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Procter & Gamble reworking compensation

structure in bid to boost performance
culture
P&G faced flak for lagging behind competition where both multinationals and Indian
players got aggressive with innovation and consumer focus.
By Kala Vijayaraghavan, Sagar Malviya, ET Bureau | Last Updated: May 18, 2016, 02.48 AM IST

6
Comments

MUMBAI: Procter & Gamble, the world’s

largest consumer goods firm, is reworking its
compensation structure in an effort to boost
performance culture amid growing criticism
of the company being stiff in responding to
changing market needs.

The changes in markets including India

would mean the annual CEO-nominated
stock award programme for top performing
P&G faced flak for lagging behind competition where staff will be replaced with guaranteed cash
both multinationals and Indian players got aggressive
rewards closely linked to individual
with innovation and consumer focus.
performances, and independent of the stock
price movement.

P&G India said it plans to adjust the rewards

system where the annual bonus programme will be driven even more by the specific
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2/22/2020 Procter & Gamble: Procter & Gamble reworking compensation structure in bid to boost performance culture - The Economic Times

“Our performance incentive programmes in India will follow the same strategy. What is
unique about P&G is that salary increments are not restricted to only annual cycles but for
top talent, can be anywhere between six and 11 months based on their specific business
results,” a P&G spokesperson said. For instance, the company’s hiring at entry level
increased by 50% compared with a year earlier and it is considering mid-career hikes to
ensure best recruitment.

This is in line with the strategy of P&G global CEO David Taylor, who at an investor
conference earlier this year said the company will move away from its global and
centralised organisational focus to empower managers regionally to increase personal
accountability and get nimbler in the marketplace.

“India remains a critical market for P&G, and is growing faster than the balance of the
company’s global portfolio. In the last 18 months, P&G India has become profitable and
the value accretive results that India has delivered have contributed positively to the health
of the parent company,” the spokesperson said. Al Rajwani, who took over as local CEO
last year, is heading the profit-focused growth in India.

Earlier, P&G faced flak for lagging behind competition where both multinationals and
Indian players got aggressive with innovation and consumer focus.

“There is a joint collaborative planning with lot of focus and speedy execution under Al
which has gone to a higher level. The company has been quite aggressive in identifying
market needs and addressing it with a focussed portfolio,” said Devendra Chawla,
president-FMCG and Brands at the Future Group, the largest buyer of P&G products for its
supermarkets — Big Bazaar, Easyday and Nilgiris.

Globally, maker of the Olay cream and Pantene shampoo has been reorganising its brand
portfolio, focusing on the core ones and selling dozens of unprofitable brands. For the
quarter ended March 31, it posted a better-thanexpected profit, helped by cost cutting and
higher selling prices, but sales fell for the seventh straight quarter.

The performance of its Indian business isn’t different. The company’s efforts to push its
margins wider by getting rid of products that it doesn’t consider strategic anymore are
weighing on sales, but fattening margins.

In India, it posted high-single-digit sales growth in the January-March quarter in segments

that are strategically important for it — the company says nearly 85% of its portfolio comes
under these. Rest of its local businesses shrank 30%.

“This topline pain is worth it. We’re making significant progress in improving local profit
margins, up about 700 basis points (7 percentage points),” chief financial officer Jon
Moeller said in an investors call late last month. “We have gone from losing significant
money in India to triple-digit profits in just two years,” he said.

P&G invested more than Rs 2,000 crore in India in the past three years, mainly to set up
manufacturing units to reduce dependence on pricier imports.

The businesses that are either being fixed or exited from in India include brands such as
Wella hair colour, Oral B toothpaste and Duracell batteries that was divested globally.
ntities including listed firms Gillette India NSE -1.40 % and P&G Hygiene and Healthcare, and
unlisted company P&G Home Products make razors and shaving products to feminine
hygiene and baby-care products, detergents, anti-cold balms, oral care products,
shampoos and creams.

Read more on Procter & Gamble Big Bazaar Future Group David Taylor

Gillette India Pantene

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