Sma Micro-Electronic Products Division - Organisational Alignment: The Congruence Model

SMA Micro-Electronic Products Division - Organisational Alignment: The Congruence Model

Case context

Guido Spichty, VP and GM of Micro-Electronics Products Division (MEPD) of SMA, meeting SMA’s director of organisation effectiveness due to ongoing poor financial performance of his division. He believes there are conflicts between groups and would like the organisational effectiveness group to advise him.

MEPD’s managers know they are not producing new products fast enough to grow, but do not agree on strategies, priorities or criteria for profitability. External market pressure fierce and hence, price / cost squeezes continued.

MEPD Financial Performance

10% fall in sales from 2010 to 2011, negligible growth in 2012

60% drop in operating margin. Operating margin of MEPD approx. 6.5% vs 10% for MEPD

SMA

Leading Swiss manufacturer of microelectronics, production systems, precision mechanical components and watch products. Strong technical capability in invention and manufacture of micro-mechanical and micro-electronics products. Average 10% growth for last 10 years due to capacity to innovate, though growth was uneven due to dependence on invention in the laboratory. Many products made in response to requests from OEMs. SMA has historically grown profitably without substantive competitive pressures. Barriers to entry – patents, technological know-how, substantial capital investment.

Established in Bienne, Switzerland, which is a small town. Tight knit corporation, people would interact informally, seeing eachother frequently on / off SMA’s premises.

Organisation Structure

Technical Staffs (R&D) division reported directly to chairman of the board.

Manufacturing was strongest functional area after R&D. Many of the executives had been promoted form manufacturing. Plants were viewed as profit centres, bottom line results measured at plant level by gross margin and divisional level by operating margin.

Relatively small sales departments and limited marketing efforts. Most sales to OEM’s. Conducted at high levels of the corporation. Decisions on new products also at high levels of the corporation.

MEPD Division

Products – integrated circuits (ICs) and microprocessors. Historic growth due to SMA’s unique tech capabilities.

2 plants – Grenzach (ICs), Neuchatel (microprocessors)

Turn of century – client base changed from telcos to commercial electronics (microcomputers, medical, control, consumer electronics)

2010 – 2012 – fierce competition as demand weakened, pressure on prices. Managers felt this was suddenly a commodity business and wondered whether MEPD could meet SMA@s high expectations for profitability and growth.

Competitive necessities – low price, high reliable quality (poor quality could shut down an OEM operation), short lead times on new product needs of customers (usually no more than 4 weeks)

1200 people, 250 salaried employees. Self contained (except for some R&D) multifunctional organisation.