Thursday, June 17, 1999
P&G set to export area jobs
BY RANDY TUCKER
The Cincinnati Enquirer
Hundreds of Procter & Gamble employees in Cincinnati could be faced with the choice of moving to another country and taking a pay cut or losing their jobs as a result of the company's sweeping reorganization.
P&G is planning to consolidate many of its back-office functions, such as accounting, payroll and travel services, at regionally based “Global Business Services” centers. Most of those facilities are located outside the United States.
About 1,100 jobs at P&G headquarters are to be eliminated over three to five years as a result of the realignment, considered by company executives as the biggest change to P&G's culture and operations in its history.
But the company has said it will offer some of those displaced workers the option of transferring to new locations, including San Jose, Costa Rica. That is where the company will employ 1,500 workers at one of its new business-services centers.
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2005 PLAN
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Under Organization 2005, P&G will lay off 15,000 workers, or 13 percent of its worldwide work force. It also will take a $1.9 billion charge and shutter up to 10 plants. It calls for cutting costs by $900 million annually after 2001.
The plan is designed to standardize production lines and consolidate manufacturing capacity under the framework of its new “Global Business” uunits to put new products on store shelves quicker than ever.
More about Organization 2005
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“We will acknowledge that there will be some transfer opportunities in Costa Rica,” Simon Denegri, a P&G spokesman, said Wednesday. “But honestly, no final decision has been taken on exactly how many people will be offered transfer opportunities.”
Mr. Denegri said some people will be offered temporary transfers to help start up the new business-services center. Others will be offered permanent transfers to the Costa Rica center, he said.
But no matter what the conditions of the transfers, many P&G employees are likely to balk at the offers because, among other things, their pay is likely to be cut, said Rajan Kamath, a professor of strategy in the College of Business Administration at the University of Cincinnati.
“The back-room activities in any company are available in other parts of the world at a fraction of the cost of what they are in the United States,” Mr. Kamath said. “By moving their back-room activities to Costa Rica ... that's a cost savings. Because of the cost of living and other factors, salaries and wages will be lower there.”
P&G would not comment on the salaries or other compensation available to employees who choose to transfer to Costa Rica.
But Mr. Denegri said employees who transfer to Costa Rica will be working under different contracts than in Cincinnati.
Mr. Denegri said the company is aware that many of its employees simply won't be willing to move.
“This (transfer) may not be a viable option for many employees for a certain number of reasons,” he said. “In those cases, what the company will do is endeavor to find these employees new assignments.”
To that end, the company has set up “internal placement offices” at its downtown headquarters to help employees with outplacement or to move to other jobs within the company.
“Where that's not viable or feasible, they will be offered a voluntary separation package,” Mr. Denegri said.
That means they will be asked to quit or retire.
Overall, 1,900 jobs are to be eliminated in Cincinnati as part of P&G's Organization 2005 restructuring plan.
It also is intended to eliminate a cumbersome managerial hierarchy that the company says has slowed decision-making in the past.
But the reorganization seems to be having a disproportionate effect on rank-and-file workers, at least in Cincinnati.
“That's usually the way it goes,” said UC's Mr. Kamath. “The front office stays the same, while the back office gets shipped off.”
He cited software giant Microsoft as an example.
“Every Microsoft product has a toll-free number to call if you need support,” Mr. Kamath said. “But when you call that 800 number, the telephone rings in Ireland. Almost all of Microsoft's 800 numbers are handled by call centers in Ireland, of all places. That's because it costs a fraction of the amount that it would cost you in America to have a software engineer working three shifts, 24 hours a day.”
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