Leo Burnett

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Leo Burnett TRW Systems

• Elizabeth Chung
• Guus Goorts
• Merete Aarhaug
• Stephanie Coyiuto
• Jaime Zhong

BH3303 Organizational Effectiveness
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Agenda

• Overview - The Link
• Leo Burnett
• TRW Systems
• Conclusion

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The Link
(Daft, page 53)
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Leo Burnett - History

• 1997
• Advertising agency
• Started in 1935 and located in Chicago
• CEO and Chairman Richard Fizdale
• Worlds 8-th largest ad agency
• Clients Kelloggs, Marlboro Man, Coke
• 1916 full time and 218 part time employees

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Leo Burnett - Mission
Founder Leo Burnett quoted Good advertising
does not just circulate information. It
penetrates the public mind with desires and
belief.

• Current Philosophy Brand Belief System (BBS)
• The Leo BBS is driven by the concept of creating
  belief

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Functional vs. Divisional Structure
Functional Structure
Divisional Structure
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Leo Burnett StructureComparison of new vs. old
structure

• Old Functional
• Slow response time to environmental changes
• Clients do not get one on one attention
• Coordination, communication slowed among
  departments
• Less innovation and creativeness
• Economies of scale
• In-depth knowledge and skill development

• New Divisional
• Faster and better response to clients demands
• Full attention from agency
• Decentralized decision making
• Quality of communication improved
• No more economies of scale
• Poor coordination across the mini-agencies

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Leo Burnett - Reasons For Change

• External environment
• Several major setbacks
• Loss of high-profile accounts - United Airlines
• Regulatory scrutiny of Marlboro Man ads for
  Philip Morris
• Internal environment
• Loss of morale among employees (74 employees laid
  off)
• Power struggle among top executives

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Leo Burnett EvaluationDoes it make sense? Will
it work?

• Yes
• Necessary shake up
• Client dissatisfaction
• Improved internal /external communication
• Customization for clients
• Stimulate creativity
• Increased responsiveness to environment

• No
• Big organization
• Power of brand name
• Draw on Burnetts global resources
• Acceptance by
• Employees
• Clients
• Loss of specialization
• Need more coordination among divisions

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TRW Systems - History
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• Thompson car / aircraft parts
• Ramo Wooldridge ICBM Program
• 1960 TRW goes private

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TRW Systems - Strategy

• No clearly articulated strategy
• Fortune Professional personnel is competitive
  advantage
• Large competitors (Boeing, Lockheed, Northrop
  Grumman, BAE)
• Growth

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The Matrix Structure

• Question
• What are the characteristics of a matrix
  structure?

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The Matrix Structure

• Dual authority lines
• Any combination of function, product and
  geographic
• Shifting of project teams
• What are TRWs focus dimensions (function,
  product, geographic)?

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Conditions for Matrix Structure

• Economies of scale in the use of internal
  resources
• Outside pressure for dual focus
  (function-product)
• State of the art technological know-how
• Responsive in the change in product line
• Environment is both complex and uncertain

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1. Economies of Scale

• Project divided into sub-projects
• Sequential demand Several stages in the
  projects life cycle different people are needed
  ? no waste of creative people

Does TRW Systems fit Condition 1 for the Matrix
Structure?
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2. Outside Pressure for Dual Focus
(Function-Product)

• Functional relationship need of state-of-
  the-art technological know-how
• Product lines
• Transitory
• Changes in customer requirements
• Possibility of cancellation of large projects

Does TRW Systems fit Condition 2 for the Matrix
Structure?
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3. Environment is Complex/Uncertain

• From single customer ? competitive organization
• Creation of Aerospace Corporation (Air Force)
• Before cost-plus-fixed-fee, now incentive
  contracts rewarding performance
• Aerospace industry
• Large job shop subject to frequent changes
• Rapid change in technology

Does TRW Systems fit Condition 3 for the Matrix
Structure?
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Information Processing at TRW Systems

• Purpose
• Right balance between vertical horizontal
  information flow
• Tension between mechanisms
• Horizontal linkage coordination/collaboration ?
  reduce control
• Vertical linkage increase control

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Mechanisms to achieve vertical linkage
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Mechanisms to achieve vertical linkage
TRW Systems
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TRW Systems vertical linkage?

• No strict lines of authority
• Cant rely on bureaucracy/power to solve problems
• Few formal rules/procedures
• Atmosphere of looseness/freedom
• Ambiguous/flexible

Strength/weakness??
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Mechanisms to achieve horizontal linkage
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Mechanisms to achieve horizontal linkage
TRW Systems Learning Organization
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TRW SystemsFull Time Integrators

• Temporary project/program offices
• Project manager
• responsible for coordinating people from
  different functional departments
• No formal authority over project members

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Sources of Power

• Bottom-line responsibility
• Leadership at all levels of the organization
• Decentralized and unstable power structure
• Sources of Power/Means to maintain balance
• Pay Levels
• Job Titles
• Access to General Manager
• Situation of Offices
• Reporting Level

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Matrix Diamond Diagram

• Top Leadership

Matrix Manager
Matrix Manager
2-Boss Manager
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Roles and Responsibilities

• Functional manager/Division manager
• Authority over promotion decisions and
  performance reviews
• Program/Project Manager
• Focuses on bringing project to a successful
  conclusion
• Subproject Manager (SPM)
• prime mover in the organization
• Represents both program office and his functional
  area

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Relationship between Managers

• Large gap between authority and responsibility
• Man in the middle is working for two bosses
• Multiple managers may result in confusion and
  ambiguity as to manager evaluation and
  accountability

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Relationship among Team Members

• Very democratic anarchy?
• No clear leader
• Role ambiguity, conflicting obligations
• Potential duplication of work
• Less development of long-term relationships
• Career Development Program
• High interaction
• Good collaboration

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Career Development - Motivation

• Shared responsibility Shared measurements and
  rewards (e.g. team rewards)
• Shift towards intrinsic over extrinsic motivation
• Focus on
• personal contribution self-learning personal
  professional growth
• High caliber individuals Highly committed and
  motivated individuals
• Enhanced opportunities for visibility career
  opportunities
• Low turnover
• TRW ranked 1st in desirability as an employer
  2nd in salary

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Career Development(2 techniques team
development and tgroups)

• Cons
• Only a good thing idealistically
• Lack of well-trained people to handle employees
• Participation is involuntary
• Increased stress and pressure on employees

• Pros
• More organic organization
• Team Development
• Efforts to get a new team started faster
• Ongoing group
• Critiquing of the meetings in the organization
• Provides employees with good interpersonal skills
  and training
• Helps deal with conflicts
• Creates openness
• Possibly greater employee satisfaction

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Further Challenges with Growth

• Current problems amplified
• Increased conflicts and confusion
• More time consuming
• Possible loss of focus on strategy
• Human resources issues
• Loss of control

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Conclusion(Norhia et.al HBR 2003)
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Leo Burnett
Creativity of ideas New advertisement deals
Client focused Customization Communication
To foster creative culture
Autonomy of decision making Nimbleness
Attraction of best and creative people
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Leo Burnett in 2004

• End of the divisional structure in 1999
• previous mini-agency arrangement worked well
  in that it brought together brand teams, but it
  was less effective as a business structure.
  Linda Wolf, CEO
• Unified Structure
• Brand Teams intact but agency acts as one
  business unit

What went wrong?
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TRW Systems
Growth Strategy
Differentiation? Competitive External Environment
Collaboration focused Learning Organization
Economies of scale - HR
Developing of employees Efficient use of
talent Employee satisfaction
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Sales performance at TRW Systems
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Number of employees at TRW Systems
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TRW Systems in 2004
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Acquired by Blackstone Group
Acquired by Northrop Grumman
Acquired by Northrop Grumman
Acquired by Goodrich Corporation
What went wrong?
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Q A