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Analysis of the Organisational Behaviour at Oticon

Paper Type: Free Essay Subject: Business
Wordcount: 4462 words Published: 1st Jan 2015

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The company was established in 1904 and is one of the worlds largest producers of hearing aids. The headquarters of the company is located in Copenhagen and has approx. 3500 employees.

Being a fairly old, well established and fairly profitable company, the organization had by the mid 80’s all the strengths and weaknesses of traditional, hierarchical organizations including formal procedures, a conservative culture, employee loyalty and consensus-seeking (or conflict avoiding) behavior.

The company had eventually achieved a position as the world’s leading supplier of hearing aid until the 80’s but right from the mid-80’s it faced problems of decreased sales, financial and

organizational problems: (Source: Career Management in Non-Hierarchically Structured Organizations, by Henrik Holt Larsen from http://www.mbc.aueb.gr/hrm/hrconference/Henrik%20Holt%20Larsen.pdf)

The top management team had an increasingly reactive and status quo maintaining way of managing the company.

The management emphasized on signaling consensus to the environment (including the board of directors), which led to suppressing of disagreement and differences in opinion.

The company was structured around three major functional areas which had only limited interaction and mutual communication.

Research and development activities were suffering.

The company had great difficulties in establishing itself on the growing market for “in-the-ear” hearing aids, and focused too heavily on the more traditional “behind-the-ear” market.

The case demonstrates how introducing new, innovative organizational structures and processes can affect career growth and advancement opportunities. The case shows the tie between organizational change and career issues, rejecting the traditional perception of career as an individual voyage in an organizational landscape.

Oticon is a good example of what D. T. Hall (1996) called “The career is dead, long live the career” and the boundary career construct (Arthur & Rousseau, 1966). Key features of traditional career management like earmarking of management potential, formalized development programs, the use of promotions and organizational symbolism (e.g., privileges) etc. were simply not applicable in the “spaghetti organization” with no hierarchical structure, no traditional management positions, no high-flier program and not even an HR function. The nickname “spaghetti organization” reflects the complex, informal and almost anarchistic characteristics of the project organization, as it was initially implemented at Oticon.

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2. Organizational Culture and Climate

Edgar Schein defined culture as “A pattern of basic assumptions invented, discovered or developed by given group as it learns to cope with its problems of external adoption and internal integration worked well enough to be considered valuable and therefore, to be taught to new members as a correct way to perceive, think and feel, in relation to those problems.”

Wagner III and Hollenbeck have defined organizational culture as “the shared attitude and perceptions in an organization that are based on a set of fundamental norms and values and help members understand the organization.”

Organizational culture is not inborn. It has to be invented and later developed over a period of time. It enables employees to perform within the framework of the organization’s culture.

Environment plays a dominant role in developing the culture and so does demographic factors. Once the culture is developed, it virtually becomes a people’s organization from a functional point of view that promotes risk-taking among managerial cadre and generates novel ideas. It promotes communication that improves productivity and job satisfaction.

Organizational Climate

According to Bowditch and Buono “Organizational culture is with the nature of belief and expectations about organizational life, while climate is an indicator of whether those beliefs and expectations are being fulfilled.”

Employees in the organization keep studying the management philosophy and various actions they take to deal with organizational factors that are of a routine nature. These include the following:

(a) Selection Process of the employees.

(b) Leadership style and approach to solve problems of the employees.

(c) Wage administration.

(d) Attitude to implement change and incorporate latest technology.

(e) Job description.

(f) Organizational structure and frequency to modify the same based on need.

(g) Performance evaluation.

(h) Promotion policy and its implementation.

(i) Efforts involved in promoting creativity and innovations.

(j) Availability of resources for research and development.

Richard M. Hodgetts has classified organizational climate into two factors as under:

(a) Overt Factors

• Hierarchy

• Goals of the organization

• Financial resources

• Skills and abilities of employees

• Technological state of the organization

• Performance standards adopted

• Efficiency measurement

(b) Covert Factors

• Values

• Attitude

• Norms

• Feelings

• Interaction

• Supportiveness

• Satisfaction

Overt factors can be measured and fair assessment can therefore be made about the intentions of the management and efforts they are putting in to build an appropriate organizational climate. While on the other hand covert factors can not be quantified being of subjective nature.

Likert has carried out studies on organizational climate by isolating six different variables namely decision making, leadership style, motivation, goal setting, communication and control. Each variable was then evaluated on four dimensions. Each of the dimensions can then be studied on the five-point scale enumerated above. Based on the inputs so received on the specific study of a particular variable an appropriate conclusion of the prevailing organizational climate can be drawn. Suitable remedial measures then can be initiated to modify the climate to desired level.

According to Edgar Schein “Culture is the most difficult organizational attribute to change”. He specified three cognitive levels of organizational culture:

What can be seen and known,

Organizational mission and value,

Tacit assumptions which is the deepest level and the most difficult to explicate.

In the years before the change Oticon management had bureaucratic nature of the organization and corporate culture. It was more off hierarchical organization with importance given to people rather than position.

Oticon after year 1991 became more task culture, it developed into customer focus organization and started to be project orientated, where departments disappeared, individuals were expected to contribute to the organization and got recognized influence in the group. In short it was made more important what you do and not who you are.

3. Leadership

One of the most important aspects of human behaviour studies in organization is Leadership. It is the leader who creates a vibrant working environment. The success of an organization depends upon the efficiency of a leader. It is the attributes, positive approach and the ability to solve problems that make a person leader. Before we go further and discuss about the leadership in Oticon its important to know the major theories related to leadership.

Theories of Leadership

Trait Theory of Leadership

Not all leaders are effective managers and the vice-versa. It is hence difficult to identify effective managers and leaders. Early studies of leaders defined them by traits they were supposed to exhibit or the “attributes” that the leader possesses. The theory therefore was called “trait theory” or attribute theory of leadership. Certain authors also quote it as “great man’s” theory.

Many studies of traits have been undertaken. Ralph. M. found following traits in an effective leader:

Physical Traits

The physical traits of a leader include that of immense energy, bright appearance, intelligence, and capability and personality traits such as adaptability, aggressiveness, enthusiasm and self-confidence. They also have task related characteristics such as achievement drive, persistence and initiative and social drive like cooperativeness, interpersonal skills and administrative ability. It is next to impossible that all leaders possess all the traits and also trait theory of leadership gives no guidance as to how much of any trait a leader should have. The theory is not conclusive. It has also been observed that most of the traits identified in successful leaders are actually the pattern of behavior.

Leadership Skills and Style

Another way of analyzing leadership behaviour is in terms of skill possessed by the leader.

There are three types of skills, which are required to be used appropriately at different levels of management.

Human skills are important for all the levels of management. They are concerned with interpersonal relationship between managers and other persons who come in contact with the leader. The leaders apply internal motivation to the employees so that their willing obedience and cooperation is obtained.

Technical skill involves the ability of employees to know the technical aspect and operation and maintenance of machine, tools and allied fixture they work with. Lower level managers who are in close contact with workers have to know it in greater details as compared to higher managerial cadre. The former spends considerable time on utilization of technical skills.

Conceptual skill involves the ability to view the organization in strategic term. It is most important for top level management where long term planning and futuristic thinking is required. As managers move to higher position in the organization they must develop and utilize the conceptual skill increasingly. But at times managers are found wanting of this skill. Training, development and exposure to various situations would make the managers to cope up with higher responsibility, based on skill, maturity and understanding.

Leadership styles and behaviour.

Leadership based on authority

Transformational leadership.


Autocratic leadership: This type of leadership is practiced by the managers concentrating on power and authority within themselves. Leader expects high degree of compliance by subordinates, though he is dogmatic and positive in his approach. Manager exhibiting this type of style has the ability and enforces decision by use of rewards and fear of punishment.

Communication tends to be primarily in one direction from manager to follower. Some autocratic leaders are seen as “benevolent autocrat.” Though they listen considerably to their followers’ opinion before making any decision, the decision remains to be their own. They seemingly consider their subordinate’s ideas but when it comes to decision making they are more autocratic than benevolent. An advantage of autocratic leadership is the speed of decision-making, as the leader does not have to obtain group members approval.

However there appears to be a low morale syndrome on the group members because their views are not given due consideration and may resent the decision and support the same as little as possible.

Democratic or Participative Leadership

In contrast to autocratic leadership, democratic or participative leader consults subordinates, encourages participation in decision-making. In the process of interaction with subordinates, democratic leader suggest actions or decisions and obtains views of those under him. He has respect for sub-ordinates views and does not act without their concurrence. The leader is supportive. This style of leadership has various advantages, which include high morale and support of subordinates, smooth implementation due to subordinates being party to decision making. Because of the participation of subordinates, the quality of decisions is better as compared to the autocratic leader. Disadvantages include slower decision, lack of accountability for decisions per se and possible compromise in the process of trying to please majority of the people involved in decision-making.

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Laissez-faire Leadership

A leader who practices laissez-faire leadership is also called “free rein” leader who uses his power very little giving subordinates full freedom of action and independence for setting their goals and means of achieving them. These type of leaders depend heavily on subordinates and see their role as one of aiding the operation of followers by furnishing required information when asked for and acts only as contact between various departments and outside agencies (external environment). Here the leader attempts to exercise very little control or influence over the group members. Such type of leadership style promotes individual growth and freedom of action for goal setting. However, the loose control by the leader over the group may lead to lack of group cohesiveness and unity of purposes toward organizational objective. This may ultimately lead to inefficiency in management.

Mc Murry argued for what he called “Benevolent autocracy” by managers towards their employees. This compassionate but dictatorial approach was based on the fallowing premises:

Benevolent Autocracy

Most top managers have hard driving, autocratic personalities. Therefore they find participative management difficult to accept.

Significant decisions affecting firm must be made by top management because of the potential damage that could result from a poor decision.

Many members of large bureaucracies are in reality security seekers who do not wish to share in the decision-making process.

Participation may be interpreted by employees as their right to veto managerial decisions and to generally become lax in their work behaviour.

The use of any style will depend on the situation.


This type of leaders guides their subordinates by establishing goals which can be achieved by role identity and task requirement. Transactional leader use reward system very effectively to achieve organizational goals and set new standards. Transformational leadership follows various leadership models. Transformational leadership is practiced when leader intellectually stimulates the subordinates, excites, arouses and inspires them to perform beyond their expectations. By providing a new vision, the transformational leader transforms the followers into people who want to self-actualize. Leader by inspiration have won wars by voluntarily demanding highest sacrifices of soldiers in the battlefields. History is replete of various examples of valour and sacrifices. Transformational leadership is beyond the charismatic leadership.

In relation to Oticon

Kolind, the new CEO of Oticon practiced Transformational Leadership where in he guided their subordinates by establishing goals which can be achieved by role identity and task requirement, he stimulates the subordinates, excites, arouses and inspires them to perform beyond their expectations.

4. Motivation

Scot defined motivation as “a process of stimulating people to action to accomplish desired goals”.

Mc Farland has defined “motivation as the way in which urges, drives, desires, aspirations, strivings needs direct, control or explain the behaviour of human beings”.

Importance of Motivation

High level of performance: It is the duty of every manager to ensure that the employees have a high degree of motivation. He should offer monetary and non-monetary incentives. Highly motivated workers would be regular for work, and have a sense of belonging for the organization. Quality of product will be improved, wastage will be minimum and there will be increase in productivity, and performance level will be high.

Low employee turn over and absenteeism. Employee turnover and absenteeism is caused due to low level of motivation on the part of managers. When dissatisfaction is increased employees do not enjoy the work assigned to them. Therefore there is a tendency of absenteeism. The workers hunt for an alternative job and leave the organization whenever they get an opportunity. High level of absenteeism causes low level of production, wastages, poor quality and disruption in production schedules. Increased turnover is disastrous for any organization as it puts strain on financial position of the organization due to additional recruitment, selection, training and development. Motivation is therefore a very important management tool to achieve organizational excellence.

Acceptance of organization change. Management must continuously scan the external and the internal environment. There has been a great impact of. Social change and technology evolution on the motivation level of employees. Social change increases aspirations of workers and put an additional demand on the organization, which must be considered positively so that conducing working environment is created. Technical innovation, better working conditions, better R & D facilities, encouragement to employees and existence of better personal policies should be part of any organization. This will facilitate retention of employees. Management must ensure that the changes are introduced in the organization and its benefits explained to the employees so that there is no resistance to change and organizational growth is achieved. Re-engineering, empowerment, job enrichment, job rotation, introduction of new technology and processes will go a long way to boost employee morale and achieve high degree of motivation.

Organizational image: Employees are the mirrors of any organization. Managers must lay down high performance standards coupled with high monetary and nonmonetary rewards. Training & development programmes should be regularly organized and employee skill improved. It will have a positive impact on the employees and the image of the organization will be improved. It will also reduce employee turnover and better employee will look forward to join the organization. High organizational image will contribute towards brand image of the product and services the organization is marketing.

Motivation Theories

Maslow’s Need Hierarchy Theory

Abraham Maslow was a clinical psychologist in USA. His motivation theory is widely accepted and studied. Maslow suggested that every individual has complex set of needs at any particular moment and his behaviour is determined by the existence of strongest need. He stated that human beings have five types of needs and physiological need is the strongest hence the individual behaves in a particular manner to satisfy that need. Needs are hierarchal in nature and only one need dominates at any one point of time. Once the strongest need is satisfied then the second need emerges as being the strongest need and human behaviour is regulated in process of achieving satisfaction in series of need requirements.

Maslow further started that there is only one need satisfying process is underway at any one time. They do not disappear once they are satisfied but their intensity is reduced (relegated) below the subsequent need.

1. Physiological Needs – As per Maslow physiological need is strongest in every human being and hence it has highest strength as compared to the other needs. Individual behaves in a particular manner to satisfy basic bodily needs like hunger; thirst, shelter and clothing. These needs keep dominating unless they are reasonably satisfied. Human being is therefore motivated to work in that direction.

2. Safety Needs or Security Needs – Once the physiological need of an individual is satisfied, the safety need /security need arises and is dominant at that point of time. This need is related to the following:-

(a) Every worker is concerned about his personal safety and wants to be free of physical danger.

(b) There are various dangerous processes in the work setting. Individual desires to be free and work toward self-preservation.

(c) Safety need is also related to employee/employer relationship, which should be cordial and free from any threat to job security.

(d) There should be certainty in the job and non existence of arbitrary action on the part of management/employer.

(e) Administration policy of any organization must cover various points that are related to safety of an individual like pay, pension, insurance, and gratuity.

Individual should be given opportunities for choice of job so that he derives satisfaction. He must also be given adequate security against being fired, laid off or demotion.

3. Social Needs – Once the safety need is satisfied, third need i.e. social need arises.People want to belong to some social group where their emotional need of love, affection, warmth and friendship are satisfied. Being member of sports club, social organizations or being the company of friends and relatives, needs can satisfy social. In the work setting individuals want to be member of work group and contribute towards it so that the social need of the individual is fulfilled.

4. Esteem Need or Ego Need – Fourth need in the hierarchy of needs as suggested by Maslow is Esteem need or Ego need. Individual wants self-recognition, appreciation for the work done. It is related to self-respect, self-confidence, praise, power and control. It these needs are satisfied it gives an individual a sense self-worth and ego satisfaction.

5. Self-actualization Need – Self-actualization is the last need in the need hierarchy. Once esteem need is satisfied, there appears the self-actualization need of human being. It is related to an intense carving for something supreme one wants to achieve in life. It is transcended and related to achieving the very best that may be possible of human endeavour. People set high goals, achieve them and set a higher goals again and to achieve the same by utilising fullest potential. It is related to development of intrinsic capabilities. An individual seeking to satisfy self-actualization need seek situations or jobs that are challenging in nature – achievement of highest value out of the work.

In essence Maslow’s Motivational Theory covers the following.

(a) There are five levels of human needs.

(b) These needs are hierarchical in nature.

(c) A satisfied need is no longer a need. Once that need is satisfied, the next level need becomes stronger.

(d) Needs do not diminish. It is the gravity that changes. Individual strives to satisfy the need that has a strong appeal at any point of time.


Douglas McGregor introduced Theory X and theory Y which are diagonally opposite to each other. McGregor is aware that human beings are rational in their thought process and they are social by nature.

Analysis Paul HERSEY has analysed Theory X and Theory Y. He states that managers who accept theory X assumptions about human nature usually direct, control, and closely supervise people, whereas theory Y managers are supportive and facilitating. We want to caution against drawing such consolation because it could level to the trap of thinking that Theory X is “bad” and Theory Y is “good”.

It is unusual to find exclusively Theory X people or Theory Y people in any organization.

There would always be a mix of both type of employees in varying proportions. Managers therefore will have to tailor their motivational application in appropriate manner suiting

behavioural patterns.

5. Conclusions & Recommendations

Oticon could be used as good example of how the management theories changed over the 20th century. Darwin said that it is not the strongest or most intelligent species that survive but the one which respond to changes quickest. The global business environment is changing faster then ever. Businesses constantly need to reshape their ideas to survive. Organizations need to be transformed not restructured. Kolind was a right leader for what the market as the end of the twentieth century demanded. He transformed Oticon, abolished formal organization, disorganized Oticon and created a spaghetti organization. Oticon had a chance to face the 21st century as a modern company, ready for the new Millennium. To survive the Company needs to stay aware of markets demand and respond quickly and better than competitors. At the same time, management change methodologies will also need to stay ahead to the point where change will be anticipated as a normal part of our modern life.

Evaluation of the Outcomes, and the Present

Today, over two decade after the changes were inaugurated, overall management ideology and practice have largely remained the same, but a number of specific changes have occurred. The project organization has been “professionalized” in the sense that fewer people are now assigned as project team leaders, that project team leading has become a proper career path, and that a training program in project management has been launched — thus making it more selective and exclusive to become a project manager. The role of functional experts has been preserved, but has developed into more traditional business units or staff functions. The ambition of creating a “paperless organization” has proved to be too idealistic, so there are lots of papers to be found in the organization — albeit probably less than in comparable organizations. Lars Kolind, who initiated the radical changes in 1990-1991, retired in 1998 and was replaced by Niels Jacobsen, who had been with the company from 1988 and “co-managed” the company with Lars Kolind until his retirement.


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