Proctor and Gamble, Human Resources, Shared Services, Outsourcing, HR

Procter & Gamble's HR evolution

Global consumer giant Procter & Gamble (P&G) provides a textbook example of how a shared services approach to human resources can evolve over time. An analysis of the company’s strategy by Gartner in early 2005 identified two distinct stages: an initial reliance on three global shared services centers from 1998 to 2002, succeeded by a ten-year outsourcing deal with IBM to handle all core IT functions.

With more than 98,000 employees spread across 80 countries, achieving common benchmarks and driving down administrative costs posed a major challenge for the company. While the three shared service centers (SSCs) – located in Costa Rica, the Philippines and the United Kingdom – helped deliver a number of cost-saving benefits, they also created a number of challenges for P&G.

Gartner’s analysis of P&G’s operations identified five main reasons for the shift from an SSC model to a fully outsourced model:

1. Limitations on the amount of optimization that could be achieved using SSCs.
2. Challenges in keeping service and infrastructure skills up-to-date in an SSC approach.
3. Difficulties in justifying budget for new HR technology investments.
4. Inability to sell services from the SSC to other companies.
5. Need for ownership of HR products in order to sell HR more effectively to internal customers.

The switch to IBM came at the same time that P&G was re-examining its outsourcing arrangements in other divisions. Simultaneously, the company shifted most of its IT operations and a number of finance elements to Hewlett-Packard – a major global rival to IBM. P&G’s success in doing so suggests that companies need not feel compelled to shift all external services to a single provider simply to achieve scale benefits.

While the SSC model was superseded by the outsourcing arrangement, P&G was keen to ensure that the experience gained during its operation was not discarded. As a result, 750 members of staff from the three service centers were seconded to IBM at the commencement of the contract, ensuring continuity of knowledge.

Although the IBM deal has only been in place for a year, the company is already seeing significant benefits, particularly in the area of meeting service level agreements (SLAs). “From July to November 2004, IBM met all 21 SLAs, compared with the month before the deal took effect in which P&G’s SSC only achieved 9 out of the total,” Gartner wrote in its assessment of the arrangement.

by Angus Kidman
Source: www.humanresourcesmagazine.com.au