P&G's Byrnes To Head Health Care & Corporate New Ventures Unit

Procter & Gamble exec Bruce Byrnes will head up the company's new Health Care & Corporate New Ventures Unit under a restructuring program announced Sept. 9.

As president of the newly organized unit, Byrnes becomes one of seven newly appointed global product category leaders responsible for product design, marketing and overall strategy in their respective areas. Chairman and CEO John Pepper announced the restructuring at a Sept. 9 meeting with analysts.

Byrnes, who will assume his new duties on Jan. 1, will continue to have responsibility for Crest, Scope, Chloraseptic, Nyquil, Pepto-Bismol, Vicks Formula 44 and Vicks Vaporub, among other OTC brands, as well as the prescription products Asacol, Didronel and Macrobid.

The move is a natural one for Byrnes, who has headed the health care unit in the U.S. and North America since 1996. Since joining the company in 1970, Byrnes has divided his time between paper products and P&G's soap and detergent division before serving in the health care posts.

Also, P&G has created eight market development organizations, which Pepper characterized as one of the "most innovative" aspects of the restructuring. These groups will work in conjunction with the global business units, he noted.

The geographically focused units, he said, will work on a regional and local level to develop innovative market strategies, new alliances and distribution channels, "superior retail customer relationships and external relations programs."

The market development organizations were created to "feed consumer and market knowledge" into the global business units, which will "directly impact concept and product design," Pepper explained. The market units will also "work with local customers and external stakeholders, such as government officials, to win big in every market with as many initiatives as we can deliver."

The regional units are: North America; Western Europe; Central & Eastern Europe; Middle East, Africa & General Export; Japan/Korea; Greater China; ASEAN (Southeast Asian Basin), India & Australasia; and Latin America.

The market-based units have "enormous potential" for accelerating growth, Pepper declared. "Today, we often see dramatic differences in results from one country to another. Same initiative, same base plan, and yet some countries outperform others by two to three times in terms of market share, sales and profit growth. It all depends on the strength of the strategy and execution placed against that initiative by the local market organization."

Pepper said the difference "can relate to how well we are working with our customers, the quality of our local sampling programs, the endorsements we receive" and the "motivation and readiness to execute" of employees.

P&G has "been headed in the direction of operating as a global company for many years but until now we have always stopped short of running this business on a truly global basis," Pepper said. "And for good reason. There is a big difference between selling products in 140 countries around the world and truly planning and managing lines on a global basis."

The company has been working on the program for a year; full implementation of Organization 2005 is expected to take three to five years to complete.

With 300 brand names worldwide, P&G has "more leading brands than any other consumer goods company in the world," but there is "another level of innovation [it] can deliver:...products that establish new categories" or "dramatically reset the standard of performance in an existing category," the company noted. P&G products are marketed to nearly 5 bil. consumers. The company has ground operations in 70 countries.

To provide professional assistance to the rest of the company, P&G has created a global business service unit to "leverage" the company "while increasing the quality and speed these services support" such as accounting, payroll and order management.

The GBU will "enable P&G to achieve significant economies of scale, while improving overall quality speed of these services," the company said. VP Michael Power will assume responsibility of the unit on Oct. 1. The firm expects implementation of the global services business to take roughly five years.

Many corporate employees will be incorporated into the three new units, while others will concentrate on either developing new knowledge or conveying that intelligence across the globe.

P&G also plans to "overhaul" its reward system, "training programs and other aspects of the corporate culture to create an environment that produces bolder, more stretching goals and plans, bigger innovations and greater speed," the company said.

P&G said the major difference between Organization 2005 and the last realignment in 1995 is that the current restructuring focuses on accelerating growth, while the previous program was centered on reducing costs. Three years ago, P&G shifted its emphasis from the U.S. as an individual market to a more global approach, and named veteran VPs to head four regions.

Although the current restructuring is designed to drive growth, P&G expects it will have to make cuts in its 110,000-employee base.

The company "anticipates there will be costs associated with this reorganization that go beyond [its] current program of ongoing restructuring," VP and Treasurer Clayton Daley told analysts. "Some of the costs will center on the transition to the new global business services organization and some on the transition costs in selling and administrative areas."

"There are major product supply productivity initiatives under way that we believe will involve up-front costs," Daley continued.

The company's acknowledgement that earnings for the current quarter will not meet analysts' expectations sent P&G stock tumbling 7-3/4 on Sept. 9.

P&G also formally announced that Durk Jager, the current president and chief operating officer, will succeed John Pepper as CEO on Jan. 1, 1999. A 28-year P&G veteran, Jager has served in his current post since 1995. Pepper will continue as chairman until Sept. 1, 1999 "to see the organization through the transition and the new design."

At that time, Jager will assume the chairmanship, and Pepper will retire from the company moving to chairman of the executive committee of the board. He will succeed Edwin Artzt. Pepper joined P&G in 1963.