HR280 P&G Case Study

Effective Communications

on P&G’s Restructuring

DecisionHR280 Summative Assignment – A Case Study

Mayra Maia Fiorini

University of Brighton Business School

Business Management with Finance

Group P - 11841746

Word Lenth 1650 January 2013

HR280 Summative Assignment 2013

2 Mayra Maia Fiorini – Business Management with Finance

Summary:

Summary: ___________________________________________________________ 2

Figures Index ________________________________________________________ 2

Abbreviations ________________________________________________________ 3

Introduction _________________________________________________________ 4

P&G Restructuring Challenges _________________________________________ 5

Restructure Alternatives _____________________________________________ 5

Keeping GBS In-house __________________________________________________________ 5

Spin Off GBS as a Separate Entity ________________________________________________ 5

Outsourcing GBS Services to One or More Companies ______________________________ 5

P&G’s Full Disclosure Policy & Decrease in Motivation Due to Uncertainty __ 6

Effective Communications on Restructuring ______________________________ 7

Avoiding Uncertainty ________________________________________________ 7

Communication Mechanisms and Avoiding Noise _______________________ 8

Conclusion _________________________________________________________ 10

References _________________________________________________________ 11

Figures Index

Figure 1 - Communication Process (Source: Buchanan & Huczynski 2010, model) ___ 8

Figure 2 - Knowledge Pyramid (Source: Christopher & Tanwar 2012) ______________ 10



Abbreviations

P&G – Procter & Gamble

GBS – Global Business Services

BPO – Business Process Outsourcing

HP - Hewlett Packard

IPD – Institute of Personnel and Development

IAOP – International Association of Outsourcing Professionals



Introduction

This report’s objective is to study P&G’s restructuring alternatives and the

communicative issues raised from it, presenting possible applications of

effective communication theories to overcome those issues.

Harvard Business School’s article (Delong et al, 2005) will be used as

case study to consider the events that followed P&G’s decision to restructure

and to evaluate the effects of these decisions on its employees’ morale. Books

and academic journals will be used as reference to support this report’s

affirmation.

This assignment will work to prove that, regardless of its simplified,

standardized, and systemic strategy used on its outsourcing GBS (IAOP, 2013),

P&G could have had a more effective communication strategy communicating

those changes to its employees.



P&G Restructuring Challenges

Restructure Alternatives

Keeping GBS In-house

P&G decision to restructure arrived from understanding that GBS was

highly specialized but not part of the company’s primary operations (Delong et

al, 2005); therefore the company may not be able to provide appropriate capital

investment in the division creating the possibility of it losing competitive

advantage in innovation.

The choice of keeping GBS in-house would be the less disruptive option

(Delong et al, 2005), but not necessarily the best option for the company and

GBS.

Spin Off GBS as a Separate Entity

Outsourcing services are increasing in complexity; the industry is still

establishing itself allowing it to be shaped by the most sophisticated suppliers

and customers (Couto & Divakaran, 2009). For GBS to enter such competitive

market could be difficult as P&G worried that, even though alone it carries

market value, it was unknown if its expertise would be sufficient to compete with

more experienced BPO businesses (Delong et al, 2005).

For GBS employees, such alternative would prove less disruptive as the

new GBS entity could share principles and culture with P&G.

Outsourcing GBS Services to One or More Companies

The human management issues that arise with outsourcing can be very

damaging to morale, decreasing motivation and performance. Despite P&G’s

intentions to ensure reemployment of GBS’s staff with the outsourcing

company, moving to a smaller company may be considered, by some

employees, a step back in their careers, even if the opportunities available in a

specialized company are greater. Therefore P&G should keep its employees



informed and consulted on outsourcing proposals to avoid lack of knowledge,

which may lead to rumours, uncertainty and fear for the safety of their jobs (IPD

1998).

P&G’s Full Disclosure Policy & Decrease in Motivation Due to

Uncertainty

In April 2001, P&G employees were notified that the company was

studying the possibility of outsourcing GBS. This communication with

employees occurred to avoid speculation and rumours and to encourage

feedback, but caused uncertainty among some employees (Delong et al, 2005).

Employees want to be kept informed and contribute with ideas

(Buchanan & Huczynski, 2010); it is important to have a good communication

with staff as they become empowered when understand the full picture and are

kept updated on the situation (Holbeche & Matthews, 2012). However,

according to Holbeche and Matthews, people cope better with change when

uncertainty is reduced by management providing a clear view of the situation

and frequent update messages to employees, P&G’s announcement was made

too early in the process and the company was not sure if and how GBS would

be outsourced.

When communicating the big picture, company strategy and direction to

employees, P&G management must be authentic, consistent and keep the

company values in mind (Holbeche & Matthews, 2012). Allowing its employees

to be reemployed by the outsourcing company respected the company’s

principle of people as their most important asset (Delong et al, 2005). Not

knowing which company would be outsourcing GBS created the concern that

they could be worse off with the change, insecurity on their personal capabilities

and fear to lose their jobs (Dutfield & Eling, 1990), leading to anxiety and



frustration as the possible outcome could be considered threatening (Carver &

Scheier, 2011).

Effective Communications on Restructuring

Avoiding Uncertainty

Communication may suffer if transmitter and receiver have different

references or positions and different experiences and understandings of the

situation. This positioning issue causes judgment on both parts creating a

suspicion on the other party regarding its honesty, integrity and credibility

(Buchanan & Huczynski, 2010). P&G’s communication about outsourcing GBS

was made when P&G and its employees had two different perspectives; P&G

believed the decision was the best option for the company and GBS to grow,

while the employees became concerned with the possibility of change and the

uncertainty of their future situation (Delong et al, 2005).

When outsourcing it is important to understand what drives the business

and those reasons must be articulated clearly in order to successfully complete

the process. It is easier to convince individuals to accept an otherwise

controversial proposal if the benefits it will bring the company are clear.

Management must understand those reasons in order to evaluate options that

best fulfil them (Couto & Divakaran, 2009). The lack of clarity on P&G’s

company strategy and its weak internal communication channels caused the

employees the disengagement that followed the announcement; managers

must provide clarity and a sense of direction, explaining why the change is

needed, so employees don’t lose faith in them (Holbeche & Matthews, 2012).

Holbeche and Matthews (2012) also state that effective communications

on the vertical level, allows consistency on horizontal levels dialogs, giving

employees a sense of ownership that is increased when management



collaborates and involve them in the decision making process. Involved

employees will contribute to how these changes may occur, felling valued and

regaining a sense of control over their futures.

P&G’s approach of full disclosure was necessary; however, the strategy

used to communicate with employees was not completely effective, what

caused the decrease in motivation that followed.

Communication Mechanisms and Avoiding Noise

Buchanan and Huczynski (2010) define noise as any element that may

alter the understanding of a message, including coding and decoding mistakes,

emotional predispositions, attention diversions, past experiences, motivations,

health concerns and any other factor that may intervene with the channel of

communication.

Figure 1 - Communication Process (Source: Buchanan & Huczynski 2010, model)



P&G’s decision to communicate the possible outsourcing of GBS

personally through members of the GBS leadership team helped constant

feedback given ensure proper decoding on the receiver’s part, on personal

interchange of messages any mistake or misunderstanding can be corrected

immediately by the transmitter, avoiding assumptions as the way the message

has been decoded (Buchanan & Huczynski, 2010). However, the quantity of

people involved in the process required management to use of a number of

communication strategies to ensure effective communication within the

organization (Dutfield & Eling, 1990), as different methods are better perceived

by different people. Staff surveys, suggestion team, focus groups and seminars

on the subject should be considered to increase organizational understanding of

employees points of view and vice-versa, frequent management speeches,

podcasts and in-house newspapers help keep staff updated as well as team

briefings and daily updates can be used regularly focusing on two-way

communications (Holbeche & Matthews, 2012 and Jack Gibb 1961, cited in

Buchanan & Huczynski 2010).

When making tough decisions, transparency allows people to know that

the right choices have been made and people involved were treated fairly

(Holbeche & Matthews, 2012). Negotiating possible advantages, creating

incentives for the new situation, clarifying misunderstandings and ensuring

employee trust by explaining the reasons and benefits of change and including

employees on the decision making, helps reduce noise and preconceptions of

the subject (Dutfield & Eling, 1990).



Figure 2 - Knowledge Pyramid (Source: Christopher & Tanwar 2012)

Conclusion

This summative assessment considered the communicative challenges faced

by P&G when deciding to outsource GBS’s services and presented possible

applications of effective communication theories that would help solve those

issues.

This report was based on one article related to the previous events mentioned,

therefore making assumptions on the way P&G faced its communication

challenges and therefore should consider the possibility of misinformation on its

part.

It can conclude that a more effective communication strategy would have

helped reduce the negative effect the outsourcing decision had on employees’

motivation and performance.

Wisdom

Knowledge

Information

Data



References

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Pearson

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Delong, T. J., Brackin, W., Cabañas, A., Shellhammer, P. & Ager, D. L. (2005)

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HR280 P&G Case Study

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