Reorganizing ABB - From Matrix to Consumer - Centric Organization Structure (A)

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Case Details:

Case Code : HROB032
Case Length : 15 Pages
Period : 1998 - 2002
Pub Date : 2003
Teaching Note :Not Available
Organization : ABB
Industry : Power, Transportation, Financial Services
Countries : Switzerland

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Rationale

The matrix structure was devised by Barnevik so as to develop global strategies for ABB by taking into account the local conditions in the countries in which the company had its operations. The reasoning behind creating a decentralized structure was to drive ABB closer to its customers and expedite the decision-making process.

The dual reporting system ensured that both geographical interests as well as product-specific interests were taken care of. Further, it also ensured that there was proper information flow within the organization. Regional managers as well as business area managers could track the operations of individual companies.

In implementing the matrix structure, the challenge for ABB was to integrate the work cultures of two massive organizations - Asea and Brown Boveri. The company had to induce a change in the attitude of employees who were used to a bureaucratic culture...

The Implications

By creating a matrix organizational structure and establishing global and regional management, ABB reaped many benefits. The operations of frontline operating companies were integrated with ABB's worldwide operations through the matrix. As a result, these companies got an international identity, and their exports increased. The companies got access to the worldwide distribution network of ABB, through the matrix structure. For example, ABB Stromberg (Stromberg before restructuring), a Finland-based company, which manufactured electric drives, transformers, circuit breakers, generators, transformers, etc. was not financially performing well, despite its wide range of products, as all its products were not of international quality standards.


Exhibit I: Financial Performance of ABB
Exhibit II: ABB's Matrix Structure (1988)
Exhibit III: ABB's Group Organization (As on March 1, 1989)
Exhibit IV: ABB's Vision and Mission
Exhibit V: ABB Group Organization (1994)


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