Page 118 - DMGT402_MANAGEMENT_PRACTICES_AND_ORGANIZATIONAL_BEHAVIOUR

Unit 5: Coordination, Centralisation and Decentralisation

up to assume any headquarters functions. (ABB Marketing Services, for example, creates Notes
and runs and campaigns for ABB, but also takes on a few other clients. And Barnevik
expects it to make money.) It's not just cost cutting Barnevik is after, though that is obviously
important. Says he: "Ideally you should have a minimum of staff to disturb the operating
people and prevent them from doing their more important jobs." ...

Barnevik's master matrix gives all employees a country manager and a business sector
manager. The country managers run traditional, national companies with local boards of
directors, including eminent outsiders. ABB has about two such managers, most of them
citizens of the country in which they work. Of more exalted rank are 65 global managers
who are organised into eight segments : transportation, process automation and
engineering, environmental devices, financial services, electrical equipment (mainly
motors and robots), and three electric power businesses : generation, transmission, and
distribution.
Barnevik is well aware that the once popular management by matrix is in disfavour in the
U.S. business schools and has been abandoned by most multinational companies. But he
says he uses a loose, decentralized version of it the two bosses are not always equal that is
particularly suited to an organisation composed of many nationalities.
The matrix system makes it easier for managers like Gerhard Schulmeyer, a German who
heads ABB's U.S. businesses as well as the automation segment, to make use of technology
from other countries. Because of the matrix, Schulmeyer has a better idea of what is
available where. He says that the techniques developed by ABB in Switzerland that he
uses to service U.S. steam turbines are more reliable and efficient than those of General
Electric and Westinghouse, his main American competitors. Schulmeyer also relied on
European technology to convert a Midland, Michigan, nuclear reactor into a natural
gas-fired plant, ...
ABB executives say the value of the company's matrix system extends beyond the swapping
of technology and products. For example, the power transformer business segment consists
of 31 factories in 16 countries. Barnevik wants each of these businesses to be run locally
with intense global coordination. So every month the business segment headquarters in
Mannheim, Germany, tells all the factories how all the others are doing according to
dozens of measurements. If one factory is lagging, solutions to common problems can be
discussed and worked out across borders.
Questions

1. How is ABB achieving coordination of its global operations?
2. Which of the four basic departmentalization formats do you detect in ABB's structure
of eight segments? Explain.

3. How does ABB apparently avoid unity-of-command problems with its matrix
structure?

5.2 Centralisation

By centralisation, we mean the concentration of a formal authority at the top levels of a business
organisation. It is a tendency aimed at centralised performance. Hence, it is the opposite of
dispersal and delegation of authority. It has an important bearing on the processes of policy
formulation and decision-making.
The two major areas of management or administration are reserved with the top management
in a centralized organisation. Hence, the lower levels of the organisational hierarchy have to
look upwards for direction, advice, clarification, interpretation, etc.

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