Managing change in organizations

Managing change in organizations

In his 12 years at the helm of Siemens, CEO Heinrich von Pierer has designed and directed a major transformation in the new corporate culture. Taking this German icon from a technically superb but slow-moving industrial giant to a disciplined, nimble multinational has posed enormous challenges. Since 1992, Siemens has revamped its portfolio of businesses, expanded its reach into 192 countries, and created a more local-market-driven culture, gaining recognition as one of the best-managed and most competitive companies in the world. In this edited interview with HBR editor Thomas A. Stewart and consulting editor Louise O'Brien, von Pierer describes the requirements for transformation and how he broke down historical barriers at Siemens. He shares his insights about portfolio restructuring, his lessons from competing with GE, and the pros and cons of being based in Europe versus America. (Feldenkirchen, 2000)

It was a German-driven company, and I think they wanted somebody who was able to communicate better, both internally and externally. For 18 years—from 1972 to 1990—I was an elected member of the city council in my hometown of Erlangen. I had a lot of fun being in opposition—where the only way to influence things was to convince the other side. Once, I tried to become a member of the Federal Parliament, but I lost by one vote in my party's preelection. So I had to stay with Siemens. That's how I know it's easier to become CEO of Siemens than it is to become a member of the Federal Parliament of Germany! (Feldenkirchen, 2000)

I am also the only CEO in Germany who is a member of a works council [German labor union]. I bought several factories in East Germany after reunification, and I was made an honorary member of one of their works councils. While I don't have the right to vote, I can actively participate in meetings. So, although I never really worked in the forefront of politics, I think my experience helped me see the big picture. And at Siemens, the board knew that. They said, “Well, if we want to show a better face to the public, then he's the guy.” What did the world look like when you took over as CEO in 1992? In 1989, when the Berlin wall came down, we were excited to be celebrating the reunification of Germany. We did not realize something more important: The collapse of the Eastern Bloc was more or less the beginning of globalization. And a global marketplace at that time meant that prices really came down. That's a nice mild phrase to describe what happened. Prices started falling in '89, and the decline became more brutal over time. The prices in some of our businesses dropped by 50% in three years.

For those who consider corporate globalization to be a relatively recent phenomenon, Siemens CEO Heinrich von Pierer would politely beg to differ. Headquartered in Munich, Germany, Siemens AG has been a global company from its inception in 1847, when Warner von ...