PROCTER & GAMBLE CASE SUMMARY History and Background Procter & Gamble (P&G) is a company widely known

as one of the nations premier consumer marketing organizations. P&G was founded in Cincinnati in 1837 by William Procter, a candlemaker, and his brother-in-law, James Gamble, a soapmaker. Their mission was to produce relatively inexpensive household products, technically superior to the competition, that were quickly consumed and were an integral part of their customers life-style. The companys early innovations came both in the product arena and in marketing and advertising. In 1887, Harley Procter wrote the ad copy classic, Ivory Soap is ninety-nine and forty-four one-hundredths percent pure. This campaign helped begin a long tradition of excellence in advertising and marketing. Several organizations innovations, developed during the 1920s, the first of these was direct retail sales. A second organizational innovation was the evolution of the brand management system, it was created a separate organization for each brand and ensured that the development of new brands would not be hindered by the attention paid to older, more established products. Profit sharing, one of Cooper Procters earlier innovations, began in 1887. The Procter & Gamble Culture Procter & Gamble is an excellent example of a strong culture. To work successfully, this system requires tremendous conformity. Being procedurally correct is often more important than being right. One advantage of this conformity is a through and methodical approach to doing business. The P&G approach has been to create a product, based on research that is technically superior to the competition and will win consistently in a blind test. Stories about the importance of research and testing within the company abound. A classic is about the systemic testing performed, before making a choice P&G did an extensive market test. Another example of P&Gs extreme thoroughness is in the use of the memos. The P&G culture emphasizes written rather than oral communication in order to communicate facts and remove individual judgment. Checks, counterchecks, and an emphasis on the product characteristics and customer preferences ensure that rational decisions and are a central part of the P&G system. The system is designed to preserve the P&G way and to develop a highly motivated and talented set of new recruits into a new cohort of P&G managers. Despite this competition, the bond among the members of a cohort is very strong and often continues for the rest of their career. Careful socialization to the dos and donts of P&G culture also takes its toll. A final element of the P&G culture is a high level of secrecy. The company stopped giving detailed financial reports to its shareholders and new employees are instructed not to talk about the company to outsiders, and those who leave are counseled not to give out proprietary information. Management Practices Possibly the most distinctive management practice within P&G is its policy of only promoting from within. The company aggressively recruits top M.B.A. and B.A. graduates of major universities and places them in highly competitive situation. No one can reach the middle ranks, much less the upper levels of P&G, without 5 to 10 years of very close scrutiny and training. This creates a homogeneous leadership group with an enormous amount of common experience and a strong set of shared assumptions. A second distinctive aspect of the P&G management system is the delegation of tremendous responsibility to those at the lower levels of the

organization. Despite the high levels of responsibility given new employees and employees at all levels, many jobs carry very little individual authority. A third classic P&G management innovation is the brand management system. Brands compete for internal resources, do their own advertising and marketing, and are independent cost centers. The brand management system creates a separate organizational structure for each brand. This system included a pay for knowledge approach to advancement and promotion, in which employees were rewarded for the acquisition of skills and knowledge, not for their progression in a hierarchy. Effectiveness P&G will not enter a market unless it has a superior product. Profitability is an important criterion, but being exceptionally profitable is not important. The organization has traditionally targeted a mass market that warranted the tremendous costs associated with the product research, market research, blind tests, and so on. Effectiveness has been defined as dominance of those markets. Another intriguing issue in the effectiveness is its system of recruitment and socialization. P&G serves as a training ground for the consumer products industry, providing its competitors with well-trained and experienced managers. On balance, the internal promotion and socialization system at P&G is a powerful strategic tool. The system is highly powerful as long as the organizations mission remains fixed and fits the demands of the business environment. The Culture and Effectiveness Model Involvement. A high-involvement organization, P&G has succeeded in developing a system in which the goals of the individual and the goals of the organization are largely compatible. Consistency. The consistency of the culture is an important element in P&Gs legendary ability to move in a deliberate fashion. Decisions may be slow, but the companys ability to implement once it has chosen a course of action is impressive. Adaptability. The P&G culture allows for a high level of adaptability in the consumer goods mass market. It responds very well to market research and product research and combines those two forms of objective knowledge to introduce technically competitive. Mission. The P&G mission has traditionally been very strong and widely shared. Its mission was very well suited to a mass market and led to a culture that is overadapted to mass markets.

Lesson Learned from Procter & Gamble Culture Dynamics of an Internal Labor Market. The company has the unusual combination of the exclusive use of the internal promotion practices, intense socialization procedures, and a policy of secrecy toward outsiders. The strength and uniqueness of an organizations culture is a direct function of the impermeable nature of the organizations boundaries. Time and Inertia. The company leaders made the best decision they could informed by their own insights and the organizations past experience. If the mission and strategy are still appropriate, then the culture will continue to contribute to effective performance. Selecting Performance Targets. Rather than maximizing profits in the conventional sense, the target of P&G has been steady growth and moderate profitability.