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October 25, 1999

Culture Change:
Lessons From A Cultural Revolution
Procter & Gamble is looking to IT to change its entrenched culture--and vice versa

By Marianne Kolbasuk McGee

Culture Change:

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The Big Picture: P&G's SourceOne Global Data Warehouse

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rocter & Gamble Co. has always been an ambitious company. The 162-year-old, $38 billion consumer-goods giant, at one point best known as the company whose sole sponsorship of daily TV dramas led to the term "soap operas," has traditionally aimed to double its sales every decade and has largely succeeded--but not lately. Annual sales growth has been slowing over the last few years, from 5% in 1996 to 2.6% this year.

That's why this summer, new CEO Durk Jager kicked off Organization 2005, his plan to revitalize the company's stagnant growth rate, innovate new and improved products, and stretch P&G's goals and expectations further than ever. As ambitious as anything the company has undertaken, Organization 2005 includes cutting 15,000 workers from P&G's worldwide head count of 110,000, and reorganizing the company's corporate structure from four geographic business units to seven global business units based on product categories.

Organization 2005 aims to do nothing less than change the Cincinnati company's culture from a conservative, slow-moving, bureaucratic behemoth to that of a modern, fast-moving, Internet-savvy organization. Procter & Gamble 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. Says CIO Todd Garrett: "We've got to change, or we won't be around in the next 160 years."

The catalyst for all this change is IT. Garrett says the company's IT spending--about $1 billion annually--is increasing "faster than sales growth." Organization 2005 incorporates a laundry list of IT initiatives, including collaborative technology to facilitate planning and marketing, business-to-consumer E-commerce, Web-enabling P&G's supply chain, and a data standards and data warehouse project that will deliver timely data to desktops worldwide.

Organization 2005 also represents a radical rethinking of IT within the company. For example, to integrate IT better into the new business structure, the company decentralized its 3,600-person IT department so that 97% of those employees now work in P&G's individual product, market, and business teams, or are part of global business services, which supports shared services such as infrastructure to P&G units. The remaining 3% are still in corporate IT, says Garrett.

Todd Garrett
Photo by Jim Callaway
"We had been focused on functional expertise, like IT or financials," says John Roeder, VP of corporate IT. "The new structure is intended to make us a multiple-disciplined organization, to create more cross-sharing of information. That's a cultural change."

"Our IT people are now embedded in the organization," says Steve David, P&G's global customer business development officer. Global Customer Business Development is the new moniker for P&G's sales organization. "Our teams have IT people working side-by-side with the businesspeople. The IT people are helping build the business with the salespeople."

In addition, Procter & Gamble has 54 "change agents" working across its seven global business units, most of whom are IT people. The agents are leading cultural and business change by helping teams work together more effectively through greater use of IT, in particular real-time collaboration tools.

Analysts applaud the company's proactive stance. "Procter & Gamble's desire to change isn't a sign of weakness, but one of strength," says Mel Hughes, a financial analyst at Stein, Roe & Farnham, an investment firm that follows P&G. "Successful companies can't sit still. They must continually reinvent themselves in order to stay competitive in an ever-changing environment."

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