How Oticon developed over the period involved, and what changes may be necessary in the foreseeable future, drawing on key organisational development theory.
To what degree will be the changes made by Kolind sustainable, what challenges will the new Chief executive face, and exactly what will he need to note in terms of employing more change in the company?
Oticon and its own Development
Oticon was founded in 1904 in Denmark. It really is understandable that the new company grew up in the socio-economic context of its times: predicated on financial theory well-known in beginning of the twentieth century and it did take its common method of the buildings of business company.
The industrial revolution was still getting a profound influence on socioeconomic condition in European countries in the beginning of the twentieth century. Industrialisation and mass creation was overtaking the role of the old fashion production craftsman. Use of steam-powered machines resulted in a massive increase in the number of factories. It created the new class of industrial workers which were needed to work machines. Western european working category and middle class was made.
The pass on of the Electric era and advantages of simultaneity from the instant spread of electricity transform the notion of process-based way of working of professional sections of attention (splitting every process into a series) to the thought of the knowing of the complete, sense of work as a unity.
Rapid development of industry and changes taking place in contemporary society provided an intellectual framework which welcomed clinical knowledge.
Common threads were showing in the fruitful industries ? Marxism-Leninism and Communism focused on ?commodification? of man while Ford revolutionized car manufacturing process by employing interchangeable parts on assembly lines-heralding the beginning of industrial mass production were considering technical development and expansion of work efficiency.
Emerging scientific and technical development created new ideas and institutions of organisational development.
The first theoretician who conducted scientific research of organisational and management development was F. W. Taylor who tried out to find ?the simplest way? of working. He wished to minimize on laziness of individuals, he assumed what he called ?organized soldiering?; personnel always do lowest and often only pretend to work. He unveiled job evaluation in a technological way so every one understood how much work should be achieved in one day. This also allowed management to assess productivity more effectively.
He observed methods employed by staff in the stock and used job analysis to achieve maximum of performance. Standardised tasks were launched to workers as he believed in deep specialisation.
His theory of guidance was based on control and self-control through hierarchy. Every labourer?s work was prepared in advanced and his work was controlled and explained in details. It was management?s role to determine which job matched which employee and train them consequently.
Taylor created management as employment to do and gave it degree of respectability but also constituted a formal section between workers and supervisors. To this extent in the event analysis it is noticeable that in the turnaround this is viewed as one of the key impediments to improving the situation of the organisation at the time.
Taylorism resulted in development of a theory of administrative management.
Henri Fayol described the five functions of management as planning, coordinating, organising, commanding and managing.
He produced a conceptual platform for management as a whole.
This function of thinking was underpinned by German sociologist Maximum Weber and his analysis of bureaucracy.
He identified ideal bureaucracy in positive conditions with following characteristics: role classification, hierarchy/authority, rules and procedures, qualification for office, impartiality.
When first uncovered and developed, methodical and administrative management theories were see as intensifying steps in its modern world. Bureaucracy defined and analysed by Weber was a constructive addition to modern supervision, though it was also to persuade never have only advantages but weaknesses.
Marxist-Leninist theory as put in place by Stalin showed the evil area of strongly centralised and managed organisations. The failing of Five Year strategies in agriculture and heavy industry in the Union of Soviet Socialist Republics are adequate exemplory case of the weaknesses of any heavily centralised system.
The weaknesses of an bureaucratic system can be summed up as;
- Treatment of individual humans as impersonal thing. (and thus reducing innovation, commitment to the company and its own goals).
- Nepotism and problem can counter the guideline of impersonality and produce a recruitment and advertising system predicated on oligarchy.
- Insufficient criticism and dependability makes organisation struggling to change and realised its mistakes and limitations.
- Competences can be unclear and often decision itself may be consider more important than its impact, in unusual case decision-making process can be slow-moving or even impossible.
- Control reduces the chance component of modernization, but also reduces people?s development. Change is not welcome and employees don?t prefer to stick out of the public and be different.
And yet, bureaucratic organisations have their strengths as well, somewhat depending on people who work there e. g. if your worker inhabitants is from the idea X group from the MacGregor typology. History instructs us however that lots of people strive for more. In summary, bureaucratic advantages are:
- Security and balance of the job.
- Being controlled and directed takes responsibility from the worker. Thus, there is absolutely no stress engaged.
- Clear job description allows not using people creativeness and helps those with lack of ambition.
Analysing Oticon before 1991 there are numerous pieces of information that imply it was an extremely bureaucratic Company.
1. The Company was very traditional, with strong managerial framework. Oticon was departmentalised and lethargic; Kolind said that the Company experienced?been sleeping for ten years?.
2. Center competence rested with the top Office. There is a formal composition, job description and regulations, departments and supervisory positions.
3. The head Office and supervision was too big and top-heavy, very costly and had not been functioning effectively. Company had a wrong product on the marketplace and lost half its equity.
4. Oticon scarcely changed through the years and the only way to boost was to appoint a fresh President from outside of the organisation.
5. Oticon did not modernise his development quickly enough. THE BUSINESS was strong in analogue technology while market was moving towards digital technology.
6. One of the reasons its performance declined was that the mass creation is not adaptable because it is difficult to modify production process after a production brand is applied.
Although bureaucracy worked well for Oticon until the seventies, changes in today's world forced it into a stage of drop.
Over the last 30 years changes within the global overall economy have created new management challenges demanding solutions both more technical and more strenuous of management skills than traditional hierarchy could manage.
Vertical bureaucracy had to change to the horizontal company (Castells, 1996).
Kolind shifted Oticon from bureaucracy to modern, task-oriented, project-based company.
He created organisation around process not jobs, introduced even hierarchy and team management. The Company was run ?more creative, faster, and less expensive than the top players? (Kolind, 1990)
His mission affirmation based mostly performance management after client satisfaction.
The contingency school
Contingency approach to the management originated consequently of researchers hoping to understand why management methods that seemed to work well in one situation failed in another.
It is dependant on the idea that there is no one easiest way to manage and that to be effective, planning, managing, leading, and controlling must be designed to this circumstances encountered by an organization.
According to the contingency point of view, stable surroundings suggest mechanistic constructions that highlight centralization, formalization, standardization, and specialization to achieve efficiency and steadiness. Certainty and predictability let the use of policies, rules, and types of procedures to guide decision making for regular jobs and problems. Unstable surroundings suggest organic set ups which emphasize decentralization to achieve flexibility and adaptability. Doubt and unpredictability require general problem solving options for no routine tasks and problems.
Oticon before 1991 could be grouped as a mechanistic organisational form using its traditional composition, strong supervision, task?s difference and obedience to the company.
Oticon after 1991 used an organic strategy. The Company worked based on specific jobs and relied on worker commitment to tasks rather than 100 % pure obedience.
Communication contains information somewhat than instructions e. g. all information was scanned to the computer and open to be read by every worker.
Another important sign of organic form is network framework of control and communication. Oticon implemented four of five organising rules for network identified by Lipnick and Stamps (1994):
- Unifying purpose (personnel should show ideas, values and goals); for example at Oticon the staff were urged to take part in the informal meetings to share their ideas.
- Freedom (each member is able to stand on its own while benefit from being part of the network).
- Voluntary links and multiply market leaders. Oticon was level organisation without job headings compare to built in levels hierarchy used by Lipnick and Stamps.
The Hawthorne Tests began in 1924 and persisted through the first 1930s. A number of experts participated in the studies, including Clair Turner, Fritz J. Roethlisberger, and Elton Mayo, whose individual books on the studies are perhaps the best known. One of the major conclusions of the Hawthorne studies was that personnel' behaviour are associated with production. Another was that the workplace is a interpersonal system and informal group effect could exert a robust effect on individual behavior. A third was that the design of supervision can be an important factor in increasing personnel' job satisfaction. The studies also discovered that organizations should take steps to aid employees in changing to organizational life by fostering collaborative systems between labor and management. Such conclusions sparked increasing involvement in the human element at work.
According to the real human relations institution, the director should own skills for diagnosing the sources of human behavior at the job, interpersonal communication, and motivating and leading employees. The focus became satisfying worker needs. If employee needs were satisfied, knowledge held, the staff would subsequently be more fruitful. The human relations school focuses on issues of communication, command, determination, and group action.
Oticon under Kolind?s management realized the importance of individual value. However Kolind focused mainly on people?s mature method of work.
He believes employees to respond like adult at work, without need of being manipulated and supervised all the time. He provided them the liberty at work and he expected the good results. The companies changed to operate on a task basis, people were expected to deal with themselves and make sure they work effectively. But at first the employees weren't recruited to work in such a modern company. Many acquired a problem with lack of routine and supervision. Managers lost their authority, power and position.
Work satisfaction based on security and reputation was gone and many personnel which couldn?t deal with the situation left the Company. Kolind dealt with change in his dictatorial manner?take it or leave it?. Mayo?s management?s engagement with staff at a person psychological level was disregarded in that case. Matching to Kurt Levin?s pressure field theory people don?t want change and it is very important to improve people tendencies and perception the actual change is approximately. Communication is essential to overcome the fear. Although Kolind did talk to the staff prior to the change the participation was probably not strong enough to activate workers into the change and have their acceptance.
Kotter in his six change strategies gives good model how to minimize resistance to improve in organisation. Communication and education together with participation and participation can make people recognize that the change is necessary, overcome their resistance to see that the change is feasible.
Formal and Casual organisation
Oticon prior to the change could certainly be a formal organisation with its strong policies and strategies, job explanation, efficiency methods and rules and regulations.
As shown by Mintzberg casual communication is important because managers favor it, they plan to bypass formal systems and build their own networks of informal associates. It also is essential in social relationships; people need to relate with one another, they count on companionship. Oticon after the change became more a informal organisation. The administrator role as such actually disappears together with authority (a few of managers acquired a problem to handle it). The company focused on informal communication e. g. espresso conferences when people could exchange the ideas and information. They were expected to work on those ideas and also put them into computer so that it could be accessible for everybody else.
? Culture is both a vibrant sensation that surrounds us all the time, being constantly enacted and created by our relationships with others and shaped by leadership habit, and a set of structures, routines, rules and norms that guide and constrain habit. ? ( Schein).
According to Edgar Schein culture is the most challenging organisational attribute to change. He specified three cognitive degrees of organisational culture: what is seen and known, organisational quest and value, tacit assumptions which is the deepest level and the most difficult to explicate.
In the years prior to the change Oticon management and bureaucratic aspect of the organisation determined corporate culture. Role culture defined Oticon as it was hierarchical company with assignments more important than people and position?s electricity.
Oticon after season 1991 progress to be more job culture, it progressed into customer focus organisation and started to be task orientated, departments vanished, individuals were likely to contribute to the organisation and got recognized affect in the group. It was more important what you don't who you are. It induced the challenge within management as they lost their vitality and privileged position.
Theory of Leadership
Bass distinguished between transactional and transformational leadership. Transactional leader allows structure, goals and culture of the existing organisation. He is part of the hierarchical system and manages people within bureaucratic framework. The partnership between innovator and workers sometimes appears as a exchange, he provides rewards if they perform adequately. Jobs are detailed and punishments are known.
A transformational innovator wants to change the organisation. He has a perspective and can speak it just how which is fascinating and motivating others. He motivates employees to do more than expected, wakes up people?s communal responsibility and pride. People understand why the tasks are essential teamwork make people feel they participate in the team and satisfy their needs (Maslow).
Being very traditional company before the change Oticon got managers rather than market leaders. Warren Bennis developed assessment of the differences between management and leadership. Professionals are administers, centered on systems and buildings and systems and count on control. That is how Oticon, probably, was handled before the change.
Kolind had changed it all. He was not only transformational innovator but also charismatic one, who lead by eye-sight and value. Leader who would make people follow him for different reasons, some would totally believe in his eyesight some would follow because of his strong personality and luck of bargain. He followed almost all of Garry Yukl?s rules for transformational command; he had an obvious vision and could describe it to others. Kolind acquired to do something confidently and optimistically to be able to communicate self-assurance in the enthusiasts.
Knowledge management comprises a range of practices employed by organisation to identify, create, signify, and disperse knowledge. Nonaka used difference between explicit and tacit knowledge. Explicit knowledge is knowledge that the individual retains explicitly and consciously in mental emphasis, and may communicate to others e. g. technological, procedures, information. Tacit knowledge is what is in our minds, our ?knowledge?.
Tacit knowledge is important during creativity process. Kolind was alert to it and he put focus on staff tacit knowledge. Explicit knowledge is seen as recordable (on paper, computer disk, etc. ), and tacit as inherently difficult to record and hence to talk about through such media as computer systems.
A possible solution to the is to see showing tacit knowledge as a process, achieved through individuals interaction, somewhat than as simple content. Kolind have a say in this by linking people so that they can collaborate and share their tacit (personal) knowledge about a particular work framework or practice. Open up collection office, no demarcation lines, and option of all information as well as casual communication helped showing tacit knowledge and used it in assignments.
Post - Kolind Issues
Kolind remaining Oticon, a altered company, in 1998. New President Niels Jacobsen experienced a challenge how to keep Oticon on the trail. One of the key issues this is actually the danger that when the leader leaves the Company people intend to get back to their old patterns, and their old behaviors. Such as the example with the rubber band, if the space between your ?as is? and ?to be? is very big there is a danger that it's heading to snap again. If the music group is pressed to far company can be demolished. The rubber band represents individuals and the culture; they'll push to go back to where these were. In Oticon case it all is based of in which instant of development Kolind left the business. Gestalt psychologists see learning process as heading from unconscious competence or unconscious incompetence to conscious incompetence, then mindful competence and finally unconscious competence. If Oticon staff were at some of last two stage of this development it is possible the change made by Kolind was suffered. But if he left his staff in mindful incompetence level it's possible they would act like elastic band and push back.
Another symptom of sustained change would be if Oticon?s employees, during Kolind?s a decade management, developed in them McGregor?s Theory Y. They want and desired work and are prepared to contribute to company?s success. They allow responsibility and are creative and impressive.
New leader must find his way to lead and motivate people. Shall he follow Kolind?s way of business lead differently? Individuals were used to his management which is always difficult to replace a charismatic head.
From an individual perspective, I functioned as a administrator in Dutch company Anova with an identical composition to Oticon. The business was transformed and led by its director who was an extremely strong and charismatic head.
The company was run very successfully in East Africa for 8 years before director remaining for Holland. After his resignation the company survived another 1. 5 years and then closed down.
Addressing the issues
In overview, there are several techniques the new CEO could take predicated on the information offered on Oticon;
One is to have some internal functions and outsource (e. g. finance, HR, manufacturing), while keeping research and development inside. In this manner Oticon could make more space for young progressive people.
Another is to provide older employees a chance to set up consultancy for Oticon for specific operation, resulting in the perfect size of procedure and clearing just how for younger staff ? thus removing potential recruitment and retention issues.
Young people come to the company and bring their enthusiasm and new way to plan projects. It is much easier to keep chaos managed in the small organisation. It really needs certain quantity of worker to make all sociable groups to work effectively - demonstrated thru studies of armed service organisations.
Two questions continue to be for the organisation and the new CEO to deal with:
1. How you'll be able to regroup project categories without needing bureaucracy?
2. That they measure effectiveness without the bureaucratic tools? As confirmed above in the section on bureaucracy, bureaucracy and elements of Taylorism allow a specific delineation of functions and what activities need to be carried out ? which made it easier to observe progress. Although the business has improved a few of its key statistics it is not clear from what extent this has come from a better company and working culture or strictly through the new product. Which begs the question as to whether some form of bureaucracy may need to be created by the new CEO?
From the case study we can surmise that Oticon continues to be successful company. Despite its problems, there are several possible explanations because of this;
1. People discovered through procedure for change and became more versatile. A positive connection with change leaves people more able to handle future changes.
2. People became better at utilizing and commercializing knowledge belongings. According to Itami (1987) this means that the organisation has developed its ?invisible property? knowledge base from which all employees operate.
Oticon could be utilized as good exemplory case of how the management theories modified above the twentieth century.
Darwin said that it's not the strongest or most smart species that survive however the one which react to changes fastest.
The global business environment is changing faster then ever. Businesses constantly need to reshape their suggestions to survive. Organisations need to be altered not restructured.
Kolind was the right leader for what the market as the end of the twentieth century demanded. He altered Oticon, abolished formal organisation, disorganized Oticon and created a ?spaghetti? company.
Oticon had an opportunity to face the 21st century as a modern company, ready for the new Millennium. To survive the Company needs to stay alert to market?s demand and reply quickly and much better than competitors.
At the same time, management change methodologies will also have to stay forward to the main point where change will be anticipated as a normal part of our own modern life, resistance to change will be dmod and organisations will be able to respond considerably faster and proficiently to environmental changes.