GRUNDFOS CASE
IS IT POSSIBLE TO BUILD A BRIDGE WHILE YOU CROSS IT? THE ANSWER IS YES. WE DID IT. WE CHANGED THE GAME
GRUNDFOS - BUILDING THE BRIDGE AS WE CROSS IT
managers. Our approach was simple and straightforward – we made it clear that we needed to find answers together and within a much accelerated time frame. By engaging managers and being honest about the severity and uncertainty of the situation, a very focused and committed attitude emerged, making way for the needed transformation of the organisation. The transformation of Grundfos A/S’ organisational structure took place in the following six steps: 1
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he Danish production company Grundfos A/S represents the core entity of the Grundfos Group. With a yearly production of approximately 5 million pumps distributed and sold globally through 70 sales companies and 14 production companies within the group, Grundfos A/S is contributing with about 35 per cent of the total group value creation. In the early spring of 2009, Grundfos A/S, as so many others, experienced serious challenges due to changing market conditions and the global financial crisis. Within six weeks, sales dropped 50 per cent and the lack of new orders painted a gloomy picture of the future. This was in fact the first time since the foundation of Grundfos in 1945 that Grundfos experienced anything but steady growth. As a result, Grundfos A/S was forced to substantially reduce the workforce with more than 600 employees in order to cut costs. However, in the midst of the financial crisis, downsizing was not enough. The crisis forced the top management in Grundfos A/S to design a new organisational structure to meet the new market conditions. This called for a more dynamic and scalable organisation designed to meet the changing market demands of the future.
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he new organisation was to produce the same quantities with 20 per cent fewer white collar people. Focusing on creating a simple, more transparent and efficient organisation working as one company rather than separate units was seen as the immediate response – in practice moving from seven isolated factories to three integrated production chains and one common supply organisation. The new set-up, we believe, will provide us with a common framework and structure that will strengthen our overall business, create a stronger foundation for prioritising the resources and thus create more profitable efforts throughout the organisation. The overall strategy remained the same, but the structure of the organisation was to undergo a severe transformation. We called it “changing the game”. New world, new game. Due to the immense financial pressure on Grundfos A/S, time was an important factor in the transformation process. This called for a quick implementation of the new organisation to regain foothold in the industry. As a result, we had to implement a new organisational structure even before every detail of the plan was ready. In other words, we had to build the bridge while crossing it. At the time we did not know all the answers to the critical challenges we faced, but we knew we could rely on the competences and determination of our middle
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Developing an Organisational Blueprint by gathering the top 10 management to discuss and form the overall structure and framework of the new organisation Preparing for the changes and building management commitment. Focus was on their role as change agents and how each of them was expected to contribute to a successful transformation The kickoff and communication informing all employees in Grundfos A/S of the new organisation to ensure a common understanding of the change Involving all managers in defining the new roles and ways of working in their own organisational unit Establishing new goals and KPIs and creating clear roles, responsibilities and organisational interfaces Finalising the implementation of the new organisation through rigorous follow-up and adjustment focused on individualised efforts
Now that Grundfos A/S has almost crossed the bridge, it is time to finally anchor the changes into the new organisation and ensure that it becomes as efficient and successful as possible in our effort to regain profitability. Focus has moved from the overall framework to individualised efforts of specific departments and managers. The results are already starting to emerge: the last quarter of 2009 showed an increase of turnover which the new organisation managed to handle without any significant problems.
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s a matter of principle, the process is scheduled to end after the first half of FY2010. Our extensive transformation process has required significant efforts and man hours, and our energy must now be redirected to generating growth and developing the business going forward within the context of our new organisation. Ultimately, we need to change the game – adjusting to a new world.
Facts about Niels Møller Jensen To lead Grundfos A/S out of the severe challenges caused by the financial crisis, the company was forced to transform into a simpler and more efficient organisation. As the Managing Director of Grundfos A/S, Niels Møller Jensen was charged with the difficult task of implementing a new organisation at an almost impossible pace. With his more than ten years of experience in Grundfos, his deep knowledge of the core business, the organisation and the people and his sound and honest leadership, Niels has succeeded in leading the organisation back to growth and profitability.