Compare and contrast two organisations – (Oticon and BE) (1200 words)
This part of the assignment requires you to compare and contrast two organisations, based on the case studies provided at the end of this document. You are expected to use academic concepts, theories and the reading to do this. In particular you should look at them in terms of
Organizational Culture
Organizational structure
Motivation and job design
The two case studies at the end of this document
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Appendix 2 Case studies
Case Study 1: Barking Engineering Ltd (BE)
Barking Engineering (BE) Ltd. was founded in 1897 by Ebenezer Ewell as a manufacturer of mining equipment. Over the next few decades it evolved into a renowned producer of motor components. The firm is family controlled to this day (owning a 51% stake); the grandson of the founder Sir Basil Ewell is the Chairman of the board of directors and is also Conservative MP for Lower Crackden. Sir Basil’s two sons are in their 30s but have chosen not to enter the family business. The BE plant at Barking employs 493 staff, the majority of whom work on the production side of things (the ‘shop-floor’), the rest in managerial and clerical roles such as finance, marketing and human resources. The plant is highly unionised with two trade unions recognised (TGWU for manual employees; AMICUS for clerical and managerial employees). There is quite a long history of poor relations between management and the unions which periodically results in industrial action. The principal problem seems to be one of trust between the management and the workers.
The managing director is George Mitchell who is due to retire sometime soon. His motto is: “If it ain’t broke, don’t fix it!”. He tends not to venture on to the shop-floor very often, preferring to leave that side of things to his operations director and good friend Mike Bissell who has been with the firm for many years, having worked his way up. Below Bissell is the long-suffering production manager Ahmed Khan, a young and highly qualified engineer who has experience of working in German and Swedish plants.
Ahmed has many good ideas to improve the performance of the business but has encountered difficulty in getting them taken seriously. In particular, he is frustrated by the lack of effective communication channels between sections of the business. One of his ideas is to create a more integrated and flexible production system that is more tailored to the specifications of individual customers. The Marketing Department handle customer liaison (which usually involves rounds of golf followed by long lunches). Ahmed rarely speaks to anyone in Marketing as it is the firm’s procedure that interdepartmental liaison should go through the directors.
In recent years the company has invested in new computerised production technology in order to keep pace with stiff competition in the global market place. This has prompted the decision to reorganize the way in which work is organized on the shop-floor. Seeing the success of self-managed teams (SMTs) in other equivalent organizations, BE has decided that this would be a good model for their plant. After protracted negotiations with the trade unions, six teams were created with between 12 and 50 members in each. The teams are structured as follows: a team supervisor has overall responsibility for the SMT. The product co-ordinator’s job is to ensure the supply of raw materials and parts to meet the SMT production targets. The charge-hand acts as ‘progress-chaser’. Below the supervisory grades come a hierarchy of skilled manual grades reflecting different levels of training, experience and pay. The setter, for example, is apprentice trained and is paid a skilled rate to set up the machines for the semi-skilled operators. Semi-skilled workers receive little training and are paid little more than the minimum wage. The tasks carried out by the semi-skilled workers are narrow and repetitive. The fact that the skilled and more experienced workers are able to confine themselves to more fulfilling work is the source of some resentment.
Employee turnover is high at BE, despite being located in an area of above-average unemployment. Absenteeism is also a problem. Human Resource Manager Jim Kirkland is philosophical: “What do you expect me to do about it? It’s up to the team supervisors to man-manage (sic). I can’t help it if they end up with a bunch of useless idiots working for them! Also, the unions won’t let me sack them!”. Kirkland also recently had to deal with a complaint from a female member of staff who was concerned about the display of ‘Page 3’ photographs of topless women in the canteen. She was told: “Oh come on, Love! It’s only a bit of fun!”
Sales have started to decline and BE is beginning to struggle to meet the orders it has on its books already. George Mitchell is overseeing the finishing touches to his villa in Spain. Mike Bissell is preparing his CV to go for the soon to be vacant MD’s post (he spoke to Sir Basil over dinner at his St James club and reckons “it’s in the bag”.). Ahmed Khan is in the process of being head-hunted by a leading Japanese engineering firm.
Case Study 2: Oticon
Oticon is a Danish manufacturer of hearing aids that, in 1988, was being seriously challenged by large competitors, such as, Siemens and Phillips. Incoming CEO Lars Kolind radically restructured (‘disorganised’) it, to create what he termed the ‘spaghetti organisation’. The company had been very bureaucratic. Vertically, it had a tall hierarchy with six levels of management. Horizontally, it was separated into divisions, and the two main ones – Electronics (product development) and International (sales) – communicated poorly with each other. Within each division, employees’ work was organised around specific departments and tasks.
Kolind re-organised the work around projects instead of divisions. Project leaders (basically, anyone with a compelling idea), were appointed by a 10-person management team (the last vestige of the company’s previous mechanistic structure). Project leaders competed to attract resources and recruit people to deliver results. Employees decided whether or not to join, and could only do so with the agreement of their current project leaders. The company had a hundred or so projects at any one time, so most people worked on several at once. Additionally, they needed to be multi-skilled, so a software engineer had also to develop skills in marketing and aspects of production. Project owners (management team members) provided advice and support, but made few actual decisions. As a consequence, Oticon’s organisation structure became a fluid affair with no departments or divisions which could encourage local interests, impede communications, or make adjustments in workloads. Instead, project teams formed and reformed as they were needed. The potential problems of this ‘managed chaos’ were kept at bay by the company having a clear purpose and a set of common values, which all employees knew about and subscribed to.
This allowed Oticon to dispense with the traditional features of a mechanistic structure. There were no job titles, and employees did whatever they felt was appropriate at the time. The company did not abandon physical space completely, and continued to use its headquarters building near Copenhagen, where about 120 staff were based. However, within the building there were few formal offices, only work stations with networked computers. These were often deserted as staff frequently moved around the building. Each employee has a small personal trolley for their personal belongings which they wheeled to wherever they were working on that day. The building also had a conference room for teams to meet for problem-solving and brainstorming. Oticon’s culture continued to value face-to-face contact, but did not dictate either its form or location. Staff members used mobile phones and e-mail to participate in the activities of their teams, while away from the office. The environment stressed motion and activity, rather than sitting at desks waiting for something to happen.
Oticon’s organisation structure reflected its own needs and own culture, and mixed virtual and tangible elements which allowed the maximum use of knowledge and human capital, while, at the same time, increasing efficiency. Over the first four years of its new, organic structure, Oticon doubled its size, and its operating profits increased by almost 1, 000%. It had 1, 200 staff in Denmark. Kolind noted that, ‘hardware companies have organisations that look like machines; a company that produces knowledge needs an organisation that looks like a brain, i.e. which looks chaotic and unhierarchical’. However, in 1996, Oticon incurred a number of unanticipated costs, and reversed its radical restructuring. These included problems associated with co-ordination, employee time allocation, and the demotivating effect of managers having to intervene after projects had been approved. Additionally, management sought to align new project initiatives more closely with the company’s strategic goals. The company partially abandoned its spaghetti organisation, and gradually adopted a more traditional, matrix structure. The company is still characterised by considerable decentralisation and delegation, but many of the key elements of the spaghetti organisation have now been abandoned.
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