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Procter and Gamble Organization 2005 A

Solution Id Length Case Author Case Publisher
2635 1455 Words (6 Pages) Mikolaj Jan Piskorski, Alessandro L. Spadini Harvard Business School : 707519
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The case revolves around a multi-national company – P&G’s major restructuring program. The company has an established global sales base. The company operates with different organizational structures in the US and Western Europe. It followed a product based system in the US and a matrix system in the Europe. However, after some time, the global matrix cube system was introduced across the world in P&G. This had its own issues and hence, under the leadership of CEO Jager, a new structure namely Organisation 2005 was implemented to overcome all the issues. Organization 2005 could not perform as per the expectations and P&G’s financial position had declined considerably in a short span of time. Meanwhile, the CEO Jager had also resigned and the company was left with no true leader until Lafley was appointed as the new CEO. He was faced with a primary issue to continue with the new structure or just dismantle it to save the company from further deterioration.

Following questions are answered in this case study solution:

  1. Why did the US organizational structure shift from product grouping in the 1950s to a matrix in the 1980s?

  2. (a) What are the key distinguishing features of the Organization 2005? What are the GBUs, the MDOs, and the GBS?

    (b) How is the interaction between the GBUs, the MDOs, and the GBS regulated? Can Organization 2005 be considered as a network organization? Explain your answer.

    (c) Should Lafley make a strong commitment to keeping Organization 2005 or should he plan to dismantle the structure? Why?

Case Study Questions Answers

1. Why did the US organizational structure shift from product grouping in the 1950s to a matrix in the 1980s?

In the US market, the company had been following a product division management organizational structure owing to a homogenous market with little need for differentiation. Two important dimensions in this structure involved functions and brands. The company then in 1987, transitioned into a matrix structure, and brands were now treated as components of specific category portfolios by the general managers. This decision was taken primarily to overcome two issues. Firstly, it was implemented to eradicate the competition between the brands. In the earlier structure, brand managers were expected to compete with their counter-parts in the same division. This had a negative impact on the interdepartmental functions and relations as the brands had shared access to talent, R&D, etc. This competition could lead to internal rifts between brand managers and promote a individualistic culture as opposed to collectivist culture that can affect the achievement of overall sales objectives of P&G. Secondly, certain products required differentiation and specialization in their functional activities as the market dynamic was not purely homogeneous and the company had to achieve their goal of high sales growth. That could only be done by bringing some change to the standardized product to fulfill local needs and wants of the consumers. To cater for these, a matrix system was adopted. In this system, each category has its own manufacturing, sales, and finance departments with a direct reporting structure as well which helped to retain functional strengths of the structure while incorporating a new system.

2. (a) What are the key distinguishing features of the Organization 2005? What are the GBUs, the MDOs, and the GBS?

The key distinguishing features of the organization 2005 are as follows:

  • A brand new organizational structure aiming for an interdependent organization was put in place by eradicating the previously used matrix system

  • Cost savings of $900 million after tax by laying off approximately 15000 employees

  • Elimination of six management layers resulting in just 7 layers now

  • Highly centralized system with emphasis on standardized and formal processes to achieve uniformity 

  • High delegation of tasks to middle level individuals to save on time and cost

  • Induction of three distinct organizations including Global Business Unit, Market Development Organization, and Global Business Services

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