Building a structure to drive

Performance & Responsibility

By,
GROUP – 6
Ankur Abhilash – UH14008
Krishna Panigrahi – UH14019
Punyatoya Sahu – UH14033
Purbasa Patnaik – UH14034
Soumya Kanungo – UH14045
 Introduction

 Case revolves around the most turbulent times in the
company’s history.
 Charges of rampant corruption, bribery brought
negative publicity for the company.
 Profitability and employee satisfaction was at an all
time low.
 Under this critical situation, Peter Loscher became
the CEO in July,2007, replacing the incumbent Klaus
Kleinfeld.
 Company Background

 Founded in 1847 by Werner von Siemens and his
partner, Johann Georg Halske in Berlin.
 Siemens grew rapidly, operating on a global scale,
with presence in almost all nations.
 Transitioned from a functional reporting structure to
a divisional structure in 1989.
 This new structure placed greater emphasis on local
responsiveness and enabled Siemens to benchmark
against its peers.
 Functional vs Divisional
Structure
 Business departmentalizes
according according to the
activities performed by
individual groups
 A clear chain-of-command
 Communication flows freely
within departments, but less
so between departments
 Might complicate strategic
decision-making

 Business departmentalizes
according to geographical
areas, markets, or products
and services
 Division heads have
decision-making power
 Duplication of efforts and
increase in costs
 Intra division among
divisions
Corporate Management Structure


Corporate Governance
 Features of Siemens
structure

 Coordination among Siemens businesses and
corporate technology (CT) for a solution focused
firm
 Local Responsiveness – Mr/Ms Siemens
 Team based Management by the Four eyes principle
 Four eyes principle – a two person team consisting of
technical head and commercial head
 Kleinfeld era

 Two year restructuring programme called Fit4More.
 Siemens One, a program to simplify large scale
projects for global customers.
 Focus on global developments.
 Authoritative Rule.
 Problems at Siemens

 Bribery scandal led to low confidence among clients
and employees.
 Friction between headquarters and local regions.
 Slow and time consuming decision making process.
 Heartless management by Kleinfeld.
 Ineffectiveness of four eyed principle.
 Changes implemented by
Loscher

 Replaced 4 eyes principle with CEO principle
 Emphasis on transparency
 Corporate Reorganization
 Introduction of two dimensional structure
 Introduction of Clusters
 Simplification of financial reporting
 Empowering regional leadership
 Establishment of MBDs
 CEO Principle

 Consensus and group decision making was
abolished.
 Established one individual for one management
team.
 Reduction of management positions from multiple
managers to one CEO.
 Faster decision making process due to clear
delegation of authority.
 Comparison between the two eras
Before Loscher After Loscher

Organization structure complex

 Simpler(clear delegation
of authority)

Management style Aggressive target Goal driven keeping

oriented management future in mind

Culture Demotivated employees Motivated employees

only driven by target where their feedback
was appreciated

Decision making process 4 eyed principle CEO principle

 Corporate reorganization

 Consolidation of the business: 10 operating groups to
3 sectors
 Organization of the 190 countries into 17 regional
clusters
 Minimization of the administrative and coordination
activities within individual countries
 Establishment of Competence centers
Two Dimensional Structure

 1st dimension: Global business- Sectors, Divisions
and Business units
 2nd dimension: Regional units- Clusters and
countries
 Right of way substituted the old matrix structure
 Abolishment of profit and loss accounts except for
four categories
 Siemens Redefined

 Focus on local customization
 Developing a spirit of entrepreneurship
 Vision: “Siemens-the pioneer”
 Establishment of Market Development Boards
(MBDs)
 Siemens One approach to customers
 Recommendations

 Middle Managers as the key vehicle to get to all
organizational levels
 An open door policy and strong internal communications
 Encouragement in the form of appraisals and recognition
to enhance employee productivity
 P&L targets to be shared by global business and regional
units
 Elimination of the two-dimensional to reduce
bureaucracy and redundancy in sales and support
activities and eliminate conflicts and boost collaboration
 
Thank You