Tom Denford
By Tom Denford
Oct 26, 2012 11:36:17 AM

Chief Productivity Officer At P&G Is (Probably) Good News

 

Facing really touch choices and declaring some big ambitions (cutting $10bn from costs and $1bn from marketing spending) P&G is a fascinating case study to follow.

P&G's predicament is obviously not unique, most companies have been addressing their spending in recent years; some by choice because a recession provides a great opportunity to re-evaluate and re-organise, and some by need because they have been wrongly structured to succeed in the current climate or build for the future.

We have been following the story closely since the first announcement back in February 2012. At first glance, the claim to be able to save $1bn from their marketing spending sounds bonkers but actually is perfectly sensible in the context of a $10+bn spend. There is so much potential for wastage in the marketing value chain that no-one can credibly claim P&G are running at anywhere near 100% efficiency, hence saving 10-15% of total costs over 5 years is probably in the cold light of day a pretty timid target. They could certainly go further.

This kind of disruptive change would have an effect on P&G's total marketing headcount (standing at around the 7,000 level globally)  and that's naturally where the resistance and backlash to the statements has resided. Losing people is not a nice business plan or  press release to have to write.

But so far the announcements and the reporting around these P&G efficiency improvements  have been exclusively using the vocabulary of SAVINGS.  This week, that changed...

Bob McDonald announced the appointment of a Chief Productivity Officer. Likely to come from a procurement background, this role would be responsible for finding value-adding situations in a current culture of cost cutting.

As those of us in media and marketing know, cutting some marketing costs can have a hugely detrimental effect on the effectiveness of marketing; cutting the wrong bits, at the wrong time etc. Of course (we all say), cutting some marketing spend can offer an immediate bottom line improvement but will significantly damage top line growth potential - therefore killing the business. We don't yet know whether the recent initiatives such as the Gillette creative pitch are set up with the ambition set correctly on  "productivity" rather than "cost-saving" (can anyone throw some informed light on this?), time will tell.

As we posted on AdAge, in regard to this week's news, we believe that this appointment (of a CPO) is a good development at P&G amongst quite a lot of bad news, notably for the many people being laid off. Why?

1. Having someone in charge of "productivity" rather than "cost-savings" is an important semantic distinction. Improving productivity is a very different agenda to cost cutting and this is a distinction which marketing and marketing service suppliers should be embracing fully, not sniping at.

2. Improving productivity involves making marketing (which remember has a value-adding purpose) better than it is now. If you are a marketing leader or an agency CEO bemoaning the role of procurement in your business, this is the stuff you'll need to know about as you become more accountable.

3. Good procurement leaders are becoming masters of productivity management (rather than cost cutting).

I expect (and hope) we will see many more companies begin to utilize their procurement skills and resources for value-creation purposes rather than cost-management purposes.