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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. |
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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.
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