Sonia Ferencikova

1
CLUSTERING COUNTRY OPERATIONSWITH A CENTRAL
HEADQUATERSBEST PRACTICE STUDY

• Sonia Ferencikova
• Based on the interview of S. Ferencikova and V.
  Pucik with
• Helen Tucker
• Associate Director, HR CEE, ProcterGamble,
  Geneva

2
Background (1996 decision to go from 9 to 5
organizations)

• 1996
• Poland
• Baltic and Belarus
• Balkans, Romania, Bulgaria
• Czech Republic, Slovak Republic (Prague HQ)
• Hungary
• Ukraine
• Russia
• Turkey
• Central Asia

• Now
• Poland/Baltic
• Central Europe South (H, SLO, HR, CZ, SK)
• Ukraine/Russia
• Caucasia/Turkey
• Romania/Bulgaria/ part of Balkans

3
PG in CEE

• Strategy
• Western Europe
• as a learning model
• Leverage scale
• Look for synergies
• Move fast

• Business model
• Three major pillars
• Markets
• Manufacturing
• Products

4
Drivers of organizational change

• Using synergies among markets
• Managing more efficiently (ambassador has less
  places to go)
• Decreasing costs
• Decreasing expatriates (people constraints)
• Wild East problem

5
Chronology of the change process
6

• Fall 1996 - White paper Georg Gruber
• Need of big organizational change initiated by
  president
• External pressure on CEE markets (change of
  business model chains)
• Internal pressure (division of manpower serving
  distributors and chains, development of
  financial, logistic, IT, HR people on the ground
• Result four year plan outlining the right way
  forward
• - which markets to
  aggregate
• - what sequence
• i.e. organizational design plan based on the
  change in business
• April 1997 Preliminary data investigation
  Helen Tucker
• Trade structure
• Availability of people

7
1997 Beginning of hubbing in CEE Previous
Western experience Core country model
UK/Ireland one country with significant larger
volume dominated or swallowed by
UK Integrated or Scandinavian model head office
in Stockholm, HO dominated by one country sales
offices in four other countries 1st hub July
1997 - Poland, Baltic countries, Belarus GM in
Poland, no real synergies, intuition move,
learning, synergies now 2nd hub Hungary,
Slovenia, Croatia HR, SLO business and people
taken out of Balkans, moved to Budapest, no
extra cost cut or head cut using synergies and
scale however, new model in Blue Danube region
desirable
8

• October 1997 Kick off Meeting
• Blue Danube Project (Habsburg project)
•  
• Soft approach HT and GG talked to people before
• Purpose To agree there is/there is not a real
  opportunity for an aggregated business unit
• Participants HT, GG, GM Hungary, GM CR (plus SR)
• Place Vienna
• Discussion points Similarities differences
  (financial data, brand performance, customer
  environment, dynamics, trends, structure, people,
  recruitment, export track record) competencies
  strengths and weaknesses
• Alternatives No change/hub/ others
•  
•  

9

• Principles of the change defined in Vienna
•  
• Totally open-minded (hub/not to hub location
  of possible hub)
• There is no decision now preliminary concept
  should be written by December 1997
• Understanding of similarities and differences,
  challenging the validity of differences
• Business and structure ahead of specific people
  and assignment-planning
•  
• Where and Who irrelevant
• What and Why relevant i.e. hubbing because of
  synergies
•  
• 1st decision in 1997 not now trade structure
  different in H chains, in CR and SR some
  distributors, wholesalers, very little chain
  activities

10

• January 1998 Vision planning meeting
• (HT, GG, GM-Hungary, GM-CR plus functions HR, IT,
  sales)
•  
• Vision Create a more dynamic, powerful business
  unit
• Goal Increase business growth by improving
  customer service, quality of planning and
  execution, speed to market, innovation
• Outcome To eliminate duplication by sharing the
  work the cost
• Principle No radical evacuation
• Discussion points Data Goal Principles
  Design (Structure, location, key players) -
  Barriers for Clarification
•  
• Conclusion Aggregated model in Blue Danube
  region desirable
• clean clear structure, focus on customers in all
  five countries, diversity of employee cultures,
  recruitment in Prague, Bratislava, Zagreb,
  Ljubljana and Budapest .in the meantime
  convergence of external environment
• Slovenia, Croatia, SR behind, but CR started with
  chain activities
• March 1998 Recommendation for the change written
  by GG, HT approval needed by the president of
  Europe, information for world HQ

11
Question where

• Possible locations Vienna, Budapest, Prague
• Real locations Budapest, Prague
• Checked categories
• Cost relevance
• Infrastructure
• Center of hub
  should be multicultural
• Next evolution (EU
  accession)
• Recruitment and
  retaining issues
• Manufacturing in both detergents (CZ), paper (H)
• Crisis in CZ at that time
• Final decision Budapest

12
Question who

• GMs fully established, proud, with results,
  protecting their organizations
• Choice GM from Hungary became GM for the whole
  region (GM from Prague left for JohnsonJohnson
  in London)
• Natural elimination of expatriates between 01/98
  06/99 one HR and one financial person moved to
  other foreign assignment remaining HR and
  financial person kept their offices and two
  separate groups in both countries since 07/99
  one IT person for both countries
• In March, April 2000 34 Czech and Slovak
  employees moved to H

13
Dangers and barriers of the change

• commitment to CR, Rakovnik obligation, relation
  to government
• ability to recruit and retain multicultural team
• how manage business across five countries
  complexity
• would it be manageable for GM?
• would we be able to keep the focus on customers?
  (losing the local responsiveness)
• communication of staff

14
What made it easier

• Natural cut of expatriates
• For people who lost their jobs in Prague, social
  plan for next 6 months job market was positive
  plus there were some jobs in Rakovnik, in Prague
  sales, some accounting, some logistics were left
• Communication systems and information during the
  change (not only relocation hardware, but also
  software)
• 1. HT and GG facilitated
  recruitment and discussion, JD kept in the
  audience
• 2. Look see trips were
  organized for families
• 3. Saturday events were
  organized in the office to help people learn
  about H and Budapest
• 4. Sponsors of similar age
  were found for relocating model

15
34 people coming to Budapest

• Expatriate packages were offered for 24 months
  (from April 2000 to April 2002) they got
  benefit package, local housing package for
  one year ahead, retention bonuses in two years
  with payments in several stages (in 6,12,24
  months)
• Young staff only 5 children (impact on housing)
• The move ended up cost-efficiently even though it
  did not look like that
• 6 months before April 2002 in September 2001
  localization packages offered

16
Retention issue and diversity

• If there is diversity erosion, it will be
  Hungarian organization
• Out of 34 managers, 19 were offered to get
  localized, 18 agreed
• The rest some will move back to Prague or
  Rakovnik they did not get the offer some leave
  the company due to performance reasons, some
  people came later in July or December 2000 they
  will be offered localization packages later
• Composition of main position now GM in H is from
  Germany he speaks Hungarian he run
  multicultural organization in the Balkans Mktg
  leader is Czech, two other Mktg Hungarian,
  finance expat, HR - expat

17
Role of HR in the change process

• HR was driving the activity, not responding
• Role of HQ to design, to coach the change and
  its steps, to execute, to communicate, to make
  sure that everybody knows why the change is done,
  and why Budapest was chosen
• Role of J. Delbar and his team to be proactive
  in understanding the needs of relocated staff,
  arranging the program to answer the needs, to
  enroll the WHOLE Budapest organization into
  making it work the result 18/19 accept to stay
• Practical issues defining transfer package
  principles, social plan, outplacement support and
  retraining

18
Business implications

• In 1997 32 expatriates in two profit centers
  (CRSR, H/HR/SLO), in June 2000 one profit center
  with 12 expatriates i.e. gain - 20 positions
• One GM 20 30 local employees
• Increase in productivity
• Possibility to launch the same products in all
  countries
• Tremendous business exercise why one product is
  doing so well e.g. in CR, and is overlooked in H
• Business results continuing good, anticipated
  even better