Power and Productivity for a Better World

COMPANY BRIEF ABB (Asea Brown Boveri) was formed in 1988 by the merger of two companies: the Swedish company ASEA and the Brown Boveri of Switzerland to create a global electrical engineering giant. Percy Barnevik (of ASEA) was the chief executive and master mind of the restructuring process that integrated both the companies.  In your opinion, was the organization structure chosen for Asea Brown Boveri by Barnevick appropriate?
The Organisation structure chosen for Asea Brown Boveri is the Matrix form of organisation structure. This form of organisation structure creates dual lines of authority and combines functional and product departmentalization.

Advantages provided by this model: y y The business of ABB was very complex. The matrix form of organisation helps the company deal with internal and external complexity. Barnevick realized that geography is important but so is function, and so is customer grouping, product and technology. Hence, he went for a matrix organisation which essentially encompasses all of these factors of complexity. The leadership at ABB believed more in decentralized form of organisation and the matrix structure facilitated faster decentralized decisions. Improved global and regional products. This structure facilitates rapid response to changes in any two or more environments. Matrix structure provides speed and flexibility which results in efficient use of the company s resources. Matrix management includes improved motivation among employees and managers. As a result decision making process within the group becomes more democratic and participatory which brings specialized knowledge and skills to the table thereby increasing the efficiency of the organisation. Since the company based lot of significance to communication within organisation, the matrix structure would work for them. It reflected the needs of global and regional customers well. It provided access to a diverse range of skills and perspectives. The matrix structure can deliver performance, provided people have the skills to make the matrix work. The ability to influence, build networks and get things done without traditional line authority. The ability to lead remote and virtual teams across distance, cultures, time zones and through technology.

y y y y y

y y y y y y

The Trade-offs: y The company gave up some of the org structure clarity to achieve flexibility in the organisation structure.

Matrix type of structure is difficult to maintain as it has complex reporting mechanism with high maintenance cost.

y y y y y

The matrix organization structure itself, solves nothing, it is how people work together in the matrix organization that makes it succeed or fail. Living with ambiguity and unclear multiple expectations. Managing multiple bosses which lead to increased stress. Leads to a lot of confusion and needs a lot of discretion on behalf of the employees while reporting to 2 separate authorities. This structure has the propensity to create power struggles between functional and product managers.

Note: After checking the website of this organisation we found that they had a major structural change: ABB turned the matrix organization into a sector-based organization for the following reasons: Simplification of management structure Reaction to new market trends / on- going globalization Expectations regarding better project and works coordination Expansion coordination provided through the regional dimension Possibility of dissolving the regional organization structures In a matrix organization, there is the general problem of overlapping jurisdictions (provinces /sectors) which cause financial problems. ABB is restructuring in an effort to settle such issues.

 What are the key requirements for the success of an organizations structure?
The key requirements for the success of an organization structure are as follows: y Communication: The organization structure should be designed to ensure that individuals and departments that need to coordinate their efforts have lines of communication that are built into the structure. E.g. ABB used the Abacus software for the financial analysis and accurate data reporting between the Company management, Regional management and Company management at the Business area level. Reporting Relationships: Reporting relationships must be clear so all members of the organization understand what their responsibilities are and know to whom they are accountable. These clear relationships make it easier for managers to supervise those in lower organization levels. Each employee benefits by knowing whom they can turn to for direction or help. In addition, managers are aware of who is outside the scope of their authority, so they do not overstep their bounds and interfere with another manager s responsibilities. Right People in the Right Positions: Once the organization structure is in place, then the right people need to take responsibilities of the respective posts. Every person needs to play his role well to ensure smooth running of the organization. Effective Departmentalization and Work breakdown structure : The work breakdown structure and the departmentalization according to responsibilities should be done with diligence and future planning so as to minimize interdependence and conflicts. Ensuring greatest level of work satisfaction and optimal operational efficiency:

The organizational structure should ensure job significance and also give a sense of autonomy/empowerment to the employee. This creates a high level of internal job satisfaction and ensures high operational efficiency. y Optimum ratios of supervisors to subordinates : This ratio needs to be maintained at the optimum level in order to avoid overhead of duplicity in monitoring and overstressed levels of monitoring.

Conclusion It is very difficult to predict as to whether the organisation has chosen the right structure or not since the effective implementation of the organisation structure depends on the people. However, technically speaking, this is the most suitable organisational structure for the company given its complexity and globally spread out business.