Case Study #7: Gillette Case Analysis Prepared by Group #5: Espinosa, Melissa Katherine Francisco, Marvin Importante,

Marlyn

27 July 2013

Magtibay, Roxanne Nito, Orenz Rosapapan,

Jennifer

I.

Synthesis

Gillette manufactured and sold a product invented by its founder: the safety razor shaving system. The company expanded its business over the years, particularly its international sales operations. It also acquired the following: Toni (maker of womens hair home permanent kits), Paper Mate, Liquid Paper, and Cricket lighters. Although these acquisitions were eventually sold by Gillette, additional acquisitions were made in the succeeding decades, such as Oral B, Braun, and Duracell. Razors and blades remained its top earners. Gillette experienced rapid growth from 1997-2000, largely due to the continuous increase of its international markets share. However, the company suffered declining market shares, stagnant sales, and reduced profits in the succeeding years. This was worsened by the plateauing North American and European markets, as well as the recession that hit Asia and South America. In trying to meet sales targets, Gillette resorted to trade loading, which retailers took full advantage of. Unrealistic targets also contributed to the decline of Gillette, since the company consistently failed to hit these goals. After a century of being managed by CEOs who had no professional experiences outside Gillette, the board of directors decided to hire Jim Kilts, an outsider responsible for Nabiscos successful turnaround. Kilts was expected to break Gillettes non -receptive culture in order to steer the company toward a much-needed organizational change. II. Point of View

The case is analyzed from Jim Kilts point of view. III. Statement of the Problem

How will Gillette effectively cope with organizational changes to turn around its financial performance and increase its market share for all products? IV. Statement of the Objectives

1. To reorganize the company structure that the whole organization will support and adopt. 2. To improve sales revenue and market share globally and locally. 3. To plan and allocate resources and adjust expenditures accordingly to focus on the companys growth. 4. To find means and ways wherein company leaders and employees can work together in achieving their shared vision, new goals, and objectives for the company. V. Areas for Consideration and Assumption Strengths 1. Historically a top player in the consumer product market in North America and Europe; it also leading market shares in all core products and high margins compared to competitors. 2. Reputable in manufacturing high quality and innovative products. 3. Possesses broad distribution network all over the world. 4. Strong management foundation built by leaders who have worked for the company. Weaknesses 1. Stagnant sales that resulted to declining profits, market shares and stock price. 2. The practice of trade loading was continued as a desperate measure to meet sales targets that lead to high sales only at the end of each quarter. 3. Very conservative culture that rejected change. 4. No observation done on customers and competitors to avoid giving service levels below industry standards. 5. High SG & A due to compensation given that was not based on performance but on tradition.

VI.

Theoretical / Conceptual Framework

The Michael Beers Bottom-Up Change Model Approach is adapted for this case since Gillette has a strong culture that has resisted several changes in the organization. This framework is also relevant since it will help foster participation among employees, which can create long-term organizational capability and economic value for stakeholders. Thus, this can translate to the development of corporate culture and human capability through

individual and organizational learning. This is done through the process of obtaining feedback, reflecting, and having a dynamic system. On the other hand, John Kotters Top-Down Change Model Approach is also applicable for Gillettes case. This approach focuses on maximizing the shareholders value and is usually done with drastic restructuring. Jim Kilts recognized the need for change when investigating on the companys performance. He ultimately mus t be able to establish urgency for transformation to avoid sales and profit from declining even further.

Kotter (top-down)

Beer (bottom-up)

VII.

Alternative Courses of Action (ACA)

ACA 1: Retain the existing organizational structure, culture, and processes. Pros No adjustments will be done in the organization and employees can continue with operations without disruptions. No extra effort on the part of the management. Cons Continuous decline of the company sales and market share. Changing internal systems of the company such as culture, work behavior, and structure are time consuming and may divide Kilts attention in turning around the

company financially. ACA 2: Adapt Kotter (top-down)/Mainstream approach in instigating organizational change. Pros Defined and clear direction for the company since the message will come from the management. Prompt implementation of change needed. Cons Employees will possibly be resistant to change. Possible drastic restructuring. Will likely lead to a number of employees leaving the company.

ACA 3: Adapt Beer (bottom-up)/Multistream approach in bringing organizational change Pros Employees will feel involved in the whole process by building trust and encouraging participation, which could make employees receptive to change. Customer feedback and competitors performance are considered in adjustments that will be made. Cons Slower implementation of change. Undefined and unclear direction for the company.

ACA 4: Apply combined Kotter and Beer approaches for organizational change Pros Focused both on the organizations structure/system and culture which can boost both profit and productivity at the same time. Definite new direction will be set while engaging the all the Cons Challenge to balance two different approaches, as change should come from both sides Changes might confuse the employees.

employees. VIII. Recommendation and Implementation

The groups recommendation is to apply both change model approaches -- top-down and bottom-up -- in order to maximize both stockholder value and organizational capabilities. This will also ensure that while the management sets the final direction of the company, the employees are involved in the process and their input are valued by the management. For the structural change, a shift from Matrix structure to Divisional structure should be done. The structure will work well in their new direction because it allows a team to focus on a single product or service. This will also empower the employees by effectively cultivating teamwork and communication, which would ultimately foster trust from and obtain commitment from all stakeholders. It will lead both to higher morale and a better knowledge of the division. It is an opportunity for employees to deeply understand their customer and develop customer service activities.

Before joining the company, Kilts is already familiar with the companys background and has identified the problems. On his day one, he should set a meeting with the heads and VIPs of the company. They will discuss the changes and new strategic plan of the company to increase its sale, to become a customer centric, manage the inventory and to stop trade loading to help reduce the cost.

The new direction should be ready to be released on his first week, which will also be filled with a series of meetings. Then, the second week will focus on polishing the new objectives and goals, including the new and well-defined KRA of employees. The HR department will organize a kick-off event in the third week to disseminate the changes to all stakeholders. In addition, a new organizational chart, criteria for stakeholders performance appraisal and incentive plans to reward deserving employees will also be released.

Kilts can set up a new team to address the issue of declining market share and profits. The initial planning will focus on evaluating existing product lines according to the following aspects: Product, Price, Place, Promotion, People. Another agenda will be revisiting and assessing current targets and goals, specifically if they are SMART. Marketing and strategic assessments can be made using a Value Map, which explores the way customer value and the price/benefit tradeoff work in real markets for a given segment .

IX.

Learning Insights

Organizational change involves substantial modification of existing trends, people, technology, structures, and perspectives. In order for a company to survive, it must adapt to external factors. This can be done through continuous improvement and holistic development based on shared values, trust, and participation. Another insight is that an organized structure will provide clear roles and KRA for the employees and help avoid overlapping responsibilities. Appraisal also plays an important

role in eliciting full employee commitment. Managers can also offer performance-based awards, which will motivate employees to work harder and think outside the box. Change is inevitable, and in an organizational change, the role of the manager is vital. In the Mainstream Approach, top managers make the crucial decisions, specifically in planning and implementing a smooth transition. On the other hand, the Multistream Approach is bottom-up, with emphasis given on the detailed process of change, as well as a broader range of reorganization issues.