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Arulla 17 Parthiv C. Hathi 4 Pradeep Singh (EMP Batch 26) 28 Sumit Manocha Asea Brown Boveri
Date: 12th March 2011
Two giants of the European electrical equipment industry, Asea AB of Sweden (65,000 employees) and BBC Brown Boveri Ltd. Switzerland (85,000 employees), shook hands in 1987 forming ABB - becoming world’s largest competitor in power generation transmission and distribution, comprising 850 separate legal entities operating in 140 countries. The organization Architecture: After merger and acquisition of new companies, Asea Brown Boveri was organized in to 1300 wholly owned subsidiaries operating in 140 countries with 2,15,000 employees. Thus there was an immense need for a proper multi dimensional Matrix Organization, which should be built on twin principals of decentralization of responsibility and individual accountability. Two dimensional reporting Matrix was formed, with one dimension regional responsibilities and the other dimension product responsibilities. The Business Area Managers were responsible for developing worldwide product and technology strategies. Regional Managers were responsible for executing the strategies based on the unique needs of local markets.
The organization architecture will effectively help in addressing the three dilemmas as expressed by CEO of the company Mr. Percy Barnveik. “Asea Brown Boveri” was an organization with three internal contradictions, global and local, big and small, radically decentralized with centralized reporting and control. The way the matrix structure of ABB was designed, it solved all three issues that the CEO had. The matrix structure ensured that each and every manager was answerable to two superiors. One of them was more concerned with the global business strategies and other with the local/country wide/ business region demands. The localization ensured that the best talent was utilized. One of
Global and Local Global strategy (Top down approach) vs Local implantation (Bottom – up approach) Operating manager had 2 bosses. margins and other data vital to decision making. the other responsible for executing these strategies. thus making the management of a center simple where as at the global level the number of employees was more than 215000+ employees. Full utilization of local talent Global optimization of business. and local maximization of resources The decentralized and issue was handled the way the accounting was done. order. the global strategy indicated that closing a factory was necessary because of over production in a normal scenario. At the central level.the examples stated in the case explain how exactly a two way reporting helped the company as a whole. At the same time every local center had approximately 50 employees. Centralized and decentralized Local P&L and cash flow thus making people responsible for them. Thus such decisions could be taken only because of the matrix organization. On Basis of this analysis a TOP-DOWN strategy was made for the company. The Local head was wholly and solely responsible for making her business profitable. the global and the local shook hands and developed a synergy within themselves. Big and Small Local entity employee strength – approximately 50 . In case one. The data was collected across 140 countries in local currencies and translated in to USD to allow for analysis across border. one handling worldwide product and tech strategies. This scenario clearly indicated how. Centrally all these were collated using ABACUS to develop business wide strategies. which could provide managers with accurate and timely information on sales. the data flowed thru the computer supported reporting system named “ABACUS”. Local P&L also ensured local autonomy in working. The local head ensured that the strategy was executed. a local head will never close a factory.
- Global workforce more than 215000 Wholly 1 big company. whereas more than 1200 small wholly owned subsidiaries .