P&G is one of the US-based firms dealing in fast moving consumer products. Based in Cincinnati, P&G is one of the leading multinationals dealing in Fast Moving Consumer Goods (FMCG) around the globe. However, the firm was faced with the problem of stagnating sales revenues and profitability in the late 1990’s. Given the situation, the firm needed new strategies that would lead to immediate increased turnover (Gupta, 2004).
The immediate president and CEO Durk Jager came up with new changes in the organisation and launched a programme that would see the firm moving from this position to increased profitability within six years. The programme targeted strategic changes in the organisation culture and structure that would lead to the reduction of hierarchies and costs related to the bureaucratic management practices.
However, the intended changes of the programme resulted into increased costs. The reason for the failure of the programme was due to inappropriate change management and the leadership styles adopted by the firm (Gupta, 2004). Even though the changes had good intentions, it was drastically implemented.
The drastic implementation process resulted in increased cost and decline in profitability. In the beginning of the next financial year, the firm changed leadership and Lafley took over from Jager and reverted to the old system of management. The new management did not attempt to create drastic changes in the organisation (Gupta, 2004). The result was immediate improvement in financial performance and future prospects for growth.
The paper will critically evaluate the key organisational development issues emerging in the P&G case with specific reference to strategic development, leadership and HR practices. Moreover, the paper will be identifying the organisational challenges facing P&G over the next five years as well as presenting and justifying the strategic recommendations for the next phase of P&G development.
One of the key strategic developments in P&G is the changes in corporate structure and strategies. In fact, aligning the corporate structure with strategies is critical in attaining the desired objectives. The top management in P&G understood the need for cohesion between the corporate structure and new strategies aimed at improving the firms output in terms of sales and profitability. However, implementing the changes to attain the desired results remained a challenge to the top management of the organisation. Even though the management of the organisation had good strategies, the manner in which they were implemented did not reflect the culture of the organisation.
According to Baker, 2009, organisations often face the challenge of creating, recreating and implementing changes. While organisations continue to create and implement changes, the increased probability of encountering strong resistance from fearful and even cautious employees as well as other stakeholders is eminent. As such, organisations should comprehend the reasons for resistance and take necessary steps in order to attain the desired change outcome (Burke, 2006). Essentially, to be successful in creating change organisations have to create an environment that would enable the transformations to take effect.
P&G top management was in the process of overhauling the organisation culture and the operation processes as well as established new strategies that spurred innovation, increased efficiencies and productivity. Under the organisation 2005 programme, P&G reorganised its corporate structure from four to five geographical units. The reorganisation was based on product categories. Besides, information Technology (IT) was used as a catalyst for the change processes.
The changes in the corporate structure were to increase the speed in decision-making and enable innovativeness critical in product development. Besides, the structural changes were introduced to reduce bureaucracies and excess costs involved under the original structures. Moreover, the changes were established to establish an informal work processes and atmosphere that encourage sharing of knowledge, experiences and ideas among employees. Even though the strategic developments had noble objectives, they remained costlier to the firm.
Reasons for the failure of changes in strategic developments of the firm
As indicated the strategic changes established under various programmes remain costlier to the firm. In fact, analysts cited the rapid processes in which the changes were needed to take place. Besides the speed in which changes were required to take effect, employees did not embrace the needed changes. Spreitser, Porath and Gibson 2012 argue that employees will always be comfortable with the current skills and competencies.
In fact, change within the organisation challenge or threaten this safety. In other words, employees often feel contented with the knowledge they have gathered overtime, the mastered skills and the gradation they have received over their work processes. The experiences gained and skills provide employees with the required competency (Baker, 2009).
As such, creating change will always threaten the achievements employees have gained. Essentially, employees will resist change in order to maintain the good of the competency they have gained. Moreover, changing the work processes affect the employees’ work activities. In other words, changes create the need to learn new skills, which normally take time and additional resources on the part of employees (Chandler, 2009).
Besides, employees resisted the structural changes due to fear of failure. In fact, almost all employees within the organisation were worried of what new changes might bring. Often, changes are accompanied with layoffs, failure of promotions, salary cutbacks as well as miss outs of bonuses and incentives (Ford, 2010). In fact, strategic changes in P&G came with layoffs that were geared towards cost reduction. In most cases, employees will always resist changes that come with such new adjustments.
In addition, employees will resist change to maintain the stability of their status. In other words, changes normally alter the structure and designs, job descriptions as well as positions. As such, employees often fear losing the statuses because of changes that has been brought within the organisation (Ford, 2010). In P&G, the structural change programme played down hierarchies and old systems of doing things in the organisation such as adherence to the dress codes.
However, some employees supported changes. In most cases, such employees had the required competency in new job assignments. In addition, such employees had the capability of adapting quickly to the new changes that were brought by the organisation (Ford, 2010). Moreover, in the situations where changes come with incentives or promotions, employees will always need such changes to occur.
P&G management introduced new reward system that take into consideration extraordinary contribution of employees at all levels of the organisation. Further, employees will survive when the changes brought by the organisation increases their capabilities and competencies (Coutu, 2004). The organisation emphasised on training and development through coaching which is critical in enhancing capabilities and competencies of employees.
Essentially, organisations’ leaders have to address the challenges employees face directly in order to create change. The new organisation leaders had to come up with strategies that deal with new expectation (Spreitser et al., 2012). In addition, employees should be part of the formulation of the strategies. In fact, leaders should provide clear explanations of new tasks, generous adjustment period and enable free acceptance of change without authorisation or application of forceful means.
Leaders within the organisation have to be sympathetic of the fear and put in place strategies that would deal with challenges that come with transformations. Leaders must also understand that during the transition occasional blunders are eminent. As such, safe learning environment need to be created to allow employees comprehend new changes that have been brought. Moreover, employees are also susceptible to learn through mistakes. In addition, leaders must also safeguard the collective statuses of employees most affected by the new changes.
Change should also be implemented incrementally to avoid eminent conflicts and mistakes that may be costlier to the organisation (Spreitser et al., 2012). Moreover, incremental implementation would allow employees be familiarised with the new ideals. Essentially, incremental implementation will also reduce the chance of resistance since hesitant employees would be accustomed to the new changes.
Whereas changes might be necessary for the organisation in order to attain the strategic goals, resistance to such changes cannot be avoided. Majority of employees will always resist changes that have been brought about by the organisation for various reasons. However, understanding these reasons would enable supervisors implement and manage these changes. Essentially, organisations should comprehend the reasons for resistance to change and take necessary steps in order to attain the desired change outcome. In other words, organisations should not just focus on the desired change but also the concerns of the employees.
The successes of the organisation depend entirely on its leadership styles. P&G understands the need to have a leadership style that would enable the organisation achieve the desired outcome. Leadership style of P&G before the strategic structural changes could be described as transactional since it focused on centric measures. Besides, Jager applied transactional leadership style to drive drastic changes in the organisation. Transactional leadership focuses on the interactions between the top management and employees (Padilla, Hogan & Kaiser, 2007).
In fact, in transactional leadership styles, rewards and punishments are used as a form of motivation. Rewards are in various forms and are provided to employees with increased performances and loyalty. Transactional leadership styles are effective in situations where increased performance is the major objective of the organisation (Bass & Riggio, 2008). In addition, transactional leadership works better in the circumstances where the problems can clearly be observed and simple. In other words, employees understand the limit and the consequences of their actions.
One of the major disadvantages of the form of leadership is that employees are aligned to the organisations requirements. In other words, transactional leadership does not encourage innovativeness and creativity in solving the organisational issues (Klein & House, 2011). In other words, the leadership style does not allow employees to be creative and innovative in getting solutions to the problems.
Employees do not contribute creatively and innovatively in getting solutions affecting their work processes. The reason explains why Jager wanted to revamp the organisation culture that focused on Stretch Innovation and Speed (SIS). The philosophy leveraged P&G innovative capability. Transactional leadership style is not suitable in complex organisations where creativity and innovativeness remains critical in the attainment of goals and objectives.
Most importantly, under complex situations where employees’ contribution is emphasised, transactional leadership is not a recommended approach (Bass & Riggio, 2008). However, Jager applied similar leadership style without knowing resulting to the failure in the implementation of the change processes. Besides, given the complexity of the organisation, transactional leadership style is not appropriate.
The success of the firm resulted from the transformational leadership style adopted by Lafley. Transformational leadership is characterised by its inspirational nature and positive changes it creates in the organisation. Transformational leadership takes into consideration the concerns of employees and is focused on encouraging workforce to achieve the goals of the organisation. In fact, transformational leadership is geared towards creating positive change among employees.
Moreover, in transformational leadership style, the members of the team are encouraged to attain the desired results on assigned tasks. Further, leaders impart the vision of the group and take into consideration the members’ contribution in the attainment of the results. Besides, Transformational leaders have greater vision as well as inspirational characteristics, which is applied to motivate and change the expectations as well as perceptions of employees to work towards the desired goals and outcome.
As indicated in the case, Lafley drove the change process through the application of transformational leadership attributes. Essentially, transformational leadership style is the best employees’ management approach. Lafley acknowledged the fact that employees of the organisation need to be encouraged, motivated and inspired towards attaining the goals of the organisation. In addition, P&G needed visionary leadership to inspire and motivate employees towards attaining the desired outcome. Such characteristics are found in the transformational leadership style.
As indicated, leadership style plays a critical role in the motivation of employees. The management and leadership style should remove obstacles that alienate employees from work processes. In other words, the leadership style should encourage employees towards attaining the desired outcome (Kirchmer, 2009).
In most cases, organisations considered high achievers adopt leadership styles that create positive changes and inspire employees towards attaining the goals of the organisation. For instance, transformational type of managing employees is one such style of leadership. As mentioned, transformational leadership is characterised by its inspirational nature and positive changes it creates in an organisation.
In order to achieve increased performance among employees, P&G need to focus and often adopt leadership styles that take into consideration the concerns of employees. In addition, the leadership styles should be focused on encouraging workforce to attain the goals of the organisation. In fact, the leadership style should be geared towards creating positive change among employees. Studies indicate that performance attributes of employees increases when their concerns are greatly considered by the organisation’s management (Shields, 2012).
Moreover, to remain competitive, P&G require leadership style in which members of the team are encouraged to attain the desired results on the assigned tasks. Further, to become extremely motivated, leaders have to impart the vision of the organisation and take into consideration the members’ contribution in the attainment of the results (Armstrong & Baron 2009).
Besides, leaders should have greater vision as well as inspirational characteristics, which are applied to motivate and change the expectations as well as perceptions of employees to work towards the desired goals and outcomes. Essentially, there is need to raise optimism among employees to attain the required output. Moreover, the management needs to inspire employees towards attaining the desired outcome of the organisation.
In addition, P&G needed visionary leaders to inspire and motivate employees towards attaining the desired outcome. As indicated, leadership styles play a critical role in enhancing employees’ performance. Generally, the culture of the organisation, management approach and leadership technique are critical in determining performance of employees, which in turn influences overall productivity. The reason is that the variables are directly related to the employees’ behaviours, which further affect the outcome of the organisation.
Human resources practices
P&G applies various dimensions in its human resources management. Besides focusing on the development of the employees, the firm embraces diversity, compensations processes as well as motivational practices in order to enhance the employees’ performances. Taking into consideration of the diversity in workforce as well as training and development is a culture that the organisation has practiced.
Diversity as HR practice
The firm believes in diverse workforce to achieve the desired results. The firm acknowledges the fact that the workforce comprises of diverse and talented people that contributes positively to the attainment of the desired goals. Essentially, P&G HR managers acknowledge the effect of these dimensions on the work performance, success as well as motivations on the part of employees.
Most importantly, the HR managers of the organisation comprehend how the dimensions that bring about diversity in the workplace affect interactions of workers (Pynes, 2009). As such, the organisations’ human resource managers have put in place structures that take into consideration all the dimensions of diversity in the workforce.
Embracing diversity within the organisations’ workforce has increased benefits. For instance, diversity within the workforce has contributed to increased competitive advantage of P&G. In P&G, personnel are diverse in terms of culture, language, skills, educational and leadership background. In other words, culture, language, skills, educational and leadership background characterise variations found in the organisation’s workforce (Turnbull et al., 2009). The heterogeneous workforce created by diversified backgrounds brings into the organisation the skills and competence mix that contributes to the increased competitive edge.
Besides, workforce diversity has led to the organisation’s increased productivity. Variations in the workplace motivate workers and enable employees to be more efficient and effective leading to increased productivity (Turnbull et al., 2009). Besides, diversity in leadership enables the organisations’ executives to bring in diversified skills and technological knowhow that make the firm achieve its goals in an efficient and effective way. Moreover, diversity leads to increased creativity among the employees. The employees’ interaction with various skills leads to innovations and creativity that brings about solutions to various problems the firm faces (Mor Borak, 2005).
In addition, diversity leads to positive reputation to the firm. Companies that embrace diversified workforce are perceived to be non-discriminative in their recruitment process (Mor Borak, 2005). As a result, highly qualified and professional staffs are attracted to such firms. The qualified staff brings into the firm the necessary skills and competences that enable the organisation attain its objectives in an efficient and effective way. Such firms also have the capability of sustaining the existing talent and competent which in effect add to the firm’s reputation (Dowling, Festing & Engle, 2013). Enhanced reputation increases the firms’ competitive advantage.
Managing diversity using strategic human resources techniques enabled the organisation to gain more benefits. In other words, strategic human resources procedures enabled P&G to take maximum advantage of variability within its workforce (Friday, 2003).
In addition, adopting strategic human resources in managing workplace diversity enabled the organisation to develop practices and processes that have led to the realisation of maximum benefits. Moreover, strategic human resources made the organisation provide a vision, show commitment and communicate the benefits to all top-level management. Further, diversity as part of human resources strategic plan have been developed and aligned to the general organisations’ tactical strategies.
Besides, the strategic human resources management has ensured that diversity is associated with the organisations’ performance. The knowledge that diversity and all-encompassing environment motivating and leads to increased productivity are critical. As such, the human resources management have aligned the individual performance with the goals of the firm (Friday, 2003). Strategic human resources management has developed qualitative and non-qualitative actions that result on different facets of general diversity plans.
Moreover, strategic human resource management of the firm has ensured continuous process of identifying and developing a varied team of workers who are talented and have potential for future growth of the organisation (Friday, 2003). Unlike traditional methods of human resources management, the firm has adopted strategic management that provides a process in which continuous inflow of diversified workers are maintained. Strategic human resources managers ensure that workers are trained in various aspects of diversity and develop a culture that embraces variations in the workplace.
Organisational challenges facing P&G in the next five years
P&G is currently facing many challenges given increased global competition. The biggest challenge facing the organisation is lack of innovativeness. Lack of innovation originates from the organisation tradition centric culture, which is not open to the external changes. Besides, changing the centric culture of the organisation has remained a challenge to most of the organisation’s leadership. Essentially, the organisation has remained elusive to the external factors that drive innovation. For instance, currently, the organisation is still grappling with the challenge of sharing details on its latest innovations.
Besides, the organisation has not developed new products despite quick move by competitors in the new product development. In addition, the organisation leadership is struggling to deal with increasing pressures on the introduction of highly competitive product in the market. Essentially, the firm’s periods of growths were driven by innovations that resulted in the creation of profitable lines of products. Besides, the firm has the technology to come up with new product line that will drive its growth in the next five years. The major factor hampering the product development is the firm’s culture and the management structure. In other words, despite the firms’ capabilities in technology and employees skills, organisation culture and structure have continuously stifled the innovativeness.
Another challenge facing the firm is how to deal with its management structure. Even though the firm has made remarkable changes in its leadership and management structure portfolios, analysts still believe that the firm should do more. The firm should adopt the current horizontal management structure and leadership style that facilitate innovations and leading to reduced cost in the firm’s processes as well as increasing the speed of decision-making processes. Majority of the shareholders argue that unless the firm transforms its belief system it will still be slow in decision-making processes and innovativeness.
Recommendations for the next phase of P&G
Changing the management structure and leadership styles of the organisation
In order to improve productivity, the firm must adopt practices that encourage innovation and increased performance of the employees. Essentially, the relationship between leadership style of the organisation and employees performance is direct (Palestini, 2009). In addition, the management structure directly affects employees’ job commitments that have greater influence on the performances.
Essentially, management structure and leadership style of an organisation should be directed towards improving the performance of employees (Armstrong & Baron, 2009). Currently, the organisation should implement management structures and leadership styles that tend to motivate workers and aimed at increasing their output. In other words, the management practices adopted by the organisation should motivate the employees, which in turn contribute to increased productivity.
The first motivating management practice that the firm should adopt is cross-functional management structure. Most importantly, the cross-functional management structure encourages the astral managerial leadership and innovativeness among the organisation’s employees (Mullins, 2013). The management structure often determines the type of leadership style that have direct impact on the employees’ behaviour and the general output of the organisation.
In most cases, the management and organisation structures determine the culture of the organisation (Bratton & Gold, 2007). As such, the organisation should pursue management and organisation structures that promote cultural and moral principles as well as practices that motivate and increase the employees’ output. In fact, the organisation should entrench moral principles that emphasise employees’ motivation as well as enhancing the general output of the firm (Buchanan & Huczynski, 2007).
Employees’ management practices such as encouraging individual accountability have been found to encourage employees to effectively perform the assigned tasks resulting in increased outcome (Shields, 2012). However, such practices have to be adopted within the moral principles determined by the management structure and the leadership style.
Studies on the relationship between employees’ performance and responsibility indicate that personal accountability combined with freedom to operate explains individual innovativeness that encourages employees to do extra work not only for the organisation but also for personal goals (Buchanan & Huczynski, 2007). The practice of encouraging individual responsibility among employees is highly applicable within the cross-functional management structure (Watson, 2006).
Generally, organisations should adopt management models and leadership styles that aim to increase the output of employees, which in turn augments the general output of the organisation. In fact, models of management that focuses on the improvement of employees’ output as well as individual development increase the competitive advantage to the organisation (Farndale & Paauwe, 2005).
Most modern organisations have adopted the cross-functional management due to its effect on employees’ improvement and the accompanied astral leadership style. Astral leadership style allows cross-functional management practices that encourage work processes as well as employees’ motivation. Moreover, the cross-functional models are aided by the open communication system that limits the organisational structure spectrum.
Essentially, the corporate organisation management model should offer a sense of responsibility to the workers, which result in greater contribution to the organisation’s objectives. In other words, the management model should result in increased employees’ performance. Cross-functional model fulfills such requirements (Lord, Brown & Freiberg, 2010).
As such, cross-functional model becomes one of the management structures that encourage employees’ performance resulting into increased productivity of the organisation. Moreover, cross-functional model increases the leadership and management competencies resulting in additional competitive advantaged to the organisation (Buchanan & Huczynski, 2007).
The practices will enable the organisation be innovative and develop products that enable the firm to remain competitive in the market. Besides, the firm’s modern models of management, organisation culture and leadership style will create expected changes that foster future profitability and sales growth through innovation. Besides, the business should continue to orient its goals towards creating products that satisfy the needs of customers.
The case present some of the confrontations firms encounter particularly in the management people, strategic developments and controls. From the case, it can be deducted that creating drastic change in the strategic development often result in increased cost to the firm. Essentially, strategic changes in the organisation should be complimented with appropriate leadership style, organisation and management structure as well as human resources management practices. Moreover, organisation culture plays a critical role in the human resources management practices as well as implementing changes within the organisation.
In order to attain the desires results, change should also be implemented incrementally to avoid eminent conflicts and mistakes that may be costlier to the organisation. Moreover, incremental implementation would allow employees be familiarised with the new ideals. Essentially, incremental implementation will also reduce the chance of resistance since hesitant employees would be accustomed to the new changes. Besides, the organisation needs to adopt leadership styles that take into consideration the concerns of employees.
In addition, the leadership styles should be focused on encouraging workforce to attain the goals of the organisation. In fact, the leadership style should be geared towards creating positive change among employees. Further, the firm should adopt motivating management practices as well as cross-functional management structure. The reason is that cross-functional management structure encourages astral managerial leadership and innovativeness among employees leading to innovativeness, increased performance and productivity.
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