Case Study of Procter and Gamble (P&G): Structure and Culture

Three billion times a day, P&G brands touch the lives of people around the world. This happens because P&G provides branded products of superior quality and value to improve the lives of the world’s consumers. This results in leadership sales, profit and value creation, allowing employees, shareholders and the communities in which we operate to prosper. The Procter & Gamble Company (P&G) is a brand behemoth. The world’s first maker of household products courts market share and billion-dollar brands. Its business is divided into three global units: beauty, health and well being, and household care. It also makes pet food and water filters and produces soap operas. Some 25 of P&G’s brands are billion-dollar sellers, including Gillette Fusion, Always/Whisper, Braun, Bounty, Charmin, Crest, Downy/Lenor, Folgers (which it reportedly plans to spin off), Gillette, Iams, Olay, Pampers, Pantene, Pringles, Tide, and Wella, among others.

P&G Structure and Culture

The P&G consists of over 138,000 employees working in over 80 countries. It began as a small, family-operated soap and candle company now provides products and services of superior quality and value to consumers in more than 180 countries. In P&G, they are focusing their efforts on where they can make the most meaningful difference in both environmental and social sustainability. Their commitment begins with P&G’s Purpose, values and principles, in which sustainability is embedded, and manifests itself in a systemic and long-term way. They try to make their company better.

Business Structure

The Procter & Gamble Company (P&G) is divided into three main worldwide units, which are household care, beauty and grooming and health and well-being. Every units’ report is sent to president of global business units. P&G has restructured its hierarchy of top executives in order to meet the changing needs of their larger, more flexible and faster-paced global business. Lafley, who is the chairman of P&G, announced that ‘P&G has nearly doubled its business since 2000 with the acquisitions of the Clairol, Wella hair care businesses and Gillette. The change in structure is designed to meet the needs of a larger business that is also developing new initiatives faster than in the past’.

Initially, P&G managed its international operations through an international division of foreign expansion, in the same manner many other multinational enterprises. A variety of products were identified to match national differences and preferences. Consequently, a portfolio, consisting of subsidiaries, run by country general managers was established. However, this management structure may result in two basic problems. Firstly, the cost of operating these subsidiaries is high, and secondly the ferocious autonomy of national subsidiaries prevented the global roll out of new products and technology improvements. Therefore, P&G needed innovation in the subsidiaries management structure. It concluded that the matrix structure, in which subordinates report to more than one superior, is a better alternative for P&G, as it allows authority to be kept at lower levels. However, most firms would have some difficulty implementing this Matrix structure into their organization because it is difficult to organize multinational activities through this complex structure. For example, dual reporting can lead to disagreements and confusion and a possible overlap of responsibilities. This may result in a loss of accountability and wastes time. Through time P&G has been trying to optimize its structure. The current structure resulted in a culture within P&G, which was viewed as slow, conformist and risk-averse. This led to a decrease in productivity and an increase in inefficiency in the organization. Moreover, these factors would slow down the decision making process and reduce the competitiveness of the company. Although, the management structure of P&G seems imperfect at the moment. However, the Procter & Gamble Company is still a giant in the area of consumer goods and the leading maker of household products in the United States. P&G operates its business in over 80 countries around the world and has approximately 300 brands in more than 160 countries. The matrix structure helps P&G develop its global business structure into more specific areas. As a result, the company has become more flexible to change within market competitions and the different expectation of P&G.

The final stage of completing the innovation process of management structure is to transform the formal structure and responsibilities of the company. For example, the global business units of P&G were established in order to manage product development, manufacturing and marketing of their respective categories all around world. Furthermore, global business service units were established to organize with the transactional activities such as Accounting, HR, IT, etc. Eliminating bureaucracy and increasing accountability is another main objective of structure change.

The Procter & Gamble Company’s corporate structure has been mainly dependent on worldwide subsidiaries and merging. During this time of restructuring, P&G has continued its active acquisitions pace. For instance, P&G entered the European tissue and towel market through the purchase of Vereinigte Papierwerke Schickedanz AG’s European tissue unit and added the luxury fragrance business of Giorgio Beverly Hills, Inc. In the same year, P&G returned to the South African market following the lifting of U.S. sanctions. The company has altered its geographic management structure gradually. As a result, P&G has divided its operations into United States and International, which is would now managed around four regions, North America, Latin America, Asia and Europe/Middle East/Africa.

Procter & Gamble announced a new restructuring initiative in September 1998. A key factor of this restructuring was a shift from an organization centered around the four geographic regions to one centered on seven global business parts based on product lines: Baby Care, Beauty Care, Fabric & Home Care, Feminine Protection, Food & Beverage, Health Care & Corporate New Ventures and Tissues & Towels. P&G has continued to restructure and adapt to different markets and different financial situation worldwide. According to a firm press release announcing the new structure, ‘This change will drive greater innovation and speed by centering strategy and profit responsibility globally on brands, rather than on geographies”.

Business Culture

Culture plays an important role in any organization to run their organization well in this fast growing business world. Culture is defined as a pattern of shared basic assumption that the group learned as it solved its problem of external adaptation and integration that has work well enough to be considered valid and therefore to be taught to new members as a correct way to perceive, think and feel in relation to those problem. Organizational culture is the acquired outcome of group experience, as it is to a large extent unconscious. The organizational culture comprises of three layers first one is the artefacts, espoused values and underlying assumption.

  1. Artefacts: Innovation culture is the mission statement of Procter and gamble organization in which they state that “the consumer is boss”, consumer should be the heart of all P&G do from ideation stage through the purchase of the product. For example if 15 seconds with a deodorant or two minutes with a disposal diaper have made a small part of your life a little bit better then P&G made a difference. P&G policies made the company a unique one that respect of governments and law, respects in workplace and respect in the market place. P&G is a multinational company and it is widely spread geographically. They maintain open work system in lots of work places around the world. Executive offices do not have doors. Leaders do not have a secretary cordoning them off. All the offices on the executive floors at Procter and gamble are open the conference room is an open round space. They made it round as a small symbol of the new approach.
  2. Espoused values: P&G is having hierarchy of company ethics principles. PVP(Purpose, Values and principles), corporate policies, worldwide business conduct standards, operating policies/procedure/practices. For over 170 years P&G purpose values and principles has been guiding the way they do business. There purpose is to provide branded products and services of superior quality and values that improves the lives of the world’s consumer. P&G lives with its people and values, they recruit the finest people in the world who built organization by promoting and rewarding people without regard to any difference related to performance. For example Procter and Gamble pioneered a technician based system in its manufacturing plants during the 1960’s and 70’s. In this system they avoided the approach in which one person assigned to do only one job. The technician system still operates today. To get the highest evaluation rating in P&G factory, you learn how to do all the jobs on line and once you have that rating, company expect you to be capable of problem identification, problem solving, and innovation. This background has made it easier for us to plug manufacturing and engineering in to the innovation culture. P&G CEO Lafely said in one conference that once people in our organization have succeeded at innovation you can see the energy in the company changing. People routinely says that we can do this is feasible and the change of attitude of the people in P&G is incredible to watch. Integrity, leadership, ownership, passion for winning and trust are the main asset values of P&G. By considering purpose and values they made their principles like the show respects for individual, interest of the company and individual are inseparable and innovation is the cornerstone of P&G success. These are the officials objectives which had been espoused by the company head and it is common for P&G organization all over the world.
  3. Underlying Assumptions: It consists of unconscious, taken for granted beliefs, perception, thoughts and feelings. P&G are having problem relating to external adaption and internal integration. P&G keep refining their products, launch model from ideas, to prototype, to development, to qualification and to commercialization. Applying this sequential practice on large scale and replicate them does not mean to eliminate judgment, that’s why P&G needs active leaders and a strong innovation culture. Therefore P&G introduces the inclusive culture for leaders and they expected to build inclusive work environment that welcomes and embraces diversity an environment where people feel comfortable. Forced diversity training/learning process are utilized to equip leaders to values and nurture difference in management experience, style of leadership and problem solving approaches.

By analyzing the P&G’s culture it is seen that P&G is having a strong and dominant culture and that culture follows in every part of the world. Innovation is the main theme of P&G’s success and to bind organization culture together.