Today’s competitive market of the business segment provides customers with a variety of goods and potentially advantageous propositions. However, in order to take a profitable position in the field, it is of crucial importance to establish proper patterns of organizational structure within the unit. To simplify the following tasks, various researchers have defined a series of organizational structures companies can follow to perform a quality policy. Researchers define organizational structure as “the framework of the relations on jobs, systems, operating process, people, and groups making efforts to achieve the goals” (Ahmady et al., 2016, p. 455). Hence, the organizational structure stands for the ways in which a business unit may divide responsibilities in order to fulfill set objectives.
For a more exhaustive comprehension of the aforementioned notion, it might be of significant assistance to dwell upon the patterns of organizational structure in order to track its basic work patterns. Furthermore, one may suggest that it would be beneficial to focus on the structural peculiarities of a big enterprise with extended organizational aspects. For this reason, in the course of this paper, an attempt will be made to conduct an exhaustive analysis of the Procter & Gamble (P&G) Company in terms of its organizational structure peculiarities.
Background of the Organization
People from all over the world quite often do not pay attention to the brands and types of products they utilize on a daily basis. For instance, when it comes to basic home and self-care routines, brand names like Tide, Gillette, Always, and Head & Shoulders are familiar to practically anyone around the globe. However, only a few think of the global picture, which unites all these notions into a large universal corporation, Procter & Gamble Company. Speaking of the overall P&G product typology, the company operates in six major segments: beauty, grooming, health care, fabric & home care, and feminine & family care (“Procter & Gamble Co,” 2020). The company, hence, provides customers from all over the world with branded goods concerning the aforementioned segment.
With its headquarters in Cincinnati, Ohio, the US, the P&G Co subsidiaries are located in Africa, Americas, Asia & Pacific, and Europe, claiming to be one of the most world-known consumer goods companies. Having launched on October 31, 1837, P&G Co has been leading today’s market to a significant advantage of doing the business for more than 180 years (P&G, 2020). During this time, the corporation has managed not only to enhance the quality of its product to a significant extent, but it has also launched a variety of ecologically and socially-oriented campaigns. Such a development could only be available due to the diligent work of the staff members. P&G obtains an array of executives who are responsible for all the segments across the world. The key management positions are then divided into HR, accounting, and sales, with all of them playing a crucial role in terms of communication between the top management and all the employees. The overall number of staff workers constitutes 97,000 members.
In order to define the organizational structure type of a chosen enterprise, it is important to dwell upon the theoretical basis of the issue. To begin with, the notion of an organizational structure can be analyzed from a series of perspectives. Theorists claim the structures to fall into the major categories of physical and social relations (Ahmady et al., 2016). While the former ones concern the connections between units such as subsidiaries and overall geographical location, the latter deal with relationships formed between individuals. Ideally, these aspects are to reach a consensus in terms of cooperation when deciding upon the working structure. For example, organizational relations can be regarded from the dimensions of hierarchy, function, and inclusion (Ahmady et al., 2016). These are connected to the order in which units are organized within an enterprise, considering the measurable outcome of the structure and the scope of direct communication between the top management and other employees. The dimensions of the organizational structures, in particular, then concern the ways managers should control the unit, positions of the employees within the hierarchy, and the systems that create managerial patterns in the group.
In terms of the types of organizational structures, the notions of social structures and social forms are taken into consideration. Social structures are divided into simple, functional, multidivisional, matrix, hybrid, network, and bureaucracy (Ahmady et al., 2016). Considering the scope of the P&G corporation, it goes without saying that simple structures are not able to sustain the business, requiring a complicated approach. The social structure most likely to fit the company’s expectations is the matrix one, presupposing the combination of both functional and multidimensional work frames in order to divide the responsibility between the units. It was already mentioned that the corporation’s executives have a sophisticated hierarchy pattern to be able to control each of the subsidiaries.
In a matrix system, instead of communicating directly with top management, every local executive performs functional structure within the unit, and then reports the achieved results. Hall characterizes matrix organizational structure to have several managerial authorities that can cooperate with each other, thus, leaving the responsibility to the functional managers of each enterprise’s department (Lukinaitė & Sondaitė, 2017). Bearing this definition in mind, it is now possible to outline the major advantages and flaws of the matrix organizational structure in terms of a big enterprise.
Hence, the benefits of this system include:
- Flexibility. By providing much responsibility to the local administration in the company’s subsidiaries, it is easier for them to introduce innovations and resolve issues on the spot without consulting the administration. However, such autonomy is possible unless it concerns some severe measures to be taken;
- Absence of bureaucracy. When dealing with managing a large corporation, the hierarchy usually includes a variety of layers. Such a position ladder is especially noticeable when introducing some modifications to the existing system. In order to succeed with the proposed intervention, management has to wait for a long time for the project to pass all the stages. However, once the matrix system is applied, some of the changes may be initially introduced to the subsidiary;
- Team spirit. One of the major goals of management within an enterprise is to secure healthy communication among the team in order to increase the overall productivity rate. However, when dealing with a corporation as large as P&G, it is barely possible to preserve the spirit of a big family. For this reason, a large number of employees is divided into smaller groups that could potentially bond with the supervisor’s help (Gleeson, 2019);
- Efficient HR use. When speaking of an enterprise that constitutes almost one hundred thousand employees across the world, it is hard to think of a fair and beneficial workload division. However, the smaller the team, the easier it is for the management to observe the overall and individual productivity within a unit. For this reason, subsidiaries deal with their employees in a way that brings the most to the company’s profit and development with the help of meticulous human resources examination during the working process;
- New perspectives. While the company operates with one functional management team in charge, the amount of options to boost productivity is quite limited. However, when taking P&G structure as an example, its target audience varies greatly in terms of gender, age, economics, and geographical distribution. With having local executives in a variety of spots, there exists a high probability of new ideas and approaches genesis (Gleeson, 2019).
Once the possible positive outcomes of applying matrix organizational structure are relatively clear, it is of significant importance to outline some of the major structural failures to operate with facts in terms of contrastive analysis. Thus, the drawbacks include:
- Possibility of disagreements. While matrix structure presupposes local authorities to have a high level of autonomy, some of the issues still obtain a universal nature. In such cases, the more functional managers work within the enterprise, the higher is the risk of a conflict of interests between the units. Moreover, in the case of any conflict, the employees are stuck in the middle having no opportunity to act in favor of any decision (Gleeson, 2019);
- Unhealthy competitiveness. In a matrix system, both functional and general managers are supposed to have equal significance in terms of the enterprise’s working process. However, whereas functional managers are able to observe the process on a regular basis, they believe they have more rights in terms of decision-making. On the other hand, general managers perceive themselves to be of significant importance due to their absence of direct involvement in the manufacturing process. Although in such cases managers are to reach a consensus in favor of the company, quite frequently these discussions result in the implicit competition that harms both employees and enterprise in general;
- Increased complexity. In terms of the discussion of the system’s benefits, it was mentioned that the matrix is opposed to bureaucracy, making it easier to introduce new approaches to the system. However, a variety of managers could also make the overall communication quite sophisticated. On the P&G example, one may notice that each subsidiary has a staff of functional and general managers who are then controlled by the company’s executives. With such a scheme, employees might face some complications in terms of productivity reporting.
Hence, it was established in the discussion that while matrix organizational structure may obtain a variety of pitfalls, the advantages are more vivid in terms of productivity. In order to maintain such an outcome, however, both functional and general managers, along with the corporation’s executives are to realize the scope of responsibility they bear in the context of consumers and employees’ satisfaction.
Theory of Organization
Behind all the organizational structures existing today, there are theories of organizations that created these approaches. During the course, modern, classical, and neoclassical theories were outlined. The classical theory of organization presupposes that an organization is built upon four major components, including activities system, people, cooperation, and authority. Regarding the history of a company analyzed, one may assume that the classical approach to the organizational structure lies in the core of P&G management values.
Moreover, the major goal behind the theory is a rationalized system of responsibility differentiation, which can be noticed when dealing with P&G structure (Őnday, 2016). However, while this theory is aimed at defining the foundation of an organizational structure, it goes without saying that the majority of principles are nowadays enhanced and modified. In such a way, the enterprise can satisfy both the needs of customers and the expectations of employees. Hence, some of the core values of the modern organizational theory are also applied to the formation of the P&G labor culture. For example, the company claims to pay much attention to the individuals rather than the roles they perform in a team. Furthermore, the notion of a team is also modified in order to secure the division of the staff in groups small enough to guarantee an efficient and productive environment.
Being one of the most influential corporations in the segment, P&G includes a sophisticated corporate structure and patterns of power allocation within the enterprise. The overall structure can be regarded from the perspectives of business units and board structure. Speaking of the former, P&G is generally divided into six business units dealing with a different segment of production. Each of the business units obtains its top management that has authority in the sphere. The latter classification, on the other hand, deals with securing the company’s values and principles. The governance is, thus, performed by twelve board chairs, with each of them being responsible for a particular sector (P&G, 2020). The enterprise is also operated be the local management according to geographical distribution.
Managing a big enterprise requires the amount of responsibility frequently incompatible with human abilities. For this purpose, the matrix organizational system was introduced to successfully delegate this responsibility between the employees, functional, and general management. However, there are some drawbacks that require intervention to increase the productivity rate. The first recommendation concerns additional organizational customization. Indeed, a common goal for the team is one of the major success pillars when inspiring the employees. P&G’s geographical distribution requires a somehow different approach, customizing the policy by considering the peculiarities of culture and location. Another important recommendation would be to increase the overall level of intervention in the company’s working process. With an extensive authority model, employees and administration are rather focused on the processes taking place in their unit without paying attention to the global picture. Thus, it would be quite beneficial to introduce intervention visits between the business units in order to establish better cooperation patterns in the future.
The principles of the organizational structure have become one of the most crucial constituents of any enterprise, as it predetermines the patterns of communication and work within the company. Hence, in order to dwell upon the peculiarities of the types of such structures, the Procter & Gamble Company was analyzed in terms of the following paper. During the discussion, the type of the enterprise’s organizational structure, along with its positive and negative aspects, was defined. Furthermore, the theoretical basis of the structure was examined in order to formulate some recommendations for productivity enhancement. The future implications of the research may concern examining the corporation with a different approach toward organizational patterns in order to conduct a full-scale contrastive analysis of the structures.
Ahmady, G. A., Mehrpour, M., & Nikooravesh, A. (2016). Organizational structure. Procedia-Social and Behavioral Sciences, 230, 455-462.
Lukinaitė, E., & Sondaitė, J. (2017). Mindset of employees working in a matrix organizational structure. Business: Theory and Practice, 18, 144-151.
Őnday, Ő. (2016). Classical organization theory: from generic management of Socrates to bureaucracy of weber. International Journal of Business and Management Review, 4(1), 87-105.
P&G. (2020). P&G history. Web.
Procter & Gamble Co. (2020).