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Introduction
Procter & Gamble is a Fortune 500 American multinational corporation headquartered
in Downtown Cincinnati, Ohio that manufactures a wide range of consumer goods
(Wikipedia 2010, Procter & Gamble). Procter & Gamble (P&G) is America’s biggest
maker of household products, with at least 250 brands in six main categories: laundry
and cleaning (detergents), paper goods (toilet paper), beauty care (cosmetics,
shampoos), food and beverages (coffee, snacks), feminine care (sanitary towels) and
health care (toothpaste, medicine). P&G’s famous brands include Ariel, Pantene,
Head & Shoulders, Fabreze, Sunny Delight, and Oil of Olaz. About half of P&G's
sales come from its top ten brands. P&G also makes pet food and PUR water filters
and produces the soap operas Guiding Light and As the World Turns (Corporate
Watch, n.d. Procter & Gamble). So what has made P&G become what it is today? The
answer is multiple but apparently its organisational structure has played an important
role, which has necessitated this study.
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P&G’s Structure
An organisation is a consciously coordinated social entity, with a relatively
identifiable boundary, that functions on a relatively continuous basis to achieve a
common goal or set of goals. And organisation structure defines how tasks are to be
allocated, areas of responsibility and authority, who reports to whom, and the formal
coordinating mechanisms and interaction patterns that will be followed (Robbins &
Neil Barwell 2002, pp.6-7).
P&G has undertaken many structural changes over the past century, but that discussed
in this study is the current structure of P&G. The main structure, partial organisation
structure and specific structure of P&G are shown in Figure 1.1, 1.2 and 1.3.
Figure 1.2 Partial organisation structure of P&G (MIKOŁA J JAN PISKORSKI &
ALESSANDRO L . SPADINI , Procter & Gamble: Organization 2005(A) pdf, p.9)
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Figure 1.3 Organization 2005 Structure, 1999 (MIKOŁA J JAN PISKORSKI &
ALESSANDRO L . SPADINI , Procter & Gamble: Organization 2005(A) pdf, p.15)
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around the world. GBS was organized as a cost center. The head of GBS reported
directly to the CEO, but was not a member of the global leadership council.
As shown in Figure 1.2 and Figure 1.3, corporate new ventures president, chief
financial officer and other presidents or officers make up the functional structure,
while seven MDOS and GBUS who are responsible for different areas and different
products make up the divisional structure. Thus the structure is both functional and
divisional at once, so P&G’ organisation structure should be a matrix structure as per
the classification of organisation structure.
current structure. As organisations grow, departments and levels need to be added, and
structures grow more complex. With functional forms, this drives a change to
divisional structure (Astley 1985; Cullen, Anderson & Baker 1986, cited in Bartol et
al. 2006, p. 222). As organisations grow, decentralizations increases. This is probably
due to the rules and regulation guiding lower level decision making (Robbins 1990,
cited in Bartol et al. 2006, p.222).
Burns and Stalker (1961, cited in Bartol et al. 2006, p.223) studied the effects of
environment on organisation structure. They found different structural characteristics,
depending on whether the environment was stable with little change or unstable with
rapid change and uncertainty. P&G has been classified as a downstream company,
originating as a marketer distributor (Galbraith, 1991, cited in Leadership &
Organisation Development Journal. Vol. 15. No.2, 1994, pp.24-28). Downstream
companies, like P&G, have multiple products and multiple markets. They are also
customer oriented and concerned with tailoring their products to meet target market
needs. Thus they need to be more flexible and adaptable than traditional
manufacturing companies (Leadership & Organisation Development Journal. Vol. 15.
No.2, 1994, pp.24-28). In highly unstable and uncertain environments, by contrast,
firms had more organic characteristics, decentralized decision making, few rules and
regulations, with hierarchical considerable delegation between levels, which is also
applicable to P&G.
Any one of these five parts can dominate an organisation and where each dominates, a
different organisational form emerges. Moreover, a given structural configuration is
likely to be used depending on which part is in control. As a result, there are five
distinct design configurations and each one is associated with the domination by one
of the five basic parts.
and product focus; second it presented a unified sales contact for customers that is
focused on sales growth of all products; third the product-category business units with
profit and loss responsibility have full control over their key functions; and fourth the
service functions and corporate functions formed a third and fourth dimensions in
matrix structures over the two key dimensions. The new structure is a four-dimension
front-back hybrid matrix with a top leader, a coordination council to define priorities
and solve disputes, matrix leaders, and subordinates with the need to coordinate and
balance four influences structure as shown in Figure1.2.
The routines and policies that had created problems to the proper functioning of
the matrix organization also streamlined and adapted to the new structure. A single
business-planning process was created whereby all budget elements could be
reviewed and approved jointly by the various matrix leaders (Ronald Jean Degen,
2009, pp.34-35).
Conclusion
Through this study, we have looked into the P&G’s organisation matrix structure and
how does its structure facilitate the achievement of its goals and to some extent, this
structure is effective. However, in a context of complex, rapidly changing and highly
competitive global environments, an organisation has to adapt quickly in order to take
advantage of opportunities that arise anywhere in the world. And the need for rapid
innovation cannot be ignored as well. So turning to a boundaryless structure which
has higher environmental responsiveness may be a better option for P&G.