Reorganizing ABB - From Matrix to Consumer - Centric Organization Structure (B)


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Case Details:

Case Code : HROB033
Case Length : 13 Pages
Period : 1998 - 2002
Pub Date : 2003
Teaching Note :Not Available
Organization : ABB
Industry : Power, Transportation, Financial Services
Countries : Switzerland

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Need to Restructure Contd...

The company's businesses started showing signs of stagnation. Further, ABB's operations in Asia were severely affected by the Southeast Asian economic crisis. Analysts felt that Lindahl had to take some significant measures to revive ABB, quickly. Lindahl responded by initiating a damage control exercise. In 1998, 12 factories in the US and European regions were closed down, resulting in the reduction of ABB's workforce by 12,600 employees. He identified certain business areas that had the potential to emerge as major profit contributors for ABB. These areas included industrial control systems, deep-water oil and gas exploration, intelligent electrical systems, and services.

In 1998, Lindahl decided to restructure ABB so as to enable it to focus its resources on the potentially lucrative business areas.

Lindahl's Reorganization

Lindahl split the Power Transmission & Distribution segment into a Power Transmission segment and a Power Distribution segment, and the Industrial and Building materials segment into three new segments - the Automation segment, the Oil, Gas and Petrochemicals segment, and the Products & Contracting segment. However, the Power Generation and the Financial Services segment remained unchanged. Lindahl restructured ABB so that the company could become more focused and competitive in each field, and hence, become more responsive to new business opportunities.

As per the modifications made in the structure, the Group Executive Committee now consisted of the President and CEO, the Executive Vice Presidents of the seven new global business segments and the Chief Financial Officer (Refer Exhibit II).

In his efforts to simplify the decision-making process, Lindahl eliminated a layer of regional management, which was present in the matrix structure. The regional offices for Europe (Brussels), the Americas (Miami) and Asia (Hong Kong) were closed down.

The reason for this move was explained by Lindahl, who said, "In most countries where we have customers we [now] have local expertise, we have local brainpower that can look after the added value...

 Excerpts >>

 

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