CASE 9

BACKGROUND
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98 Casesin Organisational Behaviour
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~. throughout Europe including locations in Norway, Italy, Holland, France,
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Spain, Germany and Switzerland. Outside of Europe Oticon has sub-
I sidiaries in the US and Japan.
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In total the company has some 1,000 staff, the majority of whom are "
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employed in the Danish subsidiaries. Work at the head office, employing :~
130of the staff, coversa range of activities including new product research, j
product development and the marketing and promotion of both new and I..i~
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existing
By 1979products.
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' 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 compa-
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nies (particularly Oticon and Danavox) competing in the US market. By
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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
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new and hard competition in the American market particularly from the

StarkeyCorporation.

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Oticon Spaghetti for the ears 99

:e, THE SITUATION

.b-
This setbackled Oticon into seriousfinancial difficulties in 1987,but within
lfe
two years - at the beginning of 1990- it was back on the money-making
ng track. During this period Oticon undertook a thorough review of its opera-
ch, tions in order to identify what could be done to make the company more
nd competitive and, thereby, improve its market position. It was decided to
make the company more serviceoriented and customer focused.The over-
all objectiving was to make the company 30 per cent more efficient in three
.ng
ish years.This resulted in a new company structure with the focus on making
the Oticon an adaptable service organisation with the individual employee at
has
the centre.
Oticon introduced its restructured organisation during 1991and seems
by
md
well on its way to achieving the ambitious goal. In 1992Oticon had a total
the
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 pre-
was
Tere
vious 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.
wer
As a reflection of its growing confidence,Oticon is trying to improve this
unit
market position by introducing a new hearing aid, which automatically
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(without volume control) adapts the sound level to fit the noise of the sur-
5 of
roundings. This new type of hearing aid is produced by Oticon in both the
ver,
'behind the ear' and the 'in the ear' models.
with
In the three year period up to 1991Oticon has been through an almost
!Ved
total reconstruction of the company. During this organisational develop-
ment process there have been some changes in management and staff
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reductions have taken place. The new structure was implemented on 8
i the August 1991,and on that day everyone started in a completely different
t the
workplace (Oticon having moved into new surroundings in Hellerup).
laIIy The processthrough which Oticon has developed has had a significant
, but impact on almostall aspectsof organisationalbehaviourin the company.This
transformation did not of course come about without some resistanceto
~iped change amongst the employees.After all, the restructuring meant a clean
maid breakwith most of the usual and well known routinesand habits.In planning
aring for the new structure, the company sought ways of involving employeesin
aring the changeprocess.
) and The employeeshad beenkept informed about what was going to happen
.mpa- during the three year period leading up to its implementation. Managers
~t.By openly discussedthe reasonsfor changes,how it was to be done and the
anish possible consequencesfor employees.Many of the employeeshad partici-
:acing pated in planning and executing the restructuring of the company.
mthe Meetings were held with employeesso that up-to-date information could
be passedon and any questionsdealt with, firsthand, at the time. The new
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100 Casesin Organisational Behaviour

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
II 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 com-
fortable with the new world of Oticon.
The developmentsat Oticon have created a project-organisation- a so-
called 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 com-
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mand, 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.
If 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
iQ routine administrative tasks which have to be done in support of the pro-
ject 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 cam-
paign 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 automatichear-
ing aid, is often tied together through a larger project. The responsibility of
tbp;('()-ordinating manager is to overseethe marketing of the product and

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 Oticon- Spaghetti for the ears 101

ch the timing of its introduction into the market.

us The selection of the project leaders takes place in several ways.
ne Sometimesthe employee who has proposed the project is chosento lead
at the project. At other times senior management suggeststhe person they
Ine feel will be best suited for the job and a range of criteria are used to make
.on the choice depending upon the nature of the project. Typically these
m- include, technical skills, experience,leadership ability or corporate skills
combined with the fact that the person has time availablewhen the project
so- is due to commence.
ers The project leader is free to managethe project group in the manner he
:'he or she prefers. This meansthat the project groups are run in various ways.
Im- Somegroups meet with all the project memberson a regular basis.Others
am only meet when they find it necessary.Some groups make all decisions
!nt. jointly, while others leave the decision making to those directly involved
on with a particular aspectof the project. Projectmanagersare responsiblefor
'ing choosing the membersof eachproject group. The usual practice is simply
to go and ask, and try to persuadepeople to join the project. This informal
11an processensuresthat the membersreally want to be involved in the project
ects (otherwisethey could have refused),but it also meansthat someemployees
:her are more in demand than others. Oearly it is more beneficial for an indi-
ther vidual employee's career to be involved in a successfuland high profile
irle' project since they may then be noticed by other leaders and be invited to
.ove join other important projects.
19 a To obtain good project members, resourcesand attention from the top
management,project leadershave to be very good in promoting their pro-
cted jectswithin the organisation.If they are successfulin the promotion, project
ntly leaderswill get to the top of the priority list and are more likely to be suc-
!Ver, cessfulin obtaining scarceresourcesfor their projects.
~r of The larger projects often start with a team meeting with the purpose of
pro- to getting to know eachother and the objectivesand the scopeof the pro-
and ject. Sometimesproject members meet together for a couple of days at a
:\uch 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
0 the markets.This meansthat the project group may exist for severalyears,and
pIe a that the project memberscover a range 6f other job-functions in addition to
cam- those relating to their own specialism.There are a range of different pro-
!rger jects in progress at the company at anyone time with different timescales
)duct attached to each.The product development processfor example,typically
hear- lasts for 3 to 5 years and Oticon has about 10 to 15 larger product develop-
ity of ment projects running simultaneously.Other projectsare of a much shorter
:t and
- duration lasting a few weeksor months.
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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

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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 success-
fulThe
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 I
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 develop-
ment 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 demon-
strate 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 1 Critically evaluate the reasonsfor Oticon's successin minimising resistanceto

change?

3 What are the advantages and disadvantages of the spaghetti-organisation

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as used at Oticon?
4 What can Oticon do in order to eliminate - or at leastminimise- the disadvan-
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tages of its spaghetti-organisation?

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 Oticon - Spaghetti for the ears 103

to REFERENCES
:he Peters, T. J. (1992) Liberation Management, New York: Albert A. Knopt.
ale
~to
he RECOMMENDED READING
~ss-
Mintzberg, H. (1993).Structuresin Fives,New Jersey:Prentice-Hall.
Mullins, L. J. (1993).Managementand OrganisationalBehaviour,London: Pitman.
are Robbins, s. n993). OrganisationalBehavior,New Jersey:Prentice-Hall.
ger Peters,T. n992). LiberationManagement,
New York: Alfred A. Knopf.
are
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