Organisation 2005 (A)

Management of Innovation
Nishant Parashar
Sunil Kumar
Khalid Saljoqi

Table of Contents

About Procter & Gamble

Types of Organisation
Structure
Timeline of organizational
structure changes
Problems
Recommendation

From Candle and Soap to

multinational empire
Founded in Cincinnati, Ohio by William Procter
and James Gamble
Aggressive investment strategy building a
large factory in 1850s despite rumors of civil
wars
Keywords
Rapid Growth
Innovations in HR management
R&D
Distribution networks
Marketing & Organizational designs

Types of organizational
structure

Functional Organizational
Structure

An organization in which similar and related occupational specialties are

grouped together

Divisional Organizational
Structure

An organization made up of self-contained units

Divisional
1. Product
2. Customer
3. Geographic
4. Process

Matrix Structure

The practice of managing individuals with more than one reporting line
(in a matrix organization structure), but it is also commonly used to
describe managing cross functional, cross business group and other
forms of working that cross the traditional vertical business units often
silos - of function and geography.

Organizational Structure
Timeline
Phase 1 (1948-1987)
United States

Europe

As US market was Western Europe is a

more homogenous,
heterogeneous
a nationwide
market with
brand and product
different
division
languages, culture
management was
and laws therefore
adopted.
a decentralized
model was
Divisional Structure
adopted
Geographical
divisional structure

Phase 2 Organizational Shift

(United States)
1995- Divisional Structure

1998-Matrix Structure

Phase 2 Organizational Shift

(Europe)
1990s-Decentralized Geographical Structure

1980s-Centralized Product Structure

Problems in Europe
Corporate R&D were completely disconnected
from US Operations
Functional units were also in isolation from Is
counterparts
No standardization
Same product with the different names
R&D expense was doubled
Production became expensive

Phase-3 Global Matrix (1987-95)

In late 1980s, expansion opportunities in
Japan and other parts of world led P&G to
develop globalization model.
Corporate functions in Brussels still lacked
direct control of country functional
activities.
P&G started migrating to a global matrix
structure, country functions were consolidated
into continental functions reporting through
functional leadership and direct reporting
through the regional business manager.
In 1995 this structure was extended to rest
of the world through creation of four
regions North America , Latin America ,
Europe /Middle East/Africa and Asia.

Benefits of Global Matrix

Structure
Pooling of knowledge, transfer of best
practices, elimination of intraregional
redundancies, and standardization of
activities
Integrated manufacturing, engineering and
purchasing in to one global product supply
function
Massive savings by consolidating country
manufacturing plants and distribution
centers into higher-scale regional facilities

Global Matrix Problems

Most functions nominally had straight
line reporting through regional
management and also reporting
through functional management, so
non cooperation between functional
units leading to poor strategic
alignment
They develop their own strategic
agenda, maximize power, do not
coordinate with other functions and
business units.
As regional managers were responsible
for profit and loss they were hesitate to
launch new product.

Phase-4 Organization 2005

Introduced by Durk Jager as an aggressive
restructuring program in 1988
Objective: Designed to accelerate sales and
innovation
6 year re-structuring plan estimated to cost $1.9 billion
Voluntary separation of 15000 employees by 2001, with
almost 10500 overseas
Reduced management layers from 13 to 7
Dismantling the Matrix organisation into :
o GBU (Global Business Unit)primary responsibility of product development, brand
design, business strategy and new business development
o MDO (Market Development Organization) with primary responsibility of market
o GBS (Global Business Service) for managing internal businesses processes

Phase-4 Organization
Shift
Initial

Final

P&G has formal

command put
geography first,
followed by products
and function

In new design, P&G

was structured as 3
interdependent
global organized by
product category,
one by geography
and one by business
process.

Salient features of GBUs

and MDOs
Operated autonomously
7 GBUs each headed by a president who reported to the
CEO directly and were part of the global leadership
council
At GBU level, V.Ps of marketing, product supply, new
business development reported to GBU president
The structure was intended to increase agility and
reduce costs through accelerated global standardization

Consequence of
Organization 2005
Missed Earnings in 2000
In the fourth-quarter profits were flat against
the expectation 15-17% increase
P&G lowered its future quarterly sales growth
estimates to 2-3%
P&G Stock lost 7%, falling to $57 after the
announcement
Loss of US market share in 16 out of 30
categories
Lack of immediate results, job reductions,
reduced employee morale led to reduced profits
and stock price reduced to half in last six months

Analysis of Organization 2005

Focus was more on rolling out new products at faster rate.
Implementation of 3M concept i.e. product launched in
last 3 year should make up certain percentage of total
turnover.
Decision power was transferred from committees to
individuals due to centralization
Previously organization was more decentralized and
centralization coupled with silos of functional units and
negative growth rate has weaken moral of employees
Jager decided that P&G would sell its products under the
same name all around the world. So in Germany, the
name of its dishwashing liquid suddenly changed from
Fairy to Dawn
Large level of transfers (2000 from Europe to Geneva )
and relocation led to moral and behavioral changes.

Our Recommendations
The top management should meet managers and
employee across different levels, functions and
countries to seek feedback and provide
clarification on Organization 2005
Introduction of cross functional team to remove
silo among functional units
Giving freedom and flexibility to local managers
to align their strategy to global standard to bring
synergy
Find the true balance between centralization and
decentralization

Questions for Discussion

Nishant Daal diyo

THANKS ALL!