Siemens Corporate Strategies:
A Siemens AG Case Study
Jeff Head
Loyola University Chicago
Foundations of Organization
CPST 250
Dr. Marilyn Stocker
February 13, 2015

Siemens AG, An Organizational Analysis
“Siemens is a global technologies company comprised of 343,000 employees worldwide” (Karczewski, 2014). For the purpose of this paper an analysis of the company will be presented, to include a look at the company mission, human resources, markets, products offered, recent financial performance, and how engineering plays a major role in Siemens AG.
Description of the Organization
In 2013, Peter Loscher was replaced as CEO of Siemens AG by the current CEO Joe Kaeser. The following year Kaeser presented “Vision 2020”, a comprehensive plan to get the company back on track. This vision provided focus on the company’s path, positioning, culture and strategy. The strategic framework to support the vision centered on the company with four contributing elements: Customer and Business Focus, Governance, Management Model and Ownership Culture.
Siemens History and Operations
“Siemens was first founded in 1887 and started to expand with mass production and established a branch in Saint Petersburg and London for Russian lines and English lines” (Choudhary, 2013). It increased its production and started producing electrical power, lighting, and other advances after the Industrial Revolution, which enabled it to gain strength.
After the end of World War II, it faced expropriation of over 90% of its property in the Soviet occupied Germany. Despite this, it expanded from its base in the West Germany in 1960. It had resumed its position of being one of the world's largest engineering companies as it merged all its constituent companies to form, what is today, Siemens AG. In order for the company to meet the pressures of global competition effectively and efficiently, they developed programs that represented a radical change of approach. They based these on the strategic pillars of productivity, innovation, and growth.
Since then it has been focusing on optimizing their business portfolio through acquisitions, divestments, forming new companies, and the founding of joint ventures. For example, the merging of their nuclear power program with Framatome, in 2001, as well as the acquisition of VA Technology AG in 2005. The company is now a mature organization in the process of expanding more by releasing more products and acquiring small entities.
Vision of Engineering
“Engineering is a direct contributor to the use of scientific principles to develop products or systems to solve real life problems” (Siemens, 2015). As a part of the engineering team, we are about innovation rather than invention. We transform creative ideas into improved products, services, and technologies to find the most effective and efficient solutions to complex challenges. According to Siemens, this is accomplished by "providing a platform for those who want to have an impact on the future and contribute to the successes of the company, our customers and the world" (Siemens, 2014).
Siemens organizational culture and leadership
In order to improve the motivation of its workforce, Siemens developed a program named TOP (Time Optimized Process) based on three principles, clear goals, concrete measures and rigorous consequences. Later, it was revitalized and updated in 1998 into TOP+ through the addition of specific management instruments: Balanced Scorecards, World-Class Benchmarking, Employee Idea Systems, Economic Value Added (EVA), and Process Optimization with Early Results (POWER).
These tools gave cross-functional teams the dedicated time and resources needed for achieving goals and objectives in a very short period. It achieves its results by incorporating cultural change, productivity, innovation, and best practice sharing, to increase customer benefit and increase company value. “The result of this was a direct correlation to cost reductions from 2-3% to about 10% and increasing sales by 35%” (Siemens 2014).
Siemens has an open culture with opportunities for employees at all levels, especially for young people entering the world of engineering with Engineering Development Programs. It created a culture of equality and a sense of appreciation as a result of its recognition programs such as schemes in which suggestions and projects for improvements are rewarded.
Siemens also generated a corporate governance strategy based on Focusing on the long term, real and sustainable values and considering the interest of stakeholders. Siemens management is categorized into 5 levels of leadership: Management, Advance Management, General Management, Top Management, and Corporate Management.
Motivating the employees and encouraging them to be part of the strategy is a mandate. “It achieves this through a program called Siemens Leadership Excellence (SLE), which is specifically designed to prepare Siemens leaders for the challenges ahead” (Choudhary, 2013). “The leadership has been able to steer the company into greater heights indicating its resilience and good leadership skills” (Bolman and Deal, 2011). However, because of corruption allegations in 2006, Siemens reorganized their board and established an anti-corruption policy based on three principles: prevent, detect, and respond.
Siemens Challenges
Siemens depends on third-party service providers for the majority of its operational activities such as services for manufacturing, assembling, and testing its products, which has been declining due to capital efficiency. As a global player, it has also come under intense competition from companies such as Phillips and General Electric. These challenges will be further discussed under the SWOT analysis.
OD Analysis and Diagnosis
Bolman and Deal's Four Frames include four main aspects; which will be used in analyzing the different operations of Siemens AG: Structural, Human Resources, Political, and Symbolic.
The Structural Frame
Bolman and Deal define the structural frame for an organization as its “rules, roles, goals, policies, technology, and environment. Basically it dwells around the formal arrangement of work and jobs within an organization” (Bolman & Deal, 2011). The company is managed by a seven-member board of directors headed by Joe Kaeser, who is the president and CEO of Siemens AG. Due to the huge nature of the Siemens AG, the organizational structure revolves around the various business units that it operates, which includes, among others, Automation and automotive systems, Building Technologies, Healthcare, and Industrial solutions and technology with each business having a chief executive and a separate organization structure. This is still the case in the various regions that it operates in, with the main board in Germany being the overseer. In regards to the customer, Siemens AG maintains a global customer base; therefore, many of its customer-related rules and policies are more abstract and fluid in order to adapt to the changing needs associated with globalization while observing the various laws and regulations operating in the countries where it is present. The customer interactions have been made simple, thereby enhancing it to operate a very simple structural frame for the sales department.
The Human Resources Framework “The aspect of human resources indicates needs, skills, and relationships which are the human aspect of an organization” (Bolman and Deal, 2011). The human resources frame assumes that a company’s employees ultimately want to do good work, and employees want to help their organization or company. The TOP+ program is an indication of an organization that is focused on having the best employees and taking care of them so that they feel like part of the Siemens family. The program is focused on innovation, customer focus, and global competitiveness. According to Joe Kaeser, “Siemens established the strategic leadership program, Fit4 more, to sustainably enhance its competitiveness and to create value” (2009). The program specifies the priorities and performance targets Siemens believes will enable them to achieve their overall strategy, which is to sustain profitable growth by addressing the opportunities inherent in global Megatrends. The program contains both financial and non‐financial performance measures. The non‐financial performance measures are grouped into the categories People Excellence, Portfolio, Operational Excellence, and Corporate Responsibility. “We describe these four categories as operational “levers” that enable them to achieve their financial performance targets, which can be tracked externally by their segment reporting” (Kaeser J, 2009). Of the four pillars, People Excellence is the part of a Siemens' global action plan concerned with human resource development through four main elements: Achieving a high-performance culture, Increasing the global talent pool, Strengthening expert careers, and Siemens' Leadership Excellence (SLE) Program.
The SLE provides the highest caliber leadership and management training. In the pursuit of this it rewards those who are innovators in the various projects, hence making sure that its employees work on developing the company's heritage of innovation. Siemens uses two other aspects to achieve their SLE; Talent Management and Performance Management. By incorporating strategies such as job enrichment and job enlargement through Talent Management, individuals are encouraged to take on extra tasks and responsibilities within an existing job role, thereby; the existing job is extended to give a broader range of responsibility. Talent Management is a key part of supporting each of the elements of the Siemens' strategy. Talent Management allows managers to engage and motivate employees throughout the organization, whereas Performance Management is the engine that drives Talent Management. When carried out in a consistent way, this system ensures that everyone is told honestly about their performance. With Performance Management employees know where they stand in regards to their performance and what the consequences are in their development.
The Political Aspect
This frame emphasizes power, competition, and winning scarce resources where diverse values, beliefs, interests, behaviors, and skills provides the rich context for the allocation of power and resources according to Bolman & Deal (2011). Effective management and leadership guide the proper disbursement of power and influence and determine organizational effectiveness as this entails not only authority as dictated by the structural frame, but also power as gained by skill sets, personal reputation, and personality traits such as coercion.
In Siemens, the leadership is well organized, and the board appoints the senior leaders after careful evaluations. The board is also very powerful and influences the major decisions made at the top. It comes in to try and sort out issues affecting the organization. “Out of the 20 supervisory board members, more than half of them have been replaced, and out of the 11 managing board members of the Siemens Company from 2006, only two are still in office, and that is our chief technology officer and myself.” (Kaeser J. 2009)
The Symbolic Aspect “The symbolic frame stresses that companies are often judged as much on appearances as they are on actual outcomes, meaning, companies with a strong symbolic culture have myths, stories, rituals, and ceremonies helping align employees and reinforce a common goal” (Bolman & Deal, 2011). Events and processes have importance, more in expression than production since the faith built up and meaning shared by members infuses passion, creativity, and soul.
SWOT Analysis
Siemens is a key player in the global Industry. Hence, a SWOT analysis is essential in determining the status of the organization.
Strengths
Siemens demands diversification of its business both in terms of business segment and geography. It has over 15 business operating division classified into three sectors, industry, energy, and health care. Its business segments are further broken down into subunits: Energy, Oil & Gas, Power transmission, and Power Distribution.
Siemens generated over 80% of its revenue from international markets, which comprises of a presence in over 190 countries. This diversification provides various revenue sources as well as insulating the company from a cyclical downturn in any particular business segment or country.
This has helped Siemens build new products as well as cement on existing ones, thereby maintaining its strong market position and serving a new segment of customers. Siemens has delivered consistent financial results with growing revenues and profits and reduction in operating expenses. This has increased its financial flexibility in financing its operations, innovations and expansion strategies.
Weaknesses
The group has been reported to have weak internal controls, making its disclosure controls and procedures not effective. One of the areas has been its anti-corruption unit, where failures to prevent certain people from bypassing the financial control environment and misusing funds along with allegations of bribing customers to win contracts. This has led to bad publicity as well as the company incurring huge fines and penalties.
Opportunities
“There has been increasing demand for electricity, which is expected to double by 2030: power transmission and power distribution are the group’s key business, as it’s the second largest player in fossil power generation and fifth largest player in wind power generation” (Bolman and Deal, 2011). With the massive growth in the USA and China, as well as an increased electricity supply in the developing countries, this will provide revenue and growth for the group.
"Siemens has acquired several businesses in recent years, which have the potential to drive its future growth” (Bolman and Deal, 2011). Some include UK-based Electrum, a leading vendor of electrical installation systems in the Middle East and the UK, Power Machines a leading Russian power generating equipment manufacturer, Diagnostic Products Corporation (DPC), a leading immunodiagnostics group and Bayer Healthcare's diagnostic division made the group the third largest player in in-vitro diagnostics market. This gives it an edge in global competition, giving it the potential to drive its future growth.
Threats
Siemens depends on third-party service providers for the majority of its operational activities such as manufacturing services, assembling, and testing. “During the period of excess demand third party service providers may not have sufficient capacity to meet all of Siemens needs urgently and this could adversely affect the group’s operations” (Choudhary, 2013). “Siemens faces intense competition across its global market segments and faces downward price pressure and is exposed to market downturns” (Choudhary, 2013). Major competitors include ABB, Schneider Electric, Rockwell, and Emerson in automation sector, ABB, General Electric, Honeywell, Invensys, and Alstom in industrial solutions and services segment, General Electric, Alstom Power, Mitsubishi Heavy Industries in the power generation segment. Competition has increased not only from the major players but also from emerging players such as India and China. There has been global awareness of the environmental factors that has led to increased regulations such as WEE which makes producers of electrical and electronic goods financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. This will lead to sizeable costs incurred as it tries to comply with the regulations and penalties in cases of non-compliance.
Target for change
Siemens has, in a number of occasions, faced allegations of corruption and allegations of bribing customers to win contracts. According to Joe Kaeser, “Siemens had a record-setting $1.6 billion fine after pleading guilty to corruption on a global scale in dubious payments to secure orders in several countries” (2009) This had been a result of overriding internal controls that were not as strong as they should be to prevent such happenings. Various measures have been taken to change the culture in order to prevent this; however, more needs to be done in order to prevent heftier fines and a bad reputation. “Dealing with bribery and corruption has always been a challenge for various companies as the awarding of contracts and obtaining of planning permissions or permits create particular bribery and corruption risks” (Siemens, 2015). The first step is to set the correct tone at the top so that this trickles down to the employees thus, changing the culture of the whole organization. 11
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Proposal for change
The area of change above can be implemented by identifying a comprehensive program that will help in changing the whole mindset of the organization. An eight step program that will manage setting up rules, implementing them and monitoring them will work since it will be able to look at all the stages of policies as well as assist in culture change starting from the top to the bottom as well as give all the people an opportunity to be involved in the setting up.
This program will be championed by the departmental heads as they can access both the juniors and the seniors whose input will be highly regarded in order for them to feel that they own the program. The only change blockers will be those contemplating using the loopholes to perpetrate corruption, however, by involving everyone in the set up this will have been avoided.
In order to manage the bribery and corruption risk, the eight-step compliance program is hence recommended. The first step is to conduct a risk assessment program where the risks posed by the nature of company’s operations are assessed and identify the policies and controls in place that mitigate the corruption risk and evaluate their strengths and weaknesses. This will be followed by a corporate anti-corruption policy to provide a clear and unambiguous statement of the company’s position that addresses both governmental and commercial bribery.
“After developing a policy it will be vital to implement anti-corruption policies and controls that may involve putting in contracting provisions and warranties that include compliance with legislation and company policy are important controls” (Bolman & Deal, 2011). This will be summed up by implementation of anti-corruption, financial controls such as controls around bank accounts and petty cash, executive travel, meals and entertainment and transactions with consultants, agents, and high-risk intermediaries will also need enhanced controls.
The policy and implementation will only take effect after conducting anti-corruption compliance training in countries with a history of corruption, an anti-corruption audit will be essential to test for compliance by identifying potential violations. “The company will need to conduct appropriate due diligence on potential acquisitions” (Bolman & Deal, 2011). Once in operation, Siemens will need to re-assess the risk and modify the program taking into consideration areas omitted as well as new areas included. “This will act as a monitoring process to assess the effectiveness and the areas of improvements” (Choudhary, 2013).
Personal reflection on learning
The organizational change has been an experience and a thought changer in relation to managing change and understanding first, the areas that require change. It has shown me that in order to implement change, one has to fully understand and perform a thorough analysis of an organization in order to know the various aspects of the organization. In addition, this has to involve the people who will be impacted by the change in order to make them own the change. As for me, when I want to impact change in my organization I will have a structured strategy via an organizational analysis to ensure success. No matter how well a company is doing financially, there is always an opportunity for change; whether it’s performance, culture change or even a change that will impact the external factors of the organization.

References
Bolman, L., & Deal, T. (2011). Reframing Organizations: Artistry, Choice and Leadership.
Choudhary, A. (2013). Anatomy and impact of bribery on Siemens AG. Journal of Legal, Ethical & Regulatory Issues, Vol 16, No. 2.
Kaeser, J. (2009). Siemens 2009 Annual Report.
Siemens (2014). Engineering Development Program [Lecture notes]. Retrieved from http://www.usa.siemens.com/en/jobs_careers/students/development_and_training_programs/leadership_development_programs.htm
Siemens. (2015). Automotive Manufacturing Solutions. Retrieved Feb 2, 2015, from https://intranet.industry.usa.siemens.com/sector/home-industry/Pages/Default.aspx