SIEMENS’ SIMPLE STRUCTURE-NOT

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Group-8
01
SIEMENS’ SIMPLE STRUCTURE-NOT

3. 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

4. 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

5. 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.

6. 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

7. 06
 Simple structure
o Wide spans of control
o 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 regulations
o Centralized authority, narrow spans of control
o Decision making that follows the chain of
command
.
Types of Organization Design

8. 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

9. 08
oEarlier known as Siemens & Halske, it was
founded by Werner von Siemens on 12
October 1847.
oHeadquartered in Munich, Germany.
oIt 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

10. 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

11. 10
Klaus Kleinfeld
Key Players
Took over as CEO in 2005
Restructured company along
lines of Jack Welch.
Tried to make system less
bureaucratic.
Spun off underperforming
telecommunications businesses
Profits 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

12. 11
.
Key Players
Peter Loscher
oAppointed as CEO on May 20, 2007
oSold VDO to Continental Corporations-
generated revenue of 16.7 billion
dollars
oIn 2008,he announced elimination of
17,000 jobs.
oPlans of boosting growth with energy-
saving and infrastructure products .
oCompany experienced its share of ups
and downs.
oEfforts to restructure generated less
controversy

13. 12
 What do
Kleinfeld’s
efforts at
Siemens tell
you about the
difficulties of
restructuring
organization?.
Question-1

14. 13
Now
• 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

15. 14Restructuring the Organization
Kleinfeld tried to do the following
o Low degree of
departmentalization
o Wide span of control
o Make quicker decisions
o Develop the under performing
businesses
o Less formalization

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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

17. 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 ?

18. 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?

19. 18
 Why do you
think Loscher’s
restructuring
decisions
generated less
controversy than
Kleinfeld’s?
Question-2

20. 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

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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.

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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.

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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.

24. 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

25. 24
oA 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?

26. 25
o 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 .

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oSiemens 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.

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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.

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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.

30. 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

31. 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 firms
b) Acquisition
c) Economic crisis
d) Strategy changes
e) Excessive workforce.

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

33. 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

34. 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

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e) 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

36. 35
Restructuring a
European organization.
Making it less
bureaucratic.
Kleinfeld Vs. Loscher.
Downsizing
Conclusion

37. 36
Loscher’s efforts caused less
controversy, but did not go well
with all constituents.

38. 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.

39. 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.com
www.businessweek.com
www.forbes.com
www.thesundaytimes.com
www.youtube.com

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