Harvard Case - Siemens: Building a Structure to Drive Performance and Responsibility (A)
"Siemens: Building a Structure to Drive Performance and Responsibility (A)" Harvard business case study is written by Jesper Sorensen, Sara Gaviser Leslie. It deals with the challenges in the field of Organizational Behavior. The case study is 21 page(s) long and it was first published on : Oct 7, 2010
At Fern Fort University, we recommend that Siemens implement a comprehensive organizational restructuring plan focused on driving performance and responsibility through a decentralized, matrix structure with a strong emphasis on employee empowerment, cross-functional collaboration, and leadership development. This new structure will foster innovation, agility, and accountability while promoting a culture of diversity and inclusion.
2. Background
The case study focuses on Siemens' struggle to adapt to a rapidly changing global market characterized by increasing competition and technological disruption. The company faces challenges in its traditional hierarchical structure, which hinders innovation, slows decision-making, and fosters a siloed approach.
The main protagonists are Peter L'scher, the CEO of Siemens, who is tasked with leading the company's transformation, and the various executives within the organization who are grappling with the need for change.
3. Analysis of the Case Study
This case study can be analyzed through the lens of organizational structure and design, leadership styles, change management, and organizational culture.
Organizational Structure and Design:
- Current Structure: Siemens' current hierarchical structure, while providing stability, is rigid and hinders agility. The siloed approach creates communication breakdowns and slows down decision-making.
- Proposed Structure: A decentralized, matrix structure, where employees report to both functional and project managers, offers a more flexible and responsive approach. This structure fosters cross-functional collaboration, promotes employee empowerment, and encourages innovation.
Leadership Styles:
- Traditional Leadership: The case highlights a traditional leadership style, where power is concentrated at the top, and decision-making is centralized. This style, while effective in stable environments, is not conducive to rapid innovation and adaptation.
- Transformational Leadership: Siemens needs to embrace a transformational leadership style that emphasizes vision, inspiration, and empowerment. Leaders need to create a culture of shared responsibility, open communication, and continuous learning.
Change Management:
- Resistance to Change: Siemens faces significant resistance to change due to the existing organizational culture and the fear of job security.
- Effective Change Management: Siemens needs to implement a comprehensive change management strategy that addresses the concerns of employees, communicates the rationale for change clearly, and provides adequate training and support.
Organizational Culture:
- Current Culture: The case suggests a culture that is hierarchical, risk-averse, and resistant to change.
- Desired Culture: Siemens needs to cultivate a culture of innovation, accountability, and collaboration. This requires promoting diversity and inclusion, fostering open communication, and rewarding risk-taking.
4. Recommendations
To address the challenges facing Siemens, we recommend the following:
1. Implement a Decentralized Matrix Structure:
- Objective: To enhance flexibility, agility, and responsiveness.
- Action: Create a matrix structure with clear reporting lines and responsibilities. Empower teams to make decisions and take ownership of projects.
- Timeline: Phase the implementation over 12-18 months, starting with pilot projects in strategic areas.
2. Foster a Culture of Innovation and Collaboration:
- Objective: To encourage creativity, risk-taking, and cross-functional collaboration.
- Action: Implement initiatives such as hackathons, innovation labs, and cross-functional project teams. Encourage open communication and knowledge sharing.
- Timeline: Start immediately with pilot programs and gradually expand to all departments.
3. Develop Transformational Leaders:
- Objective: To cultivate leaders who inspire, empower, and drive change.
- Action: Implement leadership development programs that focus on emotional intelligence, communication skills, and change management. Promote leaders who demonstrate a transformational leadership style.
- Timeline: Develop a comprehensive leadership development program and start implementing it within 6 months.
4. Embrace Diversity and Inclusion:
- Objective: To create a more inclusive and diverse workforce that reflects the global market.
- Action: Implement diversity recruitment strategies, promote equal opportunities, and create a culture of respect and inclusivity.
- Timeline: Start immediately with a comprehensive diversity and inclusion strategy.
5. Implement a Robust Change Management Strategy:
- Objective: To minimize resistance and maximize employee buy-in during the transition.
- Action: Communicate the rationale for change clearly, provide training and support, and address employee concerns.
- Timeline: Start immediately with a communication plan and ongoing feedback mechanisms.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with Siemens' core competencies in technology and engineering while supporting its mission of creating sustainable and innovative solutions.
- External Customers and Internal Clients: The proposed changes will enhance Siemens' ability to meet the needs of its external customers and internal stakeholders through greater responsiveness, innovation, and efficiency.
- Competitors: The recommendations will help Siemens stay ahead of its competitors by fostering agility, innovation, and a more customer-centric approach.
- Attractiveness: The proposed changes are expected to lead to increased profitability, improved employee engagement, and a stronger company reputation.
6. Conclusion
By implementing these recommendations, Siemens can transform itself into a more agile, innovative, and customer-centric organization. The new structure will empower employees, foster collaboration, and drive performance while promoting a culture of diversity and inclusion. This transformation will enable Siemens to navigate the challenges of the global market and achieve sustainable success.
7. Discussion
Alternatives:
- Maintaining the Status Quo: This option would likely lead to further decline as Siemens struggles to keep up with the changing market.
- Partial Decentralization: This option might offer some benefits but would not fully address the need for agility and innovation.
Risks and Key Assumptions:
- Resistance to Change: There is a risk of significant resistance to change, which could hinder the implementation process.
- Cultural Shift: Shifting the organizational culture from hierarchical to collaborative will take time and effort.
- Leadership Development: Developing transformational leaders will require a significant investment in training and development.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline specific timelines, milestones, and responsibilities for each recommendation.
- Communicate the change strategy to employees: Regular communication and feedback mechanisms are crucial to build trust and ensure buy-in.
- Monitor progress and make adjustments: Regularly assess the effectiveness of the changes and make adjustments as needed.
By taking these steps, Siemens can successfully implement its transformation and emerge as a stronger, more competitive, and sustainable organization.
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Case Description
Peter Löscher became CEO of Siemens in July, 2007. It was one of the most turbulent times in the company's history as the company was reeling from a compliance scandal involving hundreds of millions of Euros in suspected bribes, and had to pay billions of Euros in fines and fees to clear its name. Further, the company's operating groups were underperforming their peers in terms of profitability, and had been for some time. Adding to the challenges, Löscher was the first outsider to run Siemens since the company's founding in 1847. After his arrival, Löscher moved quickly to assess the organization, a global, multi-line technology and engineering firm with over 475,000 employees and over €66,487 million of revenue and €3,345 million of net income. Klaus Kleinfeld, the previous CEO, had improved company performance, driven the company to become more globally focused, and sold off underperforming and non-core assets. However, his tenure was cut short by the bribery scandal. When Löscher arrived, he felt the company was overly complex, individuals lacked accountability and significant tension existed between headquarters and the regions. Löscher took advantage of the crisis to reorganize the company from 10 operating groups to 3 sectors, introduce regional clusters to enable smaller markets to focus on sales, establish the right of way of the global business, simplify financial reporting, and enhance the sales effort to market verticals. In addition to the changes that Löscher made to the company structure, he transformed employees' attitudes and renewed the entrepreneurial and innovative spirit among managers in the organization.
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