Procter and Gamble

Organisational restructuring

Chetan GoenkaNikunj PassiPankaj Rai Ramya Vihan Srivastava

Overview

Evolving Organization Structure in US

Organization Structure in Europe

Expansion and adoption of Global Matrix Model

Attractive expansion opportunities in Japan

Anticipation of the new challenge of appealing to more diverse consumer tastes and income levels

Corporate functions in Brussels still lacked direct control of country functional activities

Therefore, P&G started migrating to a global matrix structure of categories and functions.

Global Matrix Structure of P & G

Improvements bought in by Global Matrix

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

Problems with Matrix structure

Not symmetrical

Strategic agenda and non cooperating functional units

Mgmt by functional conflict led to poor strategic alignment

Regional managers unable to address global functional conflicts

Not able to fully resolve the tension between regional and product category mgmt

Organization 2005

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 :– GBU primary responsibility of product development, brand design, business

strategy and new business development– MDO with primary responsibility of market– GBS for managing internal businesses processes

The new org design was intended to improve speed with with P&G innovated and globalized its innovations

MDO’s and GBU’s

Operated autonomously

7 GBU’s each headed by a president who reported to the CEO directly and were part of the global leadership council

At GBU level, V.P’s of mktg, product supply, new business development reported to GBU president

The structure was intended to increase agility and reduce costs through accelerated global standardization.

Issues Identified of Organization 2005

Instead of increasing market share of existing products, they increased number of categories and brands

Decision power was transferred from committees to individuals.

Increase in performance linked pay for upper level employees

Clash of interests between GBU and MDU

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