In a bid to operate competitively in a changing business environment, organisations design and implement various changes in their culture. Organisational norms, values, and ways of thinking define an organisational culture. Cohn, Khurana, and Reeves (2005) observe that the basic assumptions that all stakeholders of an organisation adopt and/or observe, especially the diverse workforce, help in enhancing the success of an organisation. In this sense, culture determines the behaviour of employees towards an organisation and its customers.
Since the inception of P&G in 1937, its culture was built around the need to develop employees. The company treats its employees as family members to the extent of initiating profit sharing plans in 1887 (Gupta 2004, p.3). By starting to offer disability, life insurance, and sickness plans, it is evident that P&G focuses on human resource management and strategies for organising people as mechanisms of yielding success in terms of organisational growth and profitability.
P&G has achieved several strategic developments, leadership, and HR practices through various changes in its organisational culture. Change occurred in terms of handling people bureaucratically and in a conservative approach and the creation of innovation and creativity culture. Indeed, change was important at P&G to address the challenges of stagnating company’s profits. However, the dynamic nature of the business environment for an organisation presents the challenges of seeking change continuously as new business trends emerge (Teresa 2005, p.385).
Therefore, there is no specific moment in an organisation’s life cycle when change ceases to occur. This report paper critically evaluates the key organisational development issues emerging in the P&G case study with specific reference to strategic development, leadership, and HR practices. It also critically identifies the organisational challenges facing P&G over the next five years before presenting and justifying key strategic recommendations for the next phase of P&G development.
Organisational culture differentiates an organisation from all other organisations in the same industry. However, the fact that all organisations have their present situation and future expectations makes them all deploy similar concepts to enhance their competitive advantage such as strategic management, leadership, and HR practices.
Strategic management involves a group of continuous activities and comprehensive processes that organisations use to systematise and align resources. Actions in strategic management are aligned with the organisation’s mission, visions, and plans (Dess, Lumpkin & Taylor 2005, p.78). Activities in strategic management transform a static plan into a dynamic plan that yields strategic performance outcomes that are necessary to reach the decisions of facilitating gradual organisational growth as requirements and situations change (Hill & Gareth 2012: Senior & Fleming 2006). Strategic management focuses on analysing of an organisation’s strategic decision, which includes visions, missions, and objectives alongside the analysis of the organisation’s environment, both internally and externally.
The emergence of new challenges that prompt the alteration of the P&G’s culture is an evidence of the reality of the occurrence of change, whether it has been planned for or not. Thus, the quality of P&G’s future is a function of its present growth development strategies. When employees consider moving from one organisation to another, just like in the case of P&G, something attracts them to a competing organisation.
Indeed, middle-level employees left P&G to seek senior-level employment opportunities in competing firms (Gupta 2004, p.5). This evidences a weakness in adopting change or strategic development that keeps employees loyal and committed to the organisation by availing opportunities for career growth and progression from positions of less responsibility to those of higher responsibilities.
Strategic thinking issues emerge in the case of P&G. Through Organisation 2005 philosophy, Jager challenged past assumptions, which underlined P&G’s value proposition together with growth strategies. For instance, through the programme, he found it necessary to provide IT as a catalyst for speeding the change process (Gupta 2004, p.5). Such an effort corresponds to the concerns of strategic development initiatives, which mainly focus on enhancing the competitive advantage of an organisation (Markides 1999, p.57).
For instance, this enhancement may be in terms of reduction of direct and indirect costs of production or service administration. Although some strategic development initiatives deployed by Jager are critical, Lafley understood the need to reduce organisational costs by proposing to cut down P&G personnel by 25, 000 while taking care not to influence the operations of the company negatively. He deployed the strategy of voluntary reduction to implement the strategic decision together with seeking alternative ways of reducing costs.
Reducing costs permits organisations to focus on low cost strategy as one of the major concerns of strategic development. This concern played out in the case of P&G through Organisation 2005 programme that focused on “speeding up decision making to enable the company innovate and introduce new products, eliminates bureaucracy and reduces costs” (Gupta 2004, p.5).
Research by Smith and Munn (2006) confirms that innovative capacity of an organisation in terms of development of new processes for production and development of new products and services is essential for driving the competitive advantage of organisations irrespective of their industry of operation. Hence, P&G’s focus on seeking strategies for enhancing innovative and creative capacity of its employees rhymes well with the concerns of strategic development as a tool for growth and increasing profitability.
Before Jager introduced Organisation 2005 programme, P&G’s culture hindered knowledge sharing. For instance, “workers were reminded not to disturb other employees or visit other departments, except on official business” (Gupta 2004, p.4). With this culture, a room for interaction between employees in a bid to share knowledge through seeking alternative ways of executing a task or clarifications limited the deployment of alternative options for driving organisational success. Jager was effective in deriving a framework for strategic development by attempting to alter the formal work environment where workers used their knowledge in executing the business of the organisation without seeking other workers’ opinion on probable alternative methodologies. Unfortunately, his approaches of change resulted in a reduction of profitability of P&G.
The concept of knowledge sharing in relation to strategic development refers to consistent interaction of knowledge bases and their retention by all components or agents of an organisation or system. An organisation that fosters knowledge sharing is the one, which is intellectual and marked by accustomed driving forces, which work together (Park, Ribiere & Schulte 2004, p.112). The agents of the organisation are purposive and self-directed entities. Adel, Al-Marzooqi, and Mohammed (2007, p. 27) confirm that systems that generate knowledge “gather information and compare conceptual formulations that describe and evaluate its experience with its goals, objectives, expectations, or past formulations of descriptions or evaluations”.
Organisations that encourage knowledge sharing remain committed to continuous search and evaluation of different knowledge areas that are required in the creation and innovation of new products and services through interventions of emerging information that is triggered by technological improvements. Jager’s consideration to use IT in driving strategic development initiatives of the P&G as outlined in Organisation 2005 programme constitutes a major achievement in attempting to enhance competitive advantage in a technologically dynamic business operation environment.
Leadership is an organisational practice that not only influences the followers (employees), but also leaders in a manner that ensures the realisation of organisational objectives through change. It integrates and intertwines followers and leaders (Lussier & Achua, 2004). While leading, followers must be involved.
This effort reveals why there has been an immense scholarly interest on how leaders relate with followers with reference to the role of leadership in enhancing organisational success. Change prompts the necessity for adjustment in leadership styles to suit the emerging leadership situations (Kedharnath 2011, p.13). This claim may imply a change of leadership at P&G from bureaucratic to leadership that encourages organisational transformation and participation under the leadership of Jager and Lafley.
The roles of leaders in an organisation involve organising, leading, directing, controlling, and managing. According to Kedharnath (2011), changes in leadership approaches in an organisation encompass the efforts to derive the most effective ways of achieving organisation’s goals, objectives, and aims through people. At P&G, the initial culture only allows leaders to seek compulsion to comply with the established formal procedures. This again suggests that only autocratic and bureaucratic leadership was permissible.
Autocratic leaders deploy strong controlling and directive actions to ensure compliance with rules and organisational regulations (Daft, 2005). Although this kind of leadership is necessary, where the goal is to enforce compliance to the stipulated guidelines, it can create a negative perception that is accompanied by fear among followers. Consequently, rather than executing duties at precision to attain organisational objectives, followers execute their roles to escape the wrath of the leader. This strategy may reveal the witnessed low innovation and creativity levels before Jager and Lafley took over the position of the CEO at P&G.
Autocratic leadership approaches are a direct contrast of democratic leadership approaches. Kedharnath (2011, p.13) observes, “Democratic leaders take collaborative, responsive, and interactive actions with followers concerning work and work environment”. Democratic leadership permits followers to take part in decision-making processes. Changes in leadership through the leadership of Lafley P&G were aimed at allowing followers (employees) to act in a manner that ensured accomplishment of duties that were delegated as prescribed by customer expectations.
This change supports Sakiru and D’silva’s (2013) assertion that leaders can accomplish their roles more effectively through delegation and participation, as opposed to control and enforcement of rules and regulations. In this account, Organisation 2005 ushered in a new approach for leading people at P&G in the effort to organise work and use people successfully as a source of competitive advantage.
Jager and Lafley appreciate the roles of democratic leadership in an organisation whose culture has a history of investing in people’s centric policies as depicted in Exhibit II (Gupta 2004, p.12). However, Lafley believes that incorporating some aspects of autocratic and bureaucratic leadership in the democratic leadership is important. It implies the necessity for slow adoption of organisational change. He states, “I preserved the core of the culture and pulled people where I wanted to go” (Gupta 2004, p.9).
This claim suggests that a leader must show people the desired direction, rather than allowing them to make democratic choices on the direction to follow. Jager eliminated all hierarchical positions at P&G, thus giving all people an opportunity to engage in strategic decision-making processes. These people also acquired equal status so that they would even drink from mugs that were similar to those that were previously reserved for the top executives (Gupta 2004, p.5).
Every company requires people to organise the factors of production and to innovate and create new products and services. The human resource management plays the roles of filling various employment positions in a company through selection and recruitment (Gartner 2006, p.67). However, having the right people in an organisation is not enough. The HR must establish training and development programmes to foster skills and knowledge development, seek mechanisms for motivating people, and manage turnover (Buchanan & Huczynski 2007).
Motivation is a complex task for HR. It involves inducing certain behaviours that benefit an organisation both in the short and long-term. It involves establishing rewards and remuneration programmes, setting procedures for employee career development and promotions, and other mechanisms of enhancing employee commitment to work, for instance the delegation of responsibility to enhance job satisfaction (Brockbank 1999; Behara 2011). These roles of HR are evident in the P&G HR practices, which present advantages and disadvantages to the organisation in terms of utilising people as a source of competitive advantage to foster organisational growth.
HR has a noble role to play in ensuring commitment of people to the business of an organisation. One of the ways of doing this task is developing a sense of belonging and organisational ownership (Erskine 2012, p.12). P&G HR was effective in this end right from the beginning when it focused on managing its employees as family members (Gupta 2004, p.3). However, its practices face some criticism. For instance, the company decided to offer paid-offs in all Saturday afternoons.
While other packages such as disability, life insurance plan, and sickness schemes were important in inculcating a perception of care among its employees, paid-off Saturday afternoons potentially reduced the production capacity of the organisation on a weekly basis. Reduced output levels of an organisation pose challenges to the creation of a scheme to fund employee development and reward systems, which in turn increase employee motivation (Huselid 2007, p.639).
The influence of HR’s practices in terms of developing the perception of organisational ownership was evidenced by the P&G when 1930s economic depression forced many manufacturing organisations to collapse while leaving it in operation. Erskine (2012) argues ownership of an organisation compels employees to remain clinging on it even during periods of low productivity and profitability (p.13). Arguably, this effect was particularly effective at P&G in 1930s since the company already started to issue shares to the employees (Gupta 2004, p.3). Hence, they would not have agreed to subject their investments to risks by quitting the company.
The HRM ensures people filling various job openings are of the right calibre both skills wise and knowledge wise. P&G’s HR executed this role by conducting recruitment drives in various compasses. At P&G, Gupta (2004) states, “resumes were scanned for promising candidates, including those students who had not signed up for interviews” (p.3).
Such a practice introduced problems in motivation and future development of employees who pass various tests including the M-tests conducted by P&G on successful candidates in the recruitments drives. Glisson and Durick (2003) posit that the willingness and enthusiasm to work for a given organisation constitute an important element for job satisfaction. While filling a job opening, a person who never applied for the opening may be the most qualified in terms of skills and knowledge. This plan provides a room for voluntary turnover in search of another satisfying job.
HR has a number of options to consider in a bid to build a motivated workforce such as reviewing salaries and wages upwards and delegation to create a feeling of reasonability and involvement in decision-making processes. However, different strategies are effective for different levels of employees in the process of career growth. Theories of motivation such as Maslow’s hierarchy of needs and Herzberg’s two-factor theory establishes a classification for various mechanisms of employee motivation.
When employees join an organisation, Maslow reveals their immediate concern and source of motivation in fulfilling their psychological needs (Bowey 2005, p.23). When these needs are satisfied, they cease from being motivators. Employees start demanding higher-level aspects for inducing the motivation such as satisfying their esteem needs (e.g. responsibility and decision-making) before looking for self-actualisation.
Herzberg’s two-factor considers career progression opportunities, recognition, achievement, and feeling of responsibility as important sources of motivation for high-raking employees (Wright & Gardner 2005, p.431). Conversely, with these two theories, “P&G’s manpower policies emphasised giving new recruits early responsibility besides charting out a rapid career path” (Gupta 2004, p.3). Upon deploying Maslow’s hierarchy of needs and Herzberg’s two-factor theories, the P&G HR’s practice of giving new recruits any responsibility may not lead to motivated workforce.
The HR practices of providing opportunities for junior employees to interact and learn from experienced and senior employees can create confidence among new recruits when executing organisational duties allocated to them (Wright & Gardner 2005, p.433). Training and development programmes such as W&DP constitute an important vehicle for creating more skilled and knowledgeable employees. This strategy increases an organisation’s effectiveness to achieve its goals, mission, and objectives. In a bid to minimise conflicts within an organisation that employs people from diverse backgrounds such as P&G, focusing on diversity management is one of the critical and important HR practices.
Organisational Challenges facing P&G over the next five years
As P&G continues to pursue the strategic decision of deploying people as its most important resources for enhancing global competitive advantage, diversity managements will continue to be one of its major HR challenges in the next five years and beyond. All global organisations embrace diversity in their workforce.
They incline to the belief that employing people from the diverse background gives them an advantage by developing the capacity to tap and benefit from a wide range of talents and knowledge bases (Dessler, 2004). Hence, they can innovate and create a wide assortment of products, which translate into increased profitability upon trading them in the global markets.
When focusing on diversity at P&G as a strategic initiative to gain in terms of enhanced growth through increment of product ranges emanating from innovation capacity of diverse employees, it is crucial to note that diversity also brings together people from different cultural backgrounds. Hence, it creates cultural conflicts (Pless & Maak 2008, p.132). To resolve these conflicts, the HR management approaches are important in helping to create a common organisational culture by helping employees to understand that different people have different abilities and beliefs (Kirton & Greene 2000).
These differences should not influence the way people relate with one another (Ollapally & Bhatnagar 2009, p.456). Although, the challenge of diversity management is significant at P&G for next five years, the company can draw from its experience in diversity management to minimise the threshold of its negative impacts on global organisational success. For instance, through delimitation of the career growth of employees on geographical demarcations, opportunities exist for people to learn local languages, culture, business environments, and more, importantly, social environments (Gupta 2004, p.4).
In the global business environment that is characterised by rapid and sudden technological changes, P&G will continue to face the challenge of the need to embrace change in its work organisational culture and/or in its way of executing business processes. Lafley attributes Jager’s failure to his desire to achieve too much change in little time (Gupta 2004, p.8). This suggests that people at P&G require to be prepared to face organisational change positively.
Indeed, Lafley utilised much of his time in “communicating to employees in terms of why and how he wanted P&G to change” (Gupta 2004, p.8). Jager’s failure to spend ample time in communicating change to prepare employees for organisational cultural change reveals his failures in changing the organisational culture of the company, which resulted in a reduction of the P&G’s share value.
Jager thought that using IT as a driver for organisational change could increase growth. However, it produced opposing results. Lafley also thinks that this strategy was appropriate despite being implemented too fast. If the trend of slow embracement of change that is driven by IT continues to receive slow embracement, P&G will continue facing challenges not only in enhancing its competitive advantage in the world, which organisations’ competitive advantage is driven by innovation in IT, but also in a world of unplanned change in organisational operation environment. In this world, the practice of slow reception of the change means that by the time the change is fully implemented, its tools of success may have run obsolete. Consequently, Lafley’s strategic objective of serving consumers, winning retailers, and defeating competitors (Gupta 2004, p.8) may not be achieved at all.
Failure in implementing any change needs to be accompanied by lessons. Amid the criticism of the change approach adopted by Jager as harsh, demanding, and involving the setting of unachievable targets for employees, it had elements that could make P&G more competitive in the next five years. For example, through video conferencing, employees in the global platforms acquired an opportunity to communicate and interact in real time. Consequently, knowledge sharing in the process of development of new products becomes feasible.
As close competitors for P&G continue to deploy IT technologies to enhance speedy expedition of information across their global partners, P&G will have to revert to the changes initiated by Jager via Organisation 2005. Indeed, the company may have to consider taking in even more challenging changes such as scrapping completely the insular traditional culture and adopting a project-based culture to permit quick changes corresponding to demands in the business environment.
Project-based organisations develop their culture in a manner that ensures that all resources are allocated to guarantee effective performance of temporary systems that are aimed at attaining the demands of particular tasks, which constitute a project. P&G will need to adopt organisational culture that permits the execution of certain tasks at specified times (Park, Ribiere & Schulte 2004, p.113).
This move will force the organisation to change the culture of holding employees as permanent assets if it needs to reduce its business costs sharply as an essential strategic objective for an organisation that seeks to compete successfully with other organisations, which focus on cost reduction strategies in an attempt to increase performance.
The above assertion implies that P&G’s future business operation strategies will need to factor in the prevailing technological developments, and methodologies of cost effective production while profile the existing innovative business models. Deploying such approaches requires a quick adoption of change. Hence, P&G’s reluctance to embrace change within a short time will continue to be a major weakness of the organisation over the next five years. This may greatly inconvenience the company in an era when thousands of new products are released daily in the global marketplace followed by their improvements, or total change within a span of less than one year.
P&G still struggles with the challenge of hierarchical and bureaucratic management system upon considering that Jager failed in implementing his changes on the organisational culture. One of his concerns was breaking away from the tradition of bureaucracy and hierarchy in the management. Applying changes such as performance-based pay systems as one of the approaches of enhancing organisational performance by ensuring optimal productivity of employees may present bigger challenges to P&G in the next five years.
Adopting performance-based pay systems entails implementing organisational change. Unfortunately, people at P&G are highly resistant to change. Dess, Lumpkin, and Taylor (2005) reckon that the resistance is a common phenomenon where changes influence employees negatively. Performance-based payment system encompasses one of the changes that may face criticism from employees, especially those in senior levels in a hierarchical management protocol at P&G.
Senior employees whose payment needs adjustment to meet their performance levels are most likely to object a change in rewards or payment system. This happens when subordinates who record high performance levels earn higher incomes (Heywood & Wei 2006, p.524).
Where such changes may be deemed necessary for P&G for it to compete with other organisations in the global marketplace, conflicts between employees, their line managers, and supervisors may emerge. Apart from looking for strategies of ensuring that employees rapidly embrace change, P&G will have to seek effective ways of managing conflicts within the organisation because of future changes, which may be mandatory for the survival of the organisation in a dynamic business environment.
Strategic Recommendations for the Next Phase of P&G Development
In the next phase of P&G development, motivating people from diverse backgrounds will be an important strategy for growth. It is recommended that P&G resort to benchmarking in the effort to run consistently with the emerging developments in its industry. Similar to Lafley’s approach for encouraging people to focus on benchmarking other organisations’ products rather than just developing products in-house, the company will need to benchmark on best practices in management of diversity. For instance, Google’s workforce diversity management approaches are effective for an organisation that seeks to develop new products, which meet consumer anticipations such as P&G.
Google gains from the valid viewpoints of its diverse workforce. The workforce provides increased problem-solving capacities together with enhanced creativity levels. This strategy is critical for the success of the organisation in the future unknown dynamic business environment.
Proper management of Google’s workforce makes it gain immensely through the establishment of a central position in the competitive market. Workforce diversity management to encourage innovation and creativity comprises the strategic initiative deployed by Google Company to maintain its continued growth in a competitive market. Consequently, if P&G establishes a match between strategic initiatives and HR approaches, it can acquire a competitive advantage, which might lead to the attainment of a magnificent market share.
Therefore, proper diverse workforce management as a strategy of growth in the next phase for P&G is not only appealing to the enhancement of the top organisation’s talent, but also in attracting a wide range of customer patronage stemming from all persons who are interested in buying goods and services from P&G. In the next phase of development, P&G will need to focus on managing workforce diversity from not only the perspectives of reduction of organisational conflicts, but also from the merits of such workforce in innovation and creativity.
Increased availability of many products, which can substitute the products offered by P&G, creates the necessity of changing P&G’s organisational culture from that of produce-to-market to a culture of producing what is required. In this process, customers’ information on demand trends is important to the research and design arm of P&G.
Considering that the company trades on global platforms, collecting information on the most important product improvements from employees yields a large amount of data. Processes such as collection, analysis, and synthesis of this data to deploy as an input in the design process require integration of information management systems. Since the innovation of new products and services in an organisation needs to occur before obsolescence of the existing products, a fast-enough adoption of change is mandatory at P&G if it needs to gain competitive advantage in the global market.
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