P&G – Gillette Merger Post Merger Integration at Plants

On January 28, 2005, The Procter & Gamble Company (NYSE: PG) announced that it had signed a deal to acquire 100% of The Gillette Company (NYSE: G). The transaction was valued at approximately 57 billion USD making it the largest acquisition in P&G history and ninth biggest in history of corporate America. The combination of the two best in class consumer products companies created a stronger brand portfolio, opportunities for further innovation, faster sales growth, cost savings and revenue synergies. As a consequence of the acquisition a best-in-class and most cost effective sales and distribution model was created for India. The entire sales and distribution organization of Gillette was integrated with P&G, which led to changes in the organization design and business model. Managers from Gillette were transitioned to P&G people systems viz-a-viz Organization structure (to P&G bands from Gillette grades), compensation structure and benefits, career and progression system, assignment and succession planning et al.

Gillette India Limited – Bhiwadi Plant
Gillette India Limited (GIL), incorporated in 1984, is a listed legal entity on BSE. Post merger, P&G owns 75.9% equity, 12.9% is owned by the JV partner and 11.2% is owned by general public. GIL is a blue chip FMCG company with a consistent record of excellent sales and profits. As on year ending June 2010, the total revenue of the company was INR 8825 Million with net profit of INR 1370 Million. The company had only one manufacturing operation in India at Bhiwadi, Rajasthan which is also the registered office of the company. Established in 1986, the plant was chosen to be located at Bhiwadi for reasons of good climatic conditions suitable to blade manufacturing. It is situated about 80 kms from the capital of the country, Delhi and is located very close to the industrial area of Manesar (Haryana). Since its inception, capacities from other blade manufacturing units located out of Delhi (Sharpedge) and Mysore (Wilkinson) were consolidated at Bhiwadi. Many of the employees have relocated themselves from these facilities to Bhiwadi. The site has about 40 managers and ~230 technicians. The product portfolio of the plant includes double edge blades (Gillette, 7 O’ Clock, Wilkinson), systems and disposables (Presto, Vector, GII, Gillette Guard). Bhiwadi, being the only blades and razor manufacturing plant of the company, is strategically very important for delivering the business goals for P&G. It has played major role in delivering volumes for P&G India business. The volumes increased from 6.9 MMSU (MMSU = million stack units) in 2006-07 to 10.00 MMSU in 2010-11. To meet future business plans, Bhiwadi will need to produce more than 21 MMSU by 2014-15. For expanding capacities, huge capital investments are planned for the site. Most of the technicians at Bhiwadi have started their career with the company.


The attrition rate amongst the technicians is almost zero. Govind? You don’t seem very happy’ Govind said ‘I am happy for completing my service. he didn’t receive any long service award in the meeting while I got the long service award yesterday. ‘He has migrated to P&G system – ‘Long Service Award is not rewarded at P&G the way it is done at Gillette. The annual wage revision ranges are decided basis benchmarking with the similar companies in the local region. technicians are paid for performance – i. However. who had completed 20 years in the company this month and had received a long service award for his dedicated years of service in the meeting a day before. Almost 50% of the heritage Gillette Managers had left the company during or just before the transition. technicians have developed deep technical mastery which is one of the contributing factors in success of the plant.Bhiwadi is the only plant in the local region which is non-unionized. But this award got delayed by three months – prior to acquisition our loans and awards used to come on time. ‘But why has my manager moved to the other system? and why is it not applicable to me? 2 . the productivity levels are benchmark globally. each and every individual’s performance is appraised and rated and the merit increase is linked to the performance rating which is given on the anniversary date of the individual. As far as Anil is concerned. This transition affected about one-third of the entire technician population at Bhiwadi. He met Govind. the management team was able to handle this change well and pack centre at Baddi was started on time. I will look into it. They were required to reskill themselves and perform new alternative jobs which were brought inside the plant. What was the issue?’ ‘Sorry for the delay.’ Suresh replied. Majority of the technicians are technically qualified.e. Bhiwadi has the reputation of delivering excellent business results in all the years since its inception. At Bhiwadi. The productivity levels of the plant are very high. Suresh shook hands with him and said – ‘Congrats Govind! Twenty years is a very long time. Concerned. A day after one of the ‘all employee meetings’.’ Further puzzled Govind said. ‘And what is that system? a puzzled Govind asked. Bhiwadi plant has seen multiple changes since merger with P&G. At the same time Managers were getting integrated as well. Suresh was on the shopfloor for his daily morning visit. The average age and experience of the technicians at Bhiwadi plant is about 44 years and 20 years respectively and the average age and experience of managers is 37 years and 11 years respectively. In 2007. Over the years. Just before packaging transition. Suresh asked – What is the issue.’ Govind did not seem very delighted and took the thanks dryly. packaging capacities were shifted to the new facility which came at Baddi for cost related reasons. he is now on a different system and he will get his long service award according to that. Thank you for your remarkable contribution to this site and wishing you more such successful years to come. though my manager Anil and I both joined the plant in the same month. Suresh joined Bhiwadi as HR team leader. Also. For many processes. This made the challenge of Packaging shifting even more complex. But he will receive it too. The pay system for technicians is very unique versus rest of the industry where everybody gets similar increase at one common date. in spite of all this.

Suresh walked back to his office – concerned and wondering how will this disparity in system affect the morale of the employees. However.’ said Suresh. our work has also changed significantly after the merger. I will need to develop skills to handle major breakdowns but in that case I may not be able to operate as many machines as I am doing now. at this site traditionally we have kept our technicians ahead of the market in many benefits which has met their needs over years. they need to have different skills to manage the work as per the new systems and requirements. The requirements under new system like the technical standards. change roles and that is how their careers are managed. how training needs are to be addressed are very different. Nilesh smiled as he heard Suresh and explained. He says we need to move from `I run. Many benefits like housing loan. it was important to have our managers also on the same system. earlier we used to have ISO 9000:2001 quality system but now we have P&Gs Quality Assurance Key Elements (QAKE) as new system. Not only for our managers. We get satisfaction by learning new things…isn’t this true for you? ‘Yes it is…’.yes there are changes happening but change is the only constant. Different skills are needed by us as well to do work as per new requirements. No learning effort goes waste. Otherwise when they go to the other locations it will create discrepancies. medical insurance for parents. Nilesh was a veteran Gillette manager who had been at the site for more than a decade. vehicle loan. I Maintain’. Therefore. We are looking at introducing P&G systems like IWS.‘In P&G managers are supposed to move around. QAKE. ‘Now my Manager says that I am expected to handle even the major breakdowns. You Maintain’ to `I Run. the way consumer and customer complaints are handled. noted Govind. Govind replied. Now I am required to do so many analysis where as earlier it was only about operating the machines’. Suresh . ‘We thought about this during the integration of both companies itself. aren’t you finding it exciting? I understand QAKE but how else has your job changed? Suresh asked. nodded Govind. ‘I am ready to accept the changes but at this age of 44 what will I get by learning and doing things differently? Also technicians in other P&G plants have better benefits though their work is similar to us. ‘But learning new thing is always good. Whereas earlier we used to simply pass on the breakdown work to Maintenance department. Also. children education scholarship. Internal Controls which are the standards all across the company globally – are the technicians equipped to handle the systems? Will they accept them? What is in it for them to learn new things? Suresh raised the issue to his Plant Manager in one of the meetings.‘What changes are you talking about?’ ‘Like for example. And this has been one of the factors in keeping this site union free in spite of the high external vulnerability.’ ‘Understood…. etc are not available to P&G technicians but there are many other benefits which are available at P&G 3 .’ explained Suresh. The Plant Manager.

This packaging capacity shifting is also a big change which we have been able to accomplish successfully now. 4. Nilesh asked Suresh. Also. Together. Is there a compelling need to harmonize the compensation and benefits for technicians? 2. Over a period of time our technicians have got used to the Gillette benefits – if we try to take away these benefits from them it may create issues. But Nilesh.’ Suresh discusses the scenario with his team – Venkat and Janardhan. Venkat is a new hire from a premier HR institute whereas Janardhan has been with the company for quite some time now. even if we decide to go through this change. Business is booming and hence we need to produce at peak capacities to service the market. Nilesh continued. I understand why harmonization was not done then. they put down few questions they need to answer – 1. leave program. transportation be treated 4 . Suresh thought for a while and said. ‘Let me think about the solution and come back to you. You know we have lost more than 50% of the leadership just before and during the managers’ integration. the management capability to handle such a big change. What shall be the guiding principles for harmonization. How each Gillette benefit which the technicians are currently getting be treated? Especially how big ticket benefit items like loans. is limited. administering the Gillette heritage benefits is quite a task in itself as the delivery mechanism has completed changed and the outsourced global vendor does not have robust processes to handle them with efficiency and without error. ‘Also. This is leading to lot of issues among the employees. So what do you think is the solution?’. A) How do we design the compensation package for a Gillette technician? (Use Annexure 3 as input. Given all these constraints. What are the legal and employee relations risk in such an exercise? What should be done to mitigate the risks. hospitalization and life insurance.) B) How the transition of Gillette technicians to P&G’s benefit program be handled. we decided to not harmonize the compensation and benefits for technicians’ Now with more clarity Suresh nodded. if it is to be done? OR What shall be the guiding principles for not harmonizing? 3. which was never the case in the past. if the need be. now technicians are feeling the differences with respect to managers. ‘Right…now that I know this background.and not present for our technicians. given there are so many business changes around.

INR.000 As per Act As per Act As per Act As per Act As per Act (without any upper limit) 5 .Annexure 1 – Comparison of Compensation in P&G and Gillette Compensation (Monthly components) Base HRA Gillette P&G Yes 40 % of Base salary + INR 350 15 % of Base salary Yes 40 % of Base salary Bhiwadi Township Allowance (BTA) (attracts tax as per Act) Conveyance Allowance (attracts tax as per Act) Attendance Incentive (attracts tax as per Act) Washing Allowance (attracts tax as per Act) Compensation (Annual) LTA Medical Reimbursement Bonus Compensation (Retirals) PF Gratuity N.A.500 INR 15. 50 N.A.A. 52% of Base salary N.A. 2 months basic salary 2 months basic salary As per Act INR 18. 20% of Base Salary N.

5 lakhs/pa sum assured per family Coverage – Self/spouse/2 kids/parents Third Party Insured – Sum assured 6 lakhs for death/ permanent total disablement Life Insurance Temp Total Disablement .50/day is deducted from employees’ salary Meal subsidy @ Rs 13/night is provided Third party insured Parents covered Hospitalization INR 2.Annexure 2 – Comparison of Benefits in P&G and Gillette Benefit Item Gillette P&G 4 shifts of 8 hours each. (A. G).Rs 5000 per week upto a maximum of 104 weeks While on Business Trip. Pick and drop facility provided to all employees in the local area. spouse. 20 minutes overlap for shift handover/takeover 6 day week. Transportation Not Provided.B. G). Veg / Non-Veg Menu / Diet / Fruit Meals Breakfast is not provided Cafeteria Tea is provided Rs 3. Third Party Insured – Sum assured 6 While on Business Trip. Township allowance is not paid.C.B. (A.No overlap. Only 1 standard menu No common policy across sites Breakfast is provided Tea is provided Rs 10/month is deducted from employees’ salary Meal subsidy is not provided Self insured Parents NOT covered. 15% of the Basic salary is paid as Bhiwadi Township Allowance to employees staying in Bhiwadi. Self insured – 36 months base salary 6 .C. 6 day week. kids Self insured – 24 months base salary for death/ permanent total disablement Hours of Work 4 shifts of 8 hours each. On actuals with network hospitals Coverage – Self.

brother (immediate family member not covered by the Company’s medical policy. Can be availed any number of times upon full repayment of outstanding loan. employee can avail 36 / 48 months basic with a repayment period of 96 / 128 EMIs respectively. No cash transaction.Family includes parents. parents. kids.) Max allowable loan . spouse. in laws.Benefit Item Gillette lakhs for death/ permanent total disablement Temp Total Disablement . an employee is eligible for a further loan equivalent to12 months basic Not present Housing Loan Not present 7 . Max allowable loan of INR 10. children.000 Emergency Loan Interest free loan with a repayment period of 12 months Processed on site Loan processing time – immediately Payment made in cash Loan given for following reasons ONLY Natural Calamity. in laws. spouse. 12 months basic salary with a repayment period of 32 months After 5 years of service. Vehicle loan 2-Wheeler loan for Factory Staff at 4% p.36000 to be repaid in 60 instalments.Rs 5000 per week upto a maximum of 104 weeks P&G for death/ permanent total disablement Loan given for following reasons ONLY -Death in family where .000 Interest free loan with a repayment period of 24 months Processed by outsourced agency Loan processing time – 7 working days Payment will be received in the bank accounts.50% of annual take home pay subject to a max of INR 500. sister. interest up to a max of Rs.a. unmarried sister). bro less than 18 yrs. After repayment of 36/48 months basic. Hospitalization of parents. Death (family.

5 days at a time. leaves need to be applied and counted as leaves. Leave Year – Jan to Dec Casual Leave 8 . medical certificate required.20 days. 10 days per year 11 days per annum Maximum accumulation – 44 days No encashment. 7 days during first year of service for personal work or exigencies Cannot be taken for more than 3 working days at a stretch Will have to be authorized by the Line Manager No encashment or accumulation For intervening weekly offs /holidays. Leave Year – July to June Sick Leave 5 or more days needs return to fitness from any qualified doctor Intervening weekly offs/holidays not counted as leaves.Benefit Item Gillette salary for the purpose of house refurbishment (repayment period – 32 EMIs) The loans are given at an interest rate of 3% per annum. Encashable In case sick leave is taken for more than 2. Leave Year – Jul to Jun No half day leaves 11 days per year. leaves need to be applied and counted as leaves. Leave Year – Jan to Dec Half day leaves can be availed Casual leave of 10 days . 5 or more days needs return to fitness from company doctor For intervening weekly offs /holidays. P&G Paid Holidays 10 days per year 10 days per annum Maximum accumulation . Cannot be taken for more than 2 working days at a stretch Will have to be authorized by the Line Manager Encashable at the end of the year but cannot be accumulated Intervening weekly offs/holidays NOT counted as leaves. Balance lapses In case sick leave is taken for more than 2 days at a time. medical certificate required.

25. Short Leave 1 hr per month or half hr twice a month for meeting personal exigencies Gift given after 5. 10. 35 years of service Long Service Award Completed Years of Service For 5 years service 900/For 10 years service Rs Gift Amount Not provided 1 day for every 15 days worked for first 5 years of service 12 days worked after 5 years of service Days worked excludes Weekly Off. No encashment P&G Leave Year – July to June Leave Year – Jan to December Eligibility minimum 1 year of service Eligibility minimum 1 year of service 20 days earned leave. Minimum 3 days at a time & & 5 days for LTA Can be availed max 3+1 times in a year Accumulation (including leaves credited on 1-Jan) up to 60 days Weekly Off. Holidays excluded in EL availed Prior permission of 15 days needed Encashment of any accumulated earned leave will be permitted only on separation. EL. Provision for advanced EL on a case to case basis up to maximum of 10 days. retirement or death in service. Paid Holidays. 20. Accident Leave Minimum 4 days at a time & 5 days for LTA Maximum carry forward 30 days Earned Leave The award will consist of a gold coin bearing the Procter and Gamble logo and a felicitation plaque.Benefit Item Gillette Half day leaves can be availed No half day leaves No encashment. retirement or death in service. Weekly Off. Holidays excluded in EL availed Prior sanction 15 days in advance Encashment of any accumulated earned leave will be permitted only on separation.SL. Completed Years of Service 5 Grammage of Gold Coin 5 grams Rs 9 .CL. 30. 15. No provision for advanced EL.

See Annexure below.Benefit Item 2000/- Gillette 10 Rs 15 20 For 20 years service 3200/For 25 years service 3600/For 30 years service 4000/For 35 years service 4500/Rs 25 Rs 30 35 Rs P&G 7 grams 10 grams 15 grams 21 grams 26 grams 31 grams For 15 years service 2700/- Rs For the purchase of syllabus books. This scholarship is open for students from Class I to Class XII. Class 1 – 575 Class 2 – 650 Class 3 –675 Class 4 –700 Children Education Scholarship Class 5 –725 Class 6 –1050 Class 7 –1075 Class 8 –1100 Class 9 –1425 Class 10 –1450 Class 11 –1775 Class 12 –2100 Mediclaim Post Company pays premium for 2 years Not provided Not provided 10 .

No Company contribution Installments deducted from salaries as per advice from the committee 25% discount on MRP for Gillette brand products (max entitlement . Cooperative Thrift & Credit Society Used for lending to members as per the defined society limits & rules. Same amount contributed by company also. 58 years Gillette P&G 60 years 2 sets of uniform given annually 1 pair of safety shoes given annually 1 winter jacket given once in 3 years 2 sets of uniform given annually 1 pair of safety shoes given annually 1 winter jacket given annually Employee contributes Rs 10 per month.Benefit Item Retirement Retirement Age Uniforms/ Safety Shoes / Winter Jacket post retirement.INR 400 per person per month before discount) Not present Staff Sale Not present 11 . Administered by Welfare committee Given out as gift cheques for Welfare Fund Daughter’s marriage – Rs 7100 Son’s Marriage – Rs 2100 Self Marriage – Rs 1100 Not present Voluntary membership – Minimum Rs 100 contribution by employees per month.

*Assume Loan Perk of INR 1.per month. 12 . *LTA exemption is available twice in a block of 4 years.060 5574 1959 2612 6791 50 2177 2177 700 35100 628 1567 37295 *Assume the employee stays in a non-metro and is paying a rent of Rs. Therefore for the purpose of exemption assume that LTA is distributed equally over four years. 6500/.Annexure 3 – Current Compensation for Govind Components Base HRA BTA Attendance Incentive Conveyance Allowance Washing Allowance LTA Medical Reimbursement Bonus Monthly Gross Salary Gratuity PF Company Contribution Monthly Cost to Company Currently Monthly Amount 13.241 for the employee in question.

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