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