ABB’s structure was quite complicated. Firstly, the company made decisions at the lowest possible level. Therefore, managers and steering committees at national and local levels made many small decisions. They tailored decisions to the area of operation, which did not meet global standards. Overall, the CEO enjoyed a ceremonial and non-effective position.
Secondly, ABB’s operations meant that it brought together three international contradictions. This includes international and local presence, decentralization and centralization of decisions and being big and small. The company thrived by using business units. However, with time it was almost impossible to oversee these small units. Additionally, the company’s standards were not similar in all countries. The fact that it focused mainly on the national presence meant that its downplayed global presence.
After a decade of operations, many of these problems emerged. The economic downturn of Europe in 1998 made things worse. In 1989, the company grappled with asbestos-related suits in the United States through a company it had acquired a decade earlier. At the same time, structural related problems emerged and operations became impossible in the 5000 business units globally.
People Related Problems
The first challenge came from human resource management. The fact that it is an Engineering Firm, ABB did little to motivate its employees. This created a crisis where employees worked purely for money. They would do anything to get it without any interest in the company. Some of the principles the CEO (Barnevik) pursued was initiative and action. In the Human Resource environment in play, this was utterly impossible. Simply, there was a palpable disconnect between business and Human Resource Management. Additionally, employees operated in an environment with different sets of codes of conduct. This created double standards.
The second one came from Top Management. The different CEO that ABB hired pursued different strategies. For the first decade, Barnevik’s strategies clearly worked. However, this is attributable to the fact that he had advantage of entry. The other CEO pursued different strategies, which were a huge contrast from Barnevik. Summarily, the latest CEO has revolutionized operations at ABB by downsizing and centralizing decisions. Additionally, he has made sure that the company has a sharp focus on only one thing: automation and power.
Suggestions
My suggestions are a reflection of what Jürgen Dormann did on becoming CEO. In addition to discontinuing non-core businesses, he lay down workers who were non-productive. This saved the costs of the company immensely. A company like ABB needs to have standards that people can refer. However, ABB lacks in this department. It is paramount that the company pursues standards and international professional code of conduct in business to win the trust of customers globally.
In the current world, it is critical to keep employees motivated. ABB lacks immensely in this department too. Even the latest CEO does not have an operational plan to handle this problem. This is not a good gesture for a multinational. In addition to discontinuing non-core business within the operations of ABB, the company should discontinue non-profitable operations in some countries. In this light, the company should consider acquiring stake in companies already operating countries of interest. This will give a chance another organization to conduct business in an environment it is familiar with to the benefit of ABB. Consequently, it will serve the interests of ABB to have a presence globally.