Proctor & Gamble
Globalization and Human Resource Management Strategies:
Proctor & Gamble
Selling a portfolio of products including 50 leadership brands, of which 24 generate more than $1 billion in sales each annually, in more than 180 countries: Proctor & Gamble (P & G) was born in 1837 when William Proctor and James Gamble started the company with $7,200. Total sales in 2011 amounted to $82.6 billion in an industry that averages $1.2 billion. P & G’s global business units are the household care and the beauty and grooming segments of the consumer goods industry. Their core purpose is to provide high quality branded products providing value to all stakeholders in the chain while focused on improving the lives of their consumers. Their headquarters are in Cincinnati, Ohio and they have global operations stretching across 80 countries which are organized into five geographic units: North America; Western Europe; Latin America; and the Central & Eastern Europe, Middle East, Africa (CEEMEA) region (Proctor & Gamble, 2011). Across the headquarters and all other offices, P & G maintain a workforce of over 125,000 employees.
Understanding the differences that exist in the culture and labor markets in different countries, P & G has a strong commitment to investment in leadership in different countries. Depending on strong local management allows for the required consistent and equitable human resources management throughout the organization. In order to groom their international management teams to provide consistency in leadership, while supporting local differences in labor laws, culture and language; P & G are committed to a promote-from-within policy. This helps assure that management has come through the ranks and gained experience within the organization rather than through other companies. To help achieve this, P & G maintains a leadership development system throughout its global operations and locations. Continuous feedback is encouraged with employees receiving 360-degree reviews frequently and throughout their careers. Focus is especially maintained on the performance of line managers, where those who are the best at developing their staff are rewarded. This approach encourages development of staff as employees collectively feel responsible for not only their development, but the career development of their colleagues. Once a person is promoted to line manager, he or she is made responsible for the development of skills and knowledge of the department. Indeed, people development is a key objective in all line mangers’ objectives. To further support career development and shared values amongst its managers across the globe, P & G established corporate universities. The stated objectives of the university being: reinforcement of the corporate culture, driving of the future strategy of the company, and change management. Finally, and extending on the profit sharing mentioned earlier, P & G encourages their employees worldwide to purchase shares through a stock ownership program. Again, this economic tie to the company transcends local cultural differences and contributes to a unified goal across borders (Stiles & Trevor, 2006).
Following a centralized model for International Human Resources Management (IHRM) has allowed P & G to maintain organizational control and to establish a unified corporate identity and shared values. However, it has exposed them to problems arising from issues of localization. For example, local tax law differences such as those affecting stock plans. As a case in point, Belgium may tax restricted stock awards as income thereby requiring not only unfavorable taxes, but social security contributions (World Law Group, n.d.). To help avoid exposure to these and other issues local to operations of P & G, the HR function needs to decentralize some of its approaches and as much as possible follow polycentric hiring practices to staff the local HR offices. In other words, hire nationals to manage HR functions in their own country. However, maintaining the corporate-wide IHRM policies become more of a challenge when taking a more decentralized approach. P & G implemented an HR information technology (IT) shared services infrastructure model in 1998 that helped address these potential problems. The shared services centers allowed the company to centralize many IHRM functions. Spreading the shared services across three centers in Costa Rica, Philippines, and the United Kingdom allowed P & G to keep all HR functions connected. However, during the continued global expansion of the company there were problems and limits to the benefits. P & G found that there were limitations on the amount of optimization that could be achieved, there were challenges in keeping the service and infrastructure skills up-to-date and there were difficulties in justifying the budget for upgrades and expansion to the services. As a solution, the company decided to shift from a shared services model to a fully outsourced model. IBM was contracted to provide the HR IT function in 2003 (Kidman, 2006).
As one of the first and largest Multinational Enterprises, Proctor & Gamble have had many years to develop an IHRM function. Primarily based on a centralized model with the objective of maintaining a consistent set of core values across borders, P & G manages regional differences in culture, labor laws, language and tax codes by maintaining local HR functions. In order to keep these HR functions communicating and operating in the same fashion, the company maintains an outsourced HR IT function with IBM. This hybrid model allows P & G to maintain its most fundamental core value; that its people are the most important asset.
Kidman, A. (2006). HROA [Proctor & Gamble’s HR evolution]. Retrieved from http://www.hroassociation.org
P&G (2011). Investor Relations [Corporate Governance]. Retrieved from: http://www.pg.com
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Stiles, P. , & Trevor, J. (2006). Best Practice and Key Themes in Global Human Resource Management[Electronic version]. University of Cambridge: Downloaded from: http://www.cihrm.jbs.cam.ac.uk
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