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Smashing the Cube:

Corporate Transformation
at Ciba Geigy Ltd.
Hemant
Kanika
Mohana
Urvi
Utkarsh

By(14P081)
(14P083)
(14P087)
(14P116)
(14P117)

Company Background

Swiss chemical company specializing in


Pharmaceuticals
Agriculture
Industrial and specialty chemicals

Formed from the merger of Geigy Chemical Corporation & Society


of Chemical Industry in Basle (CIBA)
The Cube FUNCTION

GEOGRAPHY

IN
S
BU

S
ES

The Cube Need for


Change

Slowed decision making


Caused plans to be changed and upgraded to wasteful inefficiency
Bound organization and culture due to Switzerlands legal and
social traditions
State of complacency
Financial Performance dipped (after 1979)

How to Change

Changing Vision
Vision 2000 To develop program of radical culture
change

People and Leadership


Form a think tank of middle and upper management
Tap the energies of unorthodox and creative people

Business 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

Portfolio and Business


Strategies

To Focus on core competencies


Identification of 5 categories of businesses

Implications Each category to have own set of implications


for performance management and resource
allocation

Organization and
Systems

To Cube reduced to one-and-a-half dimensions


Move from a functional structure to a divisional
structure
Rise of the matrix to establish coordination
between functions
Certain number of services remained
centralized to provide infrastructure and
services to divisions

Implications
Rise of accountability for divisional managers
GC head to assume the role of coach in different
countries
Role of CU was to provide training and
counseling to line management
Huge difficulty to allocate the manufacturing
functions to divisions
Challenge of getting accustomed to culture
change

People and Leadership

To Devised its own policy of empowerment


Empowerment = Direction * Authority * Support
New incentive based pay devised at 3 levels :
Corporate, divisional and individual
Global dissemination of Vision 2000 took place
through a series of seminars

Implications Problems with middle management as they


were removed from the upper levels and too
much entrenched to be among the lower levels
Abolition of bureaucracy
People too much engrossed in incentives

Alternative approach

ABB Introduction of a 2 dimensional matrix


Corporate functions dealt according to 30/30/30/10 rule
Group executive management to maintain balance
between strategy and operations

Sandoz Major sectors became legal entities with complete


decentralization
Local presidents provided a link between Sandoz and
local units
Pharma and nutrition became the focus areas

Business unit perspective of


Ciba
Pharmaceuticals

Reached maturity

Initiated cost cutting

Diversification - bought new companies

Textile Dyes

Reduction in layers under a dept from four to two

Shipping costs cut down

Downsizing followed by a zero based budgeting

Pigments
Reduce the number of functional areas to avoid service costs

50% reduction in capital expenditures

Fully integrated business units outside Switzerland to reduce purchasing costs

Corporate Unit Perspective


Environment and Safety

Downsizing of employees from 130 to 50

Corporate unit retained formal controls

Best practices implemented

HR

Individual divisions established their HR functions

Management training programs and regionally adopted training programs introduced

Centralized information for 5000 top managers provided to KL

Finance

Permitted unrestricted foreign ownership

Financial information made more accessible

Documentation made easy and brief

Problems with
restructuring

Middle 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

Effects of restructuring
Group Perspective

Profit performance became the role and responsibility

Need to integrate global decisions and local units

Cross divisional functional committees to discuss on downsizing and


manage a revised budget

More need to customize according to local needs

KL Perspective

Final decision making authority vested in the committee chairman

KL reviewed requests for capital expenditures

Decision making delegated outside the KL at the lower levels