P&G Case

MGT 313 FALL 2015
Creating Effective Organizations

P&G Organization 2005

1a. Why did P&G’s U.S. organizational structure shift from product grouping in the 1950’s to a matrix in the 1980’s?

The introduction of the matrix organization in the US in 1987 was a direct consequence of the shift from the early functional organization into the multidivisional product organization in 1954.
The need to effectively mobilize resources to meet growing and more complex market demands, led to the multidivisional product structure in 1954, this product centric costlier model had, as some consequences, competition within brand managers and maximization of product innovation.
In 1987, the US organization reorganized into the product-category divisions. Brands would now be managed as components of category portfolios. Brand and functional managers would now report to category general managers.
The purpose of this adjustment in the late 80’s was to allow the management decision process to have a better balance between product and functionality.

1b. Why did P&G’s European organizational structure shift from geographic grouping in the 1950’s to category management in the 1980’s?

By the 80’s, the European marked was gradually becoming more homogeneous and the country functional structure implemented by P&G in the 50’s was becoming expensive and ineffective. Country manufacturing operations were not standardized, lacked economy of scale and were unreliable. Products that were adapted to local norms and regulations as an expending strategy, now added little value to the customers but significant costs and complexity to the supply chain. Also, corporate R&D were completely disconnected from US operations.
For this reason, at the 1980’s, European management started to promote cross border cooperation across functions and shifted focus from country management to product-category management.
The effort was successful despite the objections of smaller...