Stodgy Proctor & Gamble Stumbles in Reinventing Itself: Communication
For decades Procter & Gamble was lionized as the world’s smartest and best marketer. But in the late 1990s, the Cincinnati-based consumer-products giant underwent a brutal restructuring that shook it to its very laundry-detergent roots. With over 110,000 employees, it sells more than 300 brands in 140 countries and takes in more than $40 billion in annual sales. To promote its brands, it pioneered many mass marketing techniques and even created a new medium—the soap opera.
Many of its products are household names—Tide detergent, Crest toothpaste, Pampers diapers, Cover Girl makeup, and so on. Nearly every American has one or more P & G products tucked under the kitchen or bathroom sink. Despite its well-known brands, however, P & G suffered from a lack of innovation in new products, declining profit share, and a rigid, bureaucratic company culture. Moreover, it was fundamentally a U.S. company.
To make itself over from a stodgy, old-economy dinosaur into a nimble, Net-savvy 21st-century innovator, the company instituted “Organization 2005” in the late 1990s. This six-year plan set out to speed up the introduction of new products while going global. The workforce was to be cut by 15,000, and chains of command were rearranged, grouping employees by products in five “global business units.” For example, food and beverage managers, who were mostly in Cincinnati, reported to a president in Caracas, Venezuela.
Instead of bringing amazing results, however, the radical restructuring created unhappy, confused employees. According to many, the reorganization was too quick, too crude, and performed with too little consideration for the people responsible for implementing the changes.
In any organization, when employees fear that their jobs will change or even disappear, morale plummets. Rumours fly, and productivity sinks. Excessive caution and mistrust prevail. That’s why in times of upheaval, communication—and lots of it, becomes paramount.1 You’ll learn more about this case on page 24.
Procter & Gamble Revisited: Process in Progress
Long admired as one of the country’s best-managed companies, Procter & Gamble fell upon bad times when it launched a plan to reinvent itself. Durk Jager, the CEO in charge of the restructuring, lasted only 17 months before he was “coached out,” which is P & G lingo for being fired. The company’s stock price plunged to half of its former value, a startling drop for a company widely regarded as the world’s preeminent marketer.
Critics say that a major reason for the CEO’s departure was that he did not bring the managers of P & G’s brands with him on the changes. This means that he was unable to communicate to them his vision for reorganizing the company, and he did not get their support or “buy-in.” Within 18 months 80 percent of the most senior managers were performing different jobs from those they had done earlier. Jager himself was described as a “fearsome character, more than willing to shoot the messenger who brought him bad news.”2 Naturally, managers who were having trouble achieving the reorganization goals were reluctant to reveal their problems to him. As a result, problems were not resolved. Although Jager’s job was “to give P & G a serious kick in the pants,”3 many felt that the reorganization could have been executed less brutally. His brusque, noncommunicative style alienated managers. You’ll learn more about this case on page 31.
Applying Your Skills at Procter & Gamble: Process to Product
One of the goals of the massive reorganization at Procter & Gamble was moving away from TV promotions and advertising to one-on-one targeted marketing. To communicate more directly with its customers, P & G created 72 Web sites involving its best-known products, such as Tide, Crest, Scope, Oil of Olay, Pantene, Jif peanut butter, and Bounty towels. As part of a group of college interns at P & G, you have been asked to review the main Web site and give your candid reactions.4 Your boss says that management particularly values the opinions of new-hires who have not yet become “Proctoids.” Here are some questions to answer as you explore the main P & G Web site:
In teams of three to five, discuss your responses to the listed questions. Summarize your conclusions and (a) appoint one team representative to report to the class or (b) write individual memos or e-mails describing your conclusions. (See Chapter 8 and Appendix B for tips on writing memos.)