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As a result the front-line profit center managers’ performance is getting affected. * The conflict between long-term technical development and short-term profits is making the situation worse. As per the Business Area’s concern, the COMSYS project should be given priority over other activities as this project, if successfully implemented, would enhance the operations and efficiency of our relays business across the world. However, the development of the project is affecting the daily activities of the company.
The problem spilled-over to the regional transmission performance and thus allocation of funds to the project COMSYS (in this case investing in R&D) rises as an important issue to be discussed.
* Such an issue increases the difficulty in reaching to a decision. The more time we take in reaching to a conclusion; more will the performance of the company get affected. First of all, we need to ensure that the development of project COMSYS doesn’t affect the operations and performance of the company. Second, we need to allocate suitable resources like funds, workforce etc. or project COMSYS separately. Moreover, from the short-term perspective we need to implement the project as soon as possible as the resources allocated to the project would then be available for daily operations, and from the long-term perspective we would be able to eliminate the compartmentalized framework of the profit centers and thus form a common base of software and hardware. * In the current situation it would be difficult to achieve this goal as the priorities within the organization doesn’t coincide.
Project COMSYS is important for long-term development of the organization and, thus, needs sufficient resources for its implementation. I would, therefore, request the committee to take the afore-mentioned points into consideration and carry this discussion forward and helps us to reach to a decision. 2. ABB’s Global Matrix: As mentioned in its annual reports for the year 1988 and 1989, the Chairman(s) has(ve) clearly mentioned about the strategy of “think global, act local”.
Since the merger the ABB group has been following the philosophy of decentralization; its aim to be close to the customer, to have short-lines of communication and decision-making and clearly defined accountability, all are reflected in its matrix structure. The matrix structure was proposed by a 10-person top management so that it enables the group to achieve a balance between its global business focus through its 58 business areas with the market created by the 1300 local companies under the umbrella of several country-based holding companies.
The structure focuses on the principles of decentralization and individual accountability with clearly defined responsibilities from business areas heads to regional and front-line profit center managers. The business areas were responsible for carving out strategies while the local companies were responsible for implementing the strategies and achieving the objectives. All the business area heads had additional responsibilities of their national company’s operations.
Thus, the overall goal of the top management was to develop managers who can take leadership roles as a result of which “a self-driven, self-renewing organization” would be formed. One of the main reasons for the success of the matrix structure in ABB was proper communication of the philosophy by the top management to every single employee of the organization. Communicating values to the managers was given priority based on the belief that managers are loyal to values rather than to the company or a particular boss.
The core values included quality not only in products but also in the organizational processes and relationships. The management emphasized on dedication to productivity and performance at all levels of the organization. The structure implemented was well in line with the overall strategy of the organization. With rapid acquisitions after the merger ABB grew bigger, spreading its operations throughout the world. The matrix structure, therefore, provided a platform for ABB to absorb the acquired companies and made implementation of its strategies in them easier.
One of the important initiatives taken by the top management was to translate the company’s philosophy to specific task requirements for managers at all levels. Throughout the internal restructuring process it was ensured that the organization was not distracted from the market place. Important issues were delegated to teams consisting of front-line managers. The company also had a unique philosophy of resolving of problems wherein the problem, if escalated to the higher level manager, was pushed back to the team to resolve and to reach to a conclusion.
This process enabled and enhanced the problem solving capabilities of the managers. In order to implement individual accountability, a transparent reporting system named ABACUS was developed to collect performance data for all the 4500 profit centers in dollar denomination. The business area heads did not stop with just crafting strategies, rather they were personally involved up to some extent in implementing the strategies and policies. The top management, also, was well informed of the daily activities as well as the performance of all its companies.
In case any business underperformed, the top management would step in and demand explanation and offer help if needed, thus, giving proper attention to all its businesses. All the above mentioned points explain why ABB was successful with the matrix structures while many could not. Having explained the advantages of the matrix structure, I would like to mention few disadvantages which were prevailing in ABB too. 1. The complex structure with dual hierarchy sometimes leads to confusion and conflicts within the organization resulting in decreased productivity as is visible in case of the COMSYS challenge faced by Don Jans in ABB. . It is sometimes time consuming and delay in taking decision may affect the organization’s performance largely. 3. In such a structure it is difficult to ascertain accountability. The larger the organization, the complex the structure, thus, more difficult is individual accountability. 3. Management roles and responsibilities in ABB and Don Jans’s performance in ABB The management of ABB has been playing a vital role in the post-merger restructuring of ABB.
The structure evolved as a pathway for the management to achieve its goal of operating in a global scale. It provides managers the flexibility and autonomy in taking decisions. The management was driven by policies made by the CEO, Percy Barnevik. The frameworks set by Barnevik were well implemented throughout the hierarchy, for example, Barnevik implemented “7-3 formula” which says that it is better to decide quickly and be right 7 out of 10 times than delaying action in search of a perfect solution.
This policy was driven by the principle that the only unacceptable behavior is not doing anything. Under his leadership, the company grew rapidly with numerous acquisitions across the world. Nevertheless, the same philosophy, values were implemented in each of its companies. The matrix structure of ABB defined responsibilities for business area heads to work on the strategy whereas the front-line managers were held responsible for the daily operations of the local company.
The managers were provided autonomy to the extent that they had control over their company’s balance sheet such that they inherited their results year to year and, thus, the top management had no say in the decisions regarding their company’s operations. This particular autonomy motivated many managers to perform better and better. As ABB was acquiring companies, it became important for ABB to ensure that the acquired companies imbibed the culture and values of ABB.
The management took this as a challenge and ensured this by communicating the strategies and goals of the organization to managers from corporate level to business area heads to country level managers. One such regional manager for the relays division in the Coral Springs, Don Jans, who became part of ABB after the acquisition of Westinghouse in early 1989, had well-received the communication from the head of the ABB’s power transmission segment, Goran Lindahl, where he emphasized on the responsibilities of the local companies to implement the plans and achieving positive results.
It was not an easy task for Don Jans and his team from Westinghouse to adapt to the culture of ABB, however, he found the management of ABB much supportive and involved as compared to that by Westinghouse’s. When first exposed to the philosophies of ABB, Don Jans found it to be much different than Westinghouse, where the decisions were taken by the top management, unlike ABB where he had the autonomy of taking the decisions. He found ABB to be much more flexible as the decisions were very much delegated and the organization was result oriented, i. e. he top management continuously monitored results of each of its companies, and would interfere only when the results were not satisfactory. Proper communication of the organization’s strategies to the managers was given importance as they were the ones who were responsible for achieving results. For Don Jans this experience was exhilarating, as he mentions once in a meeting where the corporate managers(for relays business) were presenting to his team “about how the industry was developing, where ABB wanted to be, how it was going to get there, and so on. ”.
Such meetings were received in a positive manner as they educated his team about the organization. Moreover, the meeting did not end there, the proposals for investing in relays business by his team were given proper attention, which further encouraged Don Jans to provide better performance. The matrix structure provided Don Jans with the flexibility of operations and taking decisions. Due to which the performance of relays business (of which Don Jans was in charge) had improved. With clear communication from the top management, he was aware of what was required to deliver.
He used his experience in the industry to invest in a small-scale in microprocessor relays technologies as he had financial resources at his disposal. He used his freedom to improve the product lines of the relays division by broadening the microprocessor technologies experiment to solid state devices, and thus gave ABB a competitive advantage in the market where other players were taking advantage of the technology. Thus, Don Jans tried to improve the performance of the relays division by leaps and bounds by regular investment in newer and better technologies.