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Group-8

01SIEMENS’ SIMPLE STRUCTURE-NOT

02

Architecture does not create extraordinary organizations by collecting extraordinary people. It does so by enabling very ordinary people to perform in extraordinary ways” - John Kay

03 Organizational structure: It defines how job

tasks are formally divided, grouped and coordinated.

A good organizational structure and design helps

• Improve communication.• Increase productivity, and inspire innovation. • Create an environment where people can work

effectively.

Introduction

04Introduction

Factors affecting organizational design

• Strategy: No matter what strategy the organization pursues, the structure must support it to be successful.

• Size: The design must take into account the size of the organization.  The larger an organization grows, the more there is a need for formal structure, defined work assignments, and clear lines of authority.

05

A design aligned with business

strategy and the market

environment in which the business operates

Right business controls, Right flexibility, Right Incentives, Right people, and the Right resources.

Effective organizational design

06 Simple structure

o Wide spans of controlo Authority centralized in a single person

o Fast, flexible and inexpensive to operate o Increase in size leads to slower decision

making

Bureaucracy

o Formalized rules and regulationso Centralized authority, narrow spans of controlo Decision making that follows the chain of

command .

Types of Organization Design

07.

o Combines product and functional departmentalization

o Breaks the unity of command concept

o Employees have two bosses- functional department managers and product managers

Matrix structure

08oEarlier known as Siemens & Halske, it was founded by Werner von Siemens on 12 October 1847. oHeadquartered in Munich, Germany. o It is organized into five main divisions: Industry, Energy, Healthcare, Infrastructure & Cities, and Siemens Financial Services (SFS)

oLargest Europe-based electronics and electrical

engineering company.

The Company

09

oHas around 427,000 employees.

oAnnual revenue of 73.5 billion euros in 2011

oAlthough it was respected for its engineering prowess ,it was derided for its sluggishness.

The Company

10 Klaus Kleinfeld

Key Players

Took over as CEO in 2005Restructured company along lines of Jack Welch.Tried to make system less bureaucratic.Spun off underperforming telecommunications businessesProfits increased by 35% during his tenure of two years. Labor force was not pleased with changes-allegations were leveled against him.Forced to quit in June 2007

11.

Key PlayersPeter Loschero Appointed as CEO on May 20, 2007o Sold VDO to Continental

Corporations- generated revenue of 16.7 billion dollarso In 2008,he announced elimination of 17,000 jobs.o Plans of boosting growth with energy- saving and infrastructure products .o Company experienced its share of

ups and downs.o Efforts to restructure generated less controversy

12 What do

Kleinfeld’s efforts at Siemens tell you about the difficulties of restructuring organization?.

Question-1

13Now

• Chairman and Chief Executive Officer of Alcoa since April 2010

• He was elected to the Brookings Institution Board of Trustees in May 2010

• Chairman of the U.S.-Russia Business Council

• American business culture stint in Siemens' U.S. headquarters

• Chief executive of U.S. operations

• Strategic product manager at the CIBA-GEIGY

• Worked at Siemens About 20years

• Dramatic transformation of the company, reshaping the company’s portfolio

Then

Kleinfeld

14Restructuring the Organization

Kleinfeld tried to do the following

o Low degree of departmentalizationo Wide span of controlo Make quicker decisionso Develop the under performing businesseso Less formalization

15 50% board of members are labor representatives Labor representative did not positively react to restructuring Conflict between labor representatives and bank rolled business friendly work force Kleinfeld was forced out and replaced by Peter Loscher.

Difficulties in Restructuring

16 People do not like to change, the really don’t like

uncertainty, and anyone coming in to change things will be quickly disliked by the employees.

Organic model of restructuring is not positively effective.

Simplifying group structure might cause conflict between roles in organization.

Dominant culture v/s subculture.

Why was Kleinfeld replaced ?

17

It is appropriate to make it rational with employees’ voice as well as company’s financial stability. American way of restructuring was not apt for European organizations. Allegations against Kleinfeld about

undermining Germany’s main industrial union.

Why was Kleinfeld replaced?

18 Why do you

think Loscher’s restructuring decisions generated less controversy than Kleinfeld’s?

Question-2

19 Loscher faced the same tension as Kleinfeld, in

terms of restructuring the company.

Loscher had to take a decision to spin off an underperforming 10 billion-euro auto parts unit, VDO.

He had to weigh the forces for stability, which wanted to protect worker interest, against U.S. style pressures for financial performance

20

One of VDO’s possible buyers was a U.S. company, TRW, a U.S. private equity firm. But German labor representatives derided such private equity firms as “locusts”. Loscher decided to sell VDO to German tire giant, Continental Corporation thereby acquiring the support of workers.

21

He announced plans to consolidate more business units. Reorganized the company’s operations geographically. Loscher was more supportive of German employees with his ideology where as Kleinfeld was more American in his thinking.

22 The decision of the company’s supervisory board was unanimous, with trade union representatives supporting the decision. In mid-2008,although he announced elimination of nearly 17,000 jobs, yet he managed to downsize the organization efficiently.

23 Assume a colleague

read this case and concluded “This case proves restructuring efforts do not improve a company’s financial performance.”How would you respond to this statement?.

Question-3

24oA business organization makes changes in personnel

and departments and can change how workers and departments report to one another to meet market conditions.

oSome companies shift organizational structure to expand and create new departments to serve growing markets

o Other companies reorganize corporate structure to downsize or eliminate departments to conserve overhead. Often new owners or managers rearrange business structure to create a familiar business model.

What is Restructuring?

25o Restructuring efforts of Kleinfeld were along

the lines of what Jack Welch did at General Electrics. His efforts were to make Siemens less bureaucratic.

o He has got little applause for boosting 2006 sales by 16% and profits by 35%.

oHe had pushed Siemens' 475,000 employees to make decisions faster and focus as much on customers as on technology. He spun off underperforming telecommunications-gear businesses and simplified the company's structure.

o .

26oSiemens shares have risen 26% in the two

years since he took over, vs. 6% for GE during Kleinfeld’s tenure.

oBut in spite of all this Kleinfeld was not accepted at the organization by the employees. His downsizing acts were not accepted by the employees and the board of directors at Siemens’ who represented the employees. Kleinfeld had angry employees demonstrating outside his window very often.

27 He had to face questions about a bribery

scandal that had sapped his authority even though he was not personally implicated.

On the other hand Peter Loscher’s restructuring was more along the lines of German corporate vision. Loscher joined the organization after Kleinfeld’s tenure.

Loscher spun off an underperforming 10 billion –Euro auto part unit named VDO.

28 Instead of selling it to an American business

giant named TRW, he sold it to German tire manufacturer-Continental tires.

Though his actions often incorporated employee interests Loscher ,in mid 2008 eliminated 17000 jobs world wide in attempt to reorganize the company’s operations.

During Loscher’s tenure the company did face a lot of ups and downs. Its stock price fell in the European stock exchange and New York stock exchange but did better than its contemporaries like Alcatel and GE.

29 Do you think a CEO

who decides to restructure or downsize a company takes the well being of employees in to account? should he or she do so? Why or why not?

Question-4

30 Downsizing refers to a process where a

company or a firm simply reduces its work force in order to cut the operating costs and improve efficiency.

The following are the reasons for downsizing a company:

a) Merging of two or more firmsb) Acquisitionc) Economic crisisd) Strategy changese) Excessive workforce.

31

Yes, a CEO should consider the well being of employees while downsizing the company.

31

a)Productivity and Creativity Drops- The employees may reserve ideas in case they too are downsized. Lower creativity sometimes translates into lower productivity.

b) Potential for Legal Issues- Unjustified layoffs leave employees exposed to expensive lawsuits .Company also stands to earn a bad reputation which could further harm business.

Reasons for considering well -being of employees

31

c)Decrease Morale- After the downsizing takes place, remaining employees may face greater work responsibilities without extra pay, so it will lead to decrease in the morale of employees.

d) Social Media - Former employees may share their experiences on YouTube, Twitter, Facebook or a blog. If the comments are negative, it will seriously harm company’s reputation and also affect ability to attract new clients or employees.  

Reasons for considering well -being of employees

34e) Advance Notice- According to the Worker Adjustment and Retraining Notification Act (WARN) requires employers to give employees, a 60 days notice to mass layoffs when reducing their workforce by 33 percent or more.

f) Severance Packages- It refers to the pay and benefits an employee receives when he or she leaves a company. Severance packages also include extended benefits, such as health insurance and outplacement assistance to help the employee secure a new position.

Reasons for considering well-being of employees

35

Restructuring a European organization.

Making it less bureaucratic.

Kleinfeld Vs. Loscher.

Downsizing

Conclusion

36

Loscher’s efforts caused less controversy, but did not go well with all constituents.

37 Example of IBM, which had never laid off staff

ever since its incorporation.

Had to layoff 85,000 employees to stay in business.

This type is tough to manage and is mostly adopted to overcome adverse situations.

Not always a result of business losses.

May be needed in cases of acquisitions and mergers.

38

No business can continue to function in the same way forever.

Restructuring is one of the options for a business to stay on track with changing times and business conditions .

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Reference

www.siemens.comwww.businessweek.comwww.forbes.comwww.thesundaytimes.comwww.youtube.com

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