HBS case study 4: Asea Brown Boveri

Source: http://www.abb.com/

Company Structure

ABB, Asea Brown Boveri, is a worldwide electrical engineering giant, employing approximately 215,000 people in 100 countries. Even thought in 21th Century, managing the multinational company is still complicated. The structure of company contributed to the success of company. The group structure were divided into five including board of directors, executive committee, group functions, divisions managers and region managers. (1) From headquarters to local companies, each department has its own responsibility and duty to achieve the goals that top managers offered. For example, BA management was responsible for setting worldwide strategy and allover operating objectives, local company managers controlled operations and were responsible for profits. Local company managers have to report to BA managers and group executive managers will have meetings with BA managers regularly to control and understand local or regional operating situations. The cooperation of headquarters and regional companies made whole company can work fluently.

        

Source: http://scienceworld-frontiers.blogspot.com/2012/04/simple-organisms-cooperate-with.html

What can we learn: Percy Barnevik’s Philosophy

1.     Only a leader with visionary plans can create a sustainable company. Percy Barnevik developed and operated the company with global scale so he focused on three contradictions in the new organization including global and local, big and small, and radically decentralized with central control. The visionary plans created the future direction and missions including improving performance, driving innovation, attracting talent and acting responsibly.(2)

2.     Definitely understanding where the target customers are:  Percy Barnevik knew the vast majority of the new orders would continue to go to companies with a strong national presence because of the high level of government ownership or control of power companies. As a result, the company adjusted company R&D to satisfy customers’ needs. For example, in the project of changing landscape in the transmission market with build, own, operate and transfer(BOOT)model, (3) the company know government may not be open to new technologies and methodologies, so the transparency of projects in government have to be achievable.

3.     Decentralized responsibility and individual accountability: “30/30/30 rule” decreed the all downsized regulation by modulating the company structure and also reduced the human costs by outsource and laying off the additional employees. The headquarters personnel relocated to the front-line companies is as increasing the army in frontline battlefield. This made the company have more production.

4.     Providing the organization a clear vision of the expectations and pushing for result by data: A leader should give all company a clear regulation and expectation so every manager and employee can understand and achieve the goals of company. Moreover, when examining the performance of the department or employee, supervisors should regulate the achievement by data that employees should be followed such as how many sales the sales department should make or how many percentage customer service department have to approach so every employee can definitely know what their problems are. For example, ABB listed all the overall performance and ranking in 15 countries including gross margin, S&A revenues, EAFV revenues and so on. Those on the bottom of table desperately sought out ways to improve their standing, seeking input and support from their higher-ranked colleagues.

5.     7-3 formula: “just do it” is a very important action especially in this changing and competitive society especially in the high-technology industry. It was better to decide quickly than to search for the perfect solution and better roughly and quickly than carefully and slowly. The company which first published the creative product or thoughtful service usually can catch customers’ eyes. Many amendments can implement after the main plans carry out.  

Source: http://chrisjerickchua.wordpress.com/2011/06/28/the-organizational-system/

Suggestions

1.     Reduce horizontal and vertical manages:  The multinational company is easy to have a huge managing groups to supervise all kind of departments in all over the world. In addition, too many managers in the same horizontal structure will frustrate the employees especially when two managers’ priorities don’t coincide. As a result, even through the enormous managers are required to administrate so huge company, it is more important to implement flat organizations. Flat structure facilitates a greater level of communication between employees and management. They tend to be more democratic and offer a greater level of innovation. Communication is usually faster, more reliable and more effective than in tall structures

2.     Restructuring the business after acquiring a company: There are many advantages of acquiring a company such as gaining the technology, customers and the patent rights from other company. After the mergers and acquisitions, company has to restructure the systems, the culture and the structure of two companies. For example, after more and more acquisitions, ABACUS system in ABB was no long afford huge information to exchange in the company, so ABB have to develop a new operating system to provide all operation in the company can fluent and to pay attention to the security of information.

3.     The company should operate as a transnational company: Transnational company with a flexible structure is needed. The whole idea is to find the most adequate business model that balances the operation efficiency, asset diversification and company’s ability to adapt to the changing market. 

Transnational Company

Source : http://arifinfo.com/2011/04/26/four-international-operations-strategies/

Reference

1.http://www.abb.com/cawp/abbzh252/9c53e7b73aa42f7ec1256ae700541c35.aspx

2.http://www.abb.com/cawp/abbzh252/5f47d0088b5396dec125702a004c96b0.aspx

3.http://www05.abb.com/global/scot/scot311.nsf/veritydisplay/e3cc68d16ef33514482579b300148f8b/$file/pt05-20-9_apw.pdf