Back-room hub

Procter & Gamble decided to consolidate its back-office operations for all the Americas in one place.

The choice? Multilingual, well-educated Costa Rica. Now, if only the phones worked better

Marketplace: Executive Briefing

Larry Luxner
Latin CEO: Executive Strategies for the Americas

April 2001

CONSUMER-PRODUCTS giant Procter & Gamble has negligible sales and no manufacturing facilities in the small nation of Costa Rica. Yet when it came to reorganizing its "back-office" administrative functions for the Western Hemisphere--part of a worldwide effort by the US-based conglomerate to improve cost-effectiveness--the logical choice was the Central American country.

Jack Horvath, general manager of P&G's Global Business Services (GBS) center in Costa Rica, says that 32 cities were originally considered, including Caracas, Mexico City, Miami, Phoenix, Toronto and San Juan, Puerto Rico. Potential sites were judged on criteria such as political stability quality of life, business climate, telecommunications infrastructure and availability of bilingual workers. "Costa Rica was not No. 1 in any category But when you put the whole thing together, it was the clear winner," Horvath says, adding that "the government didn't give us anything extraordinary they wouldn't have given to anyone else. We get the usual 100 percent exemption on income tax for the first eight years, and a 100 percent exemption on import duties."

What P&G also gets is a armful of savings--US$100 million annually, says Horvath. "What we seek to do is take all the transaction work necessary to conduct our everyday business, such as finance, payroll, employee benefits, purchasing and IT support, and move them to the same location," says the 20-year P&G veteran.

The Costa Rican center represents a US$60 million investment, and occupies four 4-story office buildings. Inaugurated in mid-February, it's already the largest of P&G's three new GBS centers worldwide (the others are in Europe and Asia). GBS Costa Rica currently employs 650 people and expects to reach 1,200 fully bilingual, college-educated employees by 2005. "P&G is recruiting in Costa Rica using the same standards [used] worldwide," Horvath says. "We're hiring Costa Ricans not just for a job, but for a career with P&G."

The four buildings making up GBS Costa Rica are wired with 675,000 meters of voice and data cable to handle the company's electronic correspondence with clients throughout the Americas--as many as 300,000 emails per month. P&G workers also provide computer technical support for 5,000 sales agents, accounting for 80 P&G factories and payroll services for nearly 50,000 employees from Alaska to Argentina.

Labor rates apparently did not play a big role in selecting the center. Although Costa Rica's average hourly wages are below comparable salaries in the US, they exceed those of Mexico and the rest of Central America. "Costa Rican labor is expensive, but when you combine multilingual skills and educational levels, then we become competitive," says GBS Corporate Manager Randall Chinchilla. "We need college-educated, bilingual people."

The reason: If, for example, a retired P&G factory worker calls the company's toll-free 800 number with a question about retirement benefits, the call will most likely be answered by a bilingual payroll specialist in San Jose. "Our employee in Costa Rica will know exactly what to tell the caller," says Horvath.

Other companies monitoring the success of P&G's center include American Express and Southwest Airlines. One leading multinational, Western Union, has already located an 85-employee customer call center for all of Latin America and the Caribbean in San Jose--right next door to P&G.

Even so, Horvath notes that Costa Rica is moving too slowly toward privatizing its state-owned telephone monopoly The notorious inefficiencies that result make P&G nervous about relying on conventional circuits. That's why it pushed hard for the undersea Maya fiberoptic cable, which has brought down exorbitant Internet access prices since its arrival in December.

"A lot of high-tech companies are looking at Costa Rica, but they want to see what happens with telecommunications first," says Lynda Solar, executive director of the Costa Rican-American Chamber of Commerce. "The fact that P&G came here [given the telecom situation] is a miracle." Then again, miracles occasionally happen.

Copyright 2001 Americas Publishing Group.

Procter & Gamble's GBS center in Costa Rica

Establishment of a Global Business Service center in Costa Rica

Global Business Services Backgrounder

Global Business Services (GBS) has been created as part of Organization 2005 to bring together business activities such as accounting, Human Resources systems, order management and information technology into a single, global organization. GBS will provide services to all P&G business units at best-in-class quality, cost and speed. Today, these services are dispersed across individual business units, using a wide variety of work processes.

Project Description

Procter & Gamble's aim is to carry out a worldwide study to select among participant countries the best alternative to consolidate one of the 110 operations existent in 33 countries worldwide. The project itself consists in establishing a Global Business Service (GBS) center for the Americas.

The GBS center will centralize a series of activities which are currently scattered throughout various operations allocated in the Americas, such as: data processing, human resources (payroll, and various employee services, procurement, customer logistics and financial services).

Objective. With the establishment of a regional; GBS center, P&G is expecting to improve customer service while obtaining cost benefits out of the consolidation of various activities for multiple disperse locations currently scattered throughout America.

Project Timetable

The project will be divided into three stages

Specific activities to be carried in each phase weren't detailed by P&G's representatives.

The estimated investment is of  US$ 60 million and a 134,549 sq. feet (12 500 m2) facility.

GBS intends to locate its centers in the following locations:

• North America and Latin America: Cincinnati (USA), San Jose (Costa Rica)

• Europe, Middle East, Africa: Newcastle (UK), Brussels (Belgium), Prague (Czech Republic)

• Asia: Kobe (Japan), Manila (Philippines), Guangzhou (China), Singapore.

Copyright 2001