Procter and Gamble Company: Development Issues

Introduction

As social, economic, and cultural aspects of life keep transforming in the world, organisations need to understand that organisational change is becoming an irresistible factor in the corporate world (Adkins & Caldwell 2004). Organisational culture is a form of administration or control technique that companies use. Organisational culture involves a system of shared values, principles, norms, and assumptions among members of in a given organisation.

According to Buchanan and Huczynski (2007), over the years, organisational culture has increasingly become an important factor that directly influences organisational performance. As organisations struggle to survive in competitive markets, the management of change is becoming a prevalent aspect in organisations (Smith, Higgins, Parker, & Lightfoot 2001). However, change management is now becoming another key factor that determines organisational performance and future survival.

Management experts assert that strategic management practices, organisational leadership, and human resource management are important facets of organisational change in the realm of management (Malone 2004). Hence, the report analyses the case of Procter and Gamble, which examines issues related to the strategic management, leadership, and human resource management, with a view of identifying its organisational challenges in the next five years.

Key Organisational Development Issues

Organisations and their management practices normally entail human capital and financial capital that are concomitant throughout the operations of a company (Cameroon & Quinn 2006). When transforming or making a significant effort towards an emerging change, key development issues that Procter and Gamble must always reflect are the relationship between human resources and finances. The common organisational changes in the corporate world involve organisational culture and structure (Coghlan & Brannick 2005).

In its cultural change and transformation, Procter and Gamble has a number of organisational issues that has affected its development. In the aspect of cultural change and transformation, Procter and Gamble has experienced a number of development issues. Foot and Hook (2002) note that the process of cultural change in an organisation involves altering the arrangement of existing formal and informal practices, espoused values, assumptions, and shared norms among stakeholders. Key development issues in Procter and Gamble entails human resource management, organisational culture, change of shared values, assumptions, and organisational norms.

Strategic Development

Strategic development is part of organisational culture that involves an inclusion of shared core values towards the survival and progress of operating businesses in an organisation (Greiner & Poulfelt 2005). An organisation, therefore, should espouse its core values, principles, and norms. According to Foot and Hook (2002), core values of an organisational culture are typically the philosophies that organisational members uphold, ideologies that guide organisational planning, routine operations, and programs.

The management of organisational culture becomes a problem and an impediment to organisational development when organisational management is unable to harmonize diverse core values (Hatch & Schultz 2004). Managers often have limited time and space for interaction with their employees and this hinders them from having a frequent appraisal on the performance of employees. Shared core values in organisation bond employees together and make them to understand the philosophies, aims, targets, and regulations of a company (O’Donovan 2006). Managers at Procter and Gamble seem to understand the importance of having utterly defined and espoused values.

The two relatives, William Procter and James Gambler, initiated Procter and Gamble with principles that become quite challenging for succeeding management to rejuvenate and improve the organisation (Hughes 2004). The initial strategy of the company involved hiring of inexperienced undergraduates as managers to help in creative thinking towards generation of innovative products in the organisation.

The strategy of hiring campus leavers and engaging them directly in decision-making process of production led to unintended setbacks. William and James mistakenly hired inexperienced workforce to handle sensitive operations in departments, including financial management, manufacturing planning, marketing, research, and sales.

According to Hughes (2004), the business approach and strategy of the two founders remained flawed because the management techniques allowed excess bureaucracy, rigid philosophies, and amorphous profit sharing strategies. Profit sharing, as a management strategy, aimed at improving the commitment of workers, increasing perceived independence, and enhancing the control of the flawed control process (Tellis, Prabhu, & Chandy 2009). Thus, the bureaucratic order increased the hierarchical structure that affected the operations of the organisation.

The intended approached of Durk Jager strategically focused on change. One of the most significant approaches of management that modern firms utilise is strategic planning because it significantly revitalises and transforms business corporations (Perin 2005). Strategies are plans or designed approaches that organisations use to achieve their stated aims or operations. Cameron and Quinn (2006) hold that an actively operating organisation has a culture that effectively correlates with the development strategies.

One of the most important organisational development issues in Procter and Gamble entails strategic development. Peterson (2004) asserts that strategic development is a blueprint, which depicts arrangement of development ambitions and aims that firms anticipate achieving. The case of Procter and Gamble involves central matters concerning policies, strategies, and principles that the company constantly struggles to develop and change. Several aspects pertaining to strategic development are core issues that appear in the case of Procter and Gamble (Hughes 2004). Cultural change in Procter and Gamble involved incessant changes in policies, values, purposes, and principles.

Critical issues that support strategic development that organisational culture considers important is strategic analysis of the internal environment and external business environment, where market and competition are major components (Schein 2009). Emerging issues in the case of Procter and Gamble depict a clear distinction between commodity business and innovative business. Baldwin (2006) argues that an important part of cultural change that would spur strategic development is changing towards the strategic development aspect.

After noticing that the initial production strategies that William Procter and James Gamble used were ruining market competition and reputation of the company, Durk Jager and George Lafley renovated means of production. Significant changes exhibited by the case of Procter and Gamble reflect strategic development, which plays a central role in transforming an organisation. George Lafley aimed to strategise the company towards shifting from the commodity business to an innovative business. An effective cultural change, according to Hassin (2010), is one that helps to rejuvenate an organisation towards improving its performance and efficiency.

From the initial production technique under the regimes of William Procter and James Gamble, Procter and Gamble survived through stagnated production of varied commodities, but with minimal innovation (Hughes 2004). The cultural change of the organisation should aim at building and sustaining a substantial reputation in the market through its enhanced production techniques that subsequently help in maintaining competitive advantage (Senior & Fleming 2006).

Products of modern organisations should be able to meet customers’ preferences, desires, economic abilities, and health demands. To manage external competition and gain competitive advantage in the markets, organisations need innovations, product quality management, superior product efficiency, and must remain sensitive to customer demands (Sorensen 2002).

The regime of William Procter and James Gamble focused on quantity production, but not on quality production; and hence, little innovation was present. During the regime of Durk Jager, the program of the organisation supported the development of information technology in 2005, which raised the innovation, but failed to manoeuvre because the management failed to understand strategic development as a rigorous process. Hence, a number of lapses led to Jager’s failure

The strategy of Durk Jager towards corporate change failed to consider a number of factors, which are important in integration of a substantial change that requires ample time for adjustment (Hughes 2004). From the perspective of analysts, the approach of Durk Jager towards cultural change was appropriate, but the five-year program was too ambitious to allow the corporate systems to adjust.

According to Balkundi and Harrison (2006), cultural change management is a rigorous process that requires managers to understand the requisites, which the organisation needs to adjust to conditions in the labour market, the dynamics of the surrounding environment, and customers’ preferences among other important factors. Effective change management must understand the prevailing and inevitable barriers towards the anticipated change (Thomas & Inkson 2003). A core barrier to the success of Durk Jager was improper knowledge about the aims and intentions of the program since time to adjust to the integrated operational strategies seemed limited. It was wrong for the change to be noticeable within a short time of one year.

Organisational Leadership

An important facet of cultural change in an organisation is organisational leadership that is normally responsible for decision-making processes about employee hiring, market strategies and production techniques (Thomas & Inkson 2003). A key aspect that denotes organisational readiness towards change is leadership, where the effectiveness of the topmost management matters in the change decision-making process. Change management requires a decision-making process that involves the leadership or management of an organisation.

Change of a corporate culture involves restructuring of the hierarchical or administrative order of an organisation. An important development issues that emerged in the case of Procter and Gamble is the realignment of the management strategies, structures, and policies (Hughes 2004). An earlier impediment to the success of Procter and Gamble is the management structure and the administrative techniques that William and James earlier initiated. The hiring of numerous managers with diverse hierarchies affected the innovation process and entertained the rigid ideologies of conformists.

Cultural change in management begins at the topmost management department where effectiveness streamlines the progress of development. The form of a leadership strategy determines the decision-making processes and the hierarchy of making decisions in an organisation (Anderson, Linda & Anderson 2001). During the regime of William and James, the strategy used was inbred leaders that spurred development of the organisation and make long-term serving agreements with the organisation.

Issues that protracted during the regime of William and James regarding leadership is that the management heavily focused on the development of its people, who had little intentions of imparting any meaningful change to the organisation (Hughes 2004). The family of managers in Procter and Gamble was growing as the acceptable norms of the company allowed. However, Procter and Gamble was unable to make effective decision during the crisis (Hughes 2004). The large number of managers and hierarchies affected the systematic process of decision-making because the decisions regarding urgent matters took longer time than the situations than necessary.

Management or leadership of an organisation is normally responsible for the designing of the administrative techniques and it is very important in the development, as well as in the management of corporate culture. A practical development issue that arose from the case of Procter and Gamble is the notion of management capabilities depending on professional expertise (Hughes 2004).

Although young, proactive, and innovative minds are central to the development of the skilled workforce for the modern organisation, professional expertise is indispensable (Hughes 2004). Professional expertise mainly associate with managers, who have long-term experience in their professional field and expertise in handling various management related issues. Since the leadership strategy that William and James adopted included the recruitment of the youth with limited professional expertise, the youth are not reliable they do not have ample experience (Hughes 2004). Hence, lack of experts constrains creative and innovative minds.

From the perspective of practical management, William and James had a leadership technique that was democratic in nature because the management team treated the employees as family members (Hughes 2004). Self-governance is the core principle in the management system, where many managers make autonomous decisions regarding certain issues in the organisation. The democratic nature of leadership under William and James sought to exercise employee motivation and empowerment, which is an effective way of managing people in the current world (Hughes 2004).

By allowing people to exercise their professional freedom, organisations are able to maximize the talents and capabilities of their workers. Although experts argue that decision-making process is effective when democracy is practicable, managers have the intrinsic urge to impart organisational change and tackle grave matters of leadership (Hughes 2004). William and James were able to integrate this form of leadership appropriately into their strategies towards setting policies that would deem important to the nature of leadership.

When changing a certain corporate culture, change of leadership systems is an important aspect that enlightens organisations during moments of crises. The three regimes of leadership in Procter and Gamble had dissimilar management techniques. Durk Jager aimed at changing the leadership from liberal system to autocratic system, where top-down or hierarchical leadership style was to change the style of organisational management (Hughes 2004). Durk Jager understood that an effective cultural change required management system restructuring.

To break the monotony of the habitual behaviours that derailed the management and affected the decision control system, Durk Jager dismantled the liberal leadership and replaced it with authoritarian leadership (Hughes 2004). Failure to understand the connection between change and leadership was the foremost failure of Durk Jager. Changing a corporate culture requires the incumbent and the incoming leadership to consider the perceptions of employees towards corporate change. Duke was unable to develop an effective climate for change that would spur a smooth transition without causing any tension.

Democratic and autocratic leaderships have different principles as members, who have become used to the cultural setup of any of the two leadership styles, feel uneasy when adapting to the transitions. Since transitions are complex, the two leadership techniques require quick substitution (Green 2004). The case of Procter and Gamble presents a unique leadership quandary, which begs a question as to what are the requisites for appropriate leadership to initiate a change during the corporate culture shift.

This is where an understanding of leadership and change management as affiliated aspects, which determine the final reception and employee perception towards the transition process. Authoritarian or dictatorial leadership has a domineering aspect where topmost executive influence subordinates and other employees in the low ranks to work according to designed corporate philosophies. Democratic leadership involves a leadership technique, where managers bestow powers and authority to almost every serving member in an organisation. It may also involve distribution of powers to autonomous groups of employees, who motivate the leadership process.

Notwithstanding the office structural equity, Durk Jager aimed at practicing the autocratic system, as efforts to strengthen and manipulate the top management were evident. William, James, and George were practicing democratic system of governance, as the aspect of employee autonomy was eminent (Hughes 2004). The case of Procter and Gamble seem to reveal that corporate cultural transitions of democratic leadership to autocratic leadership is more challenging than a cultural shift from autocratic to democratic leadership (Hughes 2004).

When Durk Jager takes up the leadership of Procter and Gamble and seeks to integrate the autocratic leadership system, the performance of the firm dwindles in a drastic fall, as the transitional leadership techniques seemed difficult to adopt and adapt (Hughes 2004). When George Lafley takes over the leadership of Procter and Gamble and restores the traditional democratic hierarchical system, the company employee adapted quickly and the performance of the organisation dramatically improved from the plummeting market sales to outstanding market and sales gains.

Change is never simple for most people in organisations, unless all of them consider it imperative for the wholly survival of an organisation. As human beings react to changes, cultural change in corporate world involves the aspect of reaction towards the intended change. A corporate change would largely depend on the reception abilities of the employees where an attitude towards change is an important factor.

On normal occasions, concerted efforts towards cultural change lead to a variety of employee reaction depending on the perceptions of individual employees about the intentions and the process of transitions. Although reactions towards cultural change come in an unpredictable manner, the case of Procter and Gamble seems to reveal the autocratic leadership that uses coercion to effect a change. As evident in the Procter and Gamble case, employees feel humiliated, devastated, disrespected, and undervalued when coercion motivates corporate change (Hughes 2004). Hence, it seems proper communication of the intended changes is reasonably important.

Human Resource Management Practices

Cultural change involves dismantling of the traditional corporate philosophies and restoring them with new ideologies that employees must accept, adopt, and practice to effect the intended change. Argenti, Howell, and Beck (2005) argue that successful cultural change in an organisation should entail optimization of human and financial resources. Human capital is important cultural change because it causes organisational change.

Human resource management is an issue that recurred throughout the corporate change management process exhibited by the Procter and Gamble management system. Key organisational development issues that protracts in the case of Procter and Gamble are the human resource issues, which revolves around hiring, training and development, duty delegation, employee motivation, employee retention, turnover control, retrenchment, and replacement of employees. The human resource management practices in Procter and Gamble differ considerably as the case reveals unique human resource practices among the regimes.

The regime of William and James believed in the recruitment, empowerment, and retention of young and talented workforce from a bud stage of management, where active cognitive reasoning spurs innovation (Hughes 2004). One of the most important HR practices that influences the resilience and maintenance of steady positive performance in modern corporations is employee retention. Pfister (2009) argues that employee retention enables organisations to maintain important employees with unique capabilities that positively attribute to organisational effectiveness.

A significant observable practice in the case of Procter and Gamble was the ability of top leaders to attract and retain key talents in the organisation (Hughes 2004). William and James tactfully managed to attract and retain young business managers, but failed to notice the importance of properly realigning the top executives. Although employee attraction and retention significantly helps to maintain resilience in the performance of firms due to acquired expertise in decision-making process, inappropriate human resource practices towards retention, like in the case of William and James, might result into the ineffectiveness of an organisation.

The strategy of acquiring new recruits and placing them in a learning program is an appropriate human resource practice, but maintaining labour turnover is another aspect that human resource managers and administrators must not ignore. William and James managed to attract, employ, and retain young and innovative employees to its management system, but failed to control the labour turnover that consequently affected the performance of the organisation (Hughes 2004). High labour turnover increases expenditures in terms of employee compensation and this directly increases the wage bill of the organisation.

Employee motivation is another significant human resource practice that involves providing incentives or intrinsic motivation to the workforce (Hughes 2004). A motivated workforce struggles to succeed in meeting personal goals and the demands of the organisation. The three regimes starting with the firm developers, considered employee empowerment and motivation, but they had different human resource strategies. In the organisation 2005 program, the approach of Durk Jager towards employee retention and control of labour turnover was exemplary.

The cultural change demanded removal and replacement of the topmost officials to implement the intended cultural change effectively (Reichers, Wanous & Austin 2001). Durk Jager effectively applied retirement, reduced hiring, job retraining, relocations, and voluntary separations as strategies to reduce labour turnover that initially ruined the expenditure of the organisation (Hughes 2004).

Combined with the integration of information technology as part of innovation, Jager minimized labour turnover that contributed to recurrent company debts due to the increased compensation expenditures. In reducing labour turnover, George Lafley introduced a unique system of hiring and retaining key talents in Procter and Gamble. Lafley introduced a system of attracting old age employees to gain competent workforce with little wage expenses (Hughes 2004).

Recruitment, retention, and management of old employees with high experience and expertise in making informed decisions for the organisation significantly reduced compensation of employees and increased productivity of the firm. Lafley and Jager fought and dismantled bureaucracy that contributed to high turnover and low productivity, but managed maintain few employees.

Organisational Challenges that P & G is Likely to Face in the Next Five Years

A problem that has clearly manifested itself in Procter and Gamble is the ability of management to devise an organisational culture that governs proper human resources and financial management systems. The organisation might continue to suffer from poor innovation as old policies that destroyed the organisation have revamped through the management of Lafley (Hughes 2004). The bureaucratic problem of managing the organisation with a multitude of managers and unnecessary hierarchies seems to have deep roots because members of the organisation have developed a tendency towards the application of policies (Hughes 2004).

The future progress and survival of Procter and Gamble lies in the manner in which Lafley would control decision-making process, production strategies, and human and financial resources in the organisation. Although bureaucratic strategies for managing the organisation are the root cause of derailing decision-making process, Jager and Lafley might not have succeeded in changing the organisation in terms of its innovative techniques, human resource planning, and market control strategies.

It is important to note that main criticisms against the forms of change are still incessant despite reshuffling of the management structure and changing the corporate culture significantly (Hughes 2004). Worse to the change approach is that most criticisms emanate from the consumers in the market and thus they have a considerable impact on the marketing strategies meant to improve the future of the organisation.

Although the incumbent chief executive officer Lafley managed to reduce the bureaucratic system that was affecting change management and decision-making processes, Hughes (2004) states that important aspects of innovation that earlier affected the organisation remained unresolved. Improving the adoption of information and communication and minimizing the bureaucratic arrangement may not be sufficient as the Lafley reintroduced the previous employee recruitment system. The newly integrated information technology systems may suffer from insufficient expertise as Lafley failed to ensure a balanced recruitment program, which allow the inclusion of people with different age brackets (Hughes 2004). Modern technology requires young innovators, who can use their suaveness for betterment of the organisation.

Lafley must have brought a significant impact by ensuring that the employees are properly aware of the intentions of the intended cultural change so that an impending strategy would find a smooth transition (Hughes 2004). The future of Procter and Gamble in the next five years rests upon the ability of Lafley to maintain a focused workforce with a competitive top management team.

Schwartz (2003) holds that the future of the organisation is brilliant if the organisation maintains the prevailing competition in the top management, labour turnover brought by high bureaucracy and the ability to weigh options of integrating technology to boost innovation in the organisation. An important factor that may enhance the stability of Procter and Gamble in the next five years is the new Lafley strategy of internationalization of goods that the organisation offers (Hughes 2004). With a competent team of top management, moved by the existing culture that has begun fostering innovation as part of competitive advantage, the organisation may perform well and sustain its existence in the market.

Recommendation

Analysts have argued that although Lafley managed to impart a considerable change in Procter and Gamble, the success may last for a limited span of time. From the analysis, one would notice that Lafley changed few things from the initial management of the business inventors. The organisation may face the downbeat again if issues concerning innovation, recruitment, and retention strategies against bureaucracy receive minute attention.

To help improve the situation, Lafley must understand that the capacity and expertise of the top management team that comprises an aging workforce; and hence, mixing the workforce with young innovators is appropriate. According to Green (2004), the ages between 40 and 50 are considerably high for effective innovation using the modern information technology systems, which the organisation has already integrated. The top management team should reduce their number to avoid and eliminate bureaucracy, which may affect the decision-making process, the human resource practices, the market strategies, and the intended innovation techniques.

Conclusion

Conclusively, change in modern organisations is irresistible since market demands and corporate operations are in constant change. Procter and Gamble has shifted from its original cultural practices, but certain issues may protract in future if the organisation fails to clean up the old ideologies of conformists, who are the initial founders. Key issues that need urgent redress are innovation, human resource practices, and market strategies. The company should be an innovative business, but not a commodity business, as Lafley suggested.

The company requires changing its employee hiring and retention techniques, and change from divisional market targeting to global market anticipation. Although Lafley must have brought a significant cultural change, restoring aged workforce in the top management with little abilities to control technology effectively. Procter and Gamble must consider training young talents to replace the aging workforce that may not be productive in the next ten years. Pulling more information technological resources to enhance innovation may effectively help to strengthen innovative capabilities in near future.

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