P&G AND PURPOSE DRIVEN GROWTH – A MISMATCH MADE IN HEAVEN

As Bob McDonald, the CEO & Chairman of Procter & Gamble, has been handing over reins of P&G to A.G. Lafley, I have been thinking about the core strategy that Bob followed for the last several years: Purpose Driven Growth. It was not bad strategy per se, but one totally mismatched for a company like P&G.

You may say that the tag line “Purpose Driven Growth” sounds very inspiring so what is wrong with it. I also agree that the tag line is inspiring and inspiration moves people. But there in lies the rub. Yes, you need to move people towards lofty goals to achieve big things and organizations need mechanisms to achieve exactly this. But for P&G this was absolutely wrong mechanism because it did not tie in with its dominant control mechanism.

Organizations need ways of ensuring that hundreds and thousands of people work towards the same direction each day. Otherwise, chaos would prevail and organization would not survive. Do you think a soccer team where 11 players think the goal post is in 11 different directions can ever win a match? Inspiration is important but is has to work with the dominant of the three control mechanisms that organizations normally use. The three control mechanisms are output controls, process controls and input controls.

Consider a high performing sales organization. What kind of controls do they have? Most of them have output controls wherein people are measured on the output (i.e. deals closed). Output controls work very well when the process of creating the output is not very well understood but the results are clearly defined. There are a number of things that go into closing a deal and sales organizations usually find it best to use output controls.

Organizations that understand the link between effort and output are better off using process controls. Moreover, when the output is a result of many steps and has high risk of failure, process control is ideal. Consider what would happen if NASA started using output controls. How many launches will fail before a successful space launch? Thus it is best for organizations such as NASA to use process control. Similarly, companies that have robust processes that works well find it ideal to use process controls.

But what if output measures are hard to define, and process of output is not well understood? When would that happen? Consider a pastor such as Rick Warren, who wrote the great bestseller ‘Purpose Driven Life’. What are the results expected from a pastor? What are the processes of getting results from a pastor? Since these are not well defined, such organizations have no other option but to rely on input measures. Such organizations hire the right people and then make them go through a long process of socialization. Through this process, the organization successfully molds the the person. He or she begins to share values of the organization and without any process or output controls undertakes the right actions to achieve organizational goals. The same applies for research organizations too and this is why a doctoral program takes years to complete.

So what is the dominant control mechanism that P&G uses? If you look at the history of P&G you will realize that its strength lies in process control mechanism. It has been at the cutting edge of organizational innovation throughout its history. Organizational innovation involves restructuring the organization structure to achieve the organizational results – essentially dominant use of process control. Back in 1931, a Camay brand manager by the name of McElroy wrote a famous memo criticizing the category control mechanism in place at that time. This led to the birth of brand management and McElroy went on to become the CEO on P&G in 1948. P&G has changed its structure several times over the last 7 decades and the underlying reason was to re-align the process control towards organization goals. That is what P&G does best – achieve consistent goals through process control mechanism.

When you bring in a strategy called purpose driven growth to such an organization, what will happen? People will want to know what does it mean and what is the process of achieving it. If you tell 10 people that it means “touching and improving more consumers’ lives in more parts of the word…more completely”, you will get 11 ways of achieving purpose driven growth. To achieve full alignment towards purpose driven growth by over 120,000 employees of P&G you need either a long enculturation process around purpose driven growth or a well laid out process. Bob didn’t have the luxury of taking such a large organization through a novel socialization process and the organization could not get  clear on process controls to achieve purpose driven growth. The same organization when told to achieve total shareholder return knows the drivers of shareholder return and can achieve it but is ineffective for purpose driven growth.

So when I read articles such as “Is the era of purpose driven advertising over” I cannot help but think that P&G and purpose driven growth was a mismatch made in heaven.