Term Paper on "Procter and Gamble Organization 2005 and Beyond"

Term Paper 14 pages (4161 words) Sources: 1+

[EXCERPT] . . . .

Proctor & Gamble

Analysis of Organization 2005

Using Thompson's Eight Managerial Tasks for Strategy Execution

The intent of this paper is to analyze Proctor & Gambles' approach to implementing one of the largest strategic initiatives in their history, Organization 2005. In analyzing this strategic initiative, Thompsons' eight managerial tasks for strategy execution are used as the framework for this analysis. These specific tasks including allocating resources, building a capable organization, establishing strategy-supportive policies and exercising strategic leadership in addition to installing support systems. The defining and instituting of best practices for continuous improvement, which also leads to the shaping corporate culture to fit strategy, and finally creating a reinforcing culture by tying rewards to achievements of key strategic targets is the framework this paper will analyze Organization 2005 using. The culmination of these eight managerial tasks for strategy execution is the development of a strategy implementer's action agenda. For the agenda to be achievable there needs to be a high level of synchronization across the entire organization, a task that the CEO and senior managers working on Organization 2005 found difficult to complete. What emerges from a thorough analysis of Organization 2005 is a paradoxical and often contradicting set of requirements for this massive reorganization, looking to the past and the significant gains from standardization on the one hand, yet needing to create a high level of customization of R&D, marketing, distribution, and global brand positioning. To position Organization 2005 as a generational shift in strategy is to greatly simplify it; what is occurring with Organization 2005 is a global realignment of processes, product categories, and geographical market orientation. What follows is an analysis across each of the eight managerial tasks of strategy execution. P&G had found success in the past in standardizing processes, and those previous major successes have served as the foundation for their matrix-based organizational successes in the past. Yet in the context of the timeframe of the case study, P&G is at a crossroad of looking at the previously proven value of standardization relative to market requirements that require high levels of customization, and in that inherent conflict of past successes to future market needs, P&G finds itself in an organization quagmire as Organization 2005 is introduced and initially implemented.

Allocating Resources

The traditional model of allocating marketing resources within P&G had followed the previously highly regimented geography, product, and function process workflow and resulting hierarchy. Overarching this hierarchy however is the supremacy of Research & Development investments and expenditures which has dominated the organizational culture for decades. Organization 2005 proposes an entirely new paradigm of resource allocation, focusing on the intersection of product/brand categories, geographies, and business processes. Visualizing a Venn diagram of these three areas of product/brand categories, geographies, and business processes inevitably leads to a very process-centric strategy as it relates to the development of the Organization 2005 planning framework.

As Durk Jager has often defined in his vision statements of Organization 2005 that new brands and new markets will be the primary focus of the development priority, which further indicates the primacy of research and development in P&G. In fact Mr. Jager has also been very vocal and highly involved in the development of entirely new categories of products (Piskorski & Spadini 2006).

In analyzing the Organization 2005 initiative from the standpoint of allocating resources, the following findings provide insight into how P&G planned to re-define resource allocations based on the precepts of their planned strategic change:

Purely following process standardization is no longer a viable strategy and this is redefining resource allocations.

P&G senior management including CEO Jager had, through their experiences with matrix management during 1987-1995, and the Strengthening Global Effectiveness (SGE) restructuring program completed in 1993, had seen process standardization become the most effective strategy for re-defining how resources will be allocated. Process standardization had been a proven cost reduction and resource allocation strategy in P&G, yet Organization 2005 presents an entirely different set of market conditions and as a result, organizational constraints senior management must deal with.

Organization 2005 allocates resources into the triad architecture of Market Development Organization (MDO), Global Business Units (GBU) and Global Business Services (GBS) with the dual objectives of localizing marketing strategies while at the same time capturing business best practices. CEO Durk Jagers' roadmap for Organization 2005 allocates resources heavily into the areas of process standardization, both from a business and an it process standpoint. Both GBU and GBS are specifically focused on the process standardization aspects of the Organization 2005, with MDO leading the localization of marketing. This dichotomy of resource allocation is one of the more difficult conflicts that P&Gs' senior management had to contend with in Organization 2005, as process standardization and supply chain optimization was at odds with localized and highly targeted marketing campaigns.

Information Technologies investments are increasingly becoming a major priority for resource allocation during the Organization 2005 initiative.

Building a Capable Organization

Clearly the main consideration for Organization 2005 is the redefining of a new organizational structure that capitalizes on the past proven successes P&G has had with process standardization on the one hand, and a much more focus go-to-market strategy, localized to specific markets through the use of MDOs on the other. What the senior management of P&G quickly realizes however is that in the new organizational structure of Organization 2005 is one that contradicts itself in the missions of each organizational unit. At its most fundamental level, Organization 2005 has failed to resolve the most critical conflict in P&G at the time of this significant re-organization and initiative, and that are the trade-offs of process standardization and best practices vs. The development of more autonomous market development processes as illustrated by the development of the Market Development Organization (MDO). The following are key challenges for P&G in building a capable organization using Organization 2005 as the framework:

An inherent conflict exists between process standardization and localized go-to-market strategies due to a lack of incentives consistency. GBUs are rewarded on profit, while the MDO is rewarded for sales growth, while GBS is rewarded for standardizing processes (Piskorski & Spadini, 2006). With GBS given the critical roles of product development, brand design, business strategy and new business development, clearly global process standardization dominates the majority of organizational structure decisions. In fact P&G, in reporting the anticipated benefits of Organization 2005, publicly states they expect a 45% of all headcount reductions would be from supply chain consolidations, and 25% from the exploitation of scale benefits arising from more standardized business processes (McQulling, 2000). P&G senior management also expect to see a reduction in management layers from 13 to 7, further driven by process standardization (McQulling, 2000).

Replacing the traditional matrix organizational structure with the triad of brand/product category, business process and geography as defined by Organization 2005 creates organizational imbalance. As was the case when P&G relied on a matrix-based organizational structure, marketing is often displaced by process standardization, confusion over its role historically in the organizational structure, and the preeminence of R&D spending and long-term investment. Organization 2005 creates even more confusion as members of GBS have no clear direction if they are to re-architect major business processes or execute key marketing strategies.

Organization 2005 from an organizational perspective creates confusion within the existing P&G matrix-driven culture by defining divisions that have potentially opposing missions in addition to divergent measures of performance. Underscoring all this is the new religion of P&G, which is process standardization. The lack of clarity in roles within GBS for previous brand and marketing managers, the adherence to process standardization in the past as the panacea that P&G had successfully used in redefining their organizational directions and strategies and its conflicting role with MDO provide insight into why financial performance for P&G after Organization 2005 was initiated had been faltering. The temptation to move back into a purely process standardization strategy is where P&G reverts to during the last phases of Organization 2005 to alleviate the pain of mass organizational change.

Establishing Strategy-Supportive Policies

In addition to redefining the organizational structure and balance of P&G, the role of Organization 2005 is to also revolutionize the go-to-market strategies throughout global regions. While Europe has progressed from a "mini USA" model that was specifically tailored to each country's unique needs to a hub-and-spoke model with centralized functions located in Belgium, and then was progressing towards a consortium-based new product development and market planning model throughout the European Union nations, Organization 2005 in effect replaced this maturation of the European Common market. The policies that lead to the perfecting the hub-and-spoke model, creation of the European Technical Center (ETC) in Brussels' to support EU-based corporate R&D, process engineering, and process standardization.

In effect, the Organization 2005 initiative looked to replicate the success of the ETC, creating the triad architecture of brand/product direction, geographical focus and business process optimization through the use of the GBU's functional role. Compounding the challenge of making the strategy-supporting policies effective in Organization 2005 was the need for having more… READ MORE

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