A hearing aid manufacturing company

This report explores and explains the behaviour of the employees at Oticon, a hearing aid manufacturing company. Using relevant theories, this report also discusses about the consistency of the approach taken by the company for restructuring and the key issues faced by the organisation due to employee behaviour and the impact of the behaviour on the organisation. Oticon, a subsidiary of William Demant Holding group, is the second largest hearing aid manufacturing company in the world.
The company was founded in 1904 and is situated in Denmark, with its production plant in Scotland. The company’s Danish subsidiaries are in Coppenhagen, Hellerup, Thisted and Snekkersten. The company is widely spread in Europe as well, with its subsidiaries in Norway, France, Holland, Germany, Spain and Switzerland. Outside Europe, the company has its presence in US and Japan as well. The majority of the shares are held by Oticon Trust Fund and that accounts to 75 percent.
Lars Kolind, the current managing director holds more than 5 percent of the stock. The company is popularly known as ‘Spaghetti Organisation’, for its poor management style. During late 1970’s Oticon, including its other Danish hearing aid manufacturers, accounted for approximately 25 percent of the market share in hear aid manufacturing market. There was competition from other Danish hearing aid manufacturers like Wild ex and Danavox. The traditional model, ‘under the ear’, was the success of many European hear aid producers at that time.

The dominance of the Danish manufacturers in United States slowed down due to the entry of ‘in the ear’ hearing aid and grabbed 80 percent of the United states sales by 1983. This dragged Oticon into serious financial problems in 1987. The management followed a status quo approach in managing the company, and they emphasised greatly on shareholders differences of opinion. The company structure with three functional areas lacked interaction. ‘The most appropriate structure is dependent, therefore, upon the contingencies of the situation for each individual organisation’.
-Mullins (2007, pp. 564-566). This is familiar from the Oticon point of view, as the reasons are lack of innovation, ineffective management, complacency and the emergence of innovative competitors. The company understood that the structure to be framed should be more efficient in terms of management, motivation and production. In 1991, Mr. Lars Kolind had replaced the hierarchical structure to project based structure. This will enable each and every employee to get engaged into a project and work in teams. The employee was made to work in more than one project at the same time.
According to Mullins (2007, pp. 584-586) Matrix Organisation structure is a combination of functional departments, which contains permanent staff and can exercise greater line of control, and units that unite various activities of different functional areas in a project, geography or programme. This structure is useful when there is a necessity to process information and necessity to share resources. Oticon has adopted a similar kind of structure where an individual employee has to work in different projects under a project manager.
In general, every organisation, large or small; local, national or multinational; private or public has a structure. There is always a need for the people to know who is in charge of the business and the person responsible in dealing with critical circumstances. This can be achieved through structure. Different firms will be structured in different forms based on their size, culture, history and activities. A large multinational company may have one person as the head of a particular region, whereas a different person as the head of the other region. But the head of the organisation may be different.
A democratic organisation tends to have a flat structure whereas an autocratic business tends to have a taller structure. The structure of the company also depends on the nature of the business. There is a need to have a flatter structure in the organisation as it motivates people, who are treated equal, to come up with their ideas. Mintzberg (1994, pp. 7-9) and Bedeian (1980) argues that there is a need to discuss if the traditional hierarchical structures are relevant in modern business. As successful organisations’ grow, they tend to employ more people to meet their extra work.
These resources may not be play a pivotal role in the long run and as a result of this, the company reviews its structure. Hierarchical structures contains long chains of commands which causes poor communication and poor coordination, which left unchecked will cause diseconomies of scale Senior (2002, pp. 586) states that matrix organisation relies heavily on teamwork, with managers requiring high-level human management and behavioural skills. Oticon was moved to Hellerup and the new structure was implemented on 8 Aug 1991.
The new structure implemented, has had a significant impact on all aspects of the organisation. The usual and well known habits and routines were changed. However, there was some resistance to the change from the employees. Oticon tried to minimise the resistance by keeping the employees updated about what was going to happen in the next three years. The managers informed its employees about the new policies adopted and openly discussed about the benefits, and the reasons for implementing the change. Many employees had actively participated in planning of the company.
The company mandated all its employees to use a personal computer (PC) and they were encouraged to carry their PCs to their home such that they could gain some expertise. The attrition rate in the company had slowed down in the initial three months of implementing the change. There is some kind of resistance from the employees of Oticon with the implementation of new change. This resistance may be because of lack of trust in the management or their personal opinion on change or misunderstanding created because of miscommunication about the change.
Though, this concept seems to be a totally new experience, there were some employees who were not comfortable with the change implemented. Mullins (2007, pp. 740) suggests a framework to managers, so that they can understand what changes the organisation is capable of handling, and he identified three factors that had a significant effect on organisational responses to change. Generally the change in an organisation is led by the front line staff where as the senior managers play the role of facilitators in organisational transformation. Managerial behaviour plays a pivotal role in the implementation of the change.
Some employees may respond positively, or show interest to the change. But there are concerns where the employees are mandated to participate even if the employee is not willing to cope with the change. This may lead to further frustration and insecurity in the employee. To solve this, a manager needs to analyse the effect of change on each employee and take special care in dealing with the dis-satisfied employees. He should try to explain the potential benefits in implementing the change before the dissatisfaction in one employee might spread to the other employee.