Assignment of Cross Cultural Management on Procter & Gamble

Submitted By: VAIBHAV SINGLA Sec E, MBA-IB A1802010251

Proc er & Gamble Co. (P&G,) is a Fortune 500 American multinational corporation headquartered in Downtown Cincinnati, Ohio that manufactures a wide range of consumer goods. It is 6th in Fortune's Most Admired Companies 2010 list. P&G is credited with many business innovations including brand management and the soap opera. Procter & Gamble is a leading member of the U.S. Global Leadership Coalition, a Washington D.C.based coalition of over 400 major companies and NGOs that advocates for a larger International Affairs Budget, which funds American diplomatic and development efforts abroad.

HISTORY
William Procter, a candlemaker, and James Gamble, a soapmaker, immigrants from England and Ireland, respectively, who had settled earlier in Cincinnati, who met as they married sisters, Olivia and Elizabeth Norris,[6] formed the company initially. Alexander Norris, their father-in law, called a meeting in which he persuaded his new sons-in-law to become business partners. On October 31, 1837, as a result of the suggestion, Procter & Gamble was born. In 1858-1859, sales reached $1 million. By this point, approximately 80 employees worked for Procter & Gamble. During the American Civil War, the company won contracts to supply the Union Army with soap and candles. In addition to the increased profits experienced during the war, the military contracts introduced soldiers from all over the country to Procter & Gamble's products. In the 1880s, Procter & Gamble began to market a new product, an inexpensive soap that floats in water. The company called the soap Ivory. William Arnett Procter, William Procter's grandson, began a profit-sharing program for the company's workforce in 1887. By giving the workers a stake in the company, he correctly assumed that they would be less likely to go on strike. The company began to build factories in other locations in the United States because the demand for products had outgrown the capacity of the Cincinnati facilities. The company's leaders began to diversify its products as well and, in 1911, began producing Crisco, a shortening made of vegetable oils rather than animal fats. As radio became more popular in the 1920s and 1930s, the company sponsored a number of radio programs. As a result, these shows often became commonly known as "soap operas" The company moved into other countries, both in terms of manufacturing and product sales, becoming an international corporation with its 1930 acquisition of the Thomas Hedley Co., based in Newcastle upon Tyne, England. Procter & Gamble maintained a strong link to the North East of England after this acquisition. Numerous new products and brand names were introduced over time, and Procter & Gamble began branching out into new areas. The company introduced "Tide" laundry detergent in 1946 and "Prell" shampoo in 1947. In 1955, Procter & Gamble began selling the first toothpaste to contain fluoride, known as "Crest". Branching out once again in 1957, the company purchased Charmin Paper Mills and began manufacturing toilet paper and other paper products. Once again focusing on laundry, Procter & Gamble began making "Downy" fabric softener in 1960 and "Bounce" fabric softener sheets in 1972. One of the most revolutionary products to come out on the market was the company's "Pampers", first test-marketed in 1961. Prior to this point disposable diapers were not popular, although Johnson & Johnson had developed a product called "Chux". Babies always wore cloth diapers, which were leaky and labor intensive to wash. Pampers provided a convenient alternative, albeit at the environmental cost of more waste requiring landfilling. Procter & Gamble acquired a number of other companies that diversified its product line and significantly increased profits. These acquisitions includedFolgers Coffee, Norwich Eaton Pharmaceuticals (the makers of Pepto-Bismol), Richardson-Vicks, Noxell (Noxzema), Shulton's Old Spice, Max Factor, and the Iams Company, among others. In 1994, the company made headlines for big losses resulting from leveraged positions in interest rate derivatives, and subsequently sued Bankers Trust for fraud; this placed their management in the unusual position of testifying in

court that they had entered into transactions that they were not capable of understanding. In 1996, Procter & Gamble again made headlines when the Food and Drug Administration approved a new product developed by the company, Olestra. Also known by its brand name Olean, Olestra is a lower-calorie substitute for fat in cooking potato chips and other snacks that during its development stages is known to have caused anal leakage and gastrointestinal difficulties in humans. Procter & Gamble has dramatically expanded throughout its history, but its headquarters still remains in Cincinnati. In January 2005 P&G announced an acquisition of Gillette, forming the largest consumer goods company and placing Unilever into second place. This added brands such as Gillette razors, Duracell, Braun, and Oral-B to their stable. The acquisition was approved by the European Union and the Federal Trade Commission, with conditions to a spinoff of certain overlapping brands. P&G agreed to sell its SpinBrush battery-operated electric toothbrush business to Church & Dwight. It also divested Gillette's oral-care toothpaste line, Rembrandt. The deodorant brands Right Guard, Soft & Dri, and Dry Idea were sold to Dial Corporation. The companies officially merged on October 1, 2005. In 2008, P&G branched into the record business with its sponsorship of Tag Records, as an endorsement for TAG Body Spray. P&G's dominance in many categories of consumer products makes its brand management decisions worthy of study.[9] For example, P&G's corporate strategists must account for the likelihood of one of their products cannibalizing the sales of another. On August 24, 2009, the Irish-based pharmaceutical company Warner Chilcott announced they had bought P&G's prescription-drug business for $3.1 billion.

Procter & Gamble products in India:

Fabric Care Procter & Gamble has two of its world-leading detergents Tide and Ariel, in India to cater to the main concerns of the Indian households, namely, outstanding whiteness and stain -removal. y Ariel Front-O-Mat y Ariel 2 Fragrances y Tide Detergent y Tide Bar Hair Care P&G s Beauty Business is over US$ 10 Billion in Global Sales, making it one of the world s largest beauty companies. The P&G beauty business sells more than 50 different beauty brands including Pantene, Olay, SK-II, Max Factor, Cover Girl, Joy, Hugo Boss, Herbal Essences and Clairol Nice n Easy. In India, P&G s beauty care business comprises of Pantene, the world s largest selling shampoo, Head & Shoulders, the world s No. 1 Anti-dandruff shampoo and Rejoice Asia s No. 1 Shampoo. Procter & Gamble is committed to making every day in the lives of its consumers better through the superior quality of its products and services. y Pantene Pro V y Head & Shoulders y Rejoice Baby Care y Pampers

CULTURE AT P&G
At P&G, it s about integrity and character. It s about building trust by being open, honest, straightforward and candid with each other, our customers, consumers and business partners. They do what they say, and they say what they mean. This is what sets P&G and P&G people apart.. As a build from within organization, they see 95% of our people start at entry level and then progress and prosper throughout the organization. This not only creates many wonderful opportunities to grow and advance, it creates a special camaraderie among fellow P&Gers, many of whom came up through the ranks together. This also explains why their hiring process is so rigorous. They are not just offering a job, we expect you to grow into one of our future leaders. From day one you ll help develop or support exciting brands you know while working on projects that have a direct impact on our global, $79 billion business. To us, diversity covers a broad range of personal attributes and characteristics, such as race, sex, age, cultural heritage, personal background and sexual orientation. By sharing our unique selves, our knowledge and our expertise, and by continually stretching our wings to embrace something new and unfamiliar, we color our world and bring it to life. And isn t that what diversity should be about? Creating a world where we can appreciate each other for who we are? Shouldn t diversity be about learning from each other and growing stronger as a result of that? We think so. To bring this to life, we have 7 Affinity Networks. Our Affinity Network is a formally organized and sponsored network of employees that share a common non-job related characteristic with a firm business connection. The intention of our affinity networks is to promote an open, welcoming and inclusive culture in the company that provides respect and advancement opportunities for everyone, while increasing the company s image and reputation. We have 7 North America Corporate Affinity Networks (with smaller groups supported regionally): African American Leadership Network Asian Pacific American Leadership Team Corporate Women s Leadership Team Gay, Lesbian, Bisexual and Transgender Employees (GaBLE) Hispanic Leadership Team People with Disabilities Native American Indian Leadership Team Each network is sponsored by a corporate executive or Champion. The organizations are totally voluntary and extracurricular to the everyday work that all P&Gers do. Several of the networks also have regional and site-specific sub groups in order to manage local issues and engage their employees on a more immediate level. There are four main focus areas that each group makes exemplary efforts for in regards to their respective audiences: Support of Membership/Leadership Development Recruitment, Retention and Development Influencing Leadership Improving the Culture/Environment The U.S. Diversity Recruiting Team works diligently with each network to address any issues. Every effort is made to have consistent and continuous representation in the leadership networks in order to provide the best sourcing pipeline available, as well as, to maintain and adequately represent each group. We do our best to support any initiatives that will make our organizational environment more inclusive, encouraging candidates of all affinities to apply to our roles. Culture Change Organization 2005 also aims at changing P&G's culture from a conservative, slow-moving, bureaucratic behemoth to that of a modern, fast-moving, Internet-savvy organisation. P&G wants to make faster and better decisions, cut red tape, wring costs out of systems and procedures, fuel

innovation, set more aggressive sales goals and nearly double its revenue. The catalyst for all this change is IT. In addition, P&G wants to abandon its legacy of secrecy. Its new spirit of openness is most evident on the Internet. A year ago, it was a stodgy, nondescript site where no one other than investors or job seekers had any reason to go to. Today, you see a consumer-friendly portal with loads of information about P&G products. So far, Organization 2005 has had little to show. However, P&G stresses the company will pick the fruits of the ambitious restructuring plan in the near future. "This restructuring," former CEO Millen explained, "will ensure that P&G is well placed to address the issues facing manufacturers, retailers and wholesalers at the outset of the 21st century. Examples of these issues are the internationalisation and consolidation of retailing, consumer loyalty and retention, category management, the potential effects of the Euro currency and dramatic advances in information technology." New Alliances One of P&G's new strategies is linking up with other companies to extract as much value from its brands as possible. Last February (2001) Coke and P&G announced a $4bn [2,77bn] alliance. The alliance would involve the union of some 40 consumer products (including Sunny Delight, Pringles and Minute Maid) under the umbrella of a Coke-P&G joint venture. P&G was hoping Coke s farreaching distribution network could give the company a boost. P&G s renowned R&D capacities were attractive to Coke. Eight months later the consumer goods behemoths called the wedding off. A spokesman for Coke said: "After many months of due diligence with Procter & Gamble, we felt that we could unlock the value of our brands more effectively and profitably by retaining full control of them." However, P&G successfully tied up with chewing gum giant the Wrigley Company. The deal will allow P&G to cash in on the global gum, mint, and breath-freshener market. This is bigger than the toothpaste market and equal in size to the shampoo or skincare sectors. We will soon be able to sweeten our mouths with Crest gum, Crest mints and Crest breath freshener , the Guardian reports [. P&G has recently announced it will sell the Jif and Crisco brands in a bid to get rid of underperforming brands. P&G and J.M. Smucker Co., which makes a wide variety of jams, jellies and other foods, is acquiring the Jif peanut butter and Crisco cooking oil brands from P&G for $1 billion in stock

CEO of Procter & Gamble Alan George "A.G." Lafley (born June 13, 1947) is the former Chairman of the Board, President and Chief Executive Officer of Procter & Gamble, retiring from the company in 2010. Lafley is largely credited for turning around P&G during his tenure under the mantra Consumer is Boss. During his leadership, sales doubled, profits quadrupled, and P&G s market value increased by more than $100 billion dollars. Lafley graduated from Fenwick High School in Oak Park, Illinois, to earn an A.B. from Hamilton College in 1969. In 1970, after beginning a doctoral program, he took a commission with the U.S. Navy as a supply officer during the Vietnam War. Afterwards, he studied at Harvard Business School, receiving hisM.B.A. in 1977. He joined P&G upon his graduation, where he worked until his retirement. He is credited with revitalizing the company by focusing on P&G s billion dollar brands like Crest, Tide, and Pampers, But he also brought in several new brands, like Swiffer and Febreze, by merging P&G s internal resources with outside open innovation. Lafley is a member of the General Electric board of directors and was named the chairman of Hamilton's Board of Trustees in December 2007. He was awarded "CEO of the Year 2006" by Chief Executive Magazine and the Peter G. Peterson Award for Business Statesmanship presented by the CED in 2009. Lafley has also been announced as recipient of the 2010 Edison Achievement Award, an annual award recognizing leaders that have

made significant and lasting contributions to innovation, marketing and human-centered design throughout their careers. Thinking of CEO As you read about Procter & Gamble s social system and innovation culture,you may be thinking, There are some good ideas here for someone else. In my shop, we can barely keep the trains running on time. How am I sup-posed to do all this? Leaders of innovation take their game to another level through a particular set of practices: Establish clear criteria and don t hesitate to shift resources. Great innovation leaders keep a sharp eye on their short-term and long-term business goals and think through how and when various innovation projects will contribute to them. They deter-mine which projects to accelerate or cut on the basis of resource consumption as well as market potential. They don t hesitate to pull the plug on projects that don t clear the hurdles or that simply consume more time or money than the business can afford. Concentrate on possibility. The process of innovation is inherently uncertain. Innovation leaders live with ambiguity as ideas are shaped and re imagined; they don t let ideas die before they re fully formed or under-stood. Once a project is selected, these leaders inspire the team to keep going even as they encounter obstacles and go through iterations. At the same time, leaders are vigilant for indications that the project s market potential has diminished. Cross boundaries and help others do the same. Innovation becomes riskier when there are gulfs between, for example, technologists, marketing people , and those responsible for commercializing a new product. Inevitably, trade-offs will be required among these groups. Leaders thus must ensure that communication channels are open from the start and that facts and sound judgment prevail. They must be prepared to break dead-locks and resolve conflicts by keeping individuals focused on their common goal: the customer. Reward effort and learning. Failure is a fact of life for companies that pursue innovation seriously, and a leader s response to it has a huge effect on company culture and there-fore on future projects. Innovation leaders know that failures represent opportunities to learn. They keep people energized by publicly recognizing their earnest efforts and willingness to venture from the tried and true

Is he a threat to the people or is he a friend to the people? CEO must be friend to the people, for this he must be a good listener and leader. As leaders, we re all in danger of falling into the same trap. The higher up we move on the organizational chart, the more easily we can get cut off from the rest of the organization. Meetings with executive teams and governing boards fill up much of our schedule, and travel eats into it even more. When we do get a moment s peace, we re tempted to check the next thing off our to-do list rather than walk the halls to find out what s going on. In the end, precious little time remains to seek out the thoughts of customers or employees who are farther down the chain of command. Paradoxically and dangerously, the sheer time demands of serving in a leadership role can undermine our overall effectiveness as leaders. Moreover, when we do turn our attention as executives to communication, we sometimes make things even worse. In my own experience, which includes observing clients all over the world, it s clear that most organizations are very uneven in their communications. They re often good at the top. Their executive and senior management teams understand the CEO s vision and strategy. But the deeper you dive into the organization, the more muddled things get. Middle managers and front-line employees often have no idea how to connect their daily work to the larger strategy. Frequently they don t even know what the strategy is. Does that sound familiar? We shouldn t blame them for disregarding our occasional memos about adding value and synergies and thinking outside the box. It s our fault as leaders when we don t communicate in meaningful terms that make sense throughout the entire organization.

Cultural Challenges
The increase in numbers of long-term international business assignments has led employers to look at family relocation as an important element of a successful international assignment. Successful family relocation is increasingly recognised as a key factor in international assignments for two reasons. Firstly, one of the most common causes of failed international assignments is the employee s partner s unhappiness in the new location. Secondly, employees who relocate with their families usually feel more secure in their new environment and are less inclined to travel back to their native country as frequently as those whose families stay behind which saves the organisation time and money. Sending employees and their families abroad can present a huge risk to international organisations. If the family members fail to adjust and fit in to their new cultural environment, the company risks huge financial costs. Some estimates put the cost to an organisation of a failed international assignment at $250,000 or more. Providing cross-cultural training for relocation programmes to the international assignee s family can help prevent this direct cost to the organisation and lessen the emotional strain of the relocation on the partner and children. Participating in a Living and Working in Saudi Arabia cultural awareness training course, for example, helps families moving to Saudi Arabia anticipate any potential problems they might have in adjusting to the cultural differences while it also equips them with strategies to ensure they maximise their relocation. Training the family of international assignees provides a unique opportunity for them to experience the target culture as a family and find ways to help each other through any problems during their adjustment to their new life and surroundings. Ensuring the whole family is happy and well adjusted will drastically improve the chances of a successful international assignment and save the organisation time and money.

Re-engineering to face cultural challenges

Company's cultural legacy was the rule to conduct almost all its recruitments on campuses. Resumes were scanned for promising candidates, including those students who had not signed up for interviews. Top officials of the company went for pre-placement talks at colleges. Strong relationships were developed with college placement offices and faculty. The company hired students for various functions such as finance, manufacturing, marketing, research and sales. It hired from all the major universities in general, and from the big business schools such as Harvard, Wharton, Stanford and North western in particular. P&G conducted written tests to evaluate the applicants' aptitude for leadership and problem solving. The company conducted an in-house test (known as the M Test) that measured the candidate's interpretative and reasoning skills. Studies made by P&G showed a strong positive correlation between high scores on the M Test and success on the job. P&G's interviewing process was purposeful and behavior-based. The candidate's past experience and accomplishments were examined for leadership, problem solving capabilities, initiative and ability to work with others. P&G's manpower policies emphasized giving new recruits early responsibility and charted out a rapid career path. New recruits were encouraged to build long-term careers with the company. The company took several measures to develop its employees. Superiors were encouraged to train and help in the development of their subordinates. The vehicle for this process, used around the world, was the Work and Development Planning System (W&DP). The W&DP had four components - the previous year's plan versus the results; areas for further

growth and development; near-term and long-term career interests; and a development and training plan for the year ahead. The W&DPs were reviewed annually and updated regularly. In addition to the formal review and updates of the W&DPs, superiors were encouraged to supplement the program with informal, ongoing coaching. P&G has been known for its secrecy rather than openness. Changing this culture to one that welcomes and encourages a more open approach to innovation and doingbusiness is a significant challenge that we are addressing in a number of ways. Steps we have taken include: Establishing clear leadership from the very top of the organisation; Creating a vanguard of people charged with kick-starting activities that bring new opportunities into the organisation from outside P&G; Developing training courses to help disseminate the necessary skills across increasing numbers within the organisation; Acquiring and developing KM tools by appointing staff to increase the effectiveness of this effort. Challenge 1: Knowing who does what Internally When Procter & Gamble was a small company, all that was required to facilitate communication were coffee machines and canteens. In a business that now features offices around the globe we have had to modernise and scale these efforts. With the help of the internet we have created a virtual lunch table through the Innovation Net website for our global technical community of researchers to trade information and make connections across the company. Innovation Net has a mammoth target audience of 18,000 innovators across our R&D, Engineering, Market Research, Purchasing and Patent divisions. Sixty per cent of users visit the website several times a week, with over 1m pages accessed each month. The site hosts one system that I believe deserves closer attention. Each member of R&D within Procter & Gamble produces a one-page monthly Smart Learning Report that documents their progress. Individuals load their reports into a central repository making them fully accessible and searchable by everybody in the R&D function. It is also possible for individuals to keep abreast of developments in their fields of interest by subscribing to certain knowledge areas. Any new reports on their chosen subjects are automatically pushed to the subscriber s desk. To support this we trialled technology that made it possible to rate the relevance of content to readers needs as a way of helping the computer profile readers interests and independently recommend content to them. However, this functionality was not successful and has been discontinued, which is a good example of the need to continually respond to user feedback if new knowledge systems are to be most productive. Externally The subscription-based feature described above is also available to those searching the internet via certain meta-search engines. People with a need or interest in keeping aware of external developments have access to the search engines on request. We are also developing in -house solutions and experimenting with commercially available software to help manage these large quantities of information where necessary. Talent Finder is a separate system under internal development. Like the Smart Learning Report system, Talent Finder places the onus for maintenance on the individual user. We will soon expect all R&D employees to log and rate all the contacts (internal and external) that they solicit help from when solving particular problems. If successful, this system will provide the company with a huge, global electronic address book of useful contact information that is fully searchable by required expertise. Challenge 2: Soliciting help Internally We seek to bring together technical expertise (regardless of business unit) through the formation of communities of practice (CoPs). We have 20 such CoPs with membership ranging from 60 2,500 people. Each CoP represents a shared technical expertise across P&G, and has a budget and effective leadership to promote cross-fertilisation and diffusion of knowledge. The activities CoPs undertake include active problem solving via e-mail-based conferences, knowledge sharing via live seminars and websites, and providing recognition for expert practitioners. Each community of

practice has a budget funded in part by the CTO to cover basic operational needs, which is supplemented as necessary by the R&D manager or sponsor, or by attendance fees at CoPs training events and symposia. A recent survey of CoPs members indicated that these communities are adding value. Almost 80 per cent of members say that their participation in communities has helped to increase their efficiency and effectiveness. If accurate, this conservatively translates to $120m in productivity gains. However there is some way to go if similar gains are to be felt across the organisation as only 69 per cent of employees are aware of the CoPs network and only 38 per cent are members. Ask Me is a tool providing access to CoPs members. It enables any researcher to post questions, which are steered to the appropriate problem solvers from across the communities for advice. Researchers then form a searching knowledge base. Externally P&G is pioneering the use of managed electronic gateways to find possible solution providers that are external to the company. Ninesigma was founded three years ago to match problem owners with possible solution providers. Ninesigma charges a fee for defining, listing and pushing a problem to relevant solution providers within its network of over 40,000 members. If a potential solver believes they have a solution they can provide a summary of the recommended approach. If accepted by the company looking for the solution, they are paid for demonstrating proof of principle and any subsequent work agreed between the two parties. Innocentive is a spin-off from Eli Lilly and provides a similar service to Ninesigma but currently focuses on chemical synthesis issues. Problems are posted and rewards provided for paper and/or practical demonstration of solutions. The success rate from using these gateways to solve problems has been positive with P&G followingup on 40 per cent of the suggested solutions. Challenge 3: New opportunities I have described our activities in accessing technology, and products and business models from outside the company. These initiatives raise a number of specific challenges associated with finding, introducing and evaluating ideas that KM can help address. Finding product opportunities We look for products that are ideally already in the marketplace, have a strong strategic fit with our current areas of business interest and demonstrate the ability to grow into major profit contributors. We look for these opportunities in local markets, small to medium-sized enterprises (SMEs), incubators and from individual inventors. Electronic networks have been very helpful in this endeavour. Ideally, the networks allow us to post our interests and reach a significant number of possible solution providers. We have enjoyed some success in reaching European SMEs through the EU-sponsored Innovation Relay Network. The network was set up in 1995 to stimulate trans-national technology transfer and promote innovation services across Europe. It is the world s largest technology-transfer network with 71 centres across 33 European countries. Around 70,000 100,000 SMEs use the network to find technology transfers to help their businesses. Access to individual inventors and start-up businesses, for the time being at least, tends to be labour intensive, but is becoming more organised as associations and self-help clubs are established, which we help and encourage. P&G also maintains a close eye on local markets through on-the-ground intelligence and marketed products, such as Mintel s Global New Product Database. Introducing and evaluating opportunities We encourage individuals to enter all interesting discoveries into an internal electronic catalogue. We expect new-business development managers to routinely access the database as they seek to maintain and develop their innovation pipelines. To communicate opportunities we use a range of vehicles across the company. Similar to the venture-capital world, our ability to get the suggested ideas off the ground is heavily influenced by the quality of the pitch. Having access to appropriate knowledge when developing the pitch is important to ensure the process runs smoothly. KM systems enable us to rapidly interrogate

and make sense of patent databases and the market data relevant to these new propositions, reinforcing our reasons to accept or reject opportunities. Finally, we have experimented with electronic scoring systems for the evaluation of incoming opportunities. Such formal systems may at some point in the future prove of value when selecting ideas. However today, where much of the discussion surrounding these ideas is conducted face to face, this somewhat formal system has not been particularly helpful. A well managed, electronically enabled stage-gate process currently controls the progression of promising and accepted opportunities to in-market evaluation and commercialisation. We believe knowledge-management processes are hugely important to the success of our Open Innovation strategy at Procter & Gamble. Knowledge management holds the potential to increase the efficiency and effectiveness of our operations. However, preceding the development of KM processes we need to create and nurture an organisational culture that is always looking externally for solutions and is proudly championing the adoption of ideas found elsewhere. We have not yet reached our goal with respect to either, however, the journey is well under way and we are already witnessing significant progress.