How to use a scandal to drive change

How to use a scandal to drive change

I arrived at Siemens at a very difficult moment. The company faced allegations of bribery (see below) in several countries, and eventually it paid $1.6 billion in fines. But as I always remind anybody who is listening, never miss the opportunities that come from a good crisis – and we certainly didn’t miss ours.

The scandal created a sense of urgency without which change would have been much more difficult to achieve, regardless of who was CEO. Siemens is a very proud company with a history of innovation and success. In the absence of a catalyst like this, people would have asked themselves, “Why alter anything?”

Yet Siemens had to change. It’s not so much the uniqueness of your strategy that matters nowadays – it’s the strength of your execution. How can you adapt continually to the changing world we are in right now? Siemens needed to execute more rapidly, and to do that we had to take a hard look at both our organisational structure and whether we had the right people in the right jobs.

Although I was Siemens’ 12th chief executive, I was the first one who knew the company not from the inside but from the outside. Getting to know the company meant really engaging with people. So I went off traveling around the world. I developed a daily routine: first I would have breakfast with customers. Then morning sessions with either individual customers or politicians. Lunch with young high-potential Siemens employees. After lunch, business reviews with the local team and then a town hall meeting. Dinner with the top leadership team of the specific location. After dinner I would fly out and follow exactly the same routine in another city the next day.

Doing this repeatedly gives an extremely good view of what is really happening. What I learned was that Siemens employees were frustrated with bureaucracy and wanted more independent decision-making. At the same time, people felt that the corruption scandal represented a failure of leadership. They were shocked and ashamed, because they are very proud to be part of Siemens.

When it came to changing the company, I worked with my immediate team. I didn’t want to bring in consultants to tell us what to do. The exercise became very painful at the end. Four-fifths of the managing board members had to leave.

In Germany, companies have two boards: one is the supervisory board, with 50% employee representatives and 50% lenders and shareholders. The other is the managing board, made up of top executives, with the CEO as chairman. But at Siemens, the managing board consisted of two levels as well: some “coaches” and their direct reports, who operationally led the business as part of committees within each Siemens division – mini-boards. We got rid of this two-layer system. There were 12 units, and I could not afford to have all 12 operating CEOs sitting at my table.

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