Photo: Tudor / Flickr, CC.
When Procter & Gamble recently announced it would lay off 5,700 people and reign in its $10 billion advertising budget, the company said the scythe would cut heavily into its marketing ranks.I argued that P&G has failed to manage its margins over the last two years, allowing its promotional and marketing budget to run ahead of the sales they were generating.
In response, a P&G veteran sent me an email that both agreed and disagreed with parts of my report. I’m publishing the text of it here in full because it contains some eye-popping claims about sclerosis at a company famed for its brand management expertise.
In sum, this executive says that incompetent engineers were promoted to management, and that marketing management ballooned out of control after a decision in 2000 to focus less on product development and more on marketing brands.
Here’s the text, verbatim. For obvious reasons I’m not publishing his name:
My son sent me a link to your recent article on P&G. It is well taken, but the real root problem with that company is that it became much too top heavy with its management structure.
I spent my career with them and witnessed first hand the erosion of a once dynamic company, that simply lost its way in poor management.
P&G success is still largely linked to deep pockets that were filled from landmark product innovations. Pampers, Tide, Crest, and Ivory.
When I started at P&G there were 12 vice presidents, and one president. At that time we had one director level person that managed Pampers, Luvs, White Cloud, Charmin, Rely, and Puffs.
When I left 30 years later there were 600+ vice presidents and a president for each brand segment in each region. and multiple directors for each brand segment in each market region.
We used to hire a lot of really bright kids with Chemical Engineering degrees. We then put them to work on projects and the ones that could actually do the engineering work stayed and worked as engineers. Those that couldn’t do the engineering work, we promoted to Managers and put them in charge of the engineers. Out of this came poor management of projects by those who were largely incapable of understanding what to do. They simply didn’t understand “why” and “when.”
About 2000 there was a decision by the upper management to stop funding advanced engineering innovations and to instead focus on Marketing. [Note: This would have been the arrival of A.G. Lafley as CEO, who did indeed shift the company’s emphasis to “bringing more P&G employees outside R&D into the innovation game.”]
With this the brand managers largely took over the business and the budgets. Internal expenditures for innovative consumer research centres went wild. Companies like FRCH made a bundle. One site got a $500,000 paint job for five “consumer experience” rooms!
Out of this came the sell off of successful brands because P&G couldn’t make enough money off of them. The fact that you have a leading brand in a category, that you have owned for years, know fully well how to produce, have all the equipment and facilities paid for, and a plant level work force that knows how to make it, and you cannot make money at it says only one thing. Your management structure is screwed up.
It is interesting that Smuckers now makes far more money off of Jif and Folgers [two brands P&G sold to the company] that they do off of jams!
I would like to add that P&G is not alone in this behaviour and that similar behaviours abound in the corporate world. The domestic erosion of the middle class is leading to a position where we will see more companies leaving the US for foreign bases because they are trying to get where the growth is. P&G will be one of them.
We’d love to hear your comments if you work for P&G.
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