March 21, 2001
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Procter & Gamble May Cut
Work Force by 10% to 20%
By EMILY NELSON
Staff Reporter of THE WALL STREET JOURNAL
Procter & Gamble Co. is considering companywide job cuts in the face of an economic slowdown and to compensate for past restructuring efforts that didn't trim enough fat.
The giant consumer-products company could cut 10% to 20% of its 110,000-person global work force, according to people familiar with the discussions. An internal company task force led by Steve Donovan, a senior executive, is examining P&G's operating costs, looking for structural changes as well as head-count reductions. It isn't clear if P&G has determined the extent of the cuts or the timing for eliminating any positions. Its board had a regularly scheduled meeting March 13 and has another April 10.
The maker of Tide laundry detergent, Pampers diapers and Crest toothpaste has struggled during the past 18 months. It faces a mature U.S. market for its household staples and has internal problems: higher operating costs than many rivals and an unwieldy internal structure that its new chief executive, A.G. Lafley, is trying to rein in. Mr. Lafley, who took over last June after P&G conceded its spending was out of control, has spent his first nine months reviewing the company's brand portfolio for cuts and looking to speed up the way P&G does business.
Linda Ulrey, a spokeswoman for P&G, based in Cincinnati, declined to comment, citing the company's policy of not commenting "on rumors or speculation."
In cutting jobs, P&G would join a host of corporate leaders that have made plans to cut jobs recently, such as General Electric Co., Cisco Systems Inc., Intel Corp. and DaimlerChrysler AG.
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Cutting Back
Some recent plans for job cuts this year:
Company Cuts Date Announced
Cisco Systems 3,000-5,000 March 9
Intel 5,000 March 8
WorldCom 6,000 Feb. 28
Motorola 4,000 Feb. 11
DaimlerChrysler 26,000 Jan. 29
J.C. Penney 5,565 Jan. 25
Sara Lee 7,000 Jan. 24
Lucent 16,000 Jan. 24
Source: WSJ Research
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P&G has been in perpetual restructuring since January 1999, when it undertook a massive overhaul, putting thousands in new jobs in an effort to work globally rather than regionally. As part of that plan, called Organization 2005, it intended to eliminate 15,000 jobs, mostly through attrition and early retirement, over five years.
But so far, fewer staffers than expected have left, people familiar with the matter said. The new job cuts would compensate for that, in part, and would go deeper as well. The labor reduction has been hampered by a sharp fall in P&G's share price in 2000 to a low of $53.25 last June from $118.38 in January -- making retirement packages less attractive, since many include P&G stock.
Tuesday, P&G shares were unchanged at $65.90 at 4 p.m. in New York Stock Exchange composite trading.
P&G, which promotes its executives from within, has a tendency to drag out layoffs, favoring early-retirement packages or attrition, not a blunt ax. This time around, however, Mr. Lafley may not have that luxury, some industry watchers say. He has preached moving quickly. Some company watchers think the plans could unfold by June 30, the end of P&G's fiscal year.
"P&G clearly has a cost problem, and they need to slim down," said Jim Gingrich, an analyst at Sanford C. Bernstein & Co. While Mr. Lafley once might have hoped to increase sales enough to justify operating costs, these days it looks as if P&G's sales volumes won't recover until the fall or early next year, Mr. Gingrich said. He sees P&G eliminating some marketing overlaps, created by P&G's new global structure, for example.
Several executive recruiters said they have received a sharp increase in inquiries from P&G managers in recent weeks as rumors of layoffs circulate within the company. Any cuts would be severely felt by managers, aged 35 to 45, who are a level under the executives who report directly to Mr. Lafley but are far more experienced than brand managers, for example. Proctoids, as P&G employees are nicknamed, who may be cut loose would face a far tougher job market than even a year ago, when dot-coms raided P&G for its employees' fabled marketing know-how.
Today, many e-commerce companies have collapsed, and industries that traditionally hire P&G talent, such as food companies and telecommunications concerns, have consolidated, said Jim Mead, president of James Mead & Co., an executive-search boutique in Wilton, Conn., that specializes in the packaged-goods field. Mr. Mead, himself a former P&G executive, estimated that calls from P&G executives are up 60% to 70% and called the job market for consumer sales and marketing executives "more difficult today than it has been in perhaps the last 10 years."
P&G people are inquiring but waiting because "people really want to see what the [severance] package will be," said Dick Satterfield, managing partner at Satterfield & Associates, a recruiting firm in Cincinnati.
Mr. Donovan, the man leading the cost-cutting task force, has been president of food operations in North America and beverage operations globally, but now is concentrating on his new assignment, since P&G plans to spin off much of those food operations into a new joint venture with Coca-Cola Co. |
