Introduction
In an effort to evaluate economic aspects and concepts in relation to an organization setting, this term paper focuses on a popular consumer company Proctor and Gamble, (P&G), namely, on its organizational structure, employee compensation package, job design and dimension, as well as recommendations made in an effort to improve its operations.
Company description
Proctor and Gamble, commonly referred to as P&G is a giant consumer good producer whose offices are distributed all over the world. What initially was a business partnership of its founders Proctor and Gamble, P&G has become what it is today as a result of excellent and aggressive branding.
The company has an impressive and extensive product line, which ranges from pet foods, cleaning agents, personal care products and until recently, foods and beverages, making it one of the largest consumer goods companies in the world. This position has been complemented further upon the acquisitions the company has made overtime in a bid to diversify its product line. This has culminated to the substantial increase in profits.
The company restructured its operations from its former global structure to embracing the matrix structure that has resulted into the categorization of the structure to include two Global Business Units with each unit, further divided into Business Segments, namely, beauty segment, grooming segment, health care segment, snacks and pet care segment, fabric care, home care segment, baby care and family home care segment.
As a result of embracing this structure, the company sales levels have soared as a result of faster decision making, which is made possible due to the decentralization aspect brought about by the structure.
P&G has a leading position in many areas of consumer products, making its brand decision desirable to many firms. Good leadership, coupled with a combined team effort from all employees in all P&G’s subsidiaries have strengthened its stance in the global arena, enabling the company to survive and thrive in an increasingly competitive global market for over 100 years.
This has led to the fact that the company has received numerous honors, such as the Fortune magazine award of the Global Top companies for leaders and also awarded it the fifth place among the most popular companies.
According to Chief Executive Magazine, P&G is “the best overall company for leadership development as depicted in its list of the 40 best firms for leaders” (Daft, 2010). These achievements have not come easy as hard work and dedication have been the driving forces of the company’s success.
Organizational structure
An organizational structure, according to Daft (2010) is defined as a diagrammatic and architectural representation of a firm’s processes and procedures. In other words, it refers to an organizational hierarchy of people and how information flows within the organization.
Taking due consideration of this definition, Proctor and Gamble has adopted a matrix organizational structure. Being a multinational firm with widespread networks all over the world, the structure is most appropriate for handling global operations. This has seen the firm decentralize its operations, enabling it to open up the regional front in areas it represents by means of appointing regional directors.
The directors handle activities from the divisions available in that specific region and reports to the Headquarters. In this case, the firm has needs decentralization so the regional agencies could enjoy a great deal of autonomy in decision making.
It has proved beneficial as each market is unique and different from the other one as each serves consumers who are themselves different, hence have different tastes and preferences. In a bid to address this issue and serve their customers effectively by responding to their needs, the matrix structure becomes most appropriate.
This is a deviation from the global structure the firm had adopted as part of its global strategy.
With this structure, it was characterized by centralized decision making, coordination and control at the level of key functional activities, such as research and development, operations and marketing, thereby seeing agencies receiving directives via direct communication from the Headquarters. This goes, however, against the advancements made possible due to the courtesy of the matrix structure.
The matrix structure also makes the global dimension be represented by the executive in charge of the worldwide product division while the local dimension is in the hands of the business units in the countries. As part of its marketing strategy, P&G has 7 Market Development Organizations (MDOs), responsible for marketing products in the global regions where its presence is felt (Company 2013).
Agency problem
Lasher (2010) defines an agency problem as a conflict of interest, arising when people (agents) entrusted to look after the interests of others (principals) use the authority or power for their own benefit instead. In this case, the agent’s interest is self-motivated and overrides the one of the principals’, which should not be the case.
This problem, also referred to as principal-agent problem, is most prevalent in organizations that offer a great deal of autonomy in decision making, enabling the trustees of the shareholders to take advantage of their position to work activities in their own favor.
P&G has not avoided this issue as there have been reports of the manifestation of the agency problem in the company. This has taken the form of price fixing, in other words, the establishing of products’ prices or services, rather than allowing it to be determined naturally through free market forces. P&G in collaboration with Unilever, another consumer goods company, established a price fixing cartel in Europe.
This led to P&G, incurring a fine of $ 456.3 million. This adversely affected the share prices of its stocks, thereby leading to shareholders, losing the value of their stocks as well as affecting the reputation of the company which suffered a great blow. In this case, the directors and managers compromised the shareholders’ interests, by engaging in illegal business for unsustainable high sales levels.
Directors, managers and employees of companies are supposed to use their delegated authority to maximize the total financial returns from the business to its owners (Lasher 2010). Therefore, P&G acted contrary to its duty in regards to its shareholders.
The main reason for the occurrence of the problem was due to the urge to create artificial prices that would translate to higher profits for the firm at the expense of the consumer. Upon the exposure of this illegal activity, the firm could suffer immensely as a result of fines imposed on it, as well as loss in investor confidence.
In a bid to correct the above situation, Lasher (2010) proposes the following measures the firm could adopt:
Instituting measures, such as tough screening processes. The firm needs to put in place more restrictions that will see the decisions made by individuals scrutinized in order to promote transparency as well as accountability. This will help curb the occurrence of the problem.
Introducing watchdog bodies within the firm. These bodies may take the form of committees, such as a financial committee, procurement committee, etc.
This form of transparency of operations will instill discipline in employees as they will be wary of being exposed as a result of illegal activities, such as the occurrence of the agency problem. These bodies or committees should be comprised of independent members who do not have vested interests in the firm, as well as individuals of high levels of integrity and professionalism.
Introducing incentives for good behavior and punishments for bad behavior. In an effort to award good behavior, the firm could introduce performance-based compensation. This will motivate individuals to work hard in the right way in order to enjoy defined compensation perks.
Bad behavior could draw punishments in the form of threats of demotion or even result to firing some concerned individuals. This will make individuals conscious of their activities in order to avoid such eventualities.
Job dimension
Job dimension generally entails a description of the job in regards to the duties, purpose, responsibilities, scope and working conditions. This clearly identifies the title of the job which an individual can identify himself/herself with (Bailey 2009).
P&G description of job dimensions is, however, based on a global perspective because of its nature of being a multinational organization which has seen the description of jobs in its portfolio differ with regards to geographical position of the firm. Regional agencies of the firm differ with regards to the operations and local conditions in the host countries where they are located.
This, consequently, means that the jobs ascribed to individuals working within the global platform prompt the proper organization and design of proper job dimensions that are in line with the demands placed on these agencies.
Regions where P&G’s influence is felt are different and unique from each other. Each of them has different needs that need to be assessed in the determination of appropriate strategies that can be adopted. This also applies to the description of job dimensions.
Employees, working in different regions need to have properly defined job descriptions that detail specific duties and purpose, customized in accordance with the demands of the local market which they serve, in a bid to achieve set targets and objectives.
P&G current design is, therefore, appropriate for its business. Running a global firm is no easy feat as it requires an effective organizational structure and an effective and motivated workforce. Employees within the firm have properly defined duties expected of them which create the basis for the evaluation of their performance. As a result, it creates clear and defined tasks which they use to guide their performance.
Job design
Mathis and Jackson (2010) define job design as the process of putting together various elements of a job in accordance with organizational as well as individual requirements and presenting considerations of health, safety and ergonomics.
This leads to the outlining activities to be performed by an individual in accordance with the requirements of a job, while ensuring that a firm’s objectives are being achieved as well as ensuring that the employee is being considered with regards to achievement of personal objectives, while observing the health and safety of the employee. A good job design is important as it enables a firm to determine factors which affect work.
In this case, firms are able to identify such factors and act accordingly in order to either exploit them to improve the firm’s business, or to downplay them if they have a negative impact on the firm’s performance. These factors are normally concerned with employee working conditions.
It also enables to identify what tasks are require to be done, that is, companies require formulation of the firm’s strategic plan that details objectives that the firm strives to achieve, as well as relevant activities or tasks that will help to achieve these objectives as stipulated in the plan. This enables a firm to focus on what it aims at achieving, hence directing resources in an effective way to achieve these goals in the end.
A good job design also determines when and how tasks are going be done. Identification of tasks required to be done is not enough as there is a need to determine the appropriate time to undertake them, based on the identified factors, influencing the firm, such as the status of the economy, as well as the methodology adopted to carry out the tasks in a manner that will see the maximum use of resources in an effective way.
This in effect enables organizations to make substantial cost savings. It must also be mentioned that despite the identification of tasks required to be performed as well as the appropriate methodology and timing to carry them out, the emphasis with regards to the determination of a job design results to the prioritization of tasks as it is impractical to carry them out all at once.
Based on the above advantages that result from the adoption of formulation of a job design, the following are recommendations on how P&G can improve its job design strategy (Mathis and Jackson 2010):
- Allow and encourage employee participation in the job design process because the inclusion of employee input will help their opinions be incorporated in the job design, for instance, they may vary activities proposed, based on their personal needs, work habits and circumstances in the workplace.
- The company should organize training workshops and seminars that are dedicated to assisting employees know what is expected from them with regards to tasks they are supposed to carry out in order to achieve clarity on how to carry them out.
- The job design should have good work/rest schedules- This assists employees revamp their energy hence results to employee performance improvement.
Compensation package
Compensation does not only mean financial benefits accorded to employees but also includes non-financial aspects, such as employee professional development through training or motivating employees.
Based on my own personal view, the compensation package can be considered as not perfect since perfection has never been achieved by any firm as employee needs are diverse, and it’s not possible to satisfy all of them. However, although there is still room for improvement, P&G has tried to come up with an attractive compensation package that is responsive to changing trends in the market as described below:
- It offers competitive salaries;
- It has also a comprehensive flexible benefits program that allows employees to choose health, dental, disability and life insurance benefits that meet their unique needs and circumstances.
- Retirement plans are funded by the company and provide employees with flexibility in plan, design and investment options.
- Existence of any Employee Assistance Program gives employees a confidential access to professional counseling to help them deal with any personal or family problems.
In order to improve the existing compensation package, the firm could adopt the following recommendations as suggested by Madura (2007), namely:
- Evaluate their compensation management maturity and identify shortcomings. This will prompt the company to take appropriate steps in an effort to correct the situation, hence assist in achieving an employee satisfaction.
- Integrate appropriate sources and systems. This will enable the company to integrate existing information sources with compensation and workforce performance. This will enable the company to increase system efficiency that employees can relate with.
References
Bailey, T (2009). Organizational culture, macro and micro empowerment dimensions. Washington: Joessey Publishers.
Company. (2013). Retrieved from https://us.pg.com/
Daft, P (2010). Organizational theory and design. New York: Sage Publishers.
Lasher, P (2010). Practical financial management. Boston: Oxford Publishers.
Madura, J (2007). Introduction to business. New York: McGraw-Hill Publishers.
Mathis, R and Jackson, J (2010). Human resources management. New York: Sage Publishers.