Procter & Gamble : Organization 2005 and Beyond



Authors: Ravi Madapati,
Faculty Member,
ICMR (IBS Center for Management Research).

In the late 1990s, growth was hard to come by for P&G. In an attempt to spur growth in mature markets, P&G CEO Durk Jager initiated the Organization 2005 program amidst high expectations. But, he fumbled mid-way. Lafley, who took over the mantle seems to be on the right path but it remains to be seen whether his moves will pay off in the long run.

Procter & Gamble's (P&G) Organization 2005 was conceived as a set of far-reaching initiatives to accelerate the company's growth. It involved comprehensive changes in organizational structure, work processes and culture to make employees stretch themselves and speed up innovation. Organization 2005 also sought to leverage P&G's global presence. The program was intended to boost sales and profits by introducing an array of new products, by closing plants and by eliminating jobs. This initiative, spearheaded by P&G CEO Durk Jager (Jager) who became CEO in 1999, was to be a 6-year, $1.9 bn effort. Jager believed that rapid restructuring was necessary to create new growth opportunities for P&G. While launching the program he had expressed his optimism in an address to analysts1:

"Success is defined first and foremost in terms of growth. Unless a company grows at an acceptable rate- year in, year out- it can't sustain its organization. Success also means growing profitably. Otherwise, it can't produce the resources and capability to invest, to take risks, seizing new opportunities. The program we lay out here today is designed to deliver that growth, at a consistently higher level. Just come back in a couple of years and take a look. I believe that the best way to accelerate growth is to innovate bigger and move faster consistently and across the entire company".

Jager indicated that the cultural changes he planned to introduce would create an environment that produced bolder, more stretching goals and plans, bigger innovations and greater speed. As part of the exercise, Jager redesigned the reward system to strengthen the link between executive compensation and results.

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1] P&G press release: Organization 2005 Drive For Accelerated Growth Enters Next Phase, June 9,1999.