P&G Moves to Streamline Its Structure

Date : 09/11/2018 @ 09:20
Source : Dow Jones News
Stock : Procter & Gamble Company (The) (PG)
Quote : 93.47  0.0 (0.00%) @ 20:11
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P&G Moves to Streamline Its Structure

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By Aisha Al-Muslim 

Procter & Gamble Co. said it would revamp its management structure, shrinking the number of business units from 10 to six and giving the heads of those products control over regional sales teams as well as some functions previously run by headquarters.

The new organization, which will take effect next July, is part of a continuing effort by the maker of Pampers diapers and Crest toothpaste to streamline its operations. The company has been under pressure to improve its performance from activist Trian Fund Management, which waged a proxy fight last year and whose co-founder, Nelson Peltz, now sits on the P&G board.

"There is a need for greater agility," Chief Executive David Taylor said Thursday in an interview. "Frankly, the volatility we see in many parts of the world -- the currency volatility, the commodity volatility and just the level of competitive disruption -- has increased meaningfully the speed of change."

Last month, P&G reported its strongest quarterly sales gains in five years, snapping a stretch of lackluster growth. The gains were a signal that the consumer products giant may be entering a period of more robust growth after a yearslong struggle to adapt to rising competition, higher costs and a consumer shift toward smaller brands.

How P&G should be organized has long been a debate within the more than 180-year-old giant, which employs roughly 92,000 people around the globe. Before Mr. Peltz's campaign, the company had a matrix management structure with executives responsible for key brands and others responsible for key geographies.

Mr. Taylor, who took over in late 2015, previously reorganized the company to create 10 global business units, each with a president responsible for a product category such as baby care or oral care. But he kept six geographic sales and distribution teams, each led by a president.

Starting in July, P&G said Thursday that it will have six business units and each will have their own CEO who will report to Mr. Taylor. The CEOs of the business units are the same executives currently overseeing those product categories.

Four unit presidents will now report up to these unit CEOs and the role of the sales presidents will be eliminated. A spokesman said no executives were leaving as part of the reorganization.

Each unit CEO will be responsible for direct sales, product innovation, and supply chains for the 10 largest geographic markets, including the U.S., China, Russia and Germany. Those markets account for about 80% of the company's sales.

The smaller markets such as Latin America, Central Europe and Central Asia will be organized into a separate unit, which will be overseen by the company's finance chief Jon Moeller, who will add the title of chief operating officer.

The chunk of those smaller markets have "volatile countries with currency and geopolitical dynamics," Mr. Taylor said.

The company said it would reduce its corporate functions, with about 60% of corporate work shifting to the new business units. But P&G, which will retain its corporate research and development group, declined to say how many jobs could be affected by the latest restructuring. In the past, the company has cut thousands of jobs without making an announcement.

When asked if there will be job cuts, Mr. Taylor said, "The business leaders will decide over time if changes need to be made to adjust to market conditions and opportunities."

The company cut 3,000 jobs globally in the fiscal year that ended in June. It has reduced its workforce by 25% in the past five years, leaving 92,000 employees world-wide. The company shrunk significantly in 2016 when Mr. Taylor completed the sale of Clairol, CoverGirl and most of its beauty brands to Coty Inc. for $12 billion.

Despite strong growth in the September quarter, executives sought to tamp down expectations and stuck with their full-year forecast for organic sales to rise 2% to 3%. At its investor day Thursday, P&G didn't update its financial targets.

 

(END) Dow Jones Newswires

November 08, 2018 17:05 ET (22:05 GMT)

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