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12/2/2010
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Procter & Gamble CIO Filippo Passerini: 2010 Chief Of The Year

How does Filippo Passerini and his team hope to digitize the company end to end? Not by playing it safe.

Outsourcing And Unrest

Between 1985 and 1999, Procter & Gamble entered 55 new markets, leading to considerable duplication of back-office services, including IT ones. By 1999, the company had more than 100 data centers. "We needed to run in a different way," Passerini says.

Outsourcing was a key piece of the strategy. In just 11 months, Passerini outsourced $4.2 billion in P&G spending. Hewlett-Packard got $3 billion for IT operations. IBM took over many HR operations, and Jones Lang Lasalle the facilities management.

At that time, about 2,000 P&G employees moved over to become HP employees. The company went from more than 100 data centers down to three data centers, in the U.S., Belgium, and Singapore, and three service centers, in the U.S., U.K., and Philippines. The idea was that the remaining P&G global business services team--7,000 in all, of which 3,200 are in technology--would focus not on keeping the lights on, but on business innovation.

But the speed and the scope of that transition were brutal on employees. Uncertainty reigned. Morale in Passerini's organization, as measured by employee satisfaction surveys, sunk to the bottom quartile in the company.

IT was renamed information and decision solutions. But a name change without real change will boost only mockery, not morale.

At P&G, one of the most respected roles is to be a brand manager, the individual who leads product and marketing strategy for one of the world's iconic consumer brands. Many a future CEO has passed through P&G's brand and product ranks--think eBay's Meg Whitman, Microsoft's Steve Ballmer, GE's Jeffrey Immelt. "It's very clear that within P&G being a brand manager is very cool," Passerini says.

So he tapped into that culture for global services, naming individuals as "service managers." The title came with clear responsibilities: Set internal prices, monitor quality, and develop innovations. They must also market their services, as seen in posters in Passerini's office touting new videoconferencing and collaboration offerings. "We manage it like we would the launch of a new brand, a new product," he says.

Passerini also embedded IT people in various business units and made them accountable for delivering business results, from saving money to speeding products to market.

FROM THE TOP
P&G CEO Bob McDonald's shareholder letter talks technology
On Digitizing P&G: "With digitization, our goal is to standardize, automate and integrate systems and data so we can create a real-time operating and decision-making environment. We want P&G to be the most technology- enabled company in the world."
On Real-Time Data: "We are targeting a 20% to 25% reduction in some spending areas and we are looking for a sevenfold increase in realtime data. By getting the right data to the right decision makers at the right time, we can become increasingly efficient and productive"

Employee morale in Passerini's group edged back up; now it's in the top quartile of the company. But Passerini still awaits the employee survey each spring with high anticipation. "If people do work that is relevant, that they feel is making an impact on the business, people will respond very well, so morale will go up," he says. Morale, he adds, "is what glues the whole thing together."

Passerini finds it a bit amusing how CIOs constantly ponder "existential" questions about their role--what is my purpose, what will my future be, what is my mission in life?--that no other CXOs would ever ask. "Don't talk about it, just do the work," he says with a laugh. To him, IT professionals are "uniquely qualified" to have business leadership roles, he says, because they have front-line knowledge of business processes and the technology that enables so much of a business. But they need the right perspective. "We believe technology will always be a commodity fundamentally, and information and decisions is what we stand for and what we need to drive," he says.

To get there, Passerini thinks the IT team must do two key things: Provide tools and training to help employees collaborate more effectively, both inside and outside the company; and drive business transformation.

Business transformation doesn't always come naturally to IT. It should, given the IT organization's process knowledge and its place in every part of the company. But IT tends to get comfortable in "enabling" roles--tell us what you need and we'll provide the options. Even more so, Passerini says, IT likes to think in binary options: We can deliver that quality level or we can lower costs; we can provide additional services or we can deliver more quickly.

To that point, Passerini recalls the time he spent in a P&G line management role. He doesn't remember any "or" options. The pressure was for higher profit and higher market share, better quality and lower costs. "We brought this mind-set to IT," Passerini says. "It's and, and, and, and."

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