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Proctor & Gamble – When Change Is Not Always Transformative

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Case Study

Proctor & Gamble – When Change is not Always Transformative

LDR 6150

Weijia Lin

Instructor: James Lux


Case Description

Procter & Gamble sells its products to nearly 5 billion consumers in 140 countries around the world. In addition, The Organization 2005 program restructured P&G has more than 110 thousand employees in more than 70 countries around the world. Proctor & Gamble, a very large company, has to implement a six-year restructuring plan at the end of 1990s due to the problem of restructuring stagnation and income decline. The leader of the company, Jager, believes that the development of the company is limited by the corporate environment and culture, and the current situation has already explained the problem. He was going to restructure the whole company with the plan of Organization 2005 but he failed ultimately. This case illustrates the importance of protecting the corporate culture.

• What are the critical issues in this case?

First of all, I believe the most critical issue in this case is the leader of The Organization 2005 program restructured Procter & Gamble – Jager, was trying to adapt to the changes of the times by changing its culture. It may seem a good idea, because the company needs to keep innovating to survive, but not all the changes are effective. The company has made great efforts to develop innovative products and introduce new products. At the same time, an informal working environment is created to stimulate the creative ability of the employees. On this basis, Procter & Gamble introduced a brand new philosophy to improve the company's cultural environment, called SIS. SIS represents Stretch, Innovation and Speed. The leader of Procter & Gamble believed SIS's philosophy can help companies get out of trouble in the fast changing era.

• How do our readings and/or discussions, during the first half of this course, support your thoughts on the critical issues associated with this case?

It looks like a good idea to achieve innovation and profit by changing the corporate culture. Although it is necessary for a company to change, huge changes in most organizations cause difficulties in execution and management. Procter & Gamble has the traditional values and the cultural environment of the company is based on people. Procter & Gamble has been operating for a long time, indicating that the traditional culture is stable for the company's operation.

In addition, I think the human resource frame will be suitable for Procter & Gamble. The most important wealth of a company is the employee. Procter & Gamble regards talent as the most valuable asset of the company. Once, the former chairman of Procter & Gamble Richard Deupree said that If you leave Procter & Gamble's funds, factories and brands, and take Procter & Gamble's employees away, Procter & Gamble will break down. On the contrary, if you take away our funds, factories and brands, and did not bring our employees, we will rebuild everything we want in ten years. “The human resource frame evolved from early work of pioneers like Mary Parker Follett (1918) and Elton Mayo (1933, 1945), They argued that people’s skills, attitudes, energy, and commitment are vital resources that can make or break an enterprise.” (Bolman&Deal, 2017) Employees' intelligence, creativity and work initiative are all the driving forces for their business development.

• Why did P&G’s first transformation fail?

The company has made great efforts to develop innovative products and introduce new products. Not only the new plan made by Jager cause the failure of the first transformation but also caused by the company has changed the approach to employee goal setting and performance evaluation. The relaxing working environment is created to stimulate the creative ability of the employees and the goals set by the company for the employees are too easy to reach, and the company's performance was greatly affected. After practice, his strategy was proved to be infeasible. The cost of the company's operation has been improved and the company's profit is affected.



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