Procter & Gamble Announces Reorg From 10 Business Units to Six

Procter & Gamble

Flush from reporting Procter & Gamble’s strongest quarterly sales gains in five years, following an announcement of price increases in January, and with economic winds at the company’s sails, CEO David Taylor told investors that he’s revamping the management structure with a rejiggering that seems designed to answer some of the ongoing objections of activist shareholder and P&G board member Nelson Peltz.

Beginning in July, the company will have only six business units instead of 10, and will hand the heads of those brands control over regional sales teams as well as some functions previously run by headquarters.

“There is a need for greater agility,” Taylor told the Wall Street Journal“Frankly, the volatility we see in many parts of the world—the currency volatility, the commodity volatility and just the level of competitive disruption—has increased meaningfully the speed of change.”

Taylor already has done some corporate reorganization and cut tens of thousands of jobs at P&G through divestitures, attrition and layoffs, but the new moves were an acknowledgement that P&G needs to do more to adapt to rising competition, higher costs and a consumer shift toward smaller brands.

It’s the kind of streamlining sure to please critical activist investor Peltz, whom P&G battled last year to a stalemate before the company granted his Trian Partners firm a seat on the P&G board early this year. Peltz had called for a smaller, simplified and decentralized corporate structure because he believed it would improve accountability, agility and responsiveness to local needs.

“This is the most significant organization change we’ve made in the last 20 years,” Taylor said. “We will have a more engaged, agile and accountable organization focused on winning with consumers through superiority, fueled by productivity, and operating at the speed of the market.”

At the same time, Taylor said current chief financial officer Jon Moeller will expand his role to become chief operating officer. And contrary to one of Peltz’s recommendations, Taylor added that P&G would retain all of its R&D under one corporate umbrella instead of dispersing the function to each business unit.

More broadly, also, Taylor has yet to move significantly in Peltz’s direction on one of the big issues that has separated them: the CEO’s belief that the key to reigniting growth is to do a better job of leveraging the company’s big brands such as Crest, Pampers and Gillette, while the activist investor believes P&G should put more emphasis on small, new and even startup brands that have attracted the loyalty of millennial consumers.

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