Oticon – A full Analysis of their Company
Posted by CENTURY HEARING
A Brief Background
Oticon a Danish company has existed over a hundred years. From the onset of the company, its core aim was to assist those experiencing a hearing loss. By the early 1970s, Oticon had become the world’s leading manufacturer of the “Behind the ear” (BTE) hearing aid.
Between the late 1970s to the early 1980’s, there was a high demand for “In-the-ear” (ITE) hearing aids. All expectations were high that Oticon’s profit margin will grow with the demand. However, the reverse is the case as the company lost money and market share as its profit margin continues to decline.
One would begin to ask, “What is responsible for this fall in fortune and market share capital?”
The answer is found in the organizational structure itself. Oticon at that point was a very traditional company with a slow growth process. At that point, even with its 15 sites and 95 distributors around the globe, it was operating in a market already dominated by strong electronics giants such as Philips, Siemens, 3M, Panasonic and Sony at that time.
In other to survive the market, Oticon had to take some measures and introduce some major changes to their company organizational and attitudinal structure. The end result was aimed at boosting profit and improving company efficiency. It took the company about three years to reorganize and apply the major changes. In the end, the outcome of the change was a brand new Oticon which become more open to change. This once again returned the glorious days of the company as one of the leading manufacturers in the hearing aid industry.
When we look at the case of Oticon critically, it’s a clear demonstration of how new ideas and initiative organizational structures can boost a company’s profit margin as well as lead to better opportunities and directly help to drive career growth positively. It is clear that there is some link between career disputes and organizational structure. This helps to do away with the core traditional ideas of a career as an individual endeavor in an organizational setting.
The “old” Oticon Company lacked all the key qualities that help drive efficiency and improve market shares. There were no defined organizational structures or organizational hierarchy, no formalized development programmes geared at staff improvement. Tools like the HR, promotions and reward pattern were not present at the moment in Oticon before the major changes were introduced.
The areas where changes were affected include the organizational setup, change management techniques, organizational climate, and organization culture.
Sheldon views the organization as the process of evaluating the work to be put in by the available manpower with the availability of facilities and machinery required to carry out these duties efficiently. In return, the duties carried-out equal efficiency, systematic and positive output. It is putting the available manpower and resources into effective use.
Accordingly, Koontz and Donnel are of the view that organizational structure entails the establishment of authority relationships with efforts to ensure smooth coordination between them. The coordination is in two ways, horizontal and vertical coordination in the organization set up.
There are key factors that define a quality organizational setup. They include the following:
There must be a formal method of report hierarchy from the workers at the bottom upward to the directors or CEO’s as the case requires.
Activities must be properly grouped. This ensures that machinery, equipment, skill, and procedures can be established in one place under the supervision of what is known as the department head.
Activities should be properly coordinated with a coordinating authority stated to oversee the activities. Individual goals, department goals and goals assigned to specific groups should be clearly stated down with timeframe stated. Goals should be monitored closely to ensure the target is met within the given time frame.
Policies, company procedures, rules and guidelines as well as company ethics exist within the organization. The purpose of these policies and rules are clearly stated down. These help to reduce some of the problems the organization may run into in the future.
Various kinds of organizational setup
There are various kinds of mechanistic and organic organizational structures which can be comparatively evaluated under two clear sub-headings namely the Centralized and Decentralized systems.
The centralized system refers to the system where the decision for authority making is reserved at the top level of management. In other words, the top level makes the decision while the lower level implement. The lower level is not saddled with any responsibility for decision making. They only work to accomplish assigned missions and responsibilities. In a centralized system, where the subordinates meet operational hurdles, operations have to halt and information sent to the appropriate authority who has the authority to take the decision on such a situation.
The centralized system works best in a simple organization with few layers. More or less, it is a kind of organizational structure referred to as a “flat” structure. In a centralized system, those at the lower tier of the organization are not trained to handle higher job portfolios. One of the noticeable factors in a centralized system is the lack of trust in the lower tier and the complexity of activity that requires centralized regulation.
Under the decentralized system of company organization, decision-making authority is delegated on different levels of the organization. The decentralized system helps to improve decision making in the organization. Decentralized and centralized system of management is not to be seen as opposing to each other. They are rather to be seen as two ends of the same system.
In the decentralized system, decision-making power is given to the lower tier. This gives them some level of independence in the workplace. In other words, all levels of the organization are given appropriate authority to take decisions within their field. There is no need to wait for the upper level of authority before decisions are made in cases of job hurdles and barriers.
In the present dispensation where we have the growth of information technology, workgroup culture, core competence, and work team, a decentralized system of management is ideal. It creates a deep sense of responsibility among the employees, it saves reasonable time wasted in decision making. This, in turn, improves productivity and improves workers relationship among the different working groups.
In a decentralized system, there is an increased level of job satisfaction. This is due to the fact that the workers enjoy a higher sense of independence. They are better placed to act on situations pertaining to their job descriptions quickly.
According to studies carried out by Charlisle there are some guidelines that can determine whether the organization setup should be centralized or decentralized.
- The objectives, mission and organizational goals. In situations where an organization shares democratic power. These kinds of offices need to be decentralized. For a smaller organization with less number of staff and responsibilities, power needs to be centralized.
- How big the organization is and the intricacy of the work to be done. Production organizations with different product lines and levels as well as companies that are a consortium with other companies should have a decentralized system of management.
- The driving force of every organization is the size of the customers. The geographical location of the clients and customers is a determining factor on what system of management works best for the organization. Where the clients and customers live in distant locations from the company, organization setup should be decentralized. This will enable the lower tier staff to make decisions faster.
- Proficiency: In a situation where the people at the top level of management are highly skilled with the ability to handle a lot of activities at the same time, the centralized organization setup is recommended.
- High level of communication: where there is a high level of communication at all levels of the organization, decentralization of organizational structure will be an excellent idea. This will affect problem-solving within the organization positively and boost the employee level of independence.
- Work where timeframe is very important. There are production companies that work within a time schedule. In situations like this, self-supervision is highly recommended therefore, the organization structure should be decentralized.
Ability to manage change
Change is something every company must expect from time to time. No matter how flourishing a company might be today, consumer attitudes change from time to time. Taking Oticon as a case study, we can understand how the change in customer preferences affected profit and market share capital. This was due to the fact that the company failed on its part to pay attention to the behavioral patterns of its consumers.
An organization must be prepared to deal with the change in customer demand. The only way to figure this out is by paying attention to the environment and know when change is required in both organizational structure and products design. Change remains a constant occurrence. Even well-established organization like Oticon in the ’70s needed to change to maintain stability within the system. There are, however, some factors that act as a driving force that makes change inevitable within an organization. These factors include
- Change is the demand and taste of the customers (market forces).
- Advancement in technology
- Economic and social elements
Where an organization refuses to change or kick against change do that at their own peril. The results are not always the desirable one. In most cases, it can even lead to bankruptcy and death of the organization.
Most of the problems an organization face are as a result of the inability of the management of a company to make accurate projections and plans to respond actively to the forces of change.
The process of change
According to Kurt Lewin, there are 3 model stages of the process of change. These 3 stage model helps to drive the organization from the current position it finds itself to the new trending position (changed position). He outlines these stages as follows:
First stage: releasing or unfreezing. The organization must show the readiness and zeal to change through
- Rejection of the old ways
- Create a sense of anxiety.
- Ensure the staff at the lower tier of their psychological safety.
This process prepares the individual to accept change. It is important to get the employees enlightened about future changes they are to expect. This step involves de-learning old behavioral patterns and situations.
In this situation, the feeling of discomfort in the present psychological safe zone as well as a change in the pattern of behavior. This discomfort, in turn, creates readiness among the employees to change.
There are various steps to take to achieve the desired change. The new ideas can be communicated through bulletins, announcements, discussions during meetings, group conferences and personal contacts. This process creates a clean sheet for the assimilation of new ideas and behavioral patterns. New ideas and traditions are then assimilated which eventually become new ways of doing things.
Second stage: changing through the change in reasoning pattern. Here the organization plays an important role in helping her customers see, judge and perceive things in a different way based on the organization's new point of perception gained through
- recognizing new mentors ad role models
- Studying the environment for possible information and change in behavioral patterns.
After the unfreezing process, the next step is the movement stage. The person is gradually trained to assimilate change through mental reorientation. This stage has three steps which are:
Submission: submission can be achieved through the introduction of reward process and punishment for failure to comply. Individuals appreciate changing more if they are rewarded for it. On the other hand, punishment can also be a way of making employees accept change. Both reward and punishment are referred to as reform tools.
Recognition: There is always a sense of satisfaction when employees make a choice of their role models. Once a role model is recognized, acting to modify behavior in line with role model becomes easier. Once the people at the top level of the organization management can sit up to the position of role models, then the change process becomes a much easier step.
Adoption: This involves the process whereby the individual changes all their prior believes and ideas in order to fit into the new environment. Members go through the process of absorbing new changes and behavioral patterns.
Third stage: Assimilation: At this stage, it is the duty of the organization to help the client assimilate the new point of view into
- Their personality and ideas.
- Substantial relationship.
This is the process of internalizing the new behavioral patterns and personalizing them. Members begin to see those attitudes as their personal behavioral patterns. This process is known as stabilization. The new behavior is geared towards reintegration into the new environment. The process of assimilation is most effective when the new behavior patterns become accepted as a normal way of life. The new behavior pattern must replace the former permanently. New behavior patterns need to be constantly re-enforced so it can continue to grow and not shrink out.
Steps to take when managing change
When it comes to implementing change, the organization must plan on the best way to implement it. The first step is to have an understanding of the field in which change is required. Changes can affect one of the following areas or all the areas at once. These include cultural or structural, strategic or process oriented. Change must be managed systematically to avoid bottleneck effect. One a clear identification of the need for a change and the area in which change is required has been made, there are steps to follow to ensure a smooth transition.
State down clearly the fresh goals and company objectives: Company objectives and goals are embedded in their mission statements. It is important to revise objects due to change caused by internal or external forces.
Find the appropriate agent of change: The management is saddled with the responsibility of entrusting the process of change into the hands of the appropriate authorities to execute. The manager can as well handle this responsibility.
Identify and analyze the problem. Identifying a problem is the first step to change implementation. Companies with a high rate of employee turnover are required to collate the data and make it available whenever the consultant requests for it. This will enable him to identify the cause and proffer the appropriate solution measures to be taken. This process requires a lot of research work as it is not as easy as it sounds.
Implementation methodology: Implementing material changes when changing the entire system. It is also very important to protect employee emotions. They are required to be part of the change process. This can help reduce the stress of implementing the change process.
Development plan: for a company aiming at reducing employee turnover, in-depth research is required of other organizations when it comes to job content and possibly their reward process and appraisals.
The strategy of implementation: Timing is very crucial when it comes to change. When a change has to do with the internal employee, it must be communicated at the right time. This helps to minimize resistance that may occur with the process of change.
Execution of change: Once all the decisions to implement change has been communicated through the appropriate channels, the various departments are now saddled with the responsibility of executing the plan. This may require seminars and sometimes briefing sections. The people who will be most affected are the target of these campaigns. Employee’s needs to be positive minded to accept change.
Assessment and feedbacks: The outcome of change must be assessed and feedbacks will be obtained. If the modifications and training causes a reduction in the turnover of the employee then positive results have been recorded. If otherwise then there may be a need for new change implementation.
Oticin and the change process – think outside the box
In 1988, Oticon recruited a new CEO who was given the responsibility of introducing the required changes to the company. Lars Kolind brought the genius change idea which was totally outside the box. The new CEO spent a period of 2 years rationalizing and cutting down on cost. This genius move earned the company 20 percent in sales and the cost of administration.
In 1990, he made available his master plan of ground-breaking and essential creativities in the structure of the organization, job creation, and physical design of the company and information technology.
Lars rebuilt the company into a networking organization which transformed the company back into a world’s leading technological audio logical company. Within the next 5 years, the company was floated on the Danish stock exchange.
All the company’s transformation and success story were described in a 10-pages memo titled “Think the unthinkable”. The memo was a work of the CEO which was made available to the members of staff in March 1990. The changes that were proposed by the CEO included:
- Utilizing human and technological value to increase competitiveness more efficiently, this, in turn, reduces the overhead At that point in time, the overhead cost exceeded the actual cost of production.
- Replacement of the job hierarchy structure with a structure driven by the project. In this kind of structure, the employee is often engaged in a number of the project at a particular time. In this system, every particular project is automatically considered as a business unit.
- The marginal traditional system of organization was abandoned and managerial authorities were transferred to the project groups.
- The reduction of the paper communication was automatically replaced with the electronic scanning system for all incoming as well as introducing a good information communication networking system.
- Improved physical movements through the introduction of an open floor office. In the setup, each employee was provided a cart or a trolley which served as filing cabinet on the wheel. This cart contained the computer, phone and some amount of space for official files. This cart can easily be moved about from place to place.