Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,-,*,-,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,-,*,-,Appendix:Roland Berger&Partner success story:Turn-around of Lufthansa German Airlines,1,LH case study:The starting point,2,The critical economic situation of Lufthansa in 1991 and 1992 demanded radi-cal and lasting measures to guarantee the companys future competitiveness,Since 1990 the operation profits had been negative and had continued to worsen,The intensity of competition and extreme cost pressure were increasing in the aviation industry,The Lufthansa board therefore decided on a radical,three-stage program to guarantee future competitiveness:,down-sizing,restructuring,rebuilding,Case study,3,The three-stage competitiveness program addressed critical short-term prob-lems first before tackling deeper restructuring,Case study,Three-stage program,capacity reductions,workforce shrinkage,cost-cutting,Down-sizing,structural innovation,process innovation,Restructuring,strategic innovation,marketing innovation,Rebuilding,4,The down-sizing and restructuring stages unfolded in three phases,Case study,Phase III:,Process,optimization,Focus:,Continuing service-and,efficiency-improvements,Means:,Clear orientation towards critical,success-factors,creation of employee commitment,through further decentralization and business reengineering,Phase II:New structure,Focus:,Increased market orientation throughout the entire value chain,Cultural Change,Means:,New structure with focus on entrepreneurship and internal customer supplier-,relations,Focus:,Short term cost-cutting to ensure survival,Means:,an evenly spread cost reduction program in all departments,Phase I:Turn-around,down-sizing,restructuring,5,LH case study:A radical turn-around was the first priority,6,Turn-around phase I was marked by short-term cost-cutting and a retreat from unprofitable markets,Case study,-20%,Number of,staff,-10%,Number of,planes in,operation,-14%,Number of,routes,Turn-around Phase,I,Consultant Input,Evaluation of route network,Coaching of top-management for personnel reduction,Identification of other short term cost-cutting opportunities,Cost reduction of 400 Mio.US$,achieved in 1993,7,The results of the turn-around phase:costs fell and productivity rose,Case study,31%,-15%,Employee Productivity,1992-1994,(TKO/employee),Unit costs 1992-1994,(DM/TKO),However,further cost re-,ductions were necessary,to guarantee future,survival,8,LH case study:Designing a new corporate structure was the next step,9,The most important goals in the restructuring phase were:,Build units which are smaller,better manageable and closer to the market,Segment the organization into business units which reflect market needs and can be benchmarked,Achieve balance responsibilities among the business units,Build clear customer-supplier relationships within the company,the performance of which can be benchmarked,Achieve a competitive cost structure,Force constant internal and external benchmarking,Case study,10,Phase II was marked by a market-oriented restructuring of the entire group,Case study,Turn-around Phase II:Market-and process-oriented restructuring,Consultant Input,Creating and evaluation,organizational,alternatives,Implementation of,customer,supplier relations,between business areas,Restructuring and,redimensioning of the new business areas,Identification of,additional savings potentials,Cost reduction of 250 Mio.US$,Airline X,Outsourced,functions,Technical,Cargo,ITN,Mar-,keting,Sales,Opera-,tions,plan-,ning,Flight,Opera-,tions,Ground,Ser-,vices,Cent-,ral,Func-,tions,Airline X,Tech-,nical,Mar-,keting,Sales,Finan-,ce,Person-,nel,Stra-,tegy/,Con-,trolling,Flight,Opera-,tions,=outsourced or outsourcing planned,“Old”,Structure,“New”,Structure,11,The new structure was selected according to six criteria,Case study,Process-and client-,orientation,Delegation of,competence and,responsibility,Increased trans-,parency of results,and accomplish-,ments,Potential for mergers,and alliances,Increasing flexibility,and responsiveness,Possibility for addi-,tional thirdparty,business,New,structure,12,The new structure entailed significantly less complexity,making the company easier to manage effectively,Case study,Tech-,nical,Cargo,AG,Sys-,tems,GmbH,Lufthansa AG,Old Structure,Central,func-,tions,Marke-,ting,Tech-,nical,Cargo,Ground,Ser-,vices,Flight,Opera-,tions,Sys-,tems,Lufthansa AG,New structure,Central,func-,tions,Operations,Marketing,outsourced,Employees,Revenues,Source:Lufthansa,1996,40.300,16 billion DM,23.750,13.410,10.400,4.450,1.000,2.320,3385,420,13,The project was carried out through intensive communication with manage-ment,employees and the unions,Case study,Management,Employees,Unions,Executive board,Leadership committee,Business unit management,frequent face-to-face-meetings,TV,DAG,Works councils,Many face-to-face meetings,14,LH case study:Phase III a