Smashing the Cube: Corporate Transformation at Ciba Geigy Ltd.

Smashing the Cube: Corporate Transformation at Ciba Geigy Ltd.By-Hemant (14P081)Kanika (14P083)Mohana (14P087)Urvi (14P116)Utkarsh (14P117)Swiss chemical company specializing in PharmaceuticalsAgricultureIndustrial and specialty chemicalsFormed from the merger of Geigy Chemical Corporation & Society of Chemical Industry in Basle (CIBA)The Cube -Company BackgroundFUNCTIONGEOGRAPHYBUSINESSSlowed decision makingCaused plans to be changed and upgraded to wasteful inefficiencyBound organization and culture due to Switzerlands legal and social traditionsState of complacencyFinancial Performance dipped (after 1979)

The Cube Need for ChangeChanging Vision Vision 2000 To develop program of radical culture changePeople and LeadershipForm a think tank of middle and upper managementTap the energies of unorthodox and creative peopleBusiness strategy Luppiner would serve as a bridge to strategise to: Strike a balance between economic, social and environmental responsibilities. Ensure prosperity of enterprise beyond the year 2000 How to ChangeTo -Focus on core competenciesIdentification of 5 categories of businesses

Implications - Each category to have own set of implications for performance management and resource allocation

Portfolio and Business StrategiesTo -Cube reduced to one-and-a-half dimensionsMove from a functional structure to a divisional structureRise of the matrix to establish coordination between functionsCertain number of services remained centralized to provide infrastructure and services to divisions

Organization and SystemsImplications Rise of accountability for divisional managersGC head to assume the role of coach in different countriesRole of CU was to provide training and counseling to line managementHuge difficulty to allocate the manufacturing functions to divisionsChallenge of getting accustomed to culture change

To-Devised its own policy of empowerment Empowerment = Direction * Authority * SupportNew incentive based pay devised at 3 levels : Corporate, divisional and individualGlobal dissemination of Vision 2000 took place through a series of seminars

People and LeadershipImplications-Problems with middle management as they were removed from the upper levels and too much entrenched to be among the lower levelsAbolition of bureaucracyPeople too much engrossed in incentives

ABB-Introduction of a 2 dimensional matrixCorporate functions dealt according to 30/30/30/10 ruleGroup executive management to maintain balance between strategy and operations

Sandoz-Major sectors became legal entities with complete decentralizationLocal presidents provided a link between Sandoz and local unitsPharma and nutrition became the focus areas

Alternative approachPharmaceuticalsReached maturityInitiated cost cuttingDiversification - bought new companies

Textile DyesReduction in layers under a dept from four to twoShipping costs cut downDownsizing followed by a zero based budgeting

PigmentsReduce the number of functional areas to avoid service costs50% reduction in capital expendituresFully integrated business units outside Switzerland to reduce purchasing costs

Business unit perspective of CibaEnvironment and SafetyDownsizing of employees from 130 to 50Corporate unit retained formal controlsBest practices implemented

HRIndividual divisions established their HR functionsManagement training programs and regionally adopted training programs introducedCentralized information for 5000 top managers provided to KL

FinancePermitted unrestricted foreign ownershipFinancial information made more accessibleDocumentation made easy and briefCorporate Unit PerspectiveMiddle managers felt alienated

Difficulty in allocating manufacturing functions to divisions

Lack of standardization

Employees too much focused in incentives

Difficult to transfer employees across functions Reports generated by corporate finance units lacked details

Increase in the number of charge-out items

Global divisions became too much involved in lower divisions inhibiting cross divisional transfers

Problems with restructuringGroup PerspectiveProfit performance became the role and responsibilityNeed to integrate global decisions and local unitsCross divisional functional committees to discuss on downsizing and manage a revised budget More need to customize according to local needs

KL PerspectiveFinal decision making authority vested in the committee chairmanKL reviewed requests for capital expenditures Decision making delegated outside the KL at the lower levelsEffects of restructuring