Siemens: Building a Structure to Drive Performance and Responsibility (A)

Peter Löscher became CEO of Siemens in July, 2007. It was one of the most turbulent times in the company’s history as the company was reeling from a compliance scandal involving hundreds of millions of Euros in suspected bribes, and had to pay billions of Euros in fines and fees to clear its name. Further, the company’s operating groups were underperforming their peers in terms of profitability, and had been for some time. Adding to the challenges, Löscher was the first outsider to run Siemens since the company’s founding in 1847. After his arrival, Löscher moved quickly to assess the organization, a global, multi-line technology and engineering firm with over 475,000 employees and over €66,487 million of revenue and €3,345 million of net income. Klaus Kleinfeld, the previous CEO, had improved company performance, driven the company to become more globally focused, and sold off underperforming and non-core assets. However, his tenure was cut short by the bribery scandal. When Löscher arrived, he felt the company was overly complex, individuals lacked accountability and significant tension existed between headquarters and the regions. Löscher took advantage of the crisis to reorganize the company from 10 operating groups to 3 sectors, introduce regional clusters to enable smaller markets to focus on sales, establish the “right of way” of the global business, simplify financial reporting, and enhance the sales effort to market verticals. In addition to the changes that Löscher made to the company structure, he transformed employees’ attitudes and renewed the entrepreneurial and innovative spirit among managers in the organization.