Procter and Gamble

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REV: JULY 12, 2005

THOMAS J. DELONG, WARREN BRACKIN, ALEX CABAÑAS, PHIL SHELLHAMMER, DAVID L. AGER

Procter & Gamble: Global Business Services
Dave Walker, vice president of Business Service Opportunities and chairman of the Governance Team at Procter & Gamble, sat and stared at the reports and presentations that were piled on his desk. As head of the Governance Team, Walker was responsible for leading a lengthy review aimed at answering one question: “What should P&G do with its Global Business Services (GBS) unit?” GBS brought together internal services such as finance, accounting, employee services, customer logistics, purchasing, and information technology into a single, global organization providing services to all P&G business units. GBS leveraged P&G’s scale, capitalized on new technology, and standardized work processes to deliver improved services at significantly lower costs to all of P&G. In late 2000, GBS had achieved significant cost savings for the company, but many P&G top executives began to question whether or not continuing to invest in GBS was the best use of the company’s resources. A. G. Lafley, chairman and CEO, saw the decision as one about strategic focus: “We’re a development and commercialization company. That’s really what we do. We develop and commercialize brands and products. So we need to evaluate networking or partnering everything that is required to support a development and commercialization [kind of] company.” Lafley and other top executives were pleased with the cost savings and efficiencies that GBS had already delivered, but they were looking for more. One option was to spin off GBS as a separate entity. The business process outsourcing (BPO) industry, which provided financial, accounting, purchasing, and other critical business services to a wide variety of companies, was young but promising. In early 2001, a comprehensive review revealed that GBS had market value as a stand-alone business that could compete in this BPO market. GBS could continue to support P&G, but as a separate entity that also provided support services to other firms. However, although GBS had the expertise to effectively serve P&G, it was not clear that this expertise would be sufficient to enable the group to be competitive with BPO industry leaders. A second option was to contract with an outside company for the services that GBS currently provided. Although this option was similar to a typical outsourcing deal, it was different in at least one major feature. Often when companies outsourced support functions, the employees that worked in the support units were laid off. P&G, however, valued their GBS employees, 5,700 of which could potentially be affected by this option, and had decided that this would be a different kind of outsourcing deal. They wanted any potential outsourcing partner to offer jobs to the GBS employees. This would mean that GBS employees would have the option to continue to work on P&G campuses around the world and serve P&G business units but would be employed by an outside company. ________________________________________________________________________________________________________________ Professor Thomas J. DeLong, Warren Brackin (MBA 2004), Alex Cabañas (MBA 2004), Phil Shellhammer (MBA 2004), and Ph.D. Candidate David L. Ager prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2004 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or...
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