Cases > Case 9

CASE 9

BACKGROUND

~ ~":;:i:J'

l!

,~ ,

~

98 Casesin Organisational Behaviour

:

1

throughout Europe including locations in Norway, Italy, Holland, France, Spain, Germany and Switzerland. Outside of Europe Oticon has sub-

,7'1

.

~.

I

sidiaries in the US and Japan. In total the company has some 1,000 staff, the majority of whom are employed in the Danish subsidiaries. Work at the head office, employing 130of the staff, coversa range of activities including new product research, product development and the marketing and promotion of both new and

~ -].;.,. "",. c~"

existing products. By 1979 Oticon was considered by many observers to be the leading manufacturer of hearing aids in the world. During the late 1970sDanish producers of hearing aids accounted for approximately 25 per cent of the world market. OVer the past 15 years, however, this market share has declined to approximately 20 per cent. In addition to Oticon, which is by far the largest, the other Danish producers of hearing aids are Wildex and Danavox.In the last few years Wildex has improved its market shareat the expenseof the other two manufacturers.Oticon's salesrevenuein 1991was 476nilllion Danish kroner while for Danavox and Wildex the figures were

II'

II

:!

.

I",.."':

'I

J,'"~

1:"

347and 287nilllion Danish kroner respectively. The design of traditional hearing aids is familiar to many. The power source together with the amplification system is contained in a small unit worn behind the user's ear. This traditional style, commonly known as the 'behind the ear' model, had been the cornerstone of the success of European - not only the Danish - producers of hearing aids. However, during the 1980san alternative, more compact design of hearing aid, with the complete systemworn in the ear, came on to the market and achieved somesuccessparticularly in the American market. European producers were slow in developing and marketing an 'in the ear' model, becauseof their existing superiority in producing 'behind the ear' models. The European hearing aid industry was convinced that the better quality in sound of the 'behind the ear' model would eventually prove victorious in the battle with the cosmetically more attractive, but lower quality of sound of the 'in the ear' models. However their forecastproved to be wrong. Their causewas not helped by the significant publicity given to the 'in the ear' design when Ronald Reagan,then the Presidentof the US appearedon nationwide TV wearing a hearing aid placed in his ear rather than behind it. The 'in the ear' hearing aid was manufacturedby Starkey (a fast-growing American company) and the resulting growth in salesled to major difficulties for the Danish companies (particularly Oticon and Danavox) competing in the US market. By 199380 per cent of the US saleswere 'in the ear' hearing aids. The Danish and the other European producers of hearing aids were, therefore, facing new and hard competition in the American market particularly from the StarkeyCorporation.

I_

i , ,

"

i :~ j

I..i~ ~ :!

-

Oticon Spaghetti for the ears 99 :e, .blfe

ng ch, nd .ng ish the has by md the was Tere

wer unit .the 5 of

ver, with !Ved

\ the i the t the laIIy , but

~iped maid aring aring ) and .mpa~t.By anish :acing mthe

THE SITUATION This setbackled Oticon into seriousfinancial difficulties in 1987,but within two years - at the beginning of 1990- it was back on the money-making track. During this period Oticon undertook a thorough review of its operations in order to identify what could be done to make the company more competitive and, thereby, improve its market position. It was decided to make the company more serviceoriented and customer focused.The overall objectiving was to make the company 30 per cent more efficient in three years.This resulted in a new company structure with the focus on making Oticon an adaptable service organisation with the individual employee at the centre. Oticon introduced its restructured organisation during 1991and seems well on its way to achieving the ambitious goal. In 1992Oticon had a total revenue of 539mDanish kroner (approximately £54m).This is a 13per cent rise in revenue,compared with a 3 per cent rise in revenue during the previous years. Gross profit in 1992 was 18m Danish kroner. Oticon has regained someof its lost territories, and today it is the third largestsupplier of hearing aids in the world with a 10per cent shareof the world market. As a reflection of its growing confidence,Oticon is trying to improve this market position by introducing a new hearing aid, which automatically (without volume control) adapts the sound level to fit the noise of the surroundings. This new type of hearing aid is produced by Oticon in both the 'behind the ear' and the 'in the ear' models. In the three year period up to 1991Oticon has been through an almost total reconstruction of the company. During this organisational development process there have been some changes in management and staff reductions have taken place. The new structure was implemented on 8 August 1991,and on that day everyone started in a completely different workplace (Oticon having moved into new surroundings in Hellerup). The processthrough which Oticon has developed has had a significant impact on almostall aspectsof organisationalbehaviourin the company.This transformation did not of course come about without some resistanceto change amongst the employees.After all, the restructuring meant a clean breakwith most of the usual and well known routinesand habits.In planning for the new structure, the company sought ways of involving employeesin the changeprocess. The employeeshad beenkept informed about what was going to happen during the three year period leading up to its implementation. Managers openly discussedthe reasonsfor changes,how it was to be done and the possible consequencesfor employees.Many of the employeeshad participated in planning and executing the restructuring of the company. Meetings were held with employeesso that up-to-date information could be passedon and any questionsdealt with, firsthand, at the time. The new

~

~

100 Casesin Organisational Behaviour

II

~t.. I'~

If

iQ

organisationrequired all employeesto use a personalcomputer (PC)which for most was a completely new experience.In order to overcomeany fears or worries this might hold, employeeswere encouragedto take a PC home so that they could become familiar with its use. Employee turnover at Oticon was remarkably low considering the extent of the change.No one left the company during the first three months following the introduction of the restructured organisation despite the fact that not everyonefelt comfortable with the new world of Oticon. The developmentsat Oticon have created a project-organisation- a socalled spaghetti-organisation, which the management writer Tom Peters argues to be the most promising structure for industry in the future. The central themes in the spaghetti-organisation are the lack of a line of command, no formal organisationalhierarchy, and no specific leader to whom employeesreport. The employeesare no longer working for a department. Oticon has abolished departments and the whole organisation is built on projects.At anyone time employeesand project leadersmay have varying levels of participation in a number of different projects. Oticon has literally torn down the walls to create one big open plan office. Employeesmove from desk to desk in accordancewith the projects in which they are presently involved. In order to be able to work together and discussthe project, the team membersoften move their deskstogether in a comer of the office. To make this possibleeverybody has a 'Rullemarie' (a small transportable table with their few necessities)so they can move about and find themselvesa place at the standardised desks containing a personalcomputer. Oticon has 'banned' the use of paper. All communication is now effected through a PC-networkor face to face.The latter is usedmore frequently now that no one including project leadershas a personal office. However, even with the use of sophisticated technology there are still a number of routine administrative tasks which have to be done in support of the project teams. Employees undertaking these jobs have less freedom and control over their activities than team members since their work is much more structured. Organisation of project teams The number of participants in the project groups varies according to the amount of work being done and the complexity of the task. For examplea project with the objective to relaunch a product by a new marketing campaign typically has 2 to 3 members in the project group, while larger product development teamsmay have 10 to 20 people involved. A product developmentproject with common technology,such as the automatichearing aid, is often tied together through a larger project. The responsibility of tbp;('()-ordinating manager is to overseethe marketing of the product and

I

Oticon- Spaghetti for the ears 101 ch us ne at Ine .on msoers :'he Imam !nt. on 'ing 11an

ects :her ther irle' .ove 19 a cted ntly !Ver, ~r of proand :\uch

0 the

pIe a cam!rger )duct hearity of :t and

-

the timing of its introduction into the market. The selection of the project leaders takes place in several ways. Sometimesthe employee who has proposed the project is chosento lead the project. At other times senior management suggeststhe person they feel will be best suited for the job and a range of criteria are used to make the choice depending upon the nature of the project. Typically these include, technical skills, experience,leadership ability or corporate skills combined with the fact that the person has time availablewhen the project is due to commence. The project leader is free to managethe project group in the manner he or she prefers. This meansthat the project groups are run in various ways. Somegroups meet with all the project memberson a regular basis.Others only meet when they find it necessary.Some groups make all decisions jointly, while others leave the decision making to those directly involved with a particular aspectof the project. Projectmanagersare responsiblefor choosing the membersof eachproject group. The usual practice is simply to go and ask, and try to persuadepeople to join the project. This informal processensuresthat the membersreally want to be involved in the project (otherwisethey could have refused),but it also meansthat someemployees are more in demand than others. Oearly it is more beneficial for an individual employee's career to be involved in a successfuland high profile project since they may then be noticed by other leaders and be invited to join other important projects. To obtain good project members, resourcesand attention from the top management,project leadershave to be very good in promoting their projectswithin the organisation.If they are successfulin the promotion, project leaderswill get to the top of the priority list and are more likely to be successfulin obtaining scarceresourcesfor their projects. The larger projects often start with a team meeting with the purpose of to getting to know eachother and the objectivesand the scopeof the project. Sometimesproject members meet together for a couple of days at a location away from the company and other work pressuresin order to seek new inspiration and to take a fresh look at issuesand problems related to the project in hand. The project group is required to undertake all the tasks connectedwith product development until the product is successfully introduced in all markets.This meansthat the project group may exist for severalyears,and that the project memberscover a range 6f other job-functions in addition to those relating to their own specialism.There are a range of different projects in progress at the company at anyone time with different timescales attached to each.The product development processfor example,typically lasts for 3 to 5 years and Oticon has about 10 to 15 larger product development projects running simultaneously.Other projectsare of a much shorter duration lasting a few weeksor months.

~;II'J prl

~,

;~.~:: ~~

102 Casesin Organisational Behaviour

Project groups meet with top management once every three months to present their work and results. The criteria for successestablishedby the company are that project tasks should be completed within the timescale set and within the budget allowed, otherwise the project groups are free to work as they wish. Eachmember of the group can evenwork at home, if he or she prefers, providing their absencedoes not interfere with the successfulThe progress of the project. co-ordination and communication between the project groups are hot formalised. The connectionsbetween the employeesare much stronger within the individual project group than between groups. The groups are fully autonomous,which meansthat no one outside the project team really knows what is going on inside the group. The lack of a general overview which this processcreateshas sometimescausedp!oblems for the development process.are responsiblefor joining project groups themselvesand for Employees completing the projects they have accepted.When a project is finished (or abandoned)the employeesinvolved in the projectmove on to other projects. All employeesare encouragedto suggestnew projectsand ideas.Because of the lack of a line of command,the ideas canbe presentedto anyonein the company,even to the managingdirector. Employeesare expectedto demonstrate initiative and results.Lars Kolind, the managingdirector, puts it this way: 'If people don't have anything to do, they need to find something- or we don't needthem' (Peters,T. J.,LiberationManagement, 1992,p. 202.) In essenceOticon has thereforebecomean umbrella organisation for the projects going on in the company. The borders betweenthe projectsare, of course,not always clear~t. Projectsare often interrelated and employees are frequently working on more than one project at the same time (the average is 1.5 projects per person). Therefore the projects, the processes, and the people becomeintertwined, and it is this seemingmesswhich has given rise to the use of the spaghetti-organisationmetaphor. ACTIVITY BRIEF

I ' \~ ,i ;

1 Critically evaluate the reasonsfor Oticon's successin minimising resistanceto

change?

3 What are the advantages and disadvantages of the spaghetti-organisation as used at Oticon? 4 What can Oticon do in order to eliminate - or at leastminimise- the disadvan-

,-1

tages of its spaghetti-organisation?

I

I I

~

Oticon - Spaghetti for the ears 103 to :he

REFERENCES Peters, T. J. (1992) Liberation Management, New York: Albert A. Knopt.

ale ~to he ~ss-

are ger are ally iew lop-

l for l (or !Cts. ause \ the nonthis -or

r the re, of >yees . (the ?sses, hhas

nceto Jcture roe.

isation advan-

RECOMMENDED READING

Mintzberg, H. (1993).Structuresin Fives,New Jersey:Prentice-Hall. Mullins, L. J. (1993).Managementand OrganisationalBehaviour,London: Pitman. Robbins, s. n993). OrganisationalBehavior,New Jersey:Prentice-Hall.

Peters,T. n992). LiberationManagement, New York: Alfred A. Knopf.