Organizational Change Management
Oticon A/S, commonly known as Oticon, a Denmark based company with operational sites in various countries around the world including the United States, has not always been a strong competitor in the manufacture and distribution of hearing aids.Oticon was a rather traditional company with the conventional administrative and managerial setting that made assertion of power and job rank status tramp dynamism, flexibility and evolution to suit market change.
The economical, political and cultural similarities of the Scandinavian nations (Denmark, Sweden and Norway) led to the establishment of the “Nordic model” of industrialization “which extended cooperation between employers and social democratic governments over national economic policy into the industrial relations field” (Burnes, 2004).This “friendly” environment is the main factor that led to the growth and establishment of Oticon as the industry and market leader in the production of hearing aid instruments in the region.
Oticon’s research and development initiatives for its “behind the ear” were “unheard of” in its early years of operation even as the market evolved to demand more for digitalized and “in the ear” hearing aid instruments and products.
With emerging and technologically advanced competitors such as Philips, Siemens, Sony, 3M, and Panasonic, Oticon had to embrace change and embrace it fast if the company was to survive in the industry and sustain its already established market niche.
Oticon needed a major overall managerial turnaround coupled with research and development (R&D) as well as wholesome customer care to ensure it captured a unique market niche to overcome the stiff competition from its technologically advanced competitors such as Sony and Phillips. Oticon’s Change Initially, Oticon’s workforce was adamant of change and wanted to operate by the traditional setting of administration where power, vertical governance and leadership at the company were the “comfort zone”.
As Gould (1978, p. 13) expounded on Darwin’s description of the theory of evolution, he stated that, “Organisms become better adapted to their local environments, and that is all. ” Oticon’s employees first resisted the change recommended by Kolind, however, when he stayed firm about it, most were agreeable and embraced the change to the good of the company – they relocated to new offices, managers gave up their titles, and they all embraced teamwork.
Oticon’s changed and evolved to profitability and stable growth and its pattern of evolution can be marched to Hayes’s (2007) figure of pattern of industry evolution. As the sole producer of hearing aid instruments, Oticon underwent rapid growth as it established its market especially in Denmark and the surrounding regions. However, as the market matured and technology advancements paved way for digital hearing aid instruments from competitors, the company experienced a “slow” in its growth leading to losses in equity.
The company had to adapt the flexibility of production to ensure competitiveness through its new products such as the DigiFocus launched in 1995. As inevitable as change was to Oticon, it had to be well managed to create a positive impact and attain its objective – sustaining its leading position in the industry. Figure 1: Pattern of Industry Evolution Oticon’s change management, under Kolind and beyond, was coined by various strategic ways as discussed below. Change Approaches 1. Classical Approach
Since inception, most managers of companies in Denmark, including Oticon, had taken what Burnes (2004, p. 33) termed as a “Classical Approach … [where] The emphasis was on achieving efficiency in internal functions; seeing organizations as closed and changeless entities unaffected by the outside world. ” To Oticon, adaptation to the traditional managerial setting could jeopardize the company’s future stake in the industry and the market it had strived so hard to prosper and establish itself in as the leader.
Change was inevitable and the traditional authoritarian leadership style had to be trashed to pave way for the democratic leadership style that gave freedom for innovativeness, cooperation and participation to all staff irrespective of their “position” in the company. 2. Planned vs. Emergent Change In order to ensure successful change in an organization, a good manager has to coin the direction the organization ought to go in its operations and what needs to be achieved. To achieve this, one has to plan what needs to be done, how it should be done, when it should be done and who would be responsible for it.
This then defines the Planned Approach to change that is “consciously embarked upon and planned by an organisation, as averse to types of change that might come about by accident, by impulse …” (Burnes, 2004, p. 267). Just like Kolind planned how to change Oticon, a manager using the Planned Approach to change will explore the need to change, plan the course of action to take and allocating the resources needed, takes the appropriate actions and implements change and finally integrates the change to the organizational operational systems to sustain it for future growth.
The Emergent Approach to change is continuous and entails gradual adaptation to new conditions and processes other than merely changing the organizations structure and practices. For Oticon, Kolind knew that getting rid of the hierarchical organizational structure was not sufficient, the company had to adapt to a new way of operating to ensure success in change implementation – project-focus was adapted as the ultimate continual change process.
Kolind understood that “from the strategic conflict perspective, an organization’s ability to increase its profits is dependent on its ability to outwit, out-bluff and out-manoeuvre its rivals” (Burnes, 2004, p. 237). To achieve this, change from product sales to democratic operation and management as well as wholistic customer care were the unique strategies that the company implemented since 1990s to date under the strategic leadership of Kolind.
3. Punctuated Equilibrium Oticon’s change strategies have always been based on creating a “disorganized” company through constant shaking of people from their comfort zones in order to ensure continued creativity and innovativeness. This kind of approach to change is characterized by “a world punctuated with periods of mass extinction and rapid origination among long stretches of relative tranquility” (Gould, 1978, p. 15).
Kolind, Oticon’s former President, knew the importance of continuous change characterized by punctuated equilibrium (stability) – or rapidly altered environment and norms to embrace total quality management (TQM). Kolind wanted a unique way to stay competitive and he knew that to achieve this he had to keep the organization in constant change by keeping the company “disorganized and chaotic” in structure. Hoogervorst et al. (2005) reveal that, “TQM entails a human-centered approach to organizing which is fundamentally incompatible with traditional mechanistic thinking.
” Kolind continuously created a “disorganized” Oticon through the trashing of structure and vertical leadership and changing the location of staff workstations to ensure constant change and continued innovativeness that would sustain the company’s competitiveness. Soon after his appointment as Oticon’s President in 1988, Kolind got rid of vertical leadership structures, redefined roles and job descriptions and titles and went on to change the office setting from structured to the open-office setting.
After a period of time, Kolind had to “punctuate” the equilibrium established by changing staff work locations to different floors. As Hayes states, “This process of revolutionary change and organizational transformation provides the basis for a new state of equilibrium. However, because of forces of resistance that inhibit continuous adaptation, this new equilibrium gives rise to another period of relative stability that is followed by a further period of revolutionary change.
This process continues to unfold as a process of punctuated equilibrium” (2007, p. 8). Oticon’s Change Management Approaches Adapted by Kolind, the Human Relations approach to management has proven to withstand change and industry dynamics to ensure the company’s workforce readily embraces change. According to Burnes (2004, p. 68) the Human Relations approach “is an approach that stresses that human beings are not mere cogs in a machine but that they have emotional needs: humans want to ‘belong’, achieve recognition, and develop and fulfil their potential.
” By integrating the staff in all processes, tasks and projects undertaken by the company and encouraging them to take the initiative to start projects that would grow the company, the staff’s self-actualization needs are catered for as they feel a sense of accomplishment being in charge of projects. Beer and Nohria state that change can be summed up in two theories; theory E that bases change on the economic value it would bring to an organization, and Theory O that bases change on any given organization’s capability and stability of its culture.
Initially, Kolind employed Theory E to stabilize the company economically through cost-cutting initiatives, laying-off of some staff and reduction of product process. Once economic stability was attained, Kolind moved on with Theory O, to build a culture of cooperation and equality among staff to ensure high innovativeness, job satisfaction and dedication to the company’s commitment to wholistic customer care.
“Organizations can create a virtuous circle whereby they can influence or control the circumstances in which they operate through the changes they make and how they make them” (Burnes, 1997). Oticon created a culture and operational approach centered on its staff and its customers to attain the competitive edge none of its competitors had – project based growth, employee integration and total focus on wholistic customer care.
Equipped with the knowledge that no organization can “effectively be controlled by close supervision, rigid rules and purely economic incentives” (Burnes, 2004, p. 68), Kolind established a non-hierarchical “disorganized” company that had everyone involved in every project, task or process they desired to be involved in and creating an information-base free for all to use, hence contributing to the transformation of the company from a technological manufacturing company to a knowledge-based service business.
In order to ensure that the company’s headquarters processes and operational setting matched its operational sites, Kolind adapted the instilled efficiency at the headquarters and believed it could be a starting point for the whole company’s transformation based on the notion that “any part of an organization’s activities affects all other parts” (Burnes, 2004). Oticon’s Change Management Strategy 1. Competitive Forces Model Under this model, the organization’s environment is taken to have forces that affect the competitiveness of the organization.
The organization has to therefore align itself with its environment “the key aspect of which is the industry or industries in which it competes” (Burnes, 2004, p. 234) in order to prosper and succeed. Oticon’s top management team, under the leadership of Kolind, analyzed the strength of its competitors and decided to implement unique processes of customer satisfaction in order to sustain competitiveness. 2. Resource-Based Model By deploying unique and effective resources, an organization is able to achieve effective cost-cutting and enhance the quality of its products.
An organization’s resources can include “tangible assets, such as plant and equipment; intangible assets, such as patents and brands; and capabilities, such as the skills, knowledge and aptitudes of individuals and groups” (Amit and Schoemaker, 1993; Hall, 1993; Wernerfelt, 1995, cited in Burnes, 2004, p. 236). Oticon’s new state-of-the-art headquarter offices, developed and trained workforce as well as its increasing knowledge-base was on way it deployed the use of the resource-based model as one of its change management strategies.
In some cases this model of change strategy may be limited if a company’s resources are limited or not advanced. However, focusing in the future profitability and stability in the long-term survival of the organization investment in the organization’s resources such as employee training, upgrade of production plants and equipment e. t. c would be effective and efficient. 3. Strategic Conflict Model In this model, competitors are viewed as the “enemy’ and companies view themselves as being at war with their competitors and have to continually advance in their competitive mechanisms.
Through research and development (R&D) initiatives, sharing of information and elimination of hierarchical leadership, Oticon was able to achieve competitiveness and outwit its competitors in the implementation of a unique customer satisfaction package that no competitor would copy – wholistic customer care that sought to influence the life’s of customers as a whole other than just focusing on selling the hearing aids to them. Effectiveness of Oticon’s Change Management
Though resistant at first, the company staff became agreeable to the company’s change initiatives because they were all involved in the planning and execution of all change processes. Trained and equipped with IT skills all staff had access to computers and determined their training and developmental needs. In order to effectively manage and sustain competitiveness, Oticon underwent complete business process reengineering (BPR). Oticon’s change management processes were based on the most effective factors underlying proper business process reengineering.
For any organization to prosper, quality of its products and processes has to be high, competitive and unique. Total quality management (TQM) “is based on the emotional commitment of the chief executive officer, the understanding and knowledge of the management team about TQM, appropriate systems to stimulate, guide and direct TQM activities, and the involvement and participation of employees in the business” (Van Der Wiele et al. 2001).
Through wholistic quality management from the processes to the staff, Oticon achieved its goal of customer satisfaction and care by setting the example and working as part of the team and not a “ruler” giving out instructions. This was the ultimate underlying reason why change at Oticon was embraced and is sought to date. Oticon’s Strategy to People Management during Change Through a consensus, democratic decision making, and dynamic project planning and execution, the Oticon workforce had the freedom and environment to shape their future and the future of the company.
Despite creating a “scouting” environment where every member of staff could be a project leader, at first Kolind had stood by the first decision that the company needed drastic change and any employee who could not embrace and adapt to the change was ‘free’ to leave. Staff members were given the opportunity to initiate projects and if projects did not work out as expected they could be “forgiven”.
As catastrophic as it may have seemed and sounded this kind of free environment people management strategy created the atmosphere that demanded voluntary accountability and responsibility from each individual. Staff members were treated as adults who could make responsible decisions creating positive change in the way they perceived their work and they quickly embraced the changes that were implemented in the company. Oticon moved from a modernist organization to a post-modernist form soon as changes were implemented.
From its rigid, centralized leadership and differentiated jobs and employment structures, the company embraced complexity, fragmentation of employee relations, multi-skilled jobs, flexible networks as well as focused on a niche market of customers who longed wholistic care. Communication and freedom of movement was one of Kolind’s effective strategies in people management. Without an office and moving around like any other employee, Kolind ensured that focus was always “more on participation in the change process and communication about the change process” (Jones et al, 2008).
Oticon’s people management strategy was through freedom and empowerment and Kolind knew well how to achieve this through the project-focus operational management. As Larsen (2002) stated, “career development for most people requires “more of everything” in that success seems to be enhanced by factors, such as: range of responsibility, budgets controlled, access to top management, and personal reputation. ” Oticon’s Leadership Style Transactional vs. Transformational Leadership
Traditionally, Oticon instilled the transactional management style that sought leadership through hierarchies and rewarded staff based on their performance. However, with the appointment of Kolind, the management and leadership style changed and the organization became a “flat” organization with no hierarchy of governance. Managers’ job titles were changed to project leaders and despite being the president, Kolind saw himself part of the team rather than a dictator to give instructions and implement rules.
This was the company’s move to transformational leadership that was sensitivity to staff and customer needs and the establishment of processes that ensured developmental functionality other than reward based work assignments. To transform the people, a good manager has to transform the thinking and perception of the people towards work and the company. To do this a good manager out to show that the company values the people and in doing this the confidence and emotional “security” of the staff is instilled giving them the urge and drive to work towards the growth of the company.
Kolind, having has a background in scouting, knew the importance of cooperate leadership where everyone in the workforce was treated with the same respect and responsibility to make the right decisions for the good of the team and the company. According to Burnes (2004) Kolind “wanted to create ‘the spaghetti organisation’ – a chaotic tangle of relationships and interactions that would force the abandonment of preconceived ideas and barriers to innovation and competitiveness. ” Democratic vs. Autocratic Leadership In many ways these two types of leadership are in contrast. As Hendrickson et al.
(2007, p. 125) reveal, “A democratic or participative leader takes others’ opinions into account in making decisions, but autocratic or directive leaders seldom do” In many ways, the Oticon leadership/management team was autocratic – the organizational leadership was hierarchical and orders were given from above, however, Kolind’s style of leadership was different – he encouraged communication, eliminated hierarchies and enhanced equality among the staff; one could be a project leader in one project and a mere team member in another project hence Oticon’s current democratic leadership style.
Though through the autocratic leadership style employees have a sense of fulfillment through authority and status, the democratic style of leadership seeks development and employee freedom that enhances innovativeness and creativity. Company analysis from Cultural Perspective Culture is one aspect of organizations that separates the way they do business from all the rest in the industry and/or market.
Uniqueness, competitiveness as well as “work and the way it is done are governed, directed and tempered by an organization’s culture – the particular set of values, beliefs, customs and systems that are unique to that organization” (Burnes, 2004, p. 169). Oticon is a company that defined and maintained unique values for its people/staff and sought to ensure its customers not only got the hearing aid they needed but lived life free of stigma of hearing impairment. Culture can be defined by the norms, values and artifacts adapted in every organization.
Some of the artifacts the company adapted are: i) Scanning of mails and shredding of the paper mail to eliminate unnecessary paperwork. ii) Free communication and sharing of information. iii) Working in “mobile offices” where no workstation belonged to anyone rather that employees moved around with the mobile cabinets and used any computer available in the open office. iv) Staff did not talk about hierarchy or structure in the office but rather saw each other as equal partners.
Some of the norms Oticon employees adapted were: i) Working with their former bosses as “equal colleagues’ ii) Taking the responsibility to initiate and manage projects for the growth and development of the company. Some of the values highly esteemed by the Oticon employees were: i) Every employee was to be valued and esteemed as equally important to the company. ii) All staff members were trained to acquire IT skills and given home PCs to ensure they developed technologically.
Oticon as a “spaghetti organization” was defined by its unique structure that exhibited processes that were project-focused, free of all vertical chains of command, open-office layout, a connected free-access information system, and a no-paper office environment where offices cabinets could be moved around for flexibility of work and project execution. Oticon can then be classified among Prospectus kind of strategic organizations that always “aim for internal flexibility in order to develop and exploit new products and markets.
To operate effectively in a dynamic environment they have a loose structure, low division of labour and formalization, and a high degree of decentralization” (Burnes, 2004, p. 245). Oticon’s culture was based on equality and equal opportunity for all staff to develop themselves and create processes and projects that would increase the company’s competitiveness in the industry. This still is the underlying operational framework that defines the company’s operational processes and procedures as it continues to coin its success.
Conclusion Oticon’s operational setting is one founded and coined by unique processes strategically implemented to suit the business goals and growth objectives unique to the company. Though many may view these strategies as those that may pull a company behind, to Oticon, they have been the core values adapted and that have ensured the strategic growth and business development the company has experienced since the appointment of Lars Kolind.
Passing on the management legacy of project-focus to Neils Jacobsen in 1998, Kolind has attained his goals; the company had 15 new products in the market, attained sales and market share growth of over 12% and 8% per annum respectively – evidence of effective and successful organizational change management. Kolind’s aim was to have a “flat” organization where every staff member, including the management team members, viewed himself/herself as an equal to his/her colleagues.
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