P & G Case Study

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Can P&G's CEO Hang On?

The forecast seems entirely gloomy for the P&G CEO Bob McDonald but astonishingly, the showers have yet to fall down on his reign. McDonald has bought himself some time to steer his company into the right direction before his entire crew begins to turn on him and decide to throw him off the ship. P&G is a staple in the homes of millions of consumers globally. Their products are recognized worldwide. But, recently, P&G has been struggling to keep afloat. A perfect storm has been brewing for the past few years that has seen senior executives leave the company, mixed in with lack of innovation of products all topped by a depleted consumer base still recovering from the crippling of the recession five years ago.
When McDonald took over in the summer of 2009, he confidently told employees he would increase the revenue to $102 billion, up from the $75 billion at the time of his arrival. Instead, his company has fell considerably short of those expectations accruing $84 billion(by 2012) and a dismal 20% deflating of net income. The performance of P&G of late has worried senior employees and many questioned McDonald's performance. This brings us to our first point that many employees are now leaving the company. “P&G's woes have eroded morale. Many top people have retired early or bolted to competitors” reports Jennifer Reingold, writer for Fortune's “Can P&G's CEO Hang On?”. The loss of these skilled employees are hurting the company, especially since P&G trends show promotions within the company.
Secondly, P&G has showed a lack of innovation in recent years. This is coming from the company that brought you mega-hits such as Febreze and Swiffer (both of which you can find in my household). The previous CEO of P&G, Lafley, had installed a complex organizational system that gave executives power, similar to a system of checks and balances. Evidently, this process became more important than creating great products and or improving on current products. P&G competitors were gaining an edge on them. Their lack of innovation was another reason why numerous senior officials and other employees decided to hand in their resignation letters.
Lastly, the recession of 2008 has also played a crucial role in McDonald's company's fallout. P&G's largest consumer base was the average middle class household. After the recession hit, many families held tight to their wallets. The prices of the products
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