osd grp1 final (1)

A case study on

SIEMENS: BUILDING A STRUCTURE TO DRIVE PERFORMANCE AND RESPOSIBLITY

Submitted by,

Abhijeet Dash(UM14001)

G.Tarakeshwar Rao(UM14025)

Kundan Mohapatra(UM14032)

Nitika Baralia(UM14036)

Sambith Mishra(Um14048)

Saurabh Arora(UM14051)

IntroductionSiemens a firm established on 1847 operated on global scale and was a solution focused technology firm.

Primary Focus was to drive company’s operating units to achieve ambitious profit margin goals.

Peter Loscher takes over Klaus Kleinfeld as the CEO of Siemens in July 2007 at the most turbulent times in the company’s history.

The company was reeling from Compliance scandal, suspected bribes, fines and fees.

Peter Loscher as the new leader at Siemens brings in structural changes and corporate reorganization.

IssuesToo many levels of hierarchy- Supervisory board, Managing board, CEC, Operating groups, regional units.

Followed four-eye principle form of management-CEO and CFO formed the decision making heads and both reported to CEC.

Complex financial reporting- each operating group and each region maintained a separate P&L report.

Disconnect between regional and global leadership.

SolutionsComplex hierarchy

Four-eye principle

Complex financial reporting

Regional and global disconnect

• Loscher dismantled the CEC and established Managing Board as the sole governing body.

• 10 operating groups consisting of 70 divisions replaced by 3 sectors structure consisting of 15 divisions.

• Organised 190 countries into 17 regional clusters.

Company’s Solution

• Implement a hybrid structure which employs both the functional structure and the divisional structure which will enhance flexibility in distributing work, providing economies of scale, in-depth expertise, efficiency in resource utilization and specialization of product, service and market.

Alternative Solution


Four-eyes principle



• Replaced Four-eyes Principle with CEO Principle

• In the CEO principle ,a CEO was appointed at each sector to take decisions regarding its underlying divisions and business units.

• This led to clear chain of command and escalation path.


• Implement a Co-CEO model where executives would provide oversight of each other’s actions and have complementary skill sets to complement each other in terms of duties and backgrounds, which allows for a much broader set of experience and ideas with which to chart a strategy or make a decision. Co-CEOs also earn a little less than twice what a single CEO would earn thereby encouraging the individual to perform.



Four-eyes principle



• Loscher abolished all P&L accounts except for 4 categories

• This brought the headquarters and regions closer to work to optimize the global business’s P&L

• The metric of comparison still profit (KPI)

• The focus now was to contribute to the global P&L


• The P&L accounts could be simplified by reducing the administrative works.

• This increases the profitability of the company

• Increased efficiency in sales and administration.Alternative Solution


Four-eyes principle



• The concept of “right of way “ was developed which substituted the old matrix structure.

• Local customization was encouraged to have a strong relationship at the local level.

• Profiting from change order fees.


• Take establish R&D centres at regional level for frugal and reverse innovation

• Customization and designing be done at the regional level

• Decentralisation of control and decision making at the R&D centres.


Current challenges

Tensions still persists between global businesses and the regions. In spite ofthe 190 countries being organized into 17 regional cluster, there was still alot of bureaucracy in the system which created delay in the decision makingand conflict of interest between the regional and the global priorities.

Disconnect between the management and the employees because for the first time an outsider was leading the organization who lacked knowledge about the organizational culture

Despite refining of the processes in place at the organization, Siemens is still lagging behind its competitors in terms of profitability.

Suggested Solution

Establish more slim bureaucracy and to focus more on corecompetencies and divest non-profitable units.

Implement a normative re-educative strategy where in the employees will be sensitized about the criticality of the issues and the need for an outsider’s view to deal with the crisis and get the company back on track.

Our suggested solution is to focus on products that are more energy-efficient and resource-efficient than the market place average thereby focusing on megatrends like sustainability and energy conservation.

CONCLUSIONS

• Increased Financial Performance from the changes brought about.

• Clear chain of command and delegation of authority.

• Cross Functional teams proved be effective.

• More focus on emerging megatrends.

Thank You!!!

osd grp1 final (1)

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