Cultural Change at P&G

7/27/2019 Cultural Change at P&G

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Managing Cultural Change at P&G

Summary of the Case

Introduction

P&G, established in 1837, by William Procter and James Gamble

Was famed for its people-centric policies.

First company to introduce:

A shorter workweek

Profit-sharing plan

Employee stock options P&G had a strong, tradition-bound and conservative corporate culture – Change resistant

Culture was deeply rooted

Mid 1990: Faced stagnant revenues and profitability.

Jul y 1999 – Organization 2005 – Durk Jager

To accelerate growth, P&G's President and CEO at the time, Durk Jager (Jager) launched

the Organization 2005 program

Six-year long organizational restructuring exercise and radical revamping of P&G's

organizational culture, reduction in hierarchies, and retrenchment of employees

Aimed to increase its global revenues from $38 billion in 1999 to $70 billion by 2005

Well-conceived, it was not executed properly

Jager tried to change the culture too drastically in a very short time.

Resulted in a rise in costs and a decline in the company's profitability.

Apri l 2000 : 18% decline in its net profit for the January-March 2000 quarter.

June 2000 :

Alan George Lafley (Lafley) took over as the new President and CEO of P&G.

Reverted back to the old culture and did not make attempts to change it radically.

Financial performance improved significantly and share price shot up by 58% to $92 by

July 2003, as against a fall of 32% in S&P's 500 stock index.



HR Practises and Culture

The original culture of P&G was a clan culture where P&G’s management treated its

employee’s like family members.

The company's core values i.e. leadership, integrity, ownership, passion for winning, and

trust and with their purpose and principles and vision to strive for people and

organizational excellence and business productivity were focused on the development of

its people.

Compensation and Benefi ts:

P&G in accordance with their vision to value their employees by providing benefits and

compensation, granted Saturday afternoons off with pay, started a profit-sharing plan, and

offered sickness, disability, and life insurance plans.

Even during the Great depression, P&G's soap plants continued to function as P&G

encouraged lifetime employment by offering stock options and other benefits to those

who stayed with the company.

P&G was also one of the first companies to grant employees forty-eight weeks of

employment in a year.

Retirement benefits were provided via the Procter and Gamble Profit Sharing Trust –

defined contribution profit sharing plan and postretirement health care benefits.

P&G cul tural legacy:

P&G conducted almost all its recruitments from campuses. Resumes of promising

candidates were scanned, including those students who had not signed up for interviews

for functions, such as finance, manufacturing, marketing, research and sales.

Therefore, strong relationships were developed with college placement offices and

faculty.

Conducted written tests known as the M Test) that measured the candidate's interpretative

and reasoning skills to evaluate the applicants' aptitude for leadership and problem

solving.

Studies showed a strong positive correlation between high scores on the M Test and

success on the job.



Interviewing process was purposeful and behavior-based, past experience and

accomplishments for leadership, problem solving capabilities, initiative and ability to

work with others.

Employee Policies, Practises, and Train ing and Development (Nur tur ing Cul tur e):

Policies for new recruits emphasized on early responsibility impartment and charted out a

rapid career path to build long-term careers with the company.

Training was imparted through a Work and Development Planning System (W&DP),

which was reviewed annually and updated regularly, where superiors were encouraged to

train and develop their subordinates and supplement the programme with informal,

ongoing coaching.

Components used for training were the previous year's plan versus the results; areas for

further growth and development; near-term and long-term career interests; and a

development and training plan for the year ahead.

P&G College: Senior Managers shared experiences and insights with subordinates and

new recruits spent several days here during their first year of employment.

Diversity

Policies focused on a diverse culture, practised through the employment of non-

management graduates.

Employees were given opportunities to pursue careers outside geographical limits, which

helped spread P&G culture worldwide.

Code of Conduct

Employees were given a 24-page manual, which prescribed a code of conduct to

employees stating with strong emphasis on “doing the right thing” and avoiding risks

Good-housekeeping was emphasized upon.

Ethical behaviour was expected from all employees.

Dress Code, Publ ic Relations, and Non-disclosure

Strict formal dress code was expected.

Staff was discouraged from making public announcements on behalf of the company.



Technical people could not join trade organizations

No revelation of identity when travelling by way of ID tags

Non-disclosure documents had to be signed by Senior Management

Culture was persistent with unquestioning adherence to the past.

Risk averse and tradition bound which was stifling innovation and obstructing

commercialization of new ideas

High turnover rate with middle level employees leaving to take up senior positions in

competing firms

Cultural Changes under Jager

In 1999, P&G‟s CEO Durk Jager had initiated a major reorganization and restructuring

process termed as “Organization 2005”

The program aimed at radically changing P&Gs methodical, bureaucratic, conservative

and slow moving culture to a fast moving, IT savvy one. He attempted to create a more

adaptable organization.

Intended to accelerate innovation and create an informal environment fostering

knowledge sharing.

The mission of “Organization 2005” was to take P&G’s global turnover from $38 billion

to70 billion

The objective was to raise profitability by changing the work culture

The change drivers identified were the attributes of Stretch, Innovation, Speed(SIS)

Under this programme the following drastic and rapid changes were implemented:

The working culture was revamped to focus on a new stretch, innovation, and speed

policy, which focused on acceleration of growth and faster go-to-market.

The performance appraisal system was moved to a stretch goal plan for appraisal to see

how far employees could stretch themselves. Many a times this led to unrealistic and

unachievable goals which could lead to employee frustration and turnover.

Geographical business units (GBUs) were replaced with global business units based on

product lines, which increased the responsibilities of the GBU manager of product

development and customer service.

Structural changes made included:

o Global business service centre



o Eight market development organization based on region

o Four global business units based on product lines

P&G discarded old dress code, introduced measures to play down hierarchy,

indiscrimination among senior and junior employees.

P&G decentralized its 3,600 strong IT department and selected 54 employees to act as

change agents across 7 GBUs and facilitating teams to work together.

The intent was to create a multidiscipline organization and information dispersion.

New technology for managers and more employee empowerment by increased

collaboration and generation and sharing of ideas via intranet and videoconferencing.

Changed its culture into a more, aggressive, outspoken and risk taking culture.

Reduced product development time by half by decentralizing the decision-making

process, reducing formalization and employee empowerment.

Attempted to minimize employee turnover by open job postings to enable employees to

find more suitable job opportunities within the organization. This was an attempt to retain

talent.

However, the downside was the program involved significant job cuts with retrenchment

of over 15,000 employees.

Jager’s plan was aggressive and confrontational and tried to implement too many changes

in a short period of time.

Therefore the Cultural changes affected by Jager were:

Alignment of the company on common goals with trust as the foundation

Risk taking and team collaboration stemming from coaching and teaching

Leaders are challenged

Organization driven by innovation, stretch, and speed towards breakthrough goals.

Cultural Changes under Lafley

Lafley rebuilt the top management team and made efforts to improve P&G's operations

and profitability.

Transferred 15 senior most officers and assigned senior positions and higher roles to

women.

Average age of P&G's Global Leadership Council came down to 49, compared to 54 in

1999



Promote competition among its top management team to motivate people who are

performance-oriented.

Avoided making forecasts of the future

Communicated to employees why and how he wanted P&G to change

Tied to change employees mentality of developing products in-house.

Softer approach than Jager

Felt that “stretch forecasting” led to over optimistic expectations leading to increase in

cost

Hired an outside consultant “Kinetic Workplace” to help com pany train employees to

cange their work habits

Introduced flexible work programs like work from out and book a table in the office once

a week. This was aimed to make the employees feel comfortable and ensure job security.

However, due to increasing competitive business environment, Lafley felt that he would

have to ask employees to change faster than their understanding, capability, and

commitment.

Case Analysis

Procter & Gamble is one of the world’s largest and most innovative international companies,

operating in the extremely competitive fast-moving consumer goods market. The corporate

culture of P&G is widely accepted as unique! Its emphasis on ethical guidelines and

compliance with P&G laws and business conduct policies, are some of the culture concepts

transmitting to new employees through special recruitment procedures and socialization

practices that combine intense internal competition and impartial promotion.

P&G as a company was, undoubtedly, committed to the company employees, had extremely

strong core values, a traditional, distinctive, and ethical method of doing business, and a clear

set of internal, informal, widely accepted rules regarding “do’s and don’ts” for organizational

behavior. These characteristics contribute to the foundation of a “strong culture” that endures

over time and is consciously believed by all the organizational members. The cultural systemis founded on a set of “shared” values, beliefs and principles, very well perceived by all the



members of the organization. Furthermore, culture gives birth to special designed recruitment

procedures, and socialization practices that combine intense internal competition and

impartial promotion, so as to transfer this “shared” set of values, beliefs and principles to new

employees

However, P&G’s culture was also rigid, non-flexible with unquestioning adherence to past

precedents, deeply rooted. The culture was averse to risk and tradition bound, not moving

along with the times thereby stifling innovating and quick commercialization due to the

methodical, conservative, and insular outlook. The culture at P&G was bureaucratic as well

as a clan culture.

Changing the Culture

As described, P&’s culture was rigid and unbending. Jager tried to change the culture rapidly

and drastically leading to a failure and decrease in profit. He did not take into consultation the

people who are the core of the organization. He tried to change values and principles of those

who were already deeply rooted in the culture.

Lafley on the other hand, spoke to the employees and enrolled them in change. He did not tell

them to change but, in his words, dragged them where he wanted to go. Since the culture was

deeply rooted he preserved the original culture. This way he increased organizational

effectiveness and profitability

Because stories help define an organization’s culture, it’s easy to use them to change that

culture. Simply get people to tell stories that amplify the best aspects of the organization.

More important, tell positive stories often to drown out the sound of competing stories.

Typically, organizations try to exemplify their stories by using a common vision and mission

statement.

Vision provides the aspirations.

Mission provides the direction.

Changing the organization’s culture does depend on having a common framework. The

framework can be used in various ways to get people to share stories about how people across

the organization deliver exceptional performance. By talking to people, positive change can

be brought about.



Pitfalls of Organization 2005

Jager imposed change rapidly without advance assessment of HR issues, questions, concerns,

and ideas of the stakeholders and employees, who are the most involved in the change

outcomes. He did not anticipate the distraction and distress of the employees due to changes

brought about. This carried a high potential cost. Even if change efforts are well planned and

executed, those involved and affected will ask questions and analyze purpose and

implications. This is especially true if they haven't been involved in the planning.

Acknowledging the level and nature of concerns and questions and building a degree of

involvement can also provide insight and information about how best to manage the process.

The pitfalls encountered by Jager’s Program Organization 2005:

1. Ineffective and unachievable goal setting: The business goals set and stretching

employees potential led to employee frustration which affected employee performance.

2. Unrecognized costs: The costs of implementing and supporting change were not planned

for or adequately acknowledged. Resources need to be allocated, workloads adjusted, and

responsibilities reassigned.

3. Limited and unidirectional communication: Jager did not enroll employees in change and

substituted one bureaucratic organization for the other. Employees had limited

opportunities to ask questions.



Change using inqui ry, engagement, review and design (Positi ve Change Model)

The best way to get people to share good stories is through a inquiry and engagement. Based

on this a better future can be envisioned and designed.

Positive Change Model Positive Change Imparted by Lafley

This model involves 5 phases:

1. Initiate inquiry : Determining the subject of change and member involvement in

identifying organizational issue to be changed.

In case of P&G: Lafley spoke to employees which Jager neglected to do. Communication

would force to think differently and invite them to broaden their perspectives regarding

organizational values.

Initiate inquiry

Inquire into the

best practises

Discover Themes

Envision aPreferred Future

Design and

Deliver ways to

create a Better

Initiate inquiry: Lafley spent time

communicating with the employees

Inquire into the best practises:

Lafley did not change the core valuesand traditions

Discover Themes: He proposed

how people can work and

innovation from outside

Envision a Preferred Future:Better Profitability. Happier and

comfortable employees

Design and Deliver ways to

create a Better Future: Proposed

changes in structure and culture



2. I nquir y into best practices : Gathering information as to what is best in the organization.

Since the topic in P&G was innovation, both Jager and Lafley collected ideas from the

employees about their new ideas that can be developed and implemented. The difference

between them was, as Lafley identified, innovation was happening within the organization on

the same products i.e product quality and feature enhancement not new product development.

Therefore, he was right in suggesting that the members look outside for products.

3. Discover themes: Examine the stories of people to identify a set of themes representing the

common dimensions of people’s experiences. At P&G, the innovations and new structural

setups by Organization 2005 program may have given stories and themes about how

managers gave people the freedom to explore new ideas and post them on the intranet, how

the stretch goals had both pros and cons, and how exposure to customers all over the world

sparked creative thinking due to transfers and geographic dispersions. The themes represent

the basis from what is to what could be.

4. Envision a preferr ed fu ture: The themes are identified, the status quo is challenged and a

compelling future is described. Lafley envisioned better profits and happier employees and

therefore more productivity.

5. Design and Deli ver: Ways to create a the desired future. Lafley introduced flexible work programs, promoted competition among the managers, tried to change innovative mentality

of employees, and reorganized structure to disperse the many hierarchies and communication

gaps.

Interventions conducted at P&G to manage change

i. Restructural Reengineering

Jager and Lafley aimed at structural redesigning and reengineering, which involved

fundamental rethinking and, according to Jager, radical redesign of business processes to

achieve dramatic improvements in performance. Reengineerign required an almost

revolutionary change, such as the transfers brought about by Lafley to change how P&G

designed its structure and work. This identified and questioned the underlying assumptions of

how employees perform and resulted in radical changes in thinking and work methods. This

also resulted in a shift from specialized jobs, tasks, and structures to intergrated processes. As

pointed out by Jager, in radically changing businesses, reengineering makes use of newinformation technology, which be change agents and help organizations break out of their



traditional ways of thinking and embrace new ways of producing and delivering products.

Reengineering is also transformation of organizational structures and work designs such as

formation of GBUs.

ii. Employee Involvement Intervention

Both Lafley and Jager seeked to achieve employee involvement both in different ways.

EI intervention can improve the capabilities of the employees, increase motivate leading

to organizational effectiveness. By doing this communication is enhanced.

iii. Culture Change Interventions

P&G required a change in strategy which Jager, felt could be accomplished by change in

corporate culture, values, and work designs within the organization. Lafley on the other hand

felt cange should be through preserving the original culture, innovation, development of newstrategies, and determining the basic assumptions shared by organization employees. This

influences how members perceive, think, and behave at the work place. This also affects how

effectively firms can implement new changes which is evident from the outcomes of Jager’s

and Lafley’s efforts. Jager did not really diagnose the organization’s existing culture and

assess the cultural risks and HR issues of making changes.

Employee

Involvement

Intervention

Improved

Communication and

Coordination

Improved Motivation

Improved Capabilities

Improved

Productivity and

Organizational

Growth



Lafley used a softer approach be preserving original culture and communicating the need for

change. His was a symbolic leadership with clear vision, commitment, with sensitivity to

employees deviations.



Question 1: Established in 1837, P&G was the leading FMCG company with more than

100000 employees spread across several countries in the world. Explain

briefly the HR’s practises and corporate culture. What, in your opinion are

the positive and negative aspects of P&G’s culture?

Answer: HR practises and culture since P&G’s inception

P&G as a company was, undoubtedly, committed to the company employees, had extremely

strong core values, a traditional, distinctive, and ethical method of doing business, and a clear

set of internal, informal, widely accepted rules regarding “do’s and don’ts” for organizational

behavior. These characteristics contribute to the foundation of a “strong culture” that endures

over time and is consciously believed by all the organizational members

However, P&G’s culture was also rigid, non-flexible with unquestioning adherence to past

precedents, deeply rooted. The culture was averse to risk and tradition bound, not moving

along with the times thereby stifling innovating and quick commercialization due to the

methodical, conservative, and insular outlook. The culture at P&G was a bureaucratic as well

as a clan culture.

Clan Culture :

The original culture of P&G was a clan culture where P&G’s management treated its

employee’s like family members.

The company's core values i.e. leadership, integrity, ownership, passion for winning, and

trust and with their purpose and principles and vision to strive for people and

organizational excellence and business productivity were focused on the development of

its people.

Compensation and Benefi ts:

P&G in accordance with their vision to value their employees by providing benefits and

compensation, granted Saturday afternoons off with pay, started a profit-sharing plan, and

offered sickness, disability, and life insurance plans.

Even during the Great depression, P&G's soap plants continued to function as P&G

encouraged lifetime employment by offering stock options and other benefits to those

who stayed with the company.



P&G was also one of the first companies to grant employees forty-eight weeks of

employment in a year.

Retirement benefits were provided via the Procter and Gamble Profit Sharing Trust –

defined contribution profit sharing plan and postretirement health care benefits.

P&G cul tural legacy:

P&G conducted almost all its recruitments from campuses. Resumes of promising

candidates were scanned, including those students who had not signed up for interviews

for functions, such as finance, manufacturing, marketing, research and sales.

Therefore, strong relationships were developed with college placement offices and

faculty.

Conducted written tests known as the M Test) that measured the candidate's interpretative

and reasoning skills to evaluate the applicants' aptitude for leadership and problem

solving.

Studies showed a strong positive correlation between high scores on the M Test and

success on the job.

Interviewing process was purposeful and behavior-based, past experience and

accomplishments for leadership, problem solving capabilities, initiative and ability to

work with others.

Employee Policies, Practises, and Train ing and Development (Nurtur ing Culture):

Policies for new recruits emphasized on early responsibility impartment and charted out a

rapid career path to build long-term careers with the company.

Training was imparted through a Work and Development Planning System (W&DP),

which was reviewed annually and updated regularly, where superiors were encouraged totrain and develop their subordinates and supplement the programme with informal,

ongoing coaching.

Components used for training were the previous year's plan versus the results; areas for

further growth and development; near-term and long-term career interests; and a

development and training plan for the year ahead.

P&G College: Senior Managers shared experiences and insights with subordinates and

new recruits spent several days here during their first year of employment.



Diversity

Policies focused on a diverse culture, practised through the employment of non-

management graduates.

Employees were given opportunities to pursue careers outside geographical limits, which

helped spread P&G culture worldwide.

Code of Conduct (Bureaucratic Cul ture)

Employees were given a 24-page manual, which prescribed a code of conduct to

employees stating with strong emphasis on “doing the right thing” and avoiding risks

Good-housekeeping was emphasized upon.

Ethical behaviour was expected from all employees.

Dress Code, Publ ic Relations, and Non-disclosure

Strict formal dress code was expected.

Staff was discouraged from making public announcements on behalf of the company.

Technical people could not join trade organizations

No revelation of identity when travelling by way of ID tags

Non-disclosure documents had to be signed by Senior Management.

Posi tive and Negative aspects of P&G’s culture

Positi ve Aspects

Employees were treated as family and priority was given to the development of

employees.

Employees were given compensation and benefits which took care of the daily and

retirement requirements of the employees. This demonstrated a caring culture

Fresh talent was given a chance to prove their mettle, with help in career growth and

training opportunities. This also provides an inflow of fresh blood and ideas.

Training programme set up (W&DP) helped in employee development and linked

employee’s training to the objectives, goals, strategies, and measures of the department,

which is linked to that of the region and finally to the organization.

HR policies focused on diversity of culture.



Laid emphasis on doing the right thing.

Non-disclosure agreements signed by managers prevented leakage of information and

innovative ideas.

Negative Aspects

Lifetime employments schemes, such as profit sharing may led to complacency and

decreased commitment and innovation.

Fresh talent only was hired from campus recruitment and there is no mention of hiring of

experienced individuals from competitor’s through head hunting or external recruitment.

There would not have been experienced individual to lead the company in a different

direction or change the direction of the company.

During campus recruitment, the resumes of those individuals who had not signed up for

interviews were also scanned. There is a possibility, if offered a job, these individuals

would take up the job while simultaneously searching for new jobs. This would lead to

employee turnover and decrease in employee loyalty.

The culture was too stringent and bureaucratic, which is seen in imposing a strict dress

code, no freedom of speech, curbing their rights to join trade organizations, and

prohibition on wearing tags to disclose identity.

The company’s culture was too deeply rooted and resistant to change i.e. tradition bound.

The signing of non-disclosure demonstrated a risk averse culture and bureaucracy was

stifling innovation.

Due to slow progression and resistant to change, there was a high turnover rate which

impacted the financial position of the company and cause stagnating revenues.

The leadership were veterans immersed in the old culture and set in their ways.

Question 2: According to Jager, “Organization 2005 marks the most dramatic change in

P&G’s structure, work processes, and culture in the company’s history.” Explain how

Jager attempted to change P&G’s culture radically when he launched the program.

Answer:

In 1999, P&G‟s CEO Durk Jager had initiated a major reorganization and restructuring process termed as “Organization 2005”



The program aimed at radically changing P&Gs methodical, bureaucratic, conservative

and slow moving culture to a fast moving, IT savvy one. He attempted to create a more

adaptable organization.

Intended to accelerate innovation and create an informal environment fosteringknowledge sharing.

The mission of “Organization 2005” was to take P&G’s global turnover from $38 billion

to70 billion

The objective was to raise profitability by changing the work culture

The change drivers identified were the attributes of Stretch, Innovation, Speed(SIS)

Under this programme the following drastic and rapid changes were implemented:

The working culture was revamped to focus on a new stretch, innovation, and speed

policy, which focused on acceleration of growth and faster go-to-market.

The performance appraisal system was moved to a stretch goal plan for appraisal to see

how far employees could stretch themselves. Many a times this led to unrealistic and

unachievable goals which could lead to employee frustration and turnover.

Geographical business units (GBUs) were replaced with global business units based on

product lines, which increased the responsibilities of the GBU manager of product

development and customer service.

Structural changes made included:

o Global business service centre

o Eight market development organization based on region

o Four global business units based on product lines

P&G discarded old dress code, introduced measures to play down hierarchy,

indiscrimination among senior and junior employees.

P&G decentralized its 3,600 strong IT department and selected 54 employees to act as

change agents across 7 GBUs and facilitating teams to work together.

The intent was to create a multidiscipline organization and information dispersion.

New technology for managers and more employee empowerment by increased

collaboration and generation and sharing of ideas via intranet and videoconferencing.

Changed its culture into a more, aggressive, outspoken and risk taking culture.

Reduced product development time by half by decentralizing the decision-making

process, reducing formalization and employee empowerment.



Attempted to minimize employee turnover by open job postings to enable employees to

find more suitable job opportunities within the organization. This was an attempt to retain

talent.

However, the downside was the program involved significant job cuts with retrenchmentof over 15,000 employees.

Jager’s plan was aggressive and confrontational and tried to implement too many changes

in a short period of time.

Therefore the Cultural changes affected by Jager were:

Alignment of the company on common goals with trust as the foundation

Risk taking and team collaboration stemming from coaching and teaching

Leaders are challenged

Organization driven by innovation, stretch, and speed towards breakthrough goals.

Question 3: Lafley was able to solve the problem faced by P&G under Jager’s regime.

Compare and contrast the measures taken by both CEOs to manage cultural change at

P&G. Whose efforts do you think is “fundamentally correct” for P&G? Take a stand

and justify it.

Answer:

The major difference between Jager’s and Lafley’s efforts to manage cultural change was

their way of functioning.

Jager’s method of functioning Lafley’s method of functioning

Jager, in his efforts to restructure, substituted on

matric organization for another matrix and

complex organization.

Changes in Management Structure: Women

empowerment was not seen. Average age of

seniors was 54, with senior management already

immersed in the original culture.

There was no competition among top

management.

Jager created a bureaucratic culture by creation of

• Soon after becoming CEO, Lafley rebuilt the top

management team and made efforts to improve

P&G's operations and profitability by transfers

• Changes in the management structure: He assigned

senior positions and higher roles to women.

Average age came down to 49.

• Lafley made efforts to promote competition among

its top management team, which lead to innovation

• Lafley attempted to make the company more



GBUs.

Jager did increase communication between

employees but did not spend time addressing the

needs of the employees. Jager’s approach to cultural change was harsh and

did not give employee’s time to adjust fr om the

previous “strong culture” at P&G

Jager adopted the in-house approach of

innovation through IT deployment and

employee’s ideas.

Jager tried to cange the core culture of employees

Jager’s attempts to change lead to huge cost

implications for the company

Jager tried to implement change fast with rapid

restructuring and no external third party

involvement

Jager tried to change to fast to quickly

flexible and focused (Adaptable culture)

• Spent time with employees and increased

communication

• Lafley tried to change the culture through a soft

approach and communication

• Lafley tried to change the employee’s mentality

from in-house innovation to out-of-the box thinking

through products from other organizations

• Lafley tried to preserve the core culture.

• Lafley tried to minimise cost implications and

retrenchment through voluntary separations and

alternate opportunities

• He hired an external third party to aid in change

from a different perspective

• Lafley tried to maintain cultural equilibrium

Even though Lafley claimed that Jager’s approach was fundamentally correct, the approach

was harsh and rapid without giving employees time to adjust. Jager tried to change the

entrenched core values of P&G while Lafley maintained the core values and pulled people

where he wanted to go. He did not ask people to make changes but enrolled them in the

change process by convincing them of the applications and the benefits of the program.

Therefore, Lafley’s approach was fundamentally correct.



Question 4: Analysts had expressed doubts whether the measures taken by Lafley

would sustain P&G’s growth in the long term. What measures must Lafley take to

ensure the cultural equilibrium at P&G as well as improve the company’s growth in the

future?

Answer:

In order to maintain equilibrium between authority (bureaucratic culture) and

responsibility (adaptable culture), Lafley should find a balance between rewarding

employees and penalizing in case of unachieved targets.

Lafley should also maintain an equilibrium between individual interest i.e. company

employee empowerment and promotions and the organization’s interest reconciliation of individual interest with that of the organization interest. This can be done through

equitable remuneration of personnel.

Lafley should also balance the organization's need for personnel and its personnel

resources through hiring and firing of personnel and assigning tasks to people He should

also encourage a learning and innovative culture while maintaining traditional values.

Lafley will have to explain to the executive team and the company that the path they’ve

been on can be productive if they accelerate innovation and decentralize decision making.

He should scrutinize the entire portfolio and product/country mix to identify the most and

least profitable and promising for growth, and then to make any needed people changes or

adjust investments, such as marketing or product extensions. That’s immediate, along

with any financial quick fixes.

He should also stress on accountability. Maybe some of the improvement plan underway

was happening too slowly because one area or unit or part of the world dragged their feet

and made changes too slowly.

If Lafley accelerates progress on the operational and financial improvements underway,

and people see success as reflected in profitability and stock price, then he can look for

the creative ideas for innovation, large and small.

Also, he should also stress on global brands rather than regional brands by creating

strong brand equities, robust strategies to combat competition and innovation in products



A strategic challenge is not only getting the product and category mix right, but also

attracting talent while also integrating people across the portfolio as “one enterprise” that

can find synergies and leverage learning, resources, and talent mobility.

Documents

Cultural Change at P&G