Peter Loscher takes over as CEO of Siemens in 2007 during a turbulent time with compliance issues. He implements structural changes including dismantling the complex hierarchy and centralized decision making structure. The changes establish three main sectors each led by a CEO, simplify financial reporting to four main categories, and develop a "right of way" model to better connect regional and global operations. However, tensions remain between regional and global priorities and disconnect with employees unaccustomed to an outsider as CEO. Suggested solutions include further streamlining bureaucracy, re-educating employees, and focusing products on sustainability megatrends.

1. A case study on
SIEMENS: BUILDING A STRUCTURE TO DRIVE
PERFORMANCE AND RESPOSIBLITY
Submitted by,
Abhijeet Dash(UM14001)
G.Tarakeshwar Rao(UM14025)
Kundan Mohapatra(UM14032)
Nitika Baralia(UM14036)
Sambith Mishra(Um14048)
Saurabh Arora(UM14051)

2. Introduction
Siemens a firm established on 1847 operated on global scale and was a
solution focused technology firm.
Primary Focus was to drive company’s operating units to achieve ambitious
profit margin goals.
Peter Loscher takes over Klaus Kleinfeld as the CEO of Siemens in July 2007
at the most turbulent times in the company’s history.
The company was reeling from Compliance scandal, suspected bribes, fines
and fees.
Peter Loscher as the new leader at Siemens brings in structural changes and
corporate reorganization.

3. Issues
Too many levels of hierarchy- Supervisory board, Managing
board, CEC, Operating groups, regional units.
Followed four-eye principle form of management-CEO and CFO
formed the decision making heads and both reported to CEC.
Complex financial reporting- each operating group and each
region maintained a separate P&L report.
Disconnect between regional and global leadership.

4. Solutions
Complex
hierarchy
Four-eye
principle
Complex
financial
reporting
Regional
and global
disconnect
• Loscher dismantled the CEC and established Managing
Board as the sole governing body.
• 10 operating groups consisting of 70 divisions replaced by
3 sectors structure consisting of 15 divisions.
• Organised 190 countries into 17 regional clusters.
Company’s
Solution
• Implement a hybrid structure which employs both the
functional structure and the divisional structure which will
enhance flexibility in distributing work, providing
economies of scale, in-depth expertise, efficiency in
resource utilization and specialization of product, service
and market.
Alternative
Solution

5. Solutions
Complex
hierarchy
Four-eyes
principle
Complex
financial
reporting
Regional
and global
disconnect
• Replaced Four-eyes Principle with CEO Principle
• In the CEO principle ,a CEO was appointed at each sector to
take decisions regarding its underlying divisions and
business units.
• This led to clear chain of command and escalation path.
Company’s
Solution
• Implement a Co-CEO model where executives would
provide oversight of each other’s actions and have
complementary skill sets to complement each other in
terms of duties and backgrounds, which allows for a
much broader set of experience and ideas with which to
chart a strategy or make a decision. Co-CEOs also earn a
little less than twice what a single CEO would earn
thereby encouraging the individual to perform.
Alternative
Solution

6. Solutions
Complex
hierarchy
Four-eyes
principle
Complex
financial
reporting
Regional
and global
disconnect
• Loscher abolished all P&L accounts except for 4 categories
• This brought the headquarters and regions closer to work to
optimize the global business’s P&L
• The metric of comparison still profit (KPI)
• The focus now was to contribute to the global P&L
Company’s
Solution
• The P&L accounts could be simplified by reducing the
administrative works.
• This increases the profitability of the company
• Increased efficiency in sales and administration.Alternative
Solution

7. Solutions
Complex
hierarchy
Four-eyes
principle
Complex
financial
reporting
Regional
and global
disconnect
• The concept of “right of way “ was developed which
substituted the old matrix structure.
• Local customization was encouraged to have a strong
relationship at the local level.
• Profiting from change order fees.
Company’s
Solution
• Take establish R&D centres at regional level for frugal
and reverse innovation
• Customization and designing be done at the regional
level
• Decentralisation of control and decision making at the
R&D centres.
Alternative
Solution

8. Current challenges
Tensions still persists between global businesses and the regions. In spite of
the 190 countries being organized into 17 regional cluster, there was still a
lot of bureaucracy in the system which created delay in the decision making
and conflict of interest between the regional and the global priorities.
Disconnect between the management and the employees because for
the first time an outsider was leading the organization who lacked
knowledge about the organizational culture
Despite refining of the processes in place at the organization, Siemens is
still lagging behind its competitors in terms of profitability.

9. Suggested Solution
Establish more slim bureaucracy and to focus more on core
competencies and divest non-profitable units.
Implement a normative re-educative strategy where in the
employees will be sensitized about the criticality of the issues and
the need for an outsider’s view to deal with the crisis and get the
company back on track.
Our suggested solution is to focus on products that are more energy-
efficient and resource-efficient than the market place average thereby
focusing on megatrends like sustainability and energy conservation.

10. CONCLUSIONS
• Increased Financial Performance
from the changes brought about.
• Clear chain of command and
delegation of authority.
• Cross Functional teams proved be
effective.
• More focus on emerging
megatrends.

11. Thank You!!!