Activist investor Nelson Peltz recently released a 93-page white paper detailing his campaign for change at Procter & Gamble. He places a lot of the blame on what he describes as their insular culture and “stiflingly” bureaucratic matrix management system. He then proposes structural change to resolve the issue.
It’s common for companies early in a matrix implementation to experience an increase in bureaucracy and meetings and delays to decision-making. It is common in the early stages because people are inevitably connected to more of their colleagues as we break down silos and need to work out who needs to be involved in future. However, these factors are not an inevitable consequence of the matrix, they are about how people work within it. Because of this tinkering with the structure will make little difference, we need to address these issues by addressing ways of working and culture instead.
Nelson Pelz proposes restructuring P&G from 4 to 3 business units and giving each of them more autonomy P&G. For a company with 105,000 employees the operating units will still be pretty large. Each of the business units will still be a pretty substantial business even if there was no connection between them. Each will still have many opportunities for bureaucracy and delays to decision-making unless we address the culture and ways of working.
If Pelz is successful and creates three new silos with relatively little connection between them then P&G will be extremely unusual for an organisation of that size. The majority of the world’s most successful companies use some form of matrix organisation because they know that creating internal silos gets in the way of effective resource allocation, learning and collaboration.
Pelz seems to believe that you need full control in order to be accountable for results which is both rare and frequently counterproductive in large organizations. In reality he still proposes quite substantial global business units whether will need to be some form of matrix structure to coordinate geographies and functions within the business unit.
When I work with organisations in this field, experienced managers often say “how can I influence without authority” and “how can I be accountable for things I don’t control” in reality this often illustrates a preoccupation with authority and control in getting things done. This is frequently counter-productive in working with skilled and motivated people and is a very old-fashioned way of managing.
Tinkering with the structure is likely to cause huge short and medium-term disruption without addressing the symptoms that he is frustrated about.
I don’t have any personal knowledge of P&G, as an external person I do perceive them as quite insular and I believe they have strong policies around recruiting from within. They were also one of the pioneers of the matrix organisation so I would have thought they would have learned some things about making work over the decades.
Nevertheless, it’s always possible to improve and corporate culture is your best friend until it stops you changing. Is also extremely difficult to change your corporate culture unless you have a crisis. Hopefully Pelz’s intervention will create an opportunity for P&G to simplify and speed up the way they work – but that is not the same as changing your organization structure.
If you are reading this as an employee of P&G I love to hear your views, either to this blog or privately and to share ideas about what you think are the real issues.