H601

Assignment on

Procter & Gamble : Global Business Services

Submitted to: Suman Bhattacharjee Course Instructor Compensation Management

Submitted by: Md. Mohaiminul Hasan Khan ID : 150, Batch : 46D MBA

Date of Submission : 19th May 2013

Institute of Business Administration

Introduction
The Procter & Gamble Company, also known as P&G, is an American multinational consumer goods company headquartered in downtown Cincinnati, Ohio, USA. Its products include pet foods, cleaning agents and personal care products. Prior to the sale of Pringles to Kellogg Company, its product line included foods and beverages. Their Global Business Services unit is a large unit of 5700 members with a mission to transform the way business is done. They have indeed stuck to their mission statement for the past years but recent problems led Dave Walker to decide on what to do with this unit. He has four options to choose from which will be discussed below. For clarification the pros and cons of each will be separately discussed.

Spin off as a separate entity.

This is the business strategy of engaging with a third party service provider, who operates various activities of the buyer company offshore.

Pros
With help of BPO, P&G can use a great cost advantage and the accomplishment of assignments in short time spans compared to in-house production. Suppliers from all parts of the worlds offer even complex, high-end services to comparably low prices. That leaves P&G with the opportunity to receive high-quality services while being able to focus on their core activities. Thus, BPO can improve the efficiency and productivity of a company. Offshore outsourcing delivers the additional advantage of making precious resources, infrastructure and innovations accessible for P&G. An acceleration of profit margins and a competitive advantage are therefore the ideal outcome of BPO engagements.

Cons
Besides numerous advantages, BPO can also be a risky endeavor. The service provider often operates from another continent. Communication errors are often cited as a major drawback of outsourcing. Depending on the complexity of the outsourced service or project, it might be the case that vendors will not live up to P&G's expectation. Sometimes, suppliers lack the specialization to manage highly complex processes in service segments such as financial services for instance. Hidden costs, strategic failures or security threats are only three major risks that might occur especially when end-to-end processes are required.

Contract with an outside company for BPO while retaining current employees.
This option is the same as the first one however there is one major difference. The employees of P&G will be retained instead of handing the decision of laying them off over to the outsourcing company managers. This will have both advantages as well as disadvantages.

Pros
P&G known for it's care for their people would obviously have an advantage if they could pull this off. Retaining the jobs of 5700 employees would show them that P&G cares about their employees. Also, the employees are already familiar with the job structure and responsibilities of GBS, thus, the outside company wouldn't have to train them from the start to make them familiar with the current situation. Although the top managements would change but they would start with a hierarchy that has already proven to be effective prior to their take over and is efficient as a team to work on their job problems. Not being laid off will have a reassuring effect on the employees and would give them a moral boost, affecting their work performance.

Cons
The transition of changing the top management structure might have a negative effect on the employees. It would be stressful and demotivating to adapt to the situation. Furthermore, it's also hard to find a single company who would agree on this sort of deals as they would want to have complete control over their team, thus, even if a company agrees to it, they would definitely feel obligated to be compensated for their sacrifice of authority by P&G, either monetarily or in some other ways. Finally it would not be wise to think that all the 5700 employees would be kept on the team after the hand over. Laying off costly employees and replacing them with more cost efficient ones is a common tactic that can be used by outsourcing companies. Also, increasing the span of functions and overlapping responsibilities to lay off some more employees would be another choice that they would take. Thus, ensuring the jobs to all employees would be futile.

Outsourcing the GBS divisions to best-of-breed companies.

This option is similar to the previous one with just one major change. The whole of GBS will not be shifted to a single company, instead, all the major functional divisions would be handed over to different companies with respective expertise.

Pros
This new method would have advantages of getting the creams from all the best players in the market. The most obvious advantage is the ability for them to leverage the expertise of vendors specializing in different disciplines. The financial services would be dealt by firms with financial expertise, the technical side will be dealt by best IT firms. This would ensure top quality results and outcomes in individual divisions, thus, providing P&G with more refined outputs than the previous option. Also, outsourcing deals like this will be easier to finalize compared to one company taking over the whole of GBS. Using specialized outsource providers means tapping into a smaller market with lower costs and less turnover than larger providers. A small, specialized firm can offer more expertise at a single discipline and for at less cost. The division of outsource providers establishes an independence between the different disciplines that should yield a higher quality result. For example, a testing vendor can provide honest insight about the developed product's quality since they were not responsible for developing it. In this way, multisourcing creates a system of checks and balances that

promote quality and lower risk of problems.

Cons
However, there are numerous management concerns in this option. With all the divisions separated from each other both in terms of management structure and location as well, it will be hard for them to integrate their outputs and manage their teams to work with one single goal. Everyone will be concerned about their individual objectives and prioritize their quality instead of GBS as a whole. Onshore employees will have to manage, organize, and coordinate the output of the multiple outsource providers. Without a single outsourcer providing a turn-key solution, P&G will have to use its own time and resources to manage the project each step of the way. Thus, synergy will be minimal and the output to P&G will be faulty and unsatisfactory. With the additional expertise of multiple outsource providers comes the management of additional vendor relationships. Communications suffer without a single point of contact, making it more difficult and time-consuming to on P&G's end to manage and maintain vendor relationships.

Keeping GBS In-house.

The final option was to keep GBS in-house and not outsource their services at all. As P&G had their motto inclined towards their employees and the market already had a preconceived idea about their care and concern, it was a viable option.

Pros
The pros of keeping GBS in-house are a lot. This option unlike the other has a different approach as it is basically a reactive approach. Letting things go the way they are would strengthen employee confidence over P&G and its management. This would reinstate the feeling of belongingness within the employees. There would be better management and synergy between all the divisions of GBS as they are all under the same umbrella. As GBS has only just been formed in 1999 and was still developing as an organization, they still had a lot more to achieve and a lot more room for being efficient and effective towards P&G. Therefore, the future could hold a lot more potential for this unit, for example more cost savings could be achieved. And also there might be room for process improvements. Also, this would ensure alignment of the brand message of P&G.

Cons
Keeping GBS in-house was a risk that P&G has to take, on its financial area. Whether there would be more cost savings in the future is not certain right now. Handling near about six thousand employees is a lot and would incur a lot of costs in the future. The management structure has to be maintained by P&G and this is resource consuming. Less expertise on respective divisions is also another disadvantage that they have to deal with.

Decision
However, despite all the pros and cons of the options presented in front of Dave Walker, only one has to be chosen for coming to a decision. Provided that it has been a P&G motto to be sensitive towards their employees and show care and concern, I would have to choose the last option of keeping GBS in-house despite their cons. However, the disadvantages of this option are far more probabilistic and not very certain. Given that there are enough brainstorming, these drawbacks could be mitigated partially, if not totally, to assist GBS in its journey with P&G for the future.