Building a structure to

drive
Performance &
Responsibility

Introduction

Case revolves around the most turbulent

times in the companys 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 only
driven by target

Motivated employees
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
thetwo-dimensional
to
reduce
bureaucracy and redundancy in sales and support
activities and eliminate conflicts and boost collaboration


Thank You