Transforming P&G

Proctor and Gamble started out as two companies making and selling soap and candles separately.  But in 1837, William Proctor and James Gamble decided to come together and form one company.  And for the last several decades been a great company and a mainstay of Wall Street and Main Street.    In 2003, it earned $43.4 billion in net revenues, making it the largest household and personal products company in the world.

P&G products are everywhere.  At home, when I do laundry, I use Tide or Cheer.  When I get sick, I use Vicks for a body rub.  For the babies, we use Pampers.  In the bathroom, I use Charmin.  In the morning, I brush my teeth with Crest, and I drink Folgers coffee. in 1987 P&G introduced the world's first 2 in 1 shampoo which is very popular today.



P&G is a very innovative company that is in many ways obsessed with perfection.  To spur growth, P&G invests 4% of its worldwide sales in R&D.

By replacing the regional divisions with global divisions, P&G can better manage the teams and communicate better.  In 1999, Durk Jager, the new CEO wanted to remove the bureaucracy and erase the zero failure mentality that was so pervasive.  Shifting from regional to global, he wanted to decentralize decisions from their Cincinnati headquarters and move the decisions out to the field where they belong.

There are tremendous challenges in transforming the culture.  There is a lot of resistance from senior leadership who did not want to abandon their seniority.  "By tearing apart the old-fashioned network of 144 regional mangers, Jager broke up decades-old fiefdoms."  This was a smart move to transition from traditional to being more innovative.

Yes, the board of directors should have given Jager more time.  Their impatience was exacerbated by the stock market which was heavily impacted by timing and the overall market in general.  It takes time for success to be achieved, results to be gained.  The changes were too much too fast, but the damage was already done.  The Board should have given Jager more time than just 18 months.