| BUSINESSWEEK ONLINE : NOVEMBER 15, 1999 ISSUE | ||||||||
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| WORKING LIFE
Siemens: Building a 'B-School' in Its Own Backyard The company's execs are solving problems that would have required high-priced consultants For Siemens (SMAWY), it bordered on the embarrassing. The $65 billion German conglomerate makes 12 million mobile phones a year, but its own use of mobile-phone service was stuck in the wireless Stone Age. Managers in different units in Britain were acting like the Lone Ranger, buying phone service for their thousands of employees from a bevy of far-flung suppliers instead of huddling like a team to negotiate a cut-rate contract from one source. Co-workers were dialing each other up over costly wireless networks when they could have been patching calls through Siemens' own, less expensive network. One of the mobile-phone use manuals was prehistoric--it hadn't been updated since 1991. No surprise then that all this was wasting $4 million a year. IN-HOUSE TALENT. Usually when global companies find themselves in such straits, they hire a slew of high-priced consultants. But instead of tapping the brainpower outside of headquarters, Siemens executives started thumbing through their own worldwide employee directory. The problem, it turned out, was a perfect case study for ''Siemens University.'' This is Siemens' in-house corporate training program, in which Siemens analysts and engineers act like MBA students and use Siemens' business problems as the case studies to be solved. For the Munich-based giant, whose wide array of products includes semiconductors, washing machines, high-speed trains, offshore oil-rig equipment, and telephone systems, it's like having your kids pay back their college tuition upon graduation--along with a generous tip. Indeed, Siemens may be one of the only companies in the world whose management education program not only pays for itself but also saves the company money--about $11 million so far this year, according to Siemens. ''Why should management learning be a cost center?'' asks Matthias Bellmann, one of the program's architects, who also heads up human resources for Siemens' Information & Communication Products unit. ''Why shouldn't it be a profit center?'' The company isn't the first to link theory and practice in executive education. But the success at Siemens, a lumbering bureaucracy for decades, shows that nearly any business can unlock entrepreneurial spirit by getting managers to work beyond their accustomed roles instead of hiring outside help. Siemens CEO Heinrich von Pierer says the program is an important part of getting executives to be just as networked with one other as are the company's phones. ''The interest we get [in the program] from all over the place is a good indicator that we are on the right track,'' says von Pierer. Part of the program's success has to do with the way it takes a wrecking ball to the walls between the company's divisions, which have long operated as their own inefficient fiefdoms. Managers are thrown into teams with the ''students,'' peers from other business units, often from abroad. That can make for a lot of diversity in problem-solving, since Siemens has 444,000 employees scattered across 190 countries. ''To compete globally, they have to be able to share resources and share ideas,'' says James H. Vander Weide, a professor at Duke University's Fuqua School of Business, who teaches finance in the Siemens management learning program. ''That's one of the purposes of this.'' Just how does it work? The students identify what's known in the program jargon as a Business Impact Project, an unexploited way to make or save money. Usually the project is outside the students' area of expertise. They don't get a penny to solve the problems, so the only resource they have to start with is their ingenuity in forging alliances in other departments. The point is to force managers beyond the well-worn grooves and make them work across corporate lines of authority. CONVERTING THE SKEPTICS. Gathering several times a year for weeklong trouble-shooting sessions in classrooms all over the world, the students debate ways to save or make money. When they're not meeting, the e-mail flies. To get to the root of the British unit's problem, for example, a team of six students, who were all midlevel Siemens managers, put the word out that they were devising ways to centralize the purchase of phone service. When suppliers got wind of this, they cut prices, says Chris Winfield, finance director for a British Siemens unit and a student. The group also took its cost-savings microscope in-house, requiring that employees in Britain get bills detailing the cost of their own mobile-phone use. In one German office, mobile-phone bills fell 60% when employees realized how much money they were wasting on costly calls. As with all the Siemens University projects, the big challenge for the students is always to win over the managers heading the scrutinized units--in this case the brass in charge of mobile-phone use. To convert the skeptics, the team drew up a presentation detailing the millions in savings. ''We did a road show up and down the country,'' Winfield says. They also set up a site on the Siemens intranet that explained the project in detail, helping build support among employees. Siemens University is part of a larger restructuring effort at the company, aimed at taking a page from competitor General Electric Co.'s playbook. Siemens is banking that such moves will help boost profitability. The company fell behind by focusing too much on equipment and not enough on following GE's example of offering the higher-margin servicing, financing, and consulting services customers often need for the equipment. The result: Siemens earned $852 million on $23 billion in sales in the fourth quarter--a paltry 3.7% return, compared with GE's 9.8%. ''Siemens was product-oriented rather than customer-oriented,'' says Duke's Vander Weide. ''You can't really do that in a competitive environment.'' NO MORE CHINESE WALLS. The university is just one component of Siemens' overhaul--but a crucial one, executives say. That's because they can reinforce in the classroom what's so important to the company as a whole--becoming more service-oriented and obliterating all the Chinese walls that constrain the enterprise. In Sweden and Norway earlier this year, one team managed to get engineering, maintenance, and service units to bid jointly to build and maintain a processing facility for Swedish chemical maker Borealis. Although the bid is still pending, it was a first for the divisions. The company's management learning program isn't as well-known as other aspects of Siemens restructuring plan, such as the move to spin off the Infineon Technologies semiconductor unit next year. But slowly, investors are beginning to appreciate it. Meanwhile, shares have risen 37% in the last two years, to a recent $90. But that's still a long way from GE's 109% share appreciation in the same period. By next year, Siemens plans to be funneling 2,500 managers a year through the university. Participants still have to do their regular jobs, which leads to long hours; a peek at team e-mail shows them exchanging messages at 1 a.m. That leads to some grumbling, but to be tapped for the program is the equivalent to getting a career coach in the U.S.: It's a signal that you're an up-and-comer. The payoff can be big for the students--not to mention Siemens. By Jack Ewing in Frankfurt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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