, corporate function in Brussels still lacked direct control of country functional activities. PG was also seeking positive results in the area of innovation such that the unveiling of global proficient centers in different regions could have core competencies in a specific product category. PG also sought tremendous top-line and bottom-line improvements such as creation of powerful and independent global functions promoted to the pooling of knowledge, transfer of best practices, elimination of intra-regional redundancies and standardization of activities. It was also seeking integration of manufacturing, p urchasing, distribution and applied science into one global product supply function which managed the supply chain from beginning to end. PG achieved this specific integration in 1987. In the new global cube, PG was also seeking massive savings which could be achieved by regionally managed product- supply groups consolidating country manufacturing plants and distribution centers into higher scale regional facilities. PG also sought a stronger global sales organization with regional leadership so as to develop closer global relationship. One key result of this specific objective was the Customer line of products ripening (CBD) function which developed closer relationship with bug customers such as the one unprecedented step of co-locating with Wal-Mart in Bentonville, Arkansas to pursue joint strategical planning. Coupled with early supply chain initiatives, this undertaking allowed PG to be a first mover in electronic integration with customers, leading to dispro theatrical role ate share growth with mass discounters. Finally, significant initial standardization in Information Technology (IT) systems was do possible by a globally managed IT organization. By 1997, financial and accounting information storage had been consolidated at three global data storage centers. PG was also seeking global category management whereby it aimed at developing close relationships. This occurred with strong global Research Development (RD) product category organizations, helping to standardize and zip global product launches.As a result, PG started migrating to a global matrix structure of categories and functions. The global cube entailed Europes country functions being consolidated into Continental functions characterized by dotted-line reporting through functional leadership with direct reporting through the regional business managers. world-wide functional senior wrong presidencies were created to manage functions across all regions. Then in 1989, to better order ca tegory and branding strategies worldwide, PG created global category presidencies reporting directly to the CEO. all told country category GMs had dotted- line reporting to their global country president, however, vocation progression and promotion remained in the hands of regional line management. most additional key results included a much reduced term to globalize a new initiative. For instance, by the early 1990s, it took only quatern years, on average to globalize a new initiative. This advance allowed PG to quickly inject new technologies into recently acquired beauty care products like Pantene, Olay and emeritus Spice. For example, two-in-one shampoo and conditioner technology was developed at the Sharon Woods beauty-care global technical center in Cincinnati in mid-1980s. The hair care global category president then achieved its roll out globally under the Pantene brand name with consistent worldwide marketing message and identity. In provided over a decade, increased global focus on product categories helped PGs beauty care division to grow from USD 600 million to a extremely strategic USD 7 billion business.What are the key distinguishing features of Organization 2005?Organization 2005 was a six -year restructuring plan announced by PG in September 1998. The companys objectives were to achieve a USD 900 million in yearly after- tax speak to savings by 2004 after spending USD 1.9 billion over the v years. This was to be achieved by specific features and actions of the Organization 2005.The first part called for unpaid worker separations of 15,000 employees by 2001, of which almost 10,500 (70%) were overseas staff. Forty five percent of all job separations would result from global product- supply consolidations and a quarter from developing of scale benefits arising from more standardized business processes. The plan sought to transcend six management layers, from 13 to 7.The second part called for dismantling the matrix organizational struc ture and replacing it with an amalgam of interdependent organizations which were spheric Business Units (GBUs) with primary responsibility for the product and whose teams were compensated on profitability.Market Development Organizations (MDOs) with primary responsibility for markets and whose teams were compensated based on sales growth.Global Business Services (GBSs) which was a unit responsible for managing internal business processes and whose teams were compensated on cost management.This radical new design was aimed at improving the speed with which PG innovated and globalized its innovations.In detail the GBUs were responsible for product development, brand design, business strategy and new business development. Each operated autonomously focusing on different product categories. In total, there were s up to now GBUs with complete profit responsibility and benchmarked against concentrate product category competitors.Each GBU was led by a president, who reported directly to t he CEO and was a member of the global leadership council that determined overall company strategy. At GBU level, Vice Presidents of Marketing, RD, Product supply, New Business Development and support functions such as IT carrying out reported to the GBU president. To ensure that RD division of different GBUs would share technological innovations, a technology council composed of all GBU RD VPS would be formed to share and cross pollinate ideas.The intention of this structure was to increase agility and reduce cost through accelerated global standardization of manufacturing processes and better co-ordination of marketing activities. Global standardization of processes which were on different platforms would eliminate the lengthy process of obtaining launch approval from regional managers and result in systematically faster global rollouts of innovations and new brands.MDOs were designed to take responsibility for tailoring PG programs to local markets and using their knowledge of lo cal consumers and retailers to help PG develop market strategies to guide the finished business. Customer Business Development functions previously dispersed among various business units would be consolidated regionally and converted into line functions in each MDO. There were seven MDOs with each being led by a president who reported directly to the CEO and, like the GBU president, sat on the global leadership council.GBS was the third leg of the Organization 2005 with the responsibility to standardize, consolidate, streamline and strengthen business processes and IT platforms across GBUs and MDOs globally.The aim was to centralize responsibility for managing these processes which could lead to economies of scale while allowing the other two GBUs and MDOs to focus on core competencies. This structure was focused on specialization.GBS was organized as a cost center with the head of GBS reporting directly to the CEO but was not a member of the global leadership council.Routine and H R policies were also to be impacted in Organization 2005. Many decisions were to be make by individuals rather than committees so that routine business tasks that had taken months would now be accomplished in days. Budgeting was streamlined, integrating separate marketing, payroll, and initiative budgets into a single business planning process. It was also to overhaul its incentive system while maintaining the promote- from- within policy PG increased its performance based portion of compensation and extended its convey option compensation formerly trammel to 9,000 employees to 100,000 employees.Why did PG adopt this structure?PG adopted the structure of Organization 2005 due to key challenges and problem occurring in the Global Matrix during 1995-1998. Firstly, the matrix structure had never been symmetrical as the function retained a high degree of de-facto control because it determined career paths and promotion for its employees.Unfortunately, each function had determined its own power base and strategic agenda rather than co-operating with other functions and business units to win in the market place. The initial tension caused by functional conflict had served as an effective system of checks and balances but eventually led to poor strategic alignment throughout PG make its agency to begin to weaken in the global market as managers were focused on their particular countries rather than these global functional conflicts. This was because their focus was based on aiming for their own maximization of particular parameters rather than an best tradeoff.Secondly, the matrix structure had also not fully resolved the tension between regional and product category management. Regional managers still had sole responsibility for financial results and thus it was they who ultimately chose whether or not to launch initiatives made available by global category managers. RD divisions struggled hard to globalize new technological and brand innovations quickly but had to obtain agreement from regional managers, sometimes country managers and these managers would sometimes hesitate even if it made sense for PG strategically because it could weaken their upcoming profit and loss statement. As a result, the companys track record of being a global leader in innovation and brands stagnated and was slipping behind some of its more focused rivals. For instance, Cover Girl, a U.S. cosmetics brand that PG had acquired in 1989 had still not been globalized in 1997 compared to Maybelline, acquired by LOreal in 1996, was globalized in just a few years and well on its way to becoming a global billion-dollar brand.Thirdly, competitors were catching up quickly. PG had always been a first mover in supply chain consolidations and integration with customers, but by the latter half of the decade, over 200 vendors had opened embassies to Wal-Mart in Bentonville. Share expense consequently dropped by 3.3% since 1993 and the sales growth slowed down to 2.6% in 19 97 and 1998 by contrast to 8.5% on average in the 1980s.Lastly, the defining question was whether the global matrix cube was internally coherent or scalable over the long term. abounding accountability for results could not really by assigned to regional profit centers because they couldnt fully manage functional strategy and resource allocation. This resulted in a culture of risk aversion and avoidance of failure. With over 100 profit centers, it seemed like there were too many cooks in the kitchen meaning too many managers making decisions that were moving the company away from its intended objectives.Should Lafley make a strong commitment to keeping Organization 2005 or should he plan to dismantle the structure?A.G. Lafley should consider dismantling the structure after a careful analysis of the previous structures of Proctor and Gamble and a thorough assessment of the negative adverse effects of Organization 2005 so as to develop a more effective global structure.The main objec tive that the previous CEO, Durk Jager had was to use Organization 2005 to change PGs risk indisposed(predicate) regionally managed structure so that it could launch new blockbuster brands based on new technologies rather than incremental improvements of existing products. He also frequently scrutinized PGs RD portfolio and personally stewarded new technologies through the pipeline that he model were promising.Initially, in October 1999, fiscal first quarter results were promising indicating an immediate speedup in business performance, with sales up by 5% over the previous year which was a marked improvement over the 2.6 % annual revenue growth over the exit two years. Core give notice earnings fell short of long term goals but made a respectable increase of 10 %. This resulted in PGs stock price appreciating significantly. When the next quarterly report came out on 30 January 2000, the stock price reached an all-time high of USD 118.38 and sales had grown by an amazing 7% and core net earnings increased by 13%.Tables turned on 7 March 2000, when PG gave a profit specimen due to external factors such as increased raw material costs, delays in FDA approvals and intense competition. With 50 new products in the pipeline, the situation was evaluate to reverse. However, on 25 April 2000, when results were announced, core net earnings had dropped 18 % while sales increased 6 % despite a 2% hit from fluctuations in exchange rate. The stock price lost 10 % of its value. The last straw was on 8 June 2000, when fourth quarter profits were categorical compared to the expectations of 15 17 % increase. PG lowered its future quarterly sales growth estimates to 2 3 %, casting doubt on whether Organization 2005 was even lifting the top line. Market research companies confirmed PGs poor competitive position citing loss of U.S. market share in 16 out of 30 categories since the preceding year. PG stock finally fell to USD 57 after the resolution and was the worst per forming component of the Dow over the previous six months. end pointIn conclusion, Lafley, bearing in mind the past performance and loaded competitive arena, should dismantle Organization 2005 for the above reasons as well as for the sagging employee morale due to the substantial job reductions.