Problem:
I have outlined based on the case study the challenges that ABB must overcome. please let me know if additional challenges should be identified?
Notes:
Multi-Domestic Mode - no
Generally, but not always, have the following characteristics:
• Largely decoupled
• Decentralized decision rights
• This mode used to leverage important differences between markets
• Key Management positions filled from local talent in each location
• Communication vertically from bottom –up
Advantages:
• High level of local responsiveness
• Able to respond to multiple changing environments
Disadvantages:
• Difficult to implement decisions uniformly throughout organization
Difficult to coordinate activates
Global Mode - ABB is Global Mode
Generally, but not always, has the following cartelistic
• Mix of tight coupling and loose coupling
• Mix of centralized and decentralized decision rights
• This mode used to leverage both the important differences between markets and home-based comparative advantages
• Management is mix of home country and local talent
• Horizontal and vertical connections allow sharing of best practices and knowledge
Advantages:
• Able to benefit from both local responsiveness and global coordination
Disadvantages:
• Extremely expensive
• Slowed decision making
• Extremely complex
• Difficult to implement and balance
International Mode _ not ABB
Generally, but not always, have the following characteristics:
• Tight coupling
• Centralized decisions rights
• This mode used to leverage home-based comparative advantages
• Key management positions filed from home country
• Communication patterns follow top-down approach
• Supports increasing economies of scale
Advantages:
• High level of efficiency for given level of quality
• Uniform implementation of decisions throughout organization
Disadvantages:
Difficult to meet the needs of multiple differing environments
Summary:
The new “flat” organization eliminates levels of middle management and gives more power to the lower level groups. The internal strategic linking changed with a need for a more flat design. The strict hierarchy and order giving of the “old” gave way to a system of sharing information, which became the key ingredient in the modern company. The old hierarchy and reporting structures were simple and easily controlled, but had some major limitations. Managers on top of the pyramid can become overloaded and therefore delay the decision-making. Information traveling through many layers may be distorted by the time it gets to the recipient.
ABB organization chart is flat:
New flat organizations put, therefore, more importance on timely sharing of information and eliminating delays caused by tall hierarchies. Equally important is the external strategic linking (with consumers, suppliers, government, etc…).
Balance of global coordination derived:
1. Fast Decision Making -Fierce competition and ever changing needs of customers require fast decision making for which a flatter organization is more suitable.
Challenges derived from ABB mode:
1. High Diversity - The diversity of the “new” organization has its strategic design implications as well. People with different cultures and experiences are brought together in cross-functional teams, which makes things even more complicated. Relying solely on instructing listening and communication skills may not be enough.
2. Formal linking via integrators and liaison people is needed. Their task is not to work but to coordinate the communication and especially the decision-making. The criteria for hiring people for those spots are best explained in the example of ABB when they interview several hundred managers. (“Emphasis was placed on identifying individuals who can cooperate in multi-cultural environments and for whom innovation, risk-taking and ability to motivate others were second nature”).
3. Diverse groups of stakeholders pull decision making in different directions. Again, this requires systems for conflict resolution through negotiations and those are more difficult to create and implement then in the “old” hierarchical organizations.
4. Requires most skill and strategy. To stay focused on the global goals and at the same time become locally responsive to the desired extent asks for some serious juggling. The grouping by the Product/Geography Matrix combines the two dimensions. As in the ABB example the firm is divided into business units, each functioning independently in its environment and each reporting to both the country manager and the business unit. Even though it seems to be working for ABB it is hard to balance these two dimensions. Module sites examples where companies quit this system after finding that it is not worth dealing with confusion, high costs and conflicts arising from this complexity. ABB dealt with this problem through steering committees, an intermediary between the business unit and the two segments. Of course this is not a universal solution, everyone must find its own.
The reinventing of the organization should be conducted by following a certain set of rules. I thought the following are very important: use people from within, do not rely on consultants too much, get lower level management involved, and make people responsible for the change feel they are a part of shaping the change.
One general conclusion that can be made is that strategic grouping and linking by any one single dimension is rarely the right solution. Some sort of a combination of two or more is often a better solution. The theory is, however, just a starting point, an idea, and every organization has to find its own way.