Leadership of Procter & Gamble
Introduction Procter & Gamble (P&G) is the company founded in 1837 by James Gamble and William Procter who were brother-in-laws. It is focusing on how to provide branded products to their customers by putting many segments of the industry in the centre of their interest or activities. At first, the company began its activities by selling soap and candles. In 1850 the candle sales decreased, after the Edison’s light bulb was invented, thus, they had to stop producing candles. At the same time, U.
S Government started ordering the loads of soap for Union’s soldiers during the Civil War, thus, improving the company’s position. Of course, those soldiers continued buying the products of P after the War. This was one of the reasons how this company build brand loyalty, and has been distinguished by its extensive leadership development for many years. The company’s activities were concentrated on two main elements: exploring more productive and less time-consuming ways of making soap in order to increase the production demands. They soon had more ideas not only on the soap development, but also on the products for hair, dishwashers and laundry, which were in the center of production as well.
They started actively promoting their business, and 2007 is considered a year when P&G spent the most on advertising compares to any other US company inviting it to be more a leadership brand. Procter & Gamble Company started separating ad directing their products and services into two groups of consumers: for business purposes and for ordinary people. Talking about the latter, P&G offered baby care products, beauty & grooming, pet care, etc. Those branches include mostly pampers, conditioners, and pet food accordingly. Their business groups of customers were treated on the principles of corporate ethical responsibility.
In this essay, the P&G development from its beginning will be discussed, mainly company’s leadership style, hierarchy of the company and the decision making process. This essay will also touch the questions on advantages and disadvantages of the chosen style of development. Brief History In 1837, a soap maker James Gamble and a candle maker William Procter, under the suggestion of a candle maker Alexander Norris, their mutual father-in-law, started a union. This was a logical step because all of their products are made of the same fats, oils and raw materials. The starting capital of the company was $7,192.24 and their 50/50 partnership has lasted for fifteen years.
Procter’s responsibilities were to run the office, and Gamble was dealing with the factory. Another reason why their cooperation was so successful might be the similarity of their backgrounds as both families were the British Isles emigrants: Irish Gamble’s family and British Procter’s. Many agree that P&G was formed at a very opportune time as the US economic expansion started to alter their manufacture, and the distribution as soaps and candles was the wise choice of commodities to start business with. Although the economy remained very agrarian in the rural areas, industrialization and urbanization existed as well. Cincinnati was considered the largest meatpacking US center when Gamble and Procter started their business.
This gave an idea for P&G to be close to the animal by-products, which is critical to the manufacture of soap and candles. These two entrepreneurs shipped candles and soap to New Orleans and to the Mississippi. In 1850s, the second generation of P&G entered the business. The firm expanded its production through moving its products to the markets on railroads that had many advantages compared to rivers and canals as the tracks did not freeze during cold winters. Trains generally are faster and more regular; at that time, compared to steamboats they were less expensive and allowed the expansion of the distribution possibilities of their products. During the Civil War, Procter & Gamble became a million-dollar enterprise due to huge contracts obtained in order to supply some of the Union army representatives with its products.
Such procurements forced the factories to work a lot as the company was considered very important to the war and the company could continue their business no matter any possible obstacles connected with war. By the 1870s , P&G had grown into a company on a national level. However, it faced downturn because of the crisis in candle making due to the discovery of oil in Pennsylvania. It made kerosene ready to use and, thus, there was not much need for the candles as after the Civil War, consumers stated to prefer oil lamps to candles. As the result, for the first time in the history of P&G candle production sank below the soap production. That forced the company to expand the soap business in order to stay competitive.
The response to their crisis was Ivory soap, which represented in some way a departure from its traditional goods for the company as P&G sought always used specific methods of their product development. The Ivory soap was made from vegetable oils, which moved previously used lard, tallow and grease out of their production part. This soap was a real experiment aimed at development of the soap that was comparable to various expensive castile soaps in quality. At the same time, it was inexpensive, which made it the best enough to be mass marketing. It cost less intentionally because of its production.
Ivory soap was made of a blend of palm and coconut oils but not from olive oil. It remained solid although lathered easily, and compared to other soaps lasted much longer, and for that reason, it floated. Procter & Gamble marketed its soap more aggressively compared to the times of earlier soaps and candles production and distribution. A lot of place in their business was devoted to Public Relations Campaigns and various marketing initiatives such as advertising on wall signs, massive distribution of samples, premiums, inserts in the magazines, steamers, etc. This success of Ivory made P&G a multi-million dollar industrial giant. At the same time, Ivory was still a traditional soap made of available raw materials.
Therefore, the company remained a soap company for a long time. Only with the detergents development of in the 1930- 40s, the company experienced a dramatic change. “Tide” and “Dreft” changed P&G into the company, which utilized its technology and chemical experimentation for production of new products. In prospective that allowed putting those products on the global markets. Thus, P&G shifted from the soap company to be an industrial corportion with technologically based future (American Chemical Society, 2012).
P&G Today Nowadays, Procter&Gamble is the largest goods company in the world with the Headquarters in Cincinnati, OH. It has operations in 80 countries in the world, its main purpose is to providing qualitative, and high value products and services in order to improve the consumers’ lives. According to the information from their official website, its sales constitute $82.6 Billion for the year of 2011 (P, 2012). Its strategy is inspired by its Purpose, which is mainly to improve more consumers’ lives worldwide.
The company’s “50 Leadership Brands account for 90% of P&G sales and even more than 90% of profits. Their leadership brands include 24 Billion-Dollar Brands with each generating more than $1 billion in annual sales” (P, 2012). As P’s purpose is to touch as more lives as possible every day, investing more than $8 billion in 2010, it became one of the world’s top advertisers. According to their website information “the Company has one of the largest and strongest portfolios of trusted brands”, such as Pantene, Ariel, Downy, Pampers, Tide, Always, Charmin, Crest, Bounty, Pringles and Olay” (P&G, 2012). The Company’s Chairman, President and Chief Executive Officer lead the Company. There are ten members of the Board, which are elected each year.
Bob McDonald is the current Chairman of the Board, President and CEO. The Board is generally responsible for the Company’s affairs according to “Ohio’s General Corporation Law, Code of Regulations and the Board of Directors’ By Laws and the Company’s Amended Articles of Incorporation. In its exercising duties the Board represents and acts on behalf of the Company’s shareholders” (P&G, 2012). The document that contains additional details regarding the role and structure is “the Board Board’s Corporate Governance Guidelines” (P&G, 2012). Beauty & Grooming and Household Care are those two key areas, which P&G’s business is segmented into. The company’s unique organizational structure offers both the benefits on the global scale and the relevant local focus for consumers worldwide.
At the same time, the framework of their corporate structure provides quick and efficient benefits of a global organization as well. Their global operations keep the headquarters office in touch with their local communities, and their strong governance practices ensure that the operations are conducted on high level and integrity. The Companies similar to P&G have a great power in the world with their market capitalization is being higher compared to the GDP of many countries. Such position on the market assures their responsibility for their works and provides opportunities for others to be involved. Moreover, their main responsibility, as they state, “is to be an ethical corporate citizen” (P&G, 2012). Their work is cooperation between them and consumers: the P&G provides branded high quality products and services in order to improve the lives, and, at the same time, they expect from the consumers to reward them with profit, which will be reflected in their leadership sales by creating a value of their products.
Such cooperation will allow all of the shareholders of P&G and the communities to prosper.Their main purpose works to unify the Company with their customers and it is P&G’s main growth strategy. It is a powerful way to develop as by promoting a simple idea to improve the consumers’ everyday lives worldwide, it grows making those improvements faster. P&G serves about 5 billion people nowadays. They are trying to reach their consumers altruistically by improving their lives to enable them to increase their quality of lives.
In order to improve the lives of millions, they organize various social problems as well. They are convinced that the purpose of their company is to attract and unite an extraordinary group of people, who would share it around the world. Their “recruiting and general development philosophy is to ‘build from within’ fosters a strong culture of trust and shared experiences” (P&G, 2012). Their diversity and shared culture are the predominating and defining elements, which enable P&G to improve the everyday life of its consumer. Real-Life P&G Looking at the information website, everything seems to works perfect. However, as any company, especially if it is worldwide, there might be some disadvantages and critiques to the side of this global leader.
An anonym, a former employee shared his own both positive and negative ideas of working for P&G. The former employee is convinced that P&G is one of the best huge companies to work for. He admits about the limitless opportunities upon ‘entering’ its doors. This allows the breadth of those companies, which are working under the P&G, and such position ensures that employee can pursue anything he has potential and efforts for. The anonym emphasizes on the possibility to cooperate with smart and talented individuals from all over the world. He admits a comfortable and safe environment and work conditions.
The former employee enjoyed a competitive wage, benefits and profit sharing. He mentions about great opportunity to learn a lot about business. Among the cons, the former employee mentioned the company pride regarding hiring leaders. Here he talks about very aggressive the nature of leaders stating that they want to be ‘in charge’ of everything as much as possible. Such idea provokes a little dilemma as the presence of too many leaders might just mean that there are not simply enough followers. He mentions about the constant pushing of their agenda and, thus, it results that in the fact that business decisions simply become bogged down during various meetings.
He talks about the fact of unproductive meetings and compares them to the bane of employee’s existence. The respondent talk about ineffective energy use as much of it is just spent for trying to stay as efficient as possible. He also complains about the presence of too much “non-value added work” (Glassdoor, 2008). Trying to give a piece of advice to P&G Senior Management, the former employee admits, that the company usually rewards those who are ambitious and who tries to be first by taking on more and more responsibility consistently. He agrees, that those people are remunerated with better scores that are vital for advancement opportunities and bbetter pay.
At the same time, the respondent states that the ratings system are naturally dictated, which automatically means that there must be those workers who are rated ‘lower’ as well. At P&G, such “lower” people are usually very competent in their jobs. In addition, they are ‘penalized’ only because they are happy with their work assignment and that they do not seek greater opportunities actively. Moreover, here is another dilemma, when they are rated ‘lower for a couple annual ratings, they are to be jettisoned. Each year the company sheds many intelligent hard workings people by rating them lower just for being less ‘ambitious compared to others. The respondent states, “P does not adequately reward sustained contributions and sustained competence” (Glassdoor, 2008).
The former employee hopes a lot it will change. As we see, the notion of leadership does not necessarily have to have a good shade. On the one hand, it is a big company with high corporate standard, on the other hand, as everything, such progress has its limits, and P&G is not an exception. We can observe the two-side medal process: leadership looks positive when you look at the company from the outside or how it presents itself based on the information from their website, their advertising and social campaigns. At the same time, it acquires negative look when you ‘enter’ its doors and start ‘boiling’ insides seeing that everything is organized is just to be the profit oriented and even competent people fail their jobs and get penalized just for being less ambitious compares to others.
Failures of P&G There are a couple of ideas about the Company although being so progressive experienced some of failures throughout the history of their development. The main three of them are as follows: Coordination of activities with subsidiaries Beiske et al. (2007) mention that “P had failed to coordinate the activities of subsidiaries in order to achieve maximum gains from international profit opportunities.” As an example, they provide the Company’s Pampers’ failure to prevent Colgate Calline from wining market share in France with a copycat product. Bartlett & Ghoshal (2000) claim about the actions of the P&G; they state, “Increasingly, competitor imitated P new and innovative products and marketing strategies, and pre-empted them in national markets, where the local subsidiary was constrained by budget, organization or simple poor judgment from developing the new-product category of market segment.
” The real problem cause: is leadership punished? In 1999, Durk Jager , P&G’s CEO of those times had initiated a major reorganization intended to quicken the Company’s innovation. The aim was to promote new product development to make it more decentralized. The aim was to cover both local US and foreign markets by testing its products and centralizing its business services. The results were not satisfying for stockholders by 2000, and, thus, Jager was pressured to step down.Does the company size make it automatically better? The only question that arises is the connection between all the innovations and progress regarding its influence on the size of the company.
P&G’s “Organization 2005” included the development of Global Business Units, promotion of Market Development Organizations and Global Business Services. All of that was innovational approach ensuring ongoing functional innovation and capability improvement. The thought-provoking question that remains in this case is about the existence of particular kinds of innovative activities, for which large firms are likely to outperform small firms, and vice versa? Conclusion Procter & Gamble Company is the largest goods company in the world producing pet foods, cleaning agents and various personal care products. Being a leader in the market, the company has reach corporate traditions and development of strong leadership skills. The people of P&G are the most important asset and source of competitive advantage. The company management agrees that their success depends entirely on the strength of their talented people, which they build from within and manage with a disciplined process by their leadership team (P&G, 2012).
Although the leadership brings success, develop individuals, companies and countries, the dilemma still exists: haw far shall we go in leadership to have profit and stay human? An example from the former employee idea is a good thought-provoking element to stop and think about that extent. Being ranked as number one in 2012 list of ‘The 40 Best Companies for Leaders,’ for leadership development, Procter & Gamble remains its shape and develops further. Bob McDonald, the Company’s CEO and Chairman says that “the success of the company in leadership development goes far beyond their formal programs as it is driven by a strong commitment to diversity and collaboration, and by delivering consistent leadership messages through all levels of the organization” (Russel Raynolds Associates, 2012). The main thing for the real leader is to believe in success. Bob McDonald, in this case is the best example to follow: “In the 1980’s, we created a leadership model for Procter & Gamble we called the 3E Model.
Envision. Enable. Execute. What we discovered was we had to add a new E. We’ve now gone to a 5E Model, and one of the E’s we added was Engage. The idea is collaboration—that no leader of value does anything by themselves today.
The leader really has to engage those around them in order to get the job done. So, we actually train people in collaboration. We train them in our leadership colleges. They get feedback from their organization on their ability to collaborate and so it’s part of our leadership training” (Russel Raynolds Associates, 2012). Although there might be various ideas on the leadership development of the P&G, it is the best example to learn from as it provides a grounded framework for various case studies and general information on its development.
The company has unique history, unique development experience and unique people involved in its development in all the management levels. The main thing is to find the niche one is interested, and be success oriented as current and former P&G leaders.
