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Articles with HMA Quotes Deal Forces One Company To Fit Into Another's Culture
January 31, 2005
By Sarah Ellison and Charles Forelle
In 2001, James M. Kilts, then newly appointed as chief executive officer of Gillette Co., replaced two-thirds of the company's senior management team and trimmed 3,700 jobs, more than 10% of the company's work force. Employees of the century-old company thought they had seen the shake-up of all shake-ups.
Just wait until they see what Procter & Gamble Co. could have in store.
In announcing the $52.4 billion takeover of Gillette, P&G's CEO, A.G. Lafley, said he planned to "learn a lot from the people at Gillette" and talked about ways the companies could combine Cincinnati-based P&G's knowledge of women with the shaving know-how of Boston-based Gillette and delve into the business of women's hair removal, which Mr. Lafley said was a $10 billion business.
But Mr. Lafley's organization has a tendency to teach rather than learn. P&G has such a strong corporate culture that employees develop a lingo that only other P&Gers understand. The employees, nicknamed "Proctoids," write memos in a certain format, and use a certain brand of paper clip. Board members need a glossary to understand all the acronyms the company uses. Many P&G employees joined the company right out of business school, have never known another corporate culture and are eager to help new employees learn the ropes.
Yet Gillette employees may be difficult students. The company has its own staid culture, rooted in Gillette's flagship razor and blade business. The business model of giving away the razor and selling the blade may be the world's most-recognized mercantile concept.
Gillette's longtime focus has been on developing better and better products to make mundane activities, such as shaving, require high-tech tools -- a complex operation focused largely on high-tech research and development that P&G cannot afford to disrupt.
How well P&G and Gillette work together is crucial to the success of the takeover. In particular, P&G cannot risk alienating the core Gillette work force, which has developed products successfully for generations.
To be sure, P&G in recent years has promoted its willingness to accept ideas from the outside. Presenting the Gillette deal to analysts Friday, Mr. Lafley noted that "10 years ago, P&G was an invent-from-within company." Over the past five years, "what we've tried to do is become a much more of a connect-and-develop company."
Mr. Lafley alluded to P&G's drug brands such as Actonel and Prilosec OTC, which the company markets in partnership with pharmaceutical companies. He pointed out P&G's partnerships with Unicharm, a Japanese diaper competitor that helped develop P&G's Swiffer mop, and a joint venture with Clorox Co. to make Glad Press 'n Seal. "I think it's pretty clear we'll work with anybody," Mr. Lafley said.
In working with Gillette, P&G's task is complicated by the fact that Gillette's culture is already split in two. On one side are the longtime employees who form the heart of the razor business. On the other are "outsiders," including a group of P&G alumni and a cadre of Kilts acolytes who followed him from Nabisco Holdings Corp. to Gillette.
It is the longtime Gillette employees who "are going to have the toughest time," says Dave Hardie, a headhunter at Herbert Mines & Associates, who has recruited for both Gillette and P&G.
Though Gillette's products reach around the globe, Boston is the center of the company's universe. Brand management and most product development happen there, as does much of the high-end blade manufacturing.
Gillette cloaks its development operation in military-grade secrecy. Plans for the 1998 launch of the three-bladed Mach3 -- Gillette's most successful product -- were so tightly guarded that the company erected plywood walls around a section of its manufacturing plant that was dedicated to the new razor. Only a small group of engineers and machine operators were allowed inside the "plywood ranch," as it was called. Behind the walls were newly designed blade makers, capable of turning rolls of steel into razors at breathtaking speeds.
The purchase will bring a few P&G alums who are now at Gillette back into the fold. Joseph Scalzo, a onetime P&Ger, is now the head of Gillette's personal-care unit, which comprises antiperspirants and deodorants and is the most likely unit to be folded directly into P&G's structure.
Other former P&Gers who have joined Gillette are Robert DeMartini, a top executive in the blades and razors division; Edward F. Lonergan, who runs Gillette Europe; and James D. White, who has responsibility for Gillette's Canadian operations. These executives were all "regrettable losses," P&G executives say. But the executives' time away could enhance their skills now that they are back. The P&G executives who defected to Gillette "are now broadened and P&G gets them back," says James Mead, president of James Mead & Co., an executive recruiter who placed many of the senior executives at Gillette and worked at P&G himself nearly 30 years ago.
P&G, meantime, will have to get its arms around sports. Gillette has been a heavy proponent of sports marketing for nearly a century, and its name is on the New England Patriots' stadium in Foxboro, Mass. On Friday, P&G noted that "Gillette has a long-term deal for Gillette Stadium, and we couldn't be happier to be associated with the World Champion New England Patriots -- and we're hoping for a repeat."
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