Group-8 Date: 12th March 2011

PGEMP – 27
Subject: People and Performance
Case Study

Group Members:
18 Rupesh Jain
23 Rupesh Kumar
04 Sanjay Arulla
17 Parthiv C. Hathi
4 Pradeep Singh (EMP Batch 26)
28 Sumit Manocha

Asea Brown Boveri

Two giants of the European electrical equipment industry, Asea AB of Sweden (65,000
employees) and BBC Brown Boveri Ltd. Switzerland (85,000 employees), shook hands in 1987
forming ABB - becoming world’s largest competitor in power generation transmission and
distribution, comprising 850 separate legal entities operating in 140 countries.

The organization Architecture:

After merger and acquisition of new companies, Asea Brown Boveri was organized in to 1300
wholly owned subsidiaries operating in 140 countries with 2,15,000 employees. Thus there was
an immense need for a proper multi dimensional Matrix Organization, which should be built on
twin principals of decentralization of responsibility and individual accountability. Two
dimensional reporting Matrix was formed, with one dimension regional responsibilities and the
other dimension product responsibilities. The Business Area Managers were responsible for
developing worldwide product and technology strategies. Regional Managers were responsible
for executing the strategies based on the unique needs of local markets.

The organization architecture will effectively help in addressing the three dilemmas as expressed
by CEO of the company Mr. Percy Barnveik. “Asea Brown Boveri” was an organization with
three internal contradictions, global and local, big and small, radically decentralized with
centralized reporting and control.

The way the matrix structure of ABB was designed, it solved all three issues that the CEO had.
The matrix structure ensured that each and every manager was answerable to two superiors. One
of them was more concerned with the global business strategies and other with the local/country
wide/ business region demands. The localization ensured that the best talent was utilized. One of
the examples stated in the case explain how exactly a two way reporting helped the company as a
whole.

In case one, the global strategy indicated that closing a factory was necessary because of over
production in a normal scenario, a local head will never close a factory. Thus such decisions
could be taken only because of the matrix organization. This scenario clearly indicated how, the
global and the local shook hands and developed a synergy within themselves.

Global and Local

- Global strategy (Top down approach) vs Local implantation (Bottom – up approach)

- Operating manager had 2 bosses, one handling worldwide product and tech strategies, the
other responsible for executing these strategies.

- Full utilization of local talent

- Global optimization of business, and local maximization of resources

The decentralized and issue was handled the way the accounting was done. The Local head was
wholly and solely responsible for making her business profitable. At the central level, the data
flowed thru the computer supported reporting system named “ABACUS”, which could provide
managers with accurate and timely information on sales, order, margins and other data vital to
decision making. The data was collected across 140 countries in local currencies and translated
in to USD to allow for analysis across border. On Basis of this analysis a TOP-DOWN strategy
was made for the company. The local head ensured that the strategy was executed.

Centralized and decentralized

- Local P&L and cash flow thus making people responsible for them.

- Local P&L also ensured local autonomy in working.

- Centrally all these were collated using ABACUS to develop business wide strategies.

At the same time every local center had approximately 50 employees, thus making the
management of a center simple where as at the global level the number of employees was more
than 215000+ employees.

Big and Small

- Local entity employee strength – approximately 50

- Global workforce more than 215000

- Wholly 1 big company, whereas more than 1200 small wholly owned subsidiaries