Effective Communications
on P&G’s Restructuring
Decision
HR280 Summative Assignment – A Case Study
Mayra Maia Fiorini
University of Brighton Business School
Business Management with Finance
Group P - 11841746
Word Lenth 1650
January 2013
HR280 Summative Assignment 2013
Summary:
Summary: ___________________________________________________________ 2
Figures Index ________________________________________________________ 2
Abbreviations ________________________________________________________ 3
Introduction _________________________________________________________ 4
P&G Restructuring Challenges _________________________________________ 5
Restructure Alternatives _____________________________________________ 5
Keeping GBS In-house __________________________________________________________ 5
Spin Off GBS as a Separate Entity ________________________________________________ 5
Outsourcing GBS Services to One or More Companies ______________________________ 5
P&G’s Full Disclosure Policy & Decrease in Motivation Due to Uncertainty __ 6
Effective Communications on Restructuring ______________________________ 7
Avoiding Uncertainty ________________________________________________ 7
Communication Mechanisms and Avoiding Noise _______________________ 8
Conclusion _________________________________________________________ 10
References_________________________________________________________ 11
Figures Index
Figure 1 - Communication Process (Source: Buchanan & Huczynski 2010, model) ___ 8
Figure 2 - Knowledge Pyramid (Source: Christopher & Tanwar 2012) ______________ 10
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Abbreviations
P&G – Procter & Gamble
GBS – Global Business Services
BPO – Business Process Outsourcing
HP - Hewlett Packard
IPD – Institute of Personnel and Development
IAOP – International Association of Outsourcing Professionals
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Introduction
This report’s objective is to study P&G’s restructuring alternatives and the
communicative issues raised from it, presenting possible applications of
effective communication theories to overcome those issues.
Harvard Business School’s article (Delong et al, 2005) will be used as
case study to consider the events that followed P&G’s decision to restructure
and to evaluate the effects of these decisions on its employees’ morale. Books
and academic journals will be used as reference to support this report’s
affirmation.
This assignment will work to prove that, regardless of its simplified,
standardized, and systemic strategy used on its outsourcing GBS (IAOP, 2013),
P&G could have had a more effective communication strategy communicating
those changes to its employees.
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P&G Restructuring Challenges
Restructure Alternatives
Keeping GBS In-house
P&G decision to restructure arrived from understanding that GBS was
highly specialized but not part of the company’s primary operations (Delong et
al, 2005); therefore the company may not be able to provide appropriate capital
investment in the division creating the possibility of it losing competitive
advantage in innovation.
The choice of keeping GBS in-house would be the less disruptive option
(Delong et al, 2005), but not necessarily the best option for the company and
GBS.
Spin Off GBS as a Separate Entity
Outsourcing services are increasing in complexity; the industry is still
establishing itself allowing it to be shaped by the most sophisticated suppliers
and customers (Couto & Divakaran, 2009). For GBS to enter such competitive
market could be difficult as P&G worried that, even though alone it carries
market value, it was unknown if its expertise would be sufficient to compete with
more experienced BPO businesses (Delong et al, 2005).
For GBS employees, such alternative would prove less disruptive as the
new GBS entity could share principles and culture with P&G.
Outsourcing GBS Services to One or More Companies
The human management issues that arise with outsourcing can be very
damaging to morale, decreasing motivation and performance. Despite P&G’s
intentions to ensure reemployment of GBS’s staff with the outsourcing
company, moving to a smaller company may be considered, by some
employees, a step back in their careers, even if the opportunities available in a
specialized company are greater. Therefore P&G should keep its employees
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informed and consulted on outsourcing proposals to avoid lack of knowledge,
which may lead to rumours, uncertainty and fear for the safety of their jobs (IPD
1998).
P&G’s Full Disclosure Policy & Decrease in Motivation Due to
Uncertainty
In April 2001, P&G employees were notified that the company was
studying the possibility of outsourcing GBS. This communication with
employees occurred to avoid speculation and rumours and to encourage
feedback, but caused uncertainty among some employees (Delong et al, 2005).
Employees want to be kept informed and contribute with ideas
(Buchanan & Huczynski, 2010); it is important to have a good communication
with staff as they become empowered when understand the full picture and are
kept updated on the situation (Holbeche & Matthews, 2012). However,
according to Holbeche and Matthews, people cope better with change when
uncertainty is reduced by management providing a clear view of the situation
and frequent update messages to employees, P&G’s announcement was made
too early in the process and the company was not sure if and how GBS would
be outsourced.
When communicating the big picture, company strategy and direction to
employees, P&G management must be authentic, consistent and keep the
company values in mind (Holbeche & Matthews, 2012). Allowing its employees
to be reemployed by the outsourcing company respected the company’s
principle of people as their most important asset (Delong et al, 2005). Not
knowing which company would be outsourcing GBS created the concern that
they could be worse off with the change, insecurity on their personal capabilities
and fear to lose their jobs (Dutfield & Eling, 1990), leading to anxiety and
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frustration as the possible outcome could be considered threatening (Carver &
Scheier, 2011).
Effective Communications on Restructuring
Avoiding Uncertainty
Communication may suffer if transmitter and receiver have different
references or positions and different experiences and understandings of the
situation. This positioning issue causes judgment on both parts creating a
suspicion on the other party regarding its honesty, integrity and credibility
(Buchanan & Huczynski, 2010). P&G’s communication about outsourcing GBS
was made when P&G and its employees had two different perspectives; P&G
believed the decision was the best option for the company and GBS to grow,
while the employees became concerned with the possibility of change and the
uncertainty of their future situation (Delong et al, 2005).
When outsourcing it is important to understand what drives the business
and those reasons must be articulated clearly in order to successfully complete
the process. It is easier to convince individuals to accept an otherwise
controversial proposal if the benefits it will bring the company are clear.
Management must understand those reasons in order to evaluate options that
best fulfil them (Couto & Divakaran, 2009). The lack of clarity on P&G’s
company strategy and its weak internal communication channels caused the
employees the disengagement that followed the announcement; managers
must provide clarity and a sense of direction, explaining why the change is
needed, so employees don’t lose faith in them (Holbeche & Matthews, 2012).
Holbeche and Matthews (2012) also state that effective communications
on the vertical level, allows consistency on horizontal levels dialogs, giving
employees a sense of ownership that is increased when management
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collaborates and involve them in the decision making process. Involved
employees will contribute to how these changes may occur, felling valued and
regaining a sense of control over their futures.
P&G’s approach of full disclosure was necessary; however, the strategy
used to communicate with employees was not completely effective, what
caused the decrease in motivation that followed.
Communication Mechanisms and Avoiding Noise
Buchanan and Huczynski (2010) define noise as any element that may
alter the understanding of a message, including coding and decoding mistakes,
emotional predispositions, attention diversions, past experiences, motivations,
health concerns and any other factor that may intervene with the channel of
communication.
Figure 1 - Communication Process (Source: Buchanan & Huczynski 2010, model)
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P&G’s decision to communicate the possible outsourcing of GBS
personally through members of the GBS leadership team helped constant
feedback given ensure proper decoding on the receiver’s part, on personal
interchange of messages any mistake or misunderstanding can be corrected
immediately by the transmitter, avoiding assumptions as the way the message
has been decoded (Buchanan & Huczynski, 2010). However, the quantity of
people involved in the process required management to use of a number of
communication strategies to ensure effective communication within the
organization (Dutfield & Eling, 1990), as different methods are better perceived
by different people. Staff surveys, suggestion team, focus groups and seminars
on the subject should be considered to increase organizational understanding of
employees points of view and vice-versa, frequent management speeches,
podcasts and in-house newspapers help keep staff updated as well as team
briefings and daily updates can be used regularly focusing on two-way
communications (Holbeche & Matthews, 2012 and Jack Gibb 1961, cited in
Buchanan & Huczynski 2010).
When making tough decisions, transparency allows people to know that
the right choices have been made and people involved were treated fairly
(Holbeche & Matthews, 2012). Negotiating possible advantages, creating
incentives for the new situation, clarifying misunderstandings and ensuring
employee trust by explaining the reasons and benefits of change and including
employees on the decision making, helps reduce noise and preconceptions of
the subject (Dutfield & Eling, 1990).
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Wisdom
Knowledge
Information
Data
Figure 2 - Knowledge Pyramid (Source: Christopher & Tanwar 2012)
Conclusion
This summative assessment considered the communicative challenges faced
by P&G when deciding to outsource GBS’s services and presented possible
applications of effective communication theories that would help solve those
issues.
This report was based on one article related to the previous events mentioned,
therefore making assumptions on the way P&G faced its communication
challenges and therefore should consider the possibility of misinformation on its
part.
It can conclude that a more effective communication strategy would have
helped reduce the negative effect the outsourcing decision had on employees’
motivation and performance.
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