Procter and Gamble (P&G) is a business idea developed by William Procter and James Gamble. The company was established in the year 1837. Initially the company, engaged in making candles and soaps. However, later the company started producing consumer goods such as beauty care, health care, baby products, food and beverages etc. The company suffered with several organizational and cultural issues between 1999 and 2000. The case study on P&G, suggests that the period of 1999 and 2000 has been headed by two different CEOs i.e. Durk Jager and Alan Lafley. Both of them managed the company in their own style and presented a good example of leadership skills. Therefore, the aim objective of this report is to highlight the challenges faced by P&G. The organizational challenges under this report will be evaluated on the basis of strategic development, HR practices and leadership styles under the two different CEOs. Although, each of the CEOs had there own individual personality, management style, leadership style and functioning but both of them evidently contributed towards the success of P&G. Additionally, strategic recommendations will be provided in the form of 5 year strategic plan which will be helpful in improving the HR performance, organizational culture and the overall financial performance of the organization.
This report is solely positioned on the assessment of the organizational issues. These issues are present in Procter and Gamble under the leadership of two different individuals, Durk Jager who headed the organization in July 1999 and under the regime of Alan Lafley who ruled in June 2000. Both the styles of leadership and actions taken will be critically evaluated with reference to strategic development, leadership skills and HR practices. During mid- late 1990s, Durk Jager launched the organizational restructuring exercise, which included refurbishment of P&G’s organizational culture, retrenchment of employees along with reduction in hierarchies.
Strategic development basically involves the changes and plans that were initiated within the organization by each of the leaders separately. Further, this report will be evaluating the consequences of these changes on the performance of the company. Secondly, Leadership styles will be explained on the basis of leading methods of both the CEOs and these methods will be analyzed using the transactional and transformational theories of leadership. Additionally, this report will analyze how employees overall performs due to different leadership styles. Thirdly, HR operations will determine the practices and rules that supervise personnel management, organizational behavior and employee relations. However, all these activities will be seen under both leader’s authority. Finally, this report will demonstrate behavioral aspects of employees and their individual needs. In the last, the report will consist of strategic recommendations in regards to all the issues described. This will be carried out through a SWOT analysis on the existing HR rules and policies. Moreover, the plan in the report will address both best-fit and best practice concepts.
Durk Jager Vs Lafley:
It may be defined as strategy that is adopted by the business to grow its business (CIPD 2012). However, Durk Jager at his time of presidency introduced various changes. He used Information Technology (IT) as catalyst for change, his vision was to influence innovative approach. According to Jager, the only way to increase the growth, sale , volume and earning is to remain constant throughout. Along with these changes, reorganization of company’s corporate structure was done; P&G increased its business unit from four to five under Jager’s supervision. Jager believed that his step would help to speed up decision-making power within the organization and additionally it helps in eradicating bureaucracy (Bryson 1988). The strategic development has various benefits such as it helps organization to think strategically, helps in clarifying future directions clearly, improves performance of both employees and organizations and most importantly it effectively deals with the speedily changing conditions. However, Jager did not predicted hassle this brought to the employees of the organization by increasing the gap in the communication. For example line manager of one country is liable to report to the line manager in another country. Moreover, employees did not seem to be happy about the acquired changes (Bradutan and Sarbu nd). Employee of the P&G were not satisfied and suggested that the system have a loophole. The culture of the organization went through many other changes like they discarded old dressing code, the employees were given opportunity to decide their own dress.
While some of the things changed for bad, the others were good too. For instance, due to new changes all employees were treated equally by serving coffee in the same cups. Hence, after these changes the organization is aligned on common goals, high level of team collaboration, leaders were able to take up more challenging tasks. Therefore as a result of implemented change, Jager’s measures to change were not successful. The changes faced several problems, consequently the net profit declined to 18%. Whereas, again in the history of P&G another president named Lafley made various efforts to improve the declining conditions of the organization. He made the initial change by transferring 15 seniors most officers and gave all the high level of job roles to women. According to him this effort will help in promoting competition in the top-level hierarchies amongst the organization (Reid, Flin and Mearns 2008). Furthermore, Herzberg’s two-factor model also suggest that nature of work, recognition, job satisfaction level also helps in increasing motivation of the employees. Therefore, Lafley suggested that people on the top level management tends to be motivated by the suggested factors by Herzberg (Hyun 2009). Just like Jager, Lafley too emphasized on IT however, his action plan was mainly focused on customers. This is however a good point because it adds on a competitive advantage other competitors. While Jager practiced inflexible, inward and constant approach. On the opposite hand, Lafley wanted P&G to more open to challenges, flexible and outwardly.
Durk Jager Vs Lafley :
The two leaders Jager and Lafley both demonstrated two different kinds of leadership skills namely, transformational leaders and transactional leaders. However, both depict different personality; the transactional leader addresses the worldly necessity of the employee whereas, the transformational leader focuses on the individual-concept of the employee and the employee’s consciousness of self-worth. The transformational leader motivates the follower to habitus a self-concept that identifies with the leader’s self-idea and mission. To endeavor for consistency, the follower is motivated to apply extra effort to match the follower’s personal self-concept and operation with the leader and thereby increases his or her own sense of self-quality as a result. In 1978 Burnes, explained that transformational leadership represents a leadership style that is signified by shared vision and charisma between followers and the leaders. The potential of transformational leaders comes from their power to impact and animate others to originate exceptional piece of work. In comparison, transactional leadership explains more of a “give and take”on the job relationship – close relationship between leader and follower is constituted through transaction, such as a remuneration system for achieving any particular target or goal (Lai 2011). According to this case study, Jager tried implementing too many changes in a short interval of time therefore he represents an autocratic leadership quality.
Whereas, Lafley demonstrated democratic leadership skills and style, hence represents a democratic leader, who tries to convince all his employees (Bakhtari 1995). Jager’s leadership style was conservative, and very methodical whereas, Lafley took more pragmatic approach and a gradual approach. Lafley was considered to be transformational leader. Bass in 1985 suggested. Transformational leaders widen and promote the interests of masses, create awareness and acceptance among the people of the purposes and operation of the group and propel followers to go on the far side of their self-interests for the benefit of others (Hartog, Van Muijen and Koopman 1997). Therefore, demonstrating the transformational leadership skills, Lafley deeply inspired their employees. He always inspired his subordinates to perform beyond the expectation. As a transformational leader, Lafley gently communicated to employees stating the need to cultural change. Whereas, Jager do not believe in communicating the change process to its employees. Role of communication is really vital in the process of change. Postmes in 2001, suggests that employees will be actively committed if they attain adequate information to execute their task, and this message was presented to them via formal official channels rather than casual channels. Social communication with peer group and direct superiors foreseen commitment less than communication with more superior management did, and communication with a social emotional content was little predictive of loyalty than formal communication (Elving 2006).
Human Resource (HR) Practice:
Human Resource is the most crucial asset for any organization and it is the root of achieving competitive advantage. Managing human resources is very difficult as compared to managing technology or capital and for its effectual management, administration requires effective HRM scheme. HRM system should always be backed up by safe HRM practices. HRM practices refer to business activities oriented at managing the reserve of human resources and ensuring that the resources are employed towards the satisfaction of organizational goals. Procter and Gamble (P&G) always treated employees of the organization as its own family members. The vision of the organization is to focus on the company’s principles, core values and purpose. The organization gives pay off on Saturday of every week. The organization offered a sickness, life insurance plan, and disability benefits. They moreover, granted forty-eight weeks of employment to the employees in a year. P&G’s recruitment process is comprehensive in manner, the HR department scans resume for the most promising candidate. The company selects its candidates on the basis of applicant’s aptitude test for problem solving and leadership skills. P&G’s HR policies focused on delegating responsibility and accountability to the new recruits in order to develop and build the long lasting careers with in the company. The unique feature of P&G is amongst the best features, i.e. the new recruits are supposed to spend the first year of their employment in the P&G’s college. In this college different types of courses are taught so that the new comer can gain a deep insight as to what to expect and how to deal with the situation that might erupt in future during the time of employment. However, P&G followed several code of conducts for the benefits of the employees and to encourage dedicate working environment. For instance; employees were reminded not to disturb other workers or to visit other sector or department, except in case of extreme urgency. All these rules and regulation changed slightly during the regime of two different leaders.
Due to its transactional leadership nature, P&G was popularly known for its narrow – minded, and conservative image. Therefore, the HR policies under Jager’s regime were not people- centered. This Change, from people – centric to target – centric came as a surprise to the employees. This shock created an outrage within the employees. This outrage further leads to resistance to change. The literature suggests that resistance occurs in situation when the goal, ideas, reason and targets of change is unclear and not wisely communicated to the employees. The employee resistance towards change, also occurred due to uncertainty, threat to skills and inconvenience etc. Schein in 1999 proposed, that the culture of organization is very difficult to change (Maurer 2006). In the very starting Jager, introduced an extended goal plans and therefore resulted in setting up the unrealistic targets for the employees. However on analyzing the situation, it seemed to be a good move, as it will help in uplifting those employees who are not performing or who are under performing. Whereas on the other hand, unachievable targets can also demotivate employees and further the employees may become unproductive in terms of work.
From the situation, it can be analyzed that Locke’s goal setting theory is not used in this organization, under the regime of Jager. According to the theory of Locke, goals should always be specific, must be attainable in nature, must be accepted by the organizational members and most importantly the leader should provide feedback on the goal attained. All these are necessary to keep people motivated and aligned towards attaining the goal (Lunenburg 2011). In contrast with this theory, Jager proposed all things in contrast du to which employee’s resisted change. Secondly, he introduced a new remuneration system that was meant for only those employees that contributed extraordinary. This is both good and bad for employees, it is considered to be good because it gave recognition to the employees who performed well. While in a team-based achievement, rewarding an individual seems biased decision. This may further lead to different perception, employees will believe that reward will be given to only those who perform extraordinary rather than to those who completes the job on time. This outcome can be related to Adam’s equity theory, wherein people compare themselves with others on the basis of time, efforts, sacrifices and outputs received (Al- Zawahreh and Al- Madi nd). The environment became informal under the regime of Jager that created equality amongst each other within the organization. Lastly, Jager made significant amount of job cuts while doing restructuring of the organization. This came as a huge shock to the employees as all these actions were taken without their consent. Lafley:
Lafley’s approach was more flexible and outwardly. He believed that the targets are unachievable and not realistic therefore, he decided that conservative goal plan would be a good option. Lafley joined P&G at the time when the organization was in loss hence, he wanted to save cost. In order to save cost he started cost- cutting. For this purpose, he disallowed employees of every department to work from home. This method definitely saved a of cost for the company.
Recommendations and Conclusion:
This report widely examined the organizational issues that were present in P&G under the leadership of Jager and Lafley. Both Jager and Lafley, undergone through changes in the context of leadership, HR practice and strategic development. It is therefore clear that both the leaders had very different styles of leadership and way of operating things. Moreover, throughout the case study it is evident that their different style of doing the job has affected the organization both negatively and positively. However, the next section will focus on the plan of action that P&G needs. Additionally, the report will have a five year plan and the main objective is to improvise its HR practices and culture of the organization. In order to craft this plan a SWOT analysis will be done on P&G’s existing HR rules and processors.
SWOT of existing HR activities:
SWOT Analysis is the most famous means for audit and analysis to know the total strategic position of the commercial enterprise and its environment. Its central aim is to determine the strategies that will create a firm constricted business model that will best adjust an organization’s resources and the environment in which the business functions (Johnson and Scholes 2010). Strengths: Under SWOT analysis strength deals with what benefit does your organization have over the rivals? What do you do better than anyone else in the same field? What specific or lowest-cost resources can you show upon that others can’t? What do people in your industry see as your strengths?. The core strength of P&G is their Policy that focuses entirely on the people. The organization’s policy is lined up according to the needs of the employees. Therefore, P&G is often called as People Company. Another strength consists of its effective and efficient global processes such as training, recruitment, training and highly motivated staff. Procter and Gamble also have sustainable competitive advantage. Weaknesses: SWOT analyses under this determine things like what could you amend? What should you avert? What are masses in your market likely to perceive as weaknesses? What factors lose you gross revenue?. In the case of Procter and Gamble it can be analyzed that the company definitely lacked direction. It is evident that both leaders at there time had excellent aspirations for the organization but was poorly implemented. The second and the real weaknesses was that employees were not fully convinced with the idea of change, this could have been due to lack of communication within the organization. Lack of product offering was amongst other weaknesses. Opportunities: In this questions such as what good opportunities can you spot? What interesting trends are you aware of? . There were several opportunities open to P&G such as innovation of their products and brands. P&G would have tried exploring new market through expanding its business in other parts of the world. They need to be risk takers therefore should think of adopting growth and diversification Strategies.
Threats: Under threats questions like what hurdles do you face? What are your rivals doing? Are quality specifications for your job, products or services dynamic?. Some of the threats affects P&G as a whole. For instance, intense competition changes in demographics and customer power. Another threat for this organization is economic downturn and global recession.
This section will be based on the SWOT analysis that is done above, the following recommendations will be helpful in improving its HR performance, the profit of the organization and the culture of the organization. The foremost recommendation for P&G is to formulate an effective talent management. The process Involved in the talent management include workforce planning, development, retention, talent review and evaluation (Lewis and Heckman 2006). Talent management plays an important role in the HR department and the strategy should focus on business as a whole. The process of talent management must be unified within the business strategies of the P&G. The organization needs to realize that to survive in the market it has to match the pace of the changing environment.
The HR professional employed in this field ensures that the organization is able to determine and pull in key people with the ability to create competitive advantage and that it actively manages an proper scale of resource to meet dynamic needs, fulfilling the brief and long-term ambitions of the administration strategy (CIPD 2013). P&G should encourage recruitment and selection of individuals who have the ability to add competitive value to its organization. This needs to be done across all the levels within the organization. Moreover, P&G must try to engage all the hired staff in training and Development as it will be good for people to enhance the right skills. Additionally, employees must be taught about cultural change so that they do not resist change.
Learning and Development for employees:
Employees along with rest of the staff need to enhance and develop the skills and capabilities required to stand out on the job with the help of organizational and individual training programs. This process will help in encouraging employee retention. The process of learning and development includes 3 main steps i.e.
1. Plan; where training need is gathered.
2. Do; in this step plan is implemented
3. Review; the last step, learning and development activities are monitored and evaluated. Performance Management in the organization:
Performance Management is a process for setting up a common understanding about what is to be attained and how it is to be attained. It is a technique of managing people that expand the chance of achieving success (CIPD 2013). This generally deals with appraisals, performance etc. P&G as an organization needs to select the quality oriented view of the performance management that is related to the enhancing strong performance, regular improvement and coaching of workers by senior level of managers that helps to improve motivation of the job.
Reward Management in Procter and Gamble:
Reward management may merely defined as the joint actions an employer may take to stipulate at what levels worker wages will be offered, based on what standard and data, how the substance will be ordered over time, and how both the deliberate links between organizational goals and belief should be interpreted and acted on by the parties to the occupation kinship (Parkins and White 2011). It is amongst one of the ways when P&G can keep employee retention. This should cover pay structures, grade, and contingent pay and employee benefits as well. This overall suggests those employees efforts are accepted and this motivates workers to work better, hence ensures retention.
Concluding this report by suggesting the strategic plan for P&G to improve its HR practices. This plan is focused for five years that will include the strategies they have to adopt and they people who will implement the strategies for the people who will be affected by these strategies. Talent Planning is a strategy that will be implemented by the Chief Executive Officer and other senior executives for all the employees of P&G. The duration for this strategy is 2 years. The Learning and Development will be executed by the senior level managers for the mid and entry lever employees and this will take 3 years. Performance management will be perform by the senior executive and CEO that will be effective for all employees of P&G and its will be executed quarterly. CEO will do reward management strategy for all the employees of the company and it will be for 1 year.
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