ABB – ASEA Brown Boveri

August 2019: ABB, the Swiss Technology Company, is since 1988 the merged company of the former Swedish ASEA and the Swiss BBC. It was a company with a wide range of production sites and customers in countries all over the world. The first CEO was Percy Barnevik (1987 – 1996). To guarantee optimal decisions regarding production and customer usefulness Barnevik introduced the matrix organization. All issues regarding customers were treated jointly by the production branch and the regional sales department. These decision processes deemed to be optimal. That was however only one side. The other side was a tedious and long lasting decision process.

One of Barnevik’s successors, Jürgen Dormann (2002 – 2004), saw especially the disadvantages of the matrix organization and tried to abandon it – as the medias reported. Obviously however that wasn’t fully achieved. With Ulrich Spiesshofer, CEO from 2013 to 2019, the matrix organization was still in operation. The disadvantages however became more and more apparent as critics emphasized.

The decision processes were aggravated additionally by a steadily flow of new products in the five branches

  • Electrification
  • Industrial Automation
  • Motion and Robotnics
  • Discrete Automation and
  • Power Grids.

That was increasing the danger of non-optimal decisions due to the pure amount of information to be processed. Even a coordinating central unit could not alleviate the problems. The management seemed overstressed. In regard to its competitors ABB lagged behind.

Internal critics stated customers in more than 100 countries were not served in an optimal manner. Finally in April 2019 they could convince the supervising management board to change the company structure profoundly. – That will be a long lasting task of the new CEO Björn Rosengren, who will take over in March 2020.

First – the Power Grid branch was to be sold, in 2020 it will become part of Hitachi.

Second – the matrix organization will definitely be dismissed.

Third – the remaining branches will be upgraded and receive a mandate for more autonomous decisions. They are promoted to divisions and are furnished with much more functions including R & D and sales (regions/customers).

Comment: These are steps in a reasonable direction, however nothing has been made public how to the customers in more than 100 countries exactly will be served. How are sales organized? Have all divisions separate sales departments in 100 countries? Probably not, what will be done by the new divisions what still will be done by the central unit. To whom are the sales offices reporting. Who will be charged for the costs of these offices? For a success of the ABB re-organization these problems have to be solved satisfactorily.

P.S.: These considerations are based on public information in the media. They are to illustrate theoretical findings. If the applied assumptions prove to be different, different conclusions might be logical.

—  More? See: Business Organization System Theory 
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