Siemens: Building a Structure to drive performance and

Responsibility - Case
Tracing the Evolution of Siemens

Establishment Jt. Stock Corp.

of English M&As Func. To
Exploring Intl. Subsidiary 1st Electrical Divisional
Bribery
market Strcuture (+15
Locomotive new Op. groups ) Scandal

1847 1850 1855 1858 1866 1879 1892 1897 1969 1989 2005 2006 2007

Telegraphing Invention of Klenfield

Siemens AG New CEO
Technology Telegraph Dynamo Gen. Joins
Werner Died. Peter Loscher
expansion in 6500 Emp.
Russia
Assessment of Existing organization structure
SB - Non. Executive Directors for Monitoring roles
Supervisory Board
MB – Financial report preparation and Shareholder
interactions.
Assessment: No controlling power, lead to scandal and
Mgmt. Board hit in margins
(10 top executives)

Defining Priorities , Corp. strategy decisions

Assessment: No decision making role, too many
Corporate Executive Committee people for monitoring then to give decisions, low
employee morale.

Commercial Head and Technical Head made Decisions

(Power base was not available with Op. groups)
15 Operating Groups Assessment: 4 Eye Principle. Too many operating
groups leading to complex org. structure, too many
P&L for monitoring and consolidation, parallel lines of
authority.

High Power base and decision making(190 countries)

Regional Units
Assessment: Too much decision making by Mr/Mrs
Siemens leading to bribery scandal
Effectiveness of organization structure under Peter Loscher
Old Structure New Structure Effectiveness of New Structure:

Four eye principle to CEO principle –

Supervisory Board Supervisory Board CEO for each sector and they are
responsible for Sector financial
performance bringing in more clarity
on responsibility
Mgmt. Board Mgmt. Board
(10 top executives) (3 CEOs Heading 3 Sectors)
3 P&L as against 15 Operating group
P&L for better monitoring and control
Corporate Executive 3 Sectors
Committee (Industry, Energy, Siemens One Retained (MDBs) to
Health care) provide consolidated support to
customers in all areas of specialization.
15 Operating Groups
General Counsel brought in the
15 Business Units organization to bring transparency +
+ 3 Support Depts Strong counsel for each sector
Regional Units
(190 countries) Competence Centres to address
Clusters (17 Nos) customer issues.
Strengths & Weakness of Siemens Organization

Strengths Weakness

Industry leaders in Electrical products in 2006 Scandal – Reputation loss

the areas of industry, energy and health
care Thereby Low employee morale

Global presence Complex Organization

Huge employee strength Lack of leadership skills to fill the

complexity
Strong R&D capabilities focused on
innovation Low employees belief in the new CEO

Good market share Consolidation between Sector CEOs and

local clusters
Leaders with Techno-commercial expertise
People not sure about the results thru’
Mergers and Acquisitions leading to structural changes
capturing market space.
How can Siemens face challenges?

• Focused new leader Mr. Peter Louscher with Global Experience especially with market
leader GE

• Transparent and much simplified organization structure will lead to more employee
moral

• New structure is oriented towards Customer redressal. Increase in Customer satisfaction

• Organization focused on mega trends of the market rather than looking at a small
picture.

• Simplified P&L consolidation and responsive top management (introduction of Sectors)

• Market Development Boards – One Point of Contact for Customer need to address all
specialization support

• Easier monitoring of international business by Cluster formation

• Clusters – Understanding the pulse of customers, local CRM.