Spaghetti Organizations: Oticon’s revolutionary organization redesign & lessons learned for advertising agencies.

Prior to Rotman, I worked at one of Canada’s largest advertising agencies with well over 700 employees. Despite being a knowledge based organization, we were extremely compartmentalized and hardly spoke to one another. I consistently felt overworked and undervalued. Since leaving, I have struggled with understanding why my colleagues and I were so unhappy and why management was so blind to the problem. This week I finally had a breakthrough in Organization Design when we discussed Oticon, another knowledge based organization.

Lars Kolind
When Lars Kolind arrived, Oticon was clearly in crisis. The one time leader in hearing aid design and manufacturing was losing market share in Europe and North America. To make matters worse, they were struggling with innovation and design. The balance sheet showed a bleak future.

Kolind knew that dramatic changes were necessary to revitalize this company. Interestingly, the bold moves he took were not undertaken immediately. When Kolind arrived, Oticon was organized by product line, much like any other manufacturing firm. With a long history, the formal, compartmentalized culture was well engrained.

Short Term: Kolind’s first priority was cost-cutting. If the company was to survive, Kolind had to focus on the balance sheet. He eliminated inefficiencies by reorganizing by function which allowed for more economies of scale.

Long Term: Oticon is first and foremost a knowledge based organization. They stay ahead of their competition by constantly discovering new technologies and translating that knowledge to their products. As Oticon was struggling with R&D, Kolind took a bold, unconventional approach to design. He recognized that knowledge organizations are only as successful as the people in them, thus he reorganized in a way that both allowed knowledge transfer, broke down silos AND put people first.

The Spaghetti Organization

Upon reading about the resulting ‘spaghetti’ organization, my immediate reaction was, ‘this isn’t going to work’.

Employees were stripped of their formal job functions, rather, they were given very broad job descriptions and were encouraged to become far more well-rounded. The formal structure was completely decimated, instead they became project based, with employees choosing their own projects. The entire office was reorganized with furniture on wheels so that it would be mobile, workspaces could be changed at a drop of a hat. The most surprising development however, was the freedom offered to the employees who were free to set their own hours and vacation time. How on earth could a company operate without any accountability, you might ask? Well, performance and development were closely monitored and encouraged via monthly performance reports.

Lessons for Advertising Industry
The advertising that I worked at was organized by first and foremost by function. Within that function, we worked in groups by product (or client). For instance, I worked under a Vice President who was responsible for several of our major clients.

From what I have been able to glean from friends in the industry, this design is typical of large, full-service advertising agencies.

Could the Oticon ‘spaghetti’ organization design work for a large advertising agency?
1) Project based vs. function based (loose formal structure)
2) Broad job descriptions vs. Highly specialized
3) Employee freedom vs. 9-5ish in the office

I think the answer is yes and no.

Benefits: The project based approach makes a lot of sense, with the caveat that some continuity be maintained in order to develop a close client relationship. Additionally, employees believe it is necessary to change agencies in order to maintain fresh thinking. With the ability to constantly change projects and clients, attrition for this reason may be avoided.
Broad job descriptions would also be possible. For instance, there is currently overlap between many of the functional areas. For instance, media planners must develop a deep understanding of the consumer. This skill is also present in branding and relationship management (CRM).

Additionally, freedom to set your own hours, with the understanding that performance is constantly under review, is possible thanks to technology. In fact, there is an entire agency that exists using this premise. The Cloud Advertising Agents do not have a fixed office or hours. The entire organization operated using “free agents” on a contract basis.

The most interesting prospect of this organization design is raising the P&L to the agency level as opposed to the functional level. At times when I was working, the functions would fight over compensation. Splitting the compensation across divisions had several unfortunate drawbacks. Small cross-functional projects were rejected, or operated at a loss for one division. Staffing was inadequate in one or more divisions which lowered the quality of the work, decreasing client and employee satisfaction. Raising the P&L to the agency level may make more projects attractive and allow for adequate staffing.

Question Marks: It is not unusual for a company to employ multiple advertising and communications agencies. For instance, you will see Coca-Cola on multiple agency rosters. I’m unsure whether a spaghetti organization would attract a larger portion of the business from these clients or whether it would make a spaghetti organization less attractive.

Overall, I think that the Spaghetti organization structure shows promise for advertising agencies, and I don’t doubt that there are many that operate under this premise. For the organization that I worked at, however, as it is not in obvious crisis, I doubt management will undertake such a dramatic change. That being said, cracks are beginning to show in the once mighty ad giant. The question remains, is it smart to wait until the point of near bankruptcy, like Oticon, before making a bold change for the better?

Strategy >> Winning By Design

I love how design influences all sorts of business. This month's Strategy Magazine focuses on a classic example: Retail.

Words that should be stricken from your business vocabulary

Business buzz words are annoying. They are confusing, unnecessary, and distracting.

Our guest speaker was clearly an expert in his field. His firm is called in when a firm needs to "re-organize". He is the consultant the manages people - and it shows. On this particular evening, he has approached the class presentation in a way that will garner our respect, and yet maintain a friendly, approachable demeanor. He is dressed in a suit, but the jacket is tossed on the back of the chair - much like a student would discard his jacket after a class presentation. He is wearing a button-down shirt, but it's a friendly blue colour, not the starched, snooty white that you commonly see. His sleeves are rolled up, like he's ready to dig into the work. He screams, "I'm a hands-on manager". Everything about him is likeable.

And then he speaks...

"Our job is to start those dialogues..."
"In all the dialogues that we have..."
"How do you dialogue about the future?"
"The answer, is more dialogues..."

And his colleague chimes in, "it all comes back to the dialogue..."

STOP! I can't take it anymore! What is this, "dialogue" that you speak of? I can't focus on anything other than the ridiculous use of this word. When did it become uncouth to simple say you 'spoke with' the team? A few other vocabulary suggestions.

Next time you want to have a 'dialogue' with someone, try having a discussion instead. Try talking about the future Think about having a quick conversation. Heaven forbid you should chat with one another.

While I seethed in my chair, they continue dialoguing with one another.

Blue Shirt: We actually dialogue with teams"
Colleague, nodding in agreement: "We want people to be dialoguing together"

When airlines do silly things

United Breaks Guitars: A clever 3-part video series released on YouTube, created by a Canadian musician in response to an airline failing to respond to breaking a guitar.

We discussed this case in the context of the effect of social media on a brand - in this case, United took a hit and was publically shamed for its poor response.

Today I was reading the Huffington Post and came across this headline:

OWNER OF A KITTEN THAT DIED ON A DELTA FLIGHT OFFERED $50, PLUS AIRFARE

Will airlines never learn? United breaks a guitar and is subjected to public scathing. Did Delta really think they would escape with an impersonal 'sorry' and FIFTY BUCKS?

Schulich & Rotman, UNITE

I often get asked which business school has the better marketing department. Having never taken a single class from a Schulich professor, this is a tricky question to answer. I generally respond by recommending that potential students attend a guest lecture and decide for themselves. I am clearly biased, having enjoyed every marketing class that I attend.

I was surprised a few weeks ago to find that one of the new faces in my Integrated Marketing Communications lecture, isn't a Rotman student. Nor is she a student in another University of Toronto faculty... She is an MBA student at Schulich (York University). Apparently, Schulich students are able to attend a lecture at another university for credit. A mini-exchange. I was surprised that Schulich didn't cover similar course material - advertising is a central part of marketing after all.

I don't judge. It is lovely to expand on my network. Particularly as Rotman/Schulich are rarely on the same team. Our last 'networking' event was a hockey game where Rotman won 5-3 (hurray). The time before was at MBA Games, where Schulich had the upper hand.

In class we are all equal. Who says business schools cannot get along?

Fight or Flight: Applicable to MBA Class Discussion

I am flustered. My heart is racing. My underarms are unnaturally damp, and yet, I’m shivering. My hands are cold and clammy.

A colleague makes a simple remark about class, and I jump all over them – my voice is raised in what many people would describe as a shout. I realize that I’m yelling, and then I run away.

My stomach is growling, but I feel like I might throw up, my insides are all in knots.

I drank, not one, but two giant coffees in order to boost my energy level, low because I slept fitfully last night, tossing and turning all night, waking every hour in panic because I don’t want to be late for class (ironically causing me to wake late, thus making me late for class).

My bladder feels like it’s going to explode every five minutes (thank you coffee).

I can’t concentrate. My thoughts are racing. I st... st... stutter.

I think I’m having a Fight or Flight response to my Creative Industries Class.

For evidence, I turn to the MBA source that no one wants to admit to using: Wikipedia. Fight or flight is a biological response to extreme stress.

The symptoms:

Acceleration of heart and lung action (I definitely feel like I’ve run a marathon, but I’ve been sitting all morning)

Paling or flushing, or alternating between both (thank you to the person that invented blush – you are a lifesaver!)

Constriction of blood vessels in many parts of the body (I am wearing mittens indoors)

Relaxation of the bladder (if class had lasted another 5 minutes, I think this would have been a check)

Auditory exclusion (I do seem to have difficulty following along in class....)

Shaking (please make this shivering stop!)

This is ridiculous – class ended more than 2 hours ago!

How on Earth has this happened?

Am I intimidated by my professor and his so-called draconian leadership (he is rather scary with his out-of-the-blue ‘what does this obscure term from the reading mean?’ cold-calling and his eloquent way of both acknowledging a fledgling attempt to challenge an existing thought with a gentle, yet thorough reminder that our thoughts are naive, and incomplete).

Have I confused an interest with the topic with the ability to excel at the course material?

Perhaps I have allowed my moderate amount of success in previous electives to boost my self-confidence to unnatural levels. Perhaps a few As, and dare I publically boast, a smattering of A+ grades have led me to believe that I actually DO know something.

Maybe I am a ‘smug MBA student that thinks she knows everything’ and this class is the way to bring me back down to Earth (not very gently might I add).
Regardless of how this has happened, my heart is still racing, my body is still shaking, and I am still sweating.

I think I need a hug.

Enjoy art - for less than $1000!

Last week a contemporary art enthusiast visited our class to discuss his new club in Toronto. The mission: To make GOOD Art accessible to ordinary people & give a 'behind the scenes' look into the art scene. For a bargain price of $200, members are invited to exclusive displays, lectures with the artist & visit to the artists' studio. Sounds like a great deal, and I nearly joined. I won't share the name of the individual, nor his club, as the following is a one-sided, somewhat scathing review of his talk.

The lecture was a BIG fail.

He began with a disclaimer - that he was biased toward visual art. Fine. Understood. He then proceeded to systematically insult me in every possible way. From claiming that philanthropists only donate to the art because their profession isn't important, therefore they will only be remembered by having their name written on the side of a building.

To looking down his nose at those of us who "cannot name even 5 contemporary artists" (TRUE) and that we likely don't have worthy art collections "how many of you own a piece of art worth more than $1000?" (NOPE).

To his disdain for Leslieville who voted against a Wal-Mart development in their neighbourhood. "Instead of a beautiful shopping centre, the neighbourhood will be getting car dealerships. It's a real shame."

The point of this rant is to share that you can now enjoy visual art, for the bargain price of FREE! Google has launched Art Project

Granted, you will not be able to visit the artists' studio (most of the artists are dead after all), however, you may ENJOY the works from home, with little scathing remarks from snotty art critics. There is nothing like the real thing (believe me, anytime I travel, I always visit the museums), but if you like art, but not enough to be insulted by your lack of knowledge, this is a great entry point. Well done Google!