Proctor & Gamble : Organization 2005 Program

Founded in 1837 by William Procter, a British citizen and James Gamble, a US-based Irish soap maker
and industrialist. The company first sold candles.
Today 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).
However, P&G had not been very successful with some major crisis in 2000. ‘Annual sales growth had
been slowing over the last few years & company stumbled badly in 2000 missing analysts’ profit
expectations and causing its famously reliable stock to plummet from $103 in January 2000 to $64 in
June 2001.
In order to accelerate growth, P&G's President and CEO, Durk Jager (Jager) officially launched
the Organization 2005 program in July 1999. Organization 2005 was a six-year long organizational
restructuring exercise which included the standardization of
-work processes to expedite growth
-revamping the organizational culture in order to embrace change
-reduction in hierarchies to enable faster decision-making
-retrenchment of employees to cut costs.

Analysts believed that Jager concentrated more on developing new products rather than on P&G's well-
established brands he did too many things in too short a time. After a brief stint of 17 months, Jager had
to quit his post &In June 2000, Alan George Lafley (Lafley) took over as the new President & CEO of
P&G. Lafley announced he would improve operations and profitability and rebuild the management
team & the program was then carried out under his leadership.
The goal of the program was to improve P&G's competitive position and generate operating efficiencies
through more ambitious goals, nurturing greater innovation and reducing time-to-market. This was to
be accomplished by substantially redesigning the company's organizational structure, work processes,
culture and pay structures. Organization 2005 envisaged the transformation of P&G from a
geographically based organizational structure to one based on global product lines. The program had
five key elements:

1) Global Business Units (GBU): P&G moved from four business units based on geographical
regions to seven GBUs based on global product lines.
2) Market Development Organizations (MDO): established eight MDO regions to tailor global
marketing programs to local markets
3) Global Business Services (GBS): Overhead functions such as HR, Accounting, Order
Management, and Information Technology were merged to one corporate organization
4) Corporate Functions: Most of the corporate staff was transferred to one of the new business
units.
5) Company Culture: Redesigned reward systems and training programs to improve result
orientation amongst employees.
 
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