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Abstract Family-owned companies in a modern business setting have a challenge of preserving their corporate identity while at the same time developing their business. This is also the case for the LEGO Group, who after several years of financial losses and downsizing, is now experiencing great success with a product range different that what people normally associate the company with. As a result of this development, this thesis will examine how the LEGO Group manages to “(...) implement its company philosophy of play and creativity in its organization, while at the same time focusing on aspects of innovation?” . In order to fully examine this problem statement, the organizational organizational culture of the LEGO Group will be analyzed. This is done by analyzing the organizational structure, the vision and mission statement, the organizational communication, the organizational culture, and the – it is possible to motivational factors of the organization, in order to see how – how – or or even if – it incorporate aspects of a traditional business history in the form of core values, with an important element of a modern business setting, innovation. As a basis for the thesis, a theoretical framework of methodological hermeneutics is used. This theoretical approach makes it possible to understand the meaning of documents from the world of the sender, in this case the LEGO Group. Thereby, a more thorough analysis of the organization can be made and presented. In addition to the methodological hermeneutic approach, several several theorists are used to support the analysis of the organization of the LEGO Group. Katherine Miller‟s overview of the development in organizational management and communication is used to show the development of the LEGO Group organization. To analyze the organizational culture, the theory of Fons Trompenaars and Charles HampdenTurner, as well as theories of Ian Brooks, and Charles Conrad and Marshall Scott Poole are used. These theories account for the cultural complexity within the organization, and investigate the organizational culture as it is today but also where it is moving towards, i.e. a future perspective of the organization of the LEGO Group is considered. Finally, the motivational factors within the organization organization are analyzed by the use of David McClelland‟s needs-based motivational theory. As the thesis is based on a methodological hermeneutic approach, a qualitative method in the form of an analysis of documents is used. These documents include internal documents from the organization of the LEGO Group as well as journal articles and academic books covering the topic. The thesis is structured with an introduction, where the motivation for the thesis is stated, as well as the methodological approach is presented. A section covering the theoretical background of the thesis with important theories, and a company description, leads to the core body of the thesis, the t he analysis of the LEGO Group organization. The following discussion part is based on the findings from the previous analysis but also debates other issues and solutions. Finally, an overall conclusion sums up the entire thesis. The analysis indicates that the LEGO Group successfully manages to implement its core values while simultaneously handling the innovation aspects of the company. It has however required some organizational changes in order to create an organizational setting, where both tradition and innovation are emphasized. In addition, a change in the product range has also taken place, in order to fully implement the technological development in the products of the LEGO Group. Despite this fact, it is still stil l the core values of quality, play and creativity, which are imbued in the organization. The future of the LEGO Group is partly based on the involvement of committed consumers, and the question is how their influence will affect the
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organizational symbiosis of the core values and innovation. The LEGO Group has a great challenge ahead of it, in the form of constantly developing new products and the product range to satisfy external stakeholders, and doing so in a way where it is possible to incorporate the core values of the organization.
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Table of content
1. Introduction (MTJ & SBH) ............................................................................... ......................................................................................................... ..........................5 1.2.1 Development of hermeneutics ................................................................................................................... 6 1.2.2 Relating hermeneutics to the problem statement................................................................................. 8 1.4 Structure of thesis ................................................................................................................................... 9 1.5 Delimitation........................................................................................................................................... 10
2. The LEGO Group - The Company (MTJ) .................................................................... ............................................................................ ........ 11 3. Theoretical background (MTJ & SBH) ......................................................................... ................................................................................. ........ 13 3.1 Organizational management (MTJ)................................................................................................ 13 3.1.1. Classical approach...................................................................................................................................... 13 3.1.2. Human Relations approach ..................................................................................................................... 15 3.1.3. Human Resources approach .................................................................................................................... 16 3.2 Organizational culture – theoretical background (SBH)........................................................... 17 3.2.1 Trompenaars and Hampden-Turner ....................................................................................................... 20 3.2.2 Four Corporate Cultures ............................................................................................................................ 22 3.2.3 Talking national culture?........................................................................................................................... 23 3.3. Motivation - McClelland’s needs-based motivational theory (MTJ) ..................................... 23
4. Organizational analysis of the LEGO Group (MTJ & SBH)
........................................... 24
4.1 Identity crisis (MTJ) ........................................................................................................................... 25 4.2 Organizational structure (MTJ) ...................................................................................................... 26 4.3 Vision and Mission statement (SBH) .............................................................................................. 29 4.4. Organizational communication (MTJ).......................................................................................... 31 4.5 Organizational culture (SBH)........................................................................................................... 34 4.5.1 The Cultural Web byJohnson & Scholes c ombined with Organizational Symbolism by Conrad & Poole....................................................................................................................................................... 34 4.5.2 Four Corporate Cultures:........................................................................................................................... 38 4.5.3 Subcultures .................................................................................................................................................... 42 4.6 Motivation (MTJ) ................................................................................................................................ 43 4.7 Conclusion (MTJ & SBH) ................................................................................................................. 47
5. The future of LEGO: can core values from the 1930’s exist in a modern setting? (MTJ & SBH) ............................................................................... ............................................................................................................................................... ................................................................ 48 6. Conclusion (MTJ & SBH) ..................................................................... ......................................................................................................... .................................... 53 7. References ....................................................................... ..................................................................................................................................... .............................................................. 55 7.1 Books....................................................................................................................................................... 55 7.2 Online materials ................................................................................................................................... 56 7.3 The webpage of the LEGO Group................................................................................................... 57
Total characters: 98.641
Maria Tang Jansen (MTJ): 49,346 Sascha Brinch Hummelgaard (SBH): 49,295
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1. Introduction (MTJ & SBH)
This thesis will look upon how the LEGO Group® implements its company philosophy, philosophy, which focuses on the following six brand values; imagination, creativity, fun, learning, caring and quality. Additionally, it will be analyzed how innovation practices impact upon both the philosophy of the LEGO Group but also the organization itself. This will be done by looking at the organizational structure, the vision and mission statement, the organizational communication, the organizational culture, and motivation factors in the LEGO Group.
The LEGO Group is an international company of Danish origin and one of the world ‟s largest toy manufacturers. It has a long history and a brand that i s widely known throughout the world. The philosophy is an important characteristic of the company and is used to differentiate the LEGO Group from competitors. In order to fur ther strengthen its competitiveness, the LEGO Group has focused on innovative initiatives, which have expanded the brand to cover new areas of the toy industry. Thereby, the company has chosen a two-pronged strategy to profile itself, both internally and externally.
1.1 Problem statement
It can be difficult for a company to brand itself as innovative while at the same time staying true to the core values founded in the organization of the company. The LEGO Group has a responsibility to not only consumers but also employees of successfully developing the company while incorporating its history. Therefore, this thesis will examine the following statement:
How does the LEGO Group implement its company philosophy of play and creativity in its organization, while at the same time focusing on aspects of innovation?
1.2 Methodological approach
This thesis is based on the internal organizational perspective of the LEGO Group, where the problem statement is being examined by an analysis of documents concerning the internal
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organization of the company. This approach matches a hermeneutic view, more specifically a methodological hermeneutic view, where the aim is to understand the meanings of a text from
the sender‟s point of view. Hermeneutics is an interpretation technique, which interpret the intentions, feelings and experiences of humans. The social world is a text and reproduces meaning. Automatically, people have an opinion about others through their appearance and acting. Contrary to both positivism and critical rationalism, where focus is on the world being constructed of measurable facts, the key idea of hermeneutics is a world constructed by meaning. This difference of explanation versus understanding is based on the f act that hermeneutics is a human science, while the others are natural sciences (Kure, N. (2008). Philosophical hermeneutics [PowerPoint Slides]. Retrieved from campusnet.asb.dk).
There are five main features that distinguish hermeneutics from other scientific theories. Firstly, as mentioned above, hermeneutics focuses on understanding , not explaining texts. Secondly, hermeneutics is about understanding the meaning and the purpose of human l ife, whereas natural science only deals with explanations. As a third feature, hermeneutics works from an internal aspect, meaning that the human culture and history is tried t o be understood from within. This is a great contrast to the natural scientific approach, where objects are examined from an external aspect. Fourthly, the methods of hermeneutics are also dealt with from an internal perspective, i.e. it is a use of more intuitive methods with a focus on, for example, empathy and identification. Lastly, in contrast to natural science that often progresses by looking to the future for knowledge, hermeneutics often builds upon the past, e.g. there is still a great influence by Ancient writers such as Plato, Aristotle, and Cicero (Sherratt, 2005, p. 19).
1.2.1 Development of hermeneutics Hermeneutics is one of the oldest traditions in the humanities and can be traced back to the
ancient beginning. Back then the Gods and their messages were seen as a vital guidance to life by humans. The god Hermes was the messenger and brought messages of guidance to humans in their dreams. It is in this interpretation process of these messages, that proof of the first use of hermeneutics is found.
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There is a historical depth and complexity of hermeneutics, which has resulted in many different branchings within the field. Sherratt (2005) argues that “(...) there are, very broadly speaking, two main groups approaching hermeneutics” (p. 20). One group merely focuses on contemporary hermeneutics, i.e. hermeneutics after the Reformation. The other challenges this view and emphasizes the historical depth of hermeneutics. Sherratt (2005) argues that her “(...) overall account of hermeneutics is historical” (p. 22), and furthermore states that “it is important, even for those with contemporary interest, to be aware of the biblical t radition as part of the West‟s intellectual legacy (...)” (p. 40). However, as this thesis has its starting point in methodological hermeneutics, biblical hermeneutics will only be covered briefly, as methodological hermeneutics first emerges after the Reformation. The period of Ancient times, was followed by a long period, where the primary concern was the Bible. Focus was on an interpretation of the sacred text believed to contain the complete truth for human life. Through biblical hermeneutics, the approach to interpreting the Bible changed greatly from perceiving the Holy Book as actual words of God to rather being human texts referring to God. The Reformation resulted in changes for hermeneutics, as the Church was suddenly challenged. Texts were no longer only written in Latin, which gave more people the opportunity to interpret them. Additionally, the Church lost some of its i mportance, and a focus on disciplined faith and a more individual approach to reading the scriptures emerged. Later on, in the early 19th century, the German philosopher and Romantic Friedrich Schleiermacher, who is seen as the creator of modern hermeneutics, introduced a new form of hermeneutics. Due to his Romantic beliefs, Schleiermacher was very passionate about t he uniqueness of individual expression. Sherratt (2005) states that this fact represents “(...) a seminal shift: understanding moved for the first time away from finding an absolute truth, t o centring upon issues of individual creativity.” (p. 59). It was important to Schleiermacher to understand from a book exactly what the author meant subjectively. This led to the development of a new form of hermeneutic practice, where Schleiermacher focused on two key elements: interpretation through a grammatical and a psychological element. These elements were looked upon in relation to the so-called hermeneutic circle, which Schleiermacher saw as a methodology of interpretation.
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The hermeneutic circle is about understanding the text as a whole, and it requires the reader to analyze the parts by relating them to the unit. Schleiermacher distinguishes between two dimensions of the circle; the before-mentioned grammatical and psychological dimensions. As stated by Sherratt (2005) “the grammatical element was a technique that addressed the practice of how to interpret the language and form of the text. The psychological dimension, meanwhile, was concerned by gaining access to the author ‟s intentions and meaning” (p. 59). In the grammatical dimension, things like genre, language and the body of the work by the author were taken into account. The psychological dimension was more concerned about biographical details, the cultural and historical context and the identification with the author. (Kure, N. (2008). Philosophical hermeneutics [PowerPoint Slides]. Retrieved from campusnet.asb.dk). Schleiermacher considered both elements to be equally important for the interpretation process.
1.2.2 Relating hermeneutics to the problem statement When interpreting the documents of the LEGO Group, it is also important to keep the
hermeneutic circle in mind. As an interpreter one must reach the understanding of the texts through a referential process, in which a comparison of what is known and what is not known takes place. The interpreter should move back and forth between the parts and the whole. In the case of the LEGO Group, an example of an important part to consider in order to reach a full understanding of the whole, will be the traditions and the history of the company, which still play an essential role in the running of the business today. Since the work of Schleiermacher, hermeneutics have been further developed by theorists such as Dilthey and later Heidegger and Gadamer. They all build upon some of the same ideas as Schleiermacher‟s theory, e.g. the hermeneutic circle, but other dimensions have been added as well. Dilthey, who is known for a hermeneutic approach called philosophical hermeneutics, for example looks at the interpretation of texts from the receiver‟s perspective, and not the sender‟s as Schleiermacher does. The work of Schleiermacher is the foundation for this thesis, as the focus of the problem statement is the internal organization of the LEGO Group. In order to examine the implementation of the company philosophy and innovation aspects, a thorough analysis of the
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LEGO organization must be made with a focus on documents with the LEGO Group as the sender. Thereby, identification with the LEGO Group can be obtained, which according to Schleiermacher, is essential for an optimal interpretation and thereby an optimal understanding of the intentions of the company. In hermeneutics, qualitative methods such as text analysis, semiotics, interviews and focus groups are used (Højberg, R. (2011). Bachelor’s Thesis - Method, Spring 2011 [PowerPoint slides]. Retrieved from campusnet.asb.dk). In this thesis, the method of text analysis is being used in order to find the motives of the LEGO Group in terms of how it incorporates the core values of the company, while at the same time still paying attention to innovative initiatives. A text analysis makes it possible to examine the organization‟s intentions when it comes to promoting a strategy which emphasizes both old and new elements of the corporation.
1.3 Theoretical framework Katherine Miller‟s book “Organizational Communication: Approaches and Processes” is used to account for the development in organizational management and communication. The book “Managing People Across Cultures” by Fons Trompenaars & Charles HampdenTurner will be used to analyze the organizational culture within the LEGO Group. To support this analysis the book by Charles Conrad & Marshall Scott Poole and their theory of Organizational Symbolism will also be used. Additionally, Ian Brooks‟ “Organizational
Behaviour” also provides verification to the analysis of the organizational culture. The article “Fit, you either have it or you don‟t: „Culture Matters A Lot” written for the Financial Post by Dave McGinn, will help emphasize the importance of company culture, hence strengthen our claim. To account for an analysis of the motivational factor in the LEGO Group organization, David McClelland‟s needs-based motivational theory will be used.
1.4 Structure of thesis
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The fundamental basis of the thesis is the theoretical approach of methodological hermeneutics, which is presented in section 1.2 „Methodological approach‟. Chapter 2 provides the reader with a brief introduction to the LEGO Group, in order to create a better understanding of the company. In chapter 3, some of the main theories, which the thesis builds upon, are presented. Firstly, the development in organizational management is shown, by accounting for the development from the classical approach to the human resources approach. Next, the theories of Conrad and Poole, Johnson & Scholes, and Trompenaars and Hampden-Turner are described as a basis for the analysis of the organizational culture. Lastly, a brief introduction to McClelland‟s needs-based motivational theory is given. Chapter 4 provides the reader with an organizational analysis of the LEGO Group. Firstly, however, a brief description of the identity crisis of the LEGO Group in 2004 is accounted for in order to create a better understanding of the organizational changes the company has experienced. Thereafter follows an analysis of the organizational structure, the vision and mission statement, the organizational communication, the organizational culture, and the motivation factors of the LEGO Group organization. Chapter 5 discusses the findings of chapter 4, before a final conclusion will round up the entire thesis in chapter 6.
1.5 Delimitation The analysis of how the LEGO Group incorporates its philosophy in its organization is partly based on available documents written by the LEGO Group itself and must therefore be categorized as biased in some way. Clearly, the company has written these documents in order to communicate with its stakeholders, and assumedly, with a purpose of benefiting the interests of the LEGO Group. Although the analysis does result in an academic solution to the problem statement, it can be difficult to interpret the internal side of an organization and come up with a thorough and satisfactory statement only by interpreting documents.
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It is important to differ between organizational culture and national culture. Although it is non-discussable that the national culture has some impact on the culture wi thin the organization, this thesis will have its main focus on the organizational culture due to the length of the thesis. Additionally, cohesion exists between the internal and external culture of a company. As this thesis mainly focuses on the internal culture of the LEGO Group organization, external influences will not be thoroughly accounted for.
2. The LEGO Group - The Company (MTJ) The LEGO Group is a family owned toy manufacturing company. It was founded by Ole Kirk Christiansen in 1932, when the production of wooden toys started out in a small carpenter shop in Billund. The name “LEGO” came up by combining the two letters of the Danish words “leg godt”, meaning “play well”. The name reflects the main philosophy of the LEGO Group; that children should be able to learn and develop through play - something which the company believes enriches the lives of children. (LEGO.com - About Us - Facts and Figures – Company Profile ) Throughout its history, the LEGO Group has remained a popular brand due to its abilit y to continuously invent and develop new ideas and products, but also because of the high level of quality that the company strives for. The demand of quality is an essential part of the LEGO brand and is emphasized by the LEGO Group as an important characteristic of the brand, e.g. by living up to the motto of “only the best is good enough”.
Innovation is another key element of the history of the company, and is an aspect that is clearly visible in the development of the company throughout the years. What started out as a production based solely on wooden toys in the early days of the company, quickly expanded to a production of plastic bricks in 1947. In 1966, the LEGO Group introduced the first LEGO trains and thereby further expanded its toy production. A few years later, the concept of the LEGO Group was extended by the opening of the first LEGOLAND® Park in Billund in 1968, and the launch of the popular minifigures in 1978. In the 1980‟s the LEGO Group focused on creating products centered around themes, and in the 1990‟s several initiatives were made in order to maintain the position of being one of the world‟s leading toy
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manufacturers. Such initiatives were e.g. the LEGO.com website, and the opening of new LEGOLAND® Parks outside of Denmark. Also, the use of robot technology in the LEGO MINDSTORMS® products, which are made in cooperation with Massachusetts Institute of Technology, was an important part of the innovative initiatives of the LEGO Group during the 1990‟s. Storytelling, where products are built around a story or theme, such as LEGO ® STAR WARS™ or LEGO® TOY STORY™, has also contributed to the success of the company (LEGO.com - About Us - Facts and Figures – Company Profile ).
The consumers of LEGO products play a vital role when it comes to innovation, and the LEGO Group ensures to keep a good relationship to its consumers by always involving them in the firm. For this purpose, the LEGO Group has launched several programs aimed at different target groups of its wide audience, ranging from the LEGO Club for children between the age of 6-12, to the LEGO User Groups for adult LEGO fans (LEGO.com - About Us - Facts and Figures – Company Profile). Even though the LEGO Group is experiencing tough competition from consumer electronics, it still maintains a strong position as the world‟s fourth -largest toy manufacturer. In the early 2000‟s the company experienced a crisis with sales dropping and three years of loss. A new CEO, thorough organizational changes and a rebuilding of the company led the company back on track, and the LEGO Group managed to pull through the financial crisis in a very satisfying way, and presented an impressive surplus of DKK 2,887 million for the year of 2009. The LEGO Group continues its success and has even managed to increase its growth in a toy market otherwise characterized by stagnation (LEGO.com - About Us - Facts and Figures – Company Profile ) The LEGO Group has since its beginning been passed on from father to son, and it is still in the hands of the family. Currently, it is the founder‟s grandson, Kjeld Kirk Kristiansen, who is actively involved in the company in the form of his positions as deputy chairman of the board of LEGO A/S and as majority shareholder. Today, the LEGO Group is a global company with more than 9,000 employees (LEGO.com About Us - Facts and Figures – Company Profile). In a 2010 survey of over 3,000 people
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made by Internet toy and gizmo gift store, Firebox.com, the LEGO Group won the titl e of the most popular toy across all ages and sexes. (Eaton, 2010. Cf. appendix 12 ).
3. Theoretical background (MTJ & SBH) In the following section, the relevant theories and models will be accounted for in order to give an understanding of how and why they will be used in the later analysis.
3.1 Organizational management (MTJ) In order to thoroughly understand the organizational changes that have happened through the history of the LEGO company, the development of organizational management and organizational communication will be gone through. Focus will be on the so-called “founding approaches”, which have influenced the study of organizational management and communication greatly. To start out with, the classical approach originating in the late 19th century will be outlined, followed by a brief description of the human relations approach, and finally, the approach of human resources will be covered briefly.
3.1.1. Classical approach The classical approach originated due to a shift from agrarian society to industrial society,
where people from the countryside moved to the cities and worked in large workforce groups in factories. Due to this societal change, a need for organizational changes which could match the societal changes arose. The classical approach centers around the machine metaphor, where specialization, standardization and replaceability are in focus, and is characterized by three main theorists; Henry Fayol, Max Weber and Frederick Taylor. Fayol‟s “Theory of Classical Management” focuses on the “what” of managerial work, meaning what managers should do. Fayol proposes five elements of management, elements that management should consist of in order to be successful. The first element, planning, emphasizes the idea that in order to meet objectives, mangers must look ahead in the future. The second element, organizing, is about “(...) the arrangement of human resources (employees) and the evaluation of those employees” (Miller, 2009, p. 18). As a third element, Fayol proposes command. This involves managers setting tasks for employees in order to
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meet organizational goals. Coordination is the fourth element, and deals with how “(...) separate activities of an organization must be harmonized into a single whole” (Miller, 2009, p. 19). Control, which is the final element, covers the comparison between goals and activities. This comparison is important in order to ensure that the organization is functioning as planned. Fayol‟s theory has been criticized for not including the aspect of communication, which is essential for an organization to function. However, Miller (2009) argues, that “(...) communication can be seen as an implicit part of Fayol‟s elements of management” (p. 19), as it is necessary for running a business. Weber was a German sociologist, who lived in the same time as Fayol, but who had a more scholarly approach to the running of organizations than Fayol did. Weber‟s “Theory of Bureaucracy” focuses on bureaucratic organizations, and can be divided into six facets. The sixth facet, the functioning of authority, is the one Weber emphasizes the most. Especially the rational-legal form of authority, where power rests in expertise and rationality rather than in an individual, was in his focus. Weber believed that the reliance on rationality and impersonal norms was the basis of bureaucratic functioning. Furthermore Weber emphasized that bureaucracies should be closed systems, because in that way, they could avoid outside influences and interruptions, which could harm their functioning.
The third theorist, Frederick Taylor, developed the “Theory of Scientific Management” in the early twentieth century. Contrary to the two previous theories, Taylor focused on the relationship between manager and employee. Taylor was frustrated with the “systematic soldiering” of organizations, where social pressure kept productivity down and wages up. Therefore, Taylor developed his theory where he suggested that the best way to do each job should be determined by scientific methods. These methods included, that workers should be scientifically selected for jobs and trained in methods considered most appropriate by time and motion studies. In addition, it can be mentioned that Taylor believed that in order for an organization to function effectively, there ought to be a strict distinction between workers and managers. Workers were responsible for the physical labor, while managers should do the thinking and organizing. (Miller, 2009, p. 26).
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Common for all three theories within the classical approach is the hierarchical structure. Furthermore, the communication is formal, vertical directed and task-related (Miller, 2009, p. 49).
3.1.2. Human Relations approach One of the greatest influences on the human relations approach is that of the Hawthorne
studies. The Hawthorne studies took place in the years between 1924 and 1933, and are a number of studies conducted by a research team led by Elton Mayo. The team examined how changes in the work environment would impact the productivity of factory workers. The team concluded on their findings that “(…) the social group‟s influence on worker behavior exceeded the leverage exerted by formal o rganizational power structure” (Miller, 2009, p. 37). Mayo and his colleagues did in fact find examples of increased productivity caused by physical and economic aspects, such as mentioned in the classical approach, but they rejected these and focused solely on the social and emotional needs of the workers. On the basis of the findings of the project, Mayo concluded that “(…) worker output increased as a direct r esult of the attention paid to workers by the researchers” (Miller, 2009, p. 37), a phenomenon later known as the Hawthorne effect. Later re-analyses have led to discussions concerning the result of the Hawthorne studies, as newer studies have shown that traditional explanations such as the ones mentioned in the classical approach, e.g. worker selection, incentives and pressure from management, are better explanations to the results of the Hawthorne studies. The importance of the actual Hawthorne studies is, however, of great importance as they led to a radical development in organizational management and communication. Due to the Hawthorne studies, human needs began to play a more central role in organizations. In continuation of the Hawthorne studies, Abraham Maslow‟s Hierarchy of Needs and Douglas McGregor‟s Theory X and Theory Y, which are both theories from the human relations movement, can be mentioned in order to give an example of how the management approach changed.
Maslow‟s Hierarchy of Needs is a general theory of human motivation, which can be applied to organizations and management. Maslow proposed that humans are motivated b y five basic
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needs; the psychological needs, the safety needs, the affiliation needs, the esteem needs and the need for self-actualization, and that management can increase productivity and job satisfaction among workers if they manage to create a workplace where employees can fulfill these needs. Douglas McGregor‟s Theory X and Theory Y focuses on the divergent a ssumptions that managers can hold about organizational functioning. Theory X represents the manger influenced by the most negative aspects of classical management theories; workers are seen as unambitious, irresponsible and not very bright. In contrast, Theory Y is the manager who adheres the precepts of the human relation movement; that means a manager who assumes that workers are highly motivated to satisfy achievement and self-actualization needs, and that the job of the manager is to bring out the natural tendencies of these intelligent and motivated workers (Miller, 2009, p. 41). McGregor obviously recommends the use of Theory Y management and thereby he emphasizes that a worker should be seen as an individual with needs for attention, social interaction and individual achievement. According to Miller, the shift from classical approach to human relations approach can be characterized by a shift in the belief that “workers work” to a belief that “workers feel”, which is also seen in the two mentioned theories of Maslow and McGregor. Communication in the human relations approach is characterized by being task- and social related, vertical and horizontal directed communication, and informal (Miller, 2009, p. 49).
3.1.3. Human Resources approach The human resources approach acknowledges both the classical and the human relations
approach when it comes to organizing but it adds a very important factor to these approaches. The human resources approach puts an “(…) emphasis on the cognitive contribut ions employees make with their thoughts and ideas” (Miller, 2009, p. 43). Thereby, the individual employee and his opinion are taken into account in the organizational setting. Even though the human relations approach is acknowledged in the human resources approach, the Hawthorne studies e.g. are still seen as insufficient. When it comes to putting the studies to an empirical test, Miller (2009) argues, that there “(…) is evidence that many of the ideas of human relations theorists simply do not hold up” (p. 43). The human resource programs
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therefore put emphasis on team management and employee involvement to ensure product or service quality and organizational productivity (Miller, 2009, p. 52). The human resources approach believes that communication is task and social-related but the aspect of innovation also plays a great part. The communication goes in all directions and is team based and is thereby especially informal (Miller, 2009, p. 50).
3.2 Organizational culture – theoretical background (SBH) Organizational culture is discussed to be a metaphor and “a way of seeing and anal yzing” organizations (Brooks, 2009, p. 260). When discussing culture in general, it is somewhat difficult to have one specific definition, which makes the concept highly discussed among various theorists. As Cheng (1989) argues “even though substantial emphasis has been placed on study of organizational culture, the conception of organizational culture is still vague and controversial (Alvesson 1987; Smircich, 1983; Ashfort h, 1985)” (p.128. Cf. appendix 10). To give the reader a better understanding of the concept, the following chapter will create an overview of the development of organizational culture and different views of the concept from various theorists. Originally, the concept of organizational culture is borrowed from anthropology, which is normally referred to as the study of humanity. Dean & Kennedy (1982) and Kanter (1983) were some of the first theorists that began studying the concept of organizational culture. Blake and Mouton (1969) had however, drawn attention to the notion of culture at the organizational level much earlier (Brooks, 2009, p. 260). According to the Financial Post journalist Dave McGinn (2007)“corporate culture, roughly defined as a company‟s mix of morals, written values and codes of behaviour, has become a hot to pic in the office recent years” (cf. appendix 18). Further in this article, he states a quote from Mr. Stilson, who is a partner at Cenera, that “you can have all the skills in the world, but if you don‟t fit into the culture, if you don‟t fit into the values of the organization, it costs the company big money to replace you” (cf. appendix 18). This shows the great importance of cultural understanding within an organization and clearly states t hat cultural differences or severe misunderstandings are not cost free – an important factor to keep in mind in times of
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crisis (Hummelgaard, S. B. & Jansen, M. T. (2009). Sauer Danfoss, Organizational Communication. Unpublished paper, Aarhus School of Business, Aarhus, Denmark).
In Dave McGinn‟s article “Fit, you either have it or you don‟t: Culture Matters A Lot”, McGinn puts emphasis on the importance of fitting into the company and to it s culture. Before new employees are able to do this, it is important that organizations clearly state their perceived company culture. To do so, the company needs a clear idea of what its culture is about and should make it obvious to people outside the company as well (Hummelgaard, S. B. & Jansen, M. T. (2009). Sauer Danfoss, Organizational Communication . Unpublished paper, Aarhus School of Business, Aarhus, Denmark). Brooks (2009) discusses different cultures at ascending levels. He differs between subculture, professional culture, organizational or corporate culture, national culture and supra-national culture. He defines organizational or corporate culture as “(…) culture at the level of the organization or corporate body. Most organizations have a unique culture, even if this has numerous subcultures and/or professional cultures within it. The relative „influence‟ of culture at this level will depend, to an extent, on the strength of corporate identity and influence on its constituent units” (p. 263). As Brooks also argues, different subcultures can arise within the corporate culture. It can therefore be argued, that organizations not only have one corporate culture, but several subcultures that need to be taken into consideration when managing the company. It i s therefore important to distinguish between these various forms of cultures, when looking at the implementation of the philosophy of the LEGO Group – to what extend does the organizational culture and the possible subcultures within have an impact on the overall philosophy and how does the management handle this? In the analysis of the corporate culture within the LEGO Group, it is important to have an underlying basic idea of its corporate culture of the LEGO Group in order t o see how the philosophy of play and creativity is integrated and emphasized. Johnson and Scholes (1994) suggested that the cultural complexity and the way of seeing the management are embraced in a cultural web (cf. appendix 2). The cultural web helps with t he understanding of the potential
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significance of rituals, organizational stories, and the symbols of the organization and how these interact with each other in both creating and sustaining organizational culture. The cultural web exists of six interrelated elements that help to make up what Johnson and Scholes call the "paradigm" of the work environment (Brooks, 2009, p.268). These six elements consist of Stories, Symbols, Power structures, Organizational structures, Control System, and Rituals and routines. The web brings the attention to the importance of the symbols and rituals of the organization. Symbols are seen as the visual presentation of the organization and how the employees of the organization interpret these. As Brooks (2009) states, “all aspects of organization and of behaviour by employees and managers can carry symbolic significance” (p. 269). Hence, symbols are a considerable part of the corporate culture. The Rituals and routines within the company are the daily behavior of the employees and how „things are done around here‟. By looking at the stories as a reinforcement of the culture within the company, it is important to note how storytelling is used to communicate norms and values, to develop commitment and trust, and to create an emotional commitment. It is also used as a way of emphasizing the culture in the history and development of the company (Brooks, 2009, p.268-269). The cultural web combines the six elements and is used to examine the already existing culture within the organization and possibly change or improve things, which are not working. By combining the cultural web with the work of Conrad and Poole, a thorough analysis can take place. Conrad and Poole analyze cultures through tree main terms; Metaphors, Rituals and Ceremonies, and Stories and Storytelling (Conrad, C. & Poole, M. S. 2005, p. 164). Some of these terms overlap the elements in the cultural web, which creates coherence between the two models.
By the means of metaphors Conrad and Poole (2005) state, “that these are symbols in which one image is used to describe another one” (p. 164). This also puts emphasis on how employees see the organization. Within the term Rituals and Ceremonies, Conrad and Poole (2005) state that “rituals are informal celebrations that may or may not be officially sanctioned by the organization, and ceremonies are planned, formal, and ordained by management” (p. 166). Ceremonies can be a
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way of motivating and controlling the employees but can also be interpreted in many different ways. Stories are, according to Conrad and Poole (2005), “told most often and are most powerful,
when people are confused and concerned about what is going on in their organization (for instance, when a person is entering a new organization or when the organization is undergoing major changes)” (p. 165). It is important to see the organization of the LEGO Group from all of the above-mentioned aspects, in order to create a better understanding of how, and if, the company philosophy is emphasized in the company culture (Hummelgaard, S. B. & Jansen, M. T. (2009). Sauer Danfoss, Organizational Communication . Unpublished paper, Aarhus School of Business, Aarhus, Denmark). Both Johnson and Scholes “The cultural web”, and the work of Conrad and Poole give the reader a better understanding of the internal culture in an organization and how you are able to analyze this, as being either weak or strong. Other theorists, like Schein, are discussing corporate cultures as well. Schein provides a framework, which is analyzing in three levels. This model gives a rather statistic view of how cultures can be seen. It underplays the importance of how, for example, stories are used as a symbolism in the internal communication and culture (Brooks, 2009, p. 265). As a result thereof, the primary focus is on the theories of Johnson and Scholes, and Conrad and Poole, as they are able to provide a more thorough and comprehensive framework to analyze the corporate culture within the LEGO Group.
3.2.1 Trompenaars and Hampden-Turner Corporate culture is important when discussing the communication within the LEGO Group
and human resource management in general. Trompenaars and Hampden-Turner (2004) emphasize that “culture is often powerful and it persists when you try to disturb it” (p. 21). They furthermore add about cultures, that “like superhuman organism they have their own energy, purpose, direction, values, and ways of processing information” (p. 21). Hence, it is something managers have to be aware of if they want to use it as a strategic tool for optimizing their performance.
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In today's organizations, the corporate culture and internal communication is highly focused upon. If we therefore acknowledge that culture is important t o today‟s organizations, it is essential to have a clear definition of the term. Many definitions have been made over the years, but as Trompenaars and Hampden-Turner (2004) state, the best definition is given by Ed Schein of MIT in his book Organization, Culture and Leadership :
“A pattern of assumptions, invented, discovered, or developed by a given group, as it learns to cope with the problem of external adaption and internal integration, that has worked well enough to be considered valid, and be taught to new members, as the correct way to perceive, think, and feel in relation to these problems” (p.21).
This definition perceives a dilemma between external and internal culture and to which extend these can be reconciled. How much does the external culture affect the internal one and how should the managers of organizations relate to these factors when entering a new market and culture? Trompenaars and Hampden-Turner (2004) later give their own definition of culture:
“Culture is the pattern by which a group habitually mediates between value differences, such as rules and exceptions, technology and people, conflict and consensus, etc. Cultures can learn to reconcile such values at ever-higher levels of attainment, so that better rules are created from the study of numerous exceptions. From such reconciliation come health, wealth, and wisdom. But cultures in which one value polarity dominates and militates against another will be stressful and stagnate” (p. 23).
Trompenaars and Hampden-Turner chose to give their own definition as they put high emphasis on the term synergy. One cannot work without the other. They then created their
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framework which will be elaborated on later. Within this framework they emphasized how the quadrants need each other to frame the culture within the organization.
3.2.2 Four Corporate Cultures Trompenaars and Hampden-Turner (2004) have developed a framework, which discusses the
four corporate cultures that exist within a company (cf. appendix 3). They distinguish between person and task related culture and whether they make use of egalitarian or hierarchical organizational structure. By the use of four quadrants, Trompenaars and Hampden-Turner break down their own rules, by emphasizing polarization, while their definition elucidates the opposite, a need for synergy (Trompenaars and Hampden-Turner, 2004, p. 23). The four corporate culture model discusses four cultures; The Eiffel tower, the Family, the Incubator and the Guided Missile culture. In their way of identifying the corporate cultures within an organization, Trompenaars and Hampden-Turner put high emphasis on the fact that “cultures, whether corporate or n ational, stereotype themselves” (p. 24). When analyzing corporate cultures within the four quadrants, the idea is not to avoid stereotypes but “(...) to go beyond superficial impressions to see what lies deeper and half-submerged” (Trompenaars and Hampden-Turner, 2004, p. 24). The Four Corporate Culture model provides a framework for analyzing the corporate culture within an organization. By considering six typologies within the four quadrants (cf. appendix 4), a comprehensive picture of the culture within a company can be shown. But as Trompenaars and Hampden-Turner (2004) state, it is important not to focus solely on one of the four quadrants within a company culture, but using aspects of them all (p. 31). They furthermore state, that “every quadrant needs the others to sustain it” (p. 41). The Four Corporate Culture model discusses how the culture of an organization is an ongoing system with purpose and direction. It also touches upon the fact that cultures are so strong that they are often able to defeat all attempts from outside factors to break them down. Cultures can also work as a motivation factor, as well as they can successfully reward, inspire and inform their members (Trompenaars and Hampden-Turner, 2004, p. 15).
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It is important to clarify that the Four Corporate Cultures model is a guideline to analyzing the culture within a company – it is very rare for an organization to solely rely on one corporate culture, as several subcultures can be seen within the company. These subcultures can then create their own culture, within the overall company culture. By having different subcultures, it can be difficult for the managers of the company to implement an overall philosophy, which can be interpreted identically. Every organization should therefore especially be aware of its overall corporate culture, as it is becoming an important term for the overall organizational appearance, both outside the organization but indeed also within it. By using the Four Corporate Cultures model provided by Trompenaars and Hampden-Turner, combined with the work of both Johnson and Scholes and Conrad and Poole, an analysis, which goes beyond just seeing the corporate culture within the LEGO Group as it is today, but also where it is headed in the future, can be created. This is important for the discussion part of the thesis.
3.2.3 Talking national culture? The above-mentioned theorists are all operating with the culture that exists within the
organization. But what happens when organizations are working globally? In this case the national culture is an important factor to take into consideration as well, when talking about
the organizational culture. All individuals have different views and perceptions of the world, depending on respective nationality, background and upbringing. A criticism of t he abovementioned theories could be the missing focus on how national culture influences corporate culture. Especially when discussing the notion of perception among the employees. As Brooks (2009) states, “(…) culture could influence individual behaviour in the field of perception. Adler (1997) shows that there is likely to be a high l evel of selective perception between different cultures and countries (…)” (p. 303). It can cause misunderstanding and confusion if managers operate from different national cultures, and it is something which needs to be taken into consideration when analyzing corporate cultures.
3.3. Motivation - McClelland’s needs-based motivational theory (MTJ)
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David McClelland has proposed an acquired needs theory, where he states that human behavior is controlled by three basic needs; the need for achievement, the need for power, and the need for affiliation. The need for achievement is “(...) the extent to which an individual has a strong desire to perform challenging tasks well and to meet personal standards for accomplishment” (Dyck & Neubert, 2008, p. 420). The need for affiliation is “(...) the desire to form close meaningful relationships, avoid conflict, and establish warm friendships” (Dyck & Neubert, 2008, p. 420). Finally, the need for power is “(...) the desire to control other people, to influence their behavior, or to be responsible for them” (Dyck & Neubert, 2008, p. 420). According to McClelland, all humans have these needs but the relative intensity of them will vary from individual to individual, and a bias towards one of the needs is likely to be developed. Dyck & Neubert (2008) argue, that it is very important for managers to acknowledge and understand these needs because “(...) nurtured motivation combines with natural motivation and abilities to affect productivity” (p. 420). The need for achievement is probably the most examined one of the three, most likely because it is clearly closely related to productivity. McClelland believes that the need for achievement is satisfied, if a person is productive and accomplishing goals. In addition, it can be mentioned that McClelland‟s theory stands out from other motivational theories such as Maslow‟s Hierarchy of Needs or the ERG Theory by not arranging the needs in a hierarchical order. As McClelland believes individuals differ in the prioritizing of needs, it is impossible to create a hierarchical and general model of the thr ee needs. Also, McClelland focuses on the development of the needs through “(...) life experiences and interactions with the surrounding environments” (Dyck & Neubert, 2008, p. 420). Thereby, it is actually possible for organizations to change an individual‟s motivation code using systematic training, i.e. people can be trained to e.g. have an achievement need, which will be beneficial for an organization as this specific need is closely linked to productivity.
4. Organizational analysis of the LEGO Group (MTJ & SBH) In the following chapter, an analysis of the organization of the LEGO Group will be accounted for, with focus on the organizational structure, communication, and culture, as well
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as the vision and mission statement, and the motivational factors influences the members of the LEGO organization. As a foundation for this analysis, the first section „Identity crisis‟ gives a short introduction to the organizational changes that has happened in the LEGO Group since the year of 2004.
4.1 Identity crisis (MTJ) In 1997, the LEGO Group experienced a significant decrease in its profit and the year after, the LEGO Group lost almost 300 million Danish kroner before taxes. This led to a substantial layoff round (the biggest in the history of the LEGO Group) in 1997, where 1,000 people lost their jobs (Fishman, 2001, p. 1. Cf. appendix 13). This was a result of a significant change in children‟s engagement and perception of „play‟. The children of the LEGO Group were moving from a play economy to an ent ertainment economy, and this was a big challenge for LEGO and its core values. As the LEGO Group puts high emphasis on the philosophy of „play and creativity‟ and the deep respect for its end users, i.e. the children, this change of children's perception of „play‟ was a threat towards the core values of the company, that had been ongoing since the very start of the company. As stated by Holden (2002), in his case about the LEGO Group “it is impossible to exaggerate the importance of children and their development within the LEGO company. Children are our vital concern – as a dependable partner for parents, it is our mission to stimulate children‟s imagination and creativity, and to encourage them to explore, experience and express their own world – a world without limits” (p. 167). So what does a company as the LEGO Group do, when its most important assets are changing and shifting away from the core products and values of the company? The LEGO Group chose to enter into a partnership with Lucasfilm Ltd. in 1999, and launched 14 STAR WARS-themed kits, here adding an important aspect to LEGO play; storytelling. Children knew the story, vehicles, scenes, and characters and this became the biggest seller in the history of the company (Fishman, 2001, p. 4. Cf. appendix 13). As cited b y Fishman (2001), “it was the biggest product launch in history. The lesson went beyond the value of
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licensing. What kids were buying was something that the LEGO Group had never offered before: a story. Says Eio: "it led us to say, Storytelling is important"” (p. 5. Cf. appendix 13). The LEGO Group here chose to go from the focus of „free-play‟ LEGO bricks to more advanced toys, which needed directions in order to be build. As Fishman (2001) argues “that introduces a note of anxiety into playing with Legos--did I do it right?” (p. 4. Cf. appendix 13). This shows a confliction in the core values of the LEGO Group, as this goes against what is best for the children, and the LEGO Group is therefore still struggling on how to adapt its life-long philosophy and values to the changed world of its most important user – the children. Despite these concerns, the approach has paid off and the LEGO Group is experiencing great success with its improved product range. The organizational changes in 2004 also resulted in the strategic coordination of innovation activities. Nowadays, a cross-cultural team, the so-called „The Executive Innovation Governance Group‟ is leading the innovation effort of the LEGO Group. The Executive Innovation Governance Group “(...) determines LEGO‟s innovation goals and strategy, defines the new-product portfolio, coordinates efforts so they are mutually reinforcing, delegates authority, allocates resources, and evaluates results to ensure that all activities support the company‟s overall strategy” (Hjuler, & Robertson, 2009, p.1. Cf. appendix 13). The innovation effort is “(...) split into eight distinct types, from product development to business innovation” (Hjuler, & Robertson, 2009, p.1. Cf. appendix 13). Thereby, the responsibility is divided across four different areas; the functional groups, the Concept Lab, Product and Marketing Development and the Community. Different levels of innovativeness are expected from these four different areas. Furthermore, it is important to notice that the LEGO Group has a very broad view of innovation, and sees it as including not only new products but also pricing plans, community building, business processes and channels to markets (Hjuler & Robertson, 2009, p.1. Cf. appendix 13). This approach to innovation clearly shows that the LEGO Group considers innovation as a very important part of the process of adapting the business to the changing consumer demands.
4.2 Organizational structure (MTJ)
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This section looks at the organizational structure of the LEGO organization, and how it influences the incorporation of the core values and innovation. The starting point for an analysis of the organizational structure of the LEGO Group is the structure that is visually presented in the „Company Profile – An introduction to the LEGO Group 2010‟. According to this image, the LEGO Group is using a hierarchical organization structure with five separate functional departments (cf. appendix 1, p. 7). The organization is centralized, meaning that the “(...) authority for decision making in the organization is centralized so that it rests with top management” (Brooks, 2009, p. 191). It is however often the case that middle managers are consulted over decisions affecting them and their departments, but the overall control lies with top management. The structural approach is very traditional, and one that is often seen in family-owned businesses, where the family has been very active in the running of the firm through several years or maybe even decades, such as in the case of the LEGO Group. Centralization ensures consistency in an organization, as only few persons are in charge. Furthermore, the centralization causes jobs to be more simplified because important decisionmaking is removed. Thereby, employees are able to become highly specialized in their work, which is a great advantage for the LEGO Group, who employs a diverse workforce, ranging from manufacturing workers to financial managers, to people working within the field of HR management. Additionally, this simplification adds to a clear definition of the functional groups within the organization, resulting in a visible delegation of job tasks. The centralized structure form can, however, lead to a slow decision-making process, as decisions have to pass through heavy bureaucracy in order to get through to top managers. Also, employees can easily feel unheard and left out of decisions that actually affect them, and this lack of involvement of employees can be dangerous for the job satisfaction, motivation and productivity of employees (Brooks, 2009, p. 191). The functional structure is efficient when the organization is large, as is the case with the LEGO Group, but also when the organizational environment is characterized by stability. Although the LEGO Group had a period where it experienced declining sales rates and lay-off rounds, the fact that it i s a traditional, family-owned business adds stability to t he organization and employees know that
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the involvement of the Kirk Kristiansen family ensures long-term goals and visions for the company. An organizational structure as the one described above is also known as a classical or traditional structure, and it emphasizes aspects of classical management approaches, such as the ones of Weber, Taylor and Fayol. Aspects of Weber‟s “Theory of Bureaucracy” is present in the organizational structure. Weber believed that bureaucratic organizations were technically superior to other organizations, among other things because they had a clearly defined hierarchy, a clear division of labor, and centralized decision-making (Miller, 2009, p. 23). All are components which can be found in the functional structure of the LEGO Group. Also Taylor‟s “Theory of Scientific Management”, where focus is on the relationship between manager and employee and the control of individual work, can be applied in a context of the functional approach. Especially Taylor‟s idea of the “(...) inherent difference between management and workers”, meaning that “(...) organizational managers are best suited for thinking, planning, and administrative tasks”, while “(...) organizat ional workers are best suited for labouring”, can be found in the clearly defined hierarchy in a functional structure (Miller, 2009, p. 26). Naturally, the division between organizational workers and managers was more distinct in the early twentieth century, when Taylor developed his theory, but a hierarchical structure does create a clear distinction between workers and their job tasks. This also relates to components of Fayol‟s Theory of Classical Management, where a strict, vertical hierarchy, clear division of labor and order and control are seen as the ideal pri nciples of management. According to Miller (2009), the communication channel for these three managerial approaches is typically written, in a formal style, and the communication is happening in a vertical direction. In terms of the philosophy of the LEGO Group, where inventive play is i n focus, it may be questioned how a firmly structured hierarchy can give space to play, creativity and innovation. The organizational structure of the LEGO Group must, however, be assumed to consist of much more than what the visual presentation of the structure in t he Company Profile shows. Especially the organizational changes that happened around 2004, where the current CEO Jørgen Vig Knudstorp entered the company, emphasized a more innovativeoriented approach to the organization‟s structure and management. When Jørgen Vig
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Knudstorp joined the LEGO Group in 2004, the company was in an identity crisis after years of bad results, which according to Knudstorp had resulted in the company‟s management being “(...) quite risk averse while focusing on survival” (O‟Connell, 2009, p.1. Cf. appendix 20). Instead, Knudstorp incorporated an opportunity-driven strategy. Knudstorp chose a backto-basics strategy, focusing on the core values of the LEGO Group but doing this while emphasizing an innovative strategy as well. To implement this new combined strategy, Knudstorp had to make organizational changes and change the management style of the corporation. He implemented a „managing at eye level‟ approach, which means “(...) being able to talk to people on the factory floor, to engineers, to marketers – being at home with everyone” (O‟Connell, 2009, p.1. Cf. appendix 20). Additionally, the strategy “(...) required a looser structure and a relaxation of the top-down management style” (O‟Connell, 2009, p.1. Cf. appendix 20), which among others things meant that responsibility and decision-making was pushed down the hierarchy (O‟Connell, 2009, p.1. Cf. appendix 20). Also, a focus on creating innovation through the use of cross-functional teamwork has become an important aspect of Knudstorp‟s strategy (Hjuler & Robertson, 2009, p. 1. Cf. appendix 20). With these organizational changes the LEGO Group moves away from its traditional organizational structure to one centered around flatter structures, cross-functional teamwork, employee involvement, and more open communication. Thereby, the LEGO Group embraces a human resources approach to management, where the above-mentioned aspects are vital but also innovation plays a big part. The organizational changes are a great step towards a new future for the LEGO Group. The traditional structure of the company, which relates back to its long history, is still partly valid, but at the same time the structure has been changed and adapted. By flattening the hierarchy and delegating more responsibility, the LEGO Group has developed into an organization better prepared for the task of competing in a challenging and changing toy market. The new structural form takes the future and competitiveness of the LEGO Group into account by creating space for innovation-oriented teamwork. Meanwhile, the LEGO Group stays tru e to its core values dating back to the beginning of the company, and thereby has a structural foundation where old and new values can interact.
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The LEGO Group puts high emphasis on the knowledge of its values and identity and how everyone in the company shares it. By looking at the company‟s vision and mission statement, a basic understanding of the „who‟ and „what‟ of the or ganization can be made, e.g. which business the organization operates in and what it wants to be known and appreciated for. As Richard L. Daft (2004) states, “the mission describes the organization's vision, its shared values and belief s, and its reason for being” (p. 55) which further draws parallels to the culture that exists within the organization. The mission and vision statement of the LEGO Group, as stated on its website, is as follows: “Mission:
„Inspire and develop the builders of tomorrow‟ Our ultimate purpose is to inspire and develop children to think creatively, reason systematically and release their potential to shape their own future - experiencing the endless human possibility. Vision:
„Inventing the future of play‟ We want to pioneer new ways of playing, play materials and the business models of play leveraging globalization and digitalization... it is not just about products, it is about realizing the human possibility (LEGO.com – About Us – The LEGO Group – Mission and Vision).”
When looking at the above, it is clear that the LEGO Group puts high emphasis on caring for the creativity and innovation within the organization. The main focus of the LEGO Group is on the end-users, e.g. the children, and the overall philosophy of the company; that of play and creativity, is incorporated in the mission and vision statement. The LEGO Group creates coherence in its overall philosophy and what it wants the company to represent to the stakeholders, as the focus on innovation, creativity and pl ay are emphasized both within the company but also stated in the external communication. As Holden (2002) also states in his research of the LEGO Group, “(…) the core essence of the LEGO brand lies in stimulating creativity” (p. 166). Creativity seems to be an ongoing and important part of the LEGO
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organization and its whole identity. Also, the importance of children and their development are highly important to the company. An important thing to look at when analyzing the vision and mission of the LEGO Group is the fact that its value system is based on its product and not on a set of principles, that focus on employee attitude and behavior. On the basis of this, one can conclude that the LEGO brand is the most valuable asset of the company. Therefore, the LEGO Group has created a „Culture Board‟ and a „Brand Board‟, which include the members of top management. The key focus of the „Brand Board‟ is to establish the way in which the values and the identity of the LEGO brand are expressed globally. Stated in the Brand Book, which is created by the „Brand Board‟, is the idea that the LEGO name shall become a universal concept associated with three notions: idea, exuberance and values (Holden, 2002, p. 164-166). Under these three notions lie, inter alia, the concept of creativity, innovation and imagination. These concepts or notions show the coherence in the strategy and identity of the LEGO Group. This further means that the LEGO brand is one of the key elements of the corporate culture. It is also important for the LEGO Group to communicate the identity and values of the LEGO brand to the employees, so that the LEGO brand is not put at any risk (cf. appendix 5, p. 15). This puts further emphasis on the importance of the LEGO brand and how valuable it is to the organization. It is important to have coherence and common understanding for the values internally in order to present them externally. As stated in the Company Profile (2010), “research into the fields of play and learning has always been an important LEGO Group activity – combined with creativity. It is also referred to as „playful learning” (p. 19. Cf. appendix 1). This emphasizes the importance of not only enhancing the creativity among the end-users of the LEGO products, but also among its employees. The LEGO Group works closely together with several research institutes
throughout the world, t o enhance the creativity and innovation globally, in developing new products and ideas.
4.4. Organizational communication (MTJ) The following section analyzes the organizational communication of the LEGO Group by using aspects of Miller‟s overview of the development of organizational communication in general.
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The organizational changes, which took place at the LEGO Group in 2004, have also led to changes in the organizational communication. Looking from a purely theoretical perspective, communication in the functional structure is task-related. Miller (2009) quotes Farace, Monge and Russell for stating that there are three kinds of communication in an organizational setting; task-related communication, innovation-related communication and maintenancerelated communication. As the focus in the classical approach is on the goals of the organization, the content of the communication will be focused on the organizational functioning, i.e. the communication is task-related (p. 29). While the communication will mostly happen vertically, from a top-down approach, it can also exist on a horizontal level, but in this case it will e.g. be amongst employees working at the same level in the organization. Due to the clear distinctions between the levels of an organization in the classical approach, communication will naturally be formal (Miller, 2009, p. 29). Employees know their place in the hierarchy, and while informal communication may take place among same-level workers, the communication between employees from differing levels will be formal. One of the reasons why the LEGO Group has not been able to succeed by using a functional structure from the classical approach is likely due to innovation-related communication. According to Miller (2009), innovation-related communication will be discouraged in an organization of classical theory (p. 29). Taylor argued that the best way to do each job should be scientifically determined. Thereby, innovation-related communication will be considered unnecessary, as the organization, in theory, should already be functioning according to t he best way, hence improvement is not a possibility. Organizations today compete in tough markets, which change rapidly, and believing that improvements are unnecessary, is a foolish approach, which will have fatal consequences for an organization. The level of renewal in today‟s business market is so high, that organizations must always be on the lookout for ways to improve their business. By changing to a human resources approach, further dimensions can be added to the communication content of a company. In the classical approach, the focus lays on task-related communication, but in the human resources organization the aspects of innovation and maintenance proposed by Farace, Monge and Russell are also an i mportant part of the
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communication. The maintenance communication involves attempts to maintain the quality of human relationships within the organization, while the innovation-related communication concerns innovative initiatives such as how a job can be done better, how the organization could be structured more efficiently etc. The innovation aspect is very central for the human resources approach, because it allows employees to actively be a part of the organization and contribute with ideas. The focus on communication flowing in all directions, supports the flow of ideas in the organization, and furthermore ensures the opportunity for effective feedback on ideas and thoughts, which can be used to further improve the organization (Miller, 2009, p. 50-51). The use of a flowing communication also strengthens the focus on employee relations. By having a communication style where all members of the organization are in contact with each other in some way or another, the organization will be likely to have a stronger sense of community because people know each other and have to be able to communicate in order for the organization to run smoothly. So, the changes have led to a more flowing communication in the LEGO organization, where communication between the different levels of the organization is much more present. The focus on innovation and teamwork requires LEGO employees to work and communicate together on a daily basis, in order for the company to run successfully. Thereby, has the changed communication effort also led to a workplace where employees interact across levels, departments and even cultures. The LEGO brand stands out by focusing solely on values relating to the product. Even though the LEGO Group has employee policies, it has always emphasized the importance of offering consumers a coherent quality product. Although the LEGO Group has always weighted the welfare of its employees, it is now clearly and visibly communicating its attitude to the responsibility of employees by creating a communication policy, a health and safety policy, and the people and culture promises. These initiatives are important statements of the awareness that the LEGO Group has on its employees. The employees are a core reason for the running of the company, and the LEGO Group also acknowledges this, e.g. by st ating on its website that working at the LEGO Group is all about one thing; succeeding together. (LEGO.com – About Us – Jobs – Working at the LEGO Group )
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4.5 Organizational culture (SBH) This chapter will analyze the organizational culture of the LEGO company, by using aspects of The Cultural Web by Johnson and Scholes. The focus will be on the aspect where the LEGO Group puts their emphasis, e.g. the symbols, power structure, control s ystem, rituals and routines, and stories. The thesis will also focus on which aspects are important to the innovation and these will be analyzed together with Conrad and Poole‟s three aspects of corporate culture. By combining these theories, a stronger analysis will be made and concluded upon.
4.5.1 The Cultural Web byJohnson & Scholes combined with Organizational Symbolism by Conrad & Poole Symbols:
Symbols within the LEGO Group are important to take into consideration when looking at the corporate culture. The LEGO brand is world famous and the logo of the company has not changed much, since the company‟s origin. This e mphasizes the consistence in the brand and makes the brand-recognition stronger. According to Newson and Haynes (2008) a good logo has several purposes. It should leave an impression on us and it should be recognizable. Furthermore it should have a uniqueness that can separate it from other logos so people can relate the logo to the organization in mind. Finally, it should age well and be able to translate faithfully across media (p. 237). The LEGO Group logo seems to fulfill all of the above; it is recognizable as it has been consistent almost throughout the entire history of the company and the simplicity of the lo go is believed to have a massive impact, as it is familiar to children and adults all over the world (cf. appendix 9) Looking at the physical surroundings at the LEGO Group, it is clear to see how t he innovation aspect comes to place. The LEGO Group puts high emphasis on open meeting spaces because, as stated by Kuang (2009) “studies have estimated that the majority of innovations within a company come from passing social contacts--people shooting the breeze at the water cooler, or shouting over the tops of their cubicles” ( p. 1. Cf. appendix 17). Bright colors and relaxed settings are furthermore in focus and it is clear to see how the LEGO Group is
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following today‟s trends. The visual representation of the company is a symbol of the corporate culture as is represent how the organization chose to represent itself and its employees. Similarly, the system and all tangible artifacts can be seen as a symbol, as it convey important information about the organization (Brooks, 2009, p. 269)
Power Structures:
The power structure in the company can be linked to the organizational structure. The CEO, Jørgen Vig Knudstorp, is the head of the company. But the LEGO Group is a family owned company controlled by the Kirk Christiansen family fond, with Kjeld Kirk Kristiansen as the deputy chairman and majority shareholder of KIRKBY A/S, which controls 75 % ownership of the LEGO Group (Cf. appendix 16). A part of the identity of the LEGO Group is the family bond to the Kirk-Christiansen family, which therefore plays a very important strategic role in the LEGO Group and it is therefore a company over which central management can never have complete control (Holden, 2002, p. 168). One could therefore argue that the power structure at the LEGO Group is allocated from the top-down, but as it is a family owned business, the final saying is not solely on the CEO, but with influence from the family shareholder. Control System:
The control system at the LEGO group is, based on its organizational structure, generally tight as the employees have to report back to their respective managers. But one could argue, that after the new CEO Jørgen Vig Knudstorp entered the LEGO Group, a more loosely control system has been implemented. Knudstorp is focusing on building credibility with the employees and „managing at eye level‟, hereby being able to talk to t he people on the floor in various departments (O‟Connell, 2009, p. 1. Cf. appendix 20). By implementing a more loosely power structure in the company, more influence is given to the employees – a factor that can work as a motivation factor, as the employees will feel the y have more saying in the company, instead of just obeying orders from their managers.
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The employees at the LEGO Group are being rewarded for their job, rather t han being penalized for poor work. Especially creative and innovative ideas from employees but indeed also from customers are being rewarded. The LEGO Group puts high emphasis on the fact that there is a LEGO product for all ages, and that no one is too old to play with LEGO products. The LEGO Group has created several educational programs, both for children but indeed also for adults, who want to design more advanced LEGO figures and landscapes (LEGO.com – About Us – Lifelong Play – LEGO Education ). By inviting customers to participate in designing and creating new ideas, the LEGO Group is securing the ongoing innovation, which is needed for the company. By including customers, the organization loses some control over its system but is gaining knowledge from its most important consumers – the loyal and deeply dedicated people, hereby ensuring the important innovation of the LEGO Group. Furthermore, the LEGO Group has chosen to establish an ambassador program with the purpose of nurturing the mutually useful relations between the LEGO Group and its loyal, talented and committed consumers. Persons nominated by LEGO User Groups, select t he LEGO ambassadors globally, which shows how the LEGO Group reward not only its employees but certainly also its consumers, who are contributing to the innovation at the LEGO Group (cf. appendix 1, p.18). Another way for the LEGO Group to engage with its consumers is by inviting a small group of hackers to work in collaboration with a team of designers from the company. By doing so, the LEGO Group looses part of the control but as Ind & Schultz (2010) states “by opening itself up to an active involvement with these enthusiasts, the company has been able to tap into a rich vein of innovative thinking and has been able to once again make the brand relevant” (Cf. appendix 15). The LEGO Group is hereby working with the hackers, opposed to against them, and is in that way creating an innovation environment, which includes all of its stakeholders. The LEGO Group is inviting the public to co-create new products as part of its user-driven innovation. An example is with the LEGO MINDSTORMS®. The LEGO Group decided to launch a joint venture with MIT faculty and students but two weeks in, hackers started to create new, more advanced codes for the products. Instead of suing the hackers, the LEGO Group decided to work with them and instead released a developer‟s kit incorporating the best ideas from hackers (Naiman, 2008, p.1. Cf. appendix 19)
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Stories and storytelling:
Since the partnership with Lucasfilm Ltd. in 1999, the LEGO Group has become more focused on the concept and power of storytelling. The LEGO Group is continuously developing new products in collaboration with movies and series that are popular among children most recently LEGO® HARRY POTTER™ and LEGO® NINJAGO (LEGO.com – Products).
By combining both popular, well-known figures and stories in its product line as well as creating its own ongoing LEGO characters, the LEGO Group is using storytelling in two strong ways. Thereby, the company manages to express its core values in a new and innovative way. Another example of the LEGO Group using storytelling can be found in its monthly in-house magazine LEGO® life. An article about the 23-year old Samuel Johnson from Essex, England shows the realization of a young boy‟s dream of becoming a LEGO designer. At the age of 12, Johnson decided he wanted to be a LEGO designer and wrote a letter to the LEGO Group. He received a letter back from the LEGO Group, which listed everything Johnson had to do in order to become a LEGO designer. Johnson followed the advice and ended up achieving his dream at the age of 23. By the use of this kind of storytelling, the LEGO Group is portraying itself as a company with visions and a company where you as an employee can fulfill your dreams. It is also another way of portraying the values of innovation, creativity and play. Johnson was only a child when he wanted to enter the LEGO Group but kept developing his ideas and ended up achieving his dream (cf. appendix 7). This can be seen as a way for the LEGO Group to show a real-life experience of one of its employees, and how innovation is taking place within the company.
Metaphors:
The LEGO Group has created the LEGO® Universe, a massively multiplayer online game with LEGO figures as players in the games. It works as a united universe for the thousands of LEGO fans in the online world. Creating an entire universe with LEGO figures as the main
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characters, creates a kind of metaphor for the LEGO Group – a metaphor for inviting its consumers to play online with the figures they have used in real life for so long. This also shows the ongoing innovation and development within the organization. By creating LEGO Universe, the LEGO Group responds to the current trend of digitization. The focus on innovation within the LEGO Group invites the consumers to develop their own creativity and creates the room for play, which is highly focused on within t he LEGO Group. The „room for play‟ can be discussed as a metaphor for the LEGO Group and its way of creating innovation within the organization. The LEGO Group is hereby able to emphasize the innovation process by using metaphors, according to Conrad and Poole, especially towards it consumers. But also towards the employees and how they see the organization. The focus on creating room for play is highly emphasized in the everyday life at the LEGO Group. The employees are encouraged to cocreate new products and ideas, which contribute to the culture that exists within the organization.
Rituals and Ceremonies:
At the LEGO Group, several ceremonies are taking place throughout the company. One example is the LEGO festivities, which took place all over the world, in November 2010 (cf. appendix 8). The parties were held to celebrate the company‟s shared vision strategy and can be seen as a form of ceremony according to Conrad and Poole. By gathering people from various departments all over the world, the employees of the LEGO Group are meeting in a more informal way, which is enhancing the culture within the company and helps create relationships beyond the workplace.
4.5.2 Four Corporate Cultures: As mentioned before, the LEGO Group is operating from a functional organizational
structure, where the employees have a precise job description and a manager to each specific field. Looking at the Four Corporate Cultures model developed by Trompenaars and Hampden-Turner, it can be concluded that, by operating fr om a functional organizational structure, the culture within the LEGO Group is an Eif fel Tower culture. The structure is
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hierarchical, which is seen in the organizational structure. The communication is taskoriented, as the employees have specific tasks to accomplish, under each department. The previous section has analyzed the organization of the LEGO Group, as it was before 2004, to be a functional organizational structure, which can be traced back to the findings of Max Weber, Frederick Winslow Taylor and Henry Ford, where the classical approach origins. On the basis of this, the culture of the LEGO Group can then be concluded to belong to the Eiffel tower culture, seen from the Four Corporate Cultures model. In 2004, the LEGO Group moved from a more Eiffel Tower culture to an Incubator culture. The shift in management after a longer period of downside in sale and general turnover, led to a looser structure and a more personal insight from the CEO. It w as the former McKinsey consultant Jørgen Vig Knudstorp, who came to the LEGO Group, not being part of the Kirk Kristiansen family, and was named CEO in 2004. By still focusing on the core product, but simultaneously implementing a new strategy which required a looser structure, Knudstorp chose to push decisions as far down the hierarchy and breaking down some of the hierarchical structures, which the company was known for (O‟Connell, 2009, p.1. Cf. appendix 20). The change in management emphasized the focus on inno vation, but at a „back -to- basic‟ level. It was important for Knudstorp to keep focusing on the core product, which has been the key focus for the LEGO Group since the beginning. But to keep up with the technologybased games and entertainment a new innovation strategy had t o be implemented. The LEGO Group developed “its own LEGO innovation matrix as a tool to help identify, staff, and coordinate the different innovations needed for the development of a new product” ( Hjuler & Robertson, 2009, p. 1. Cf. appendix 14). The new matrix focused on four different areas where the innovation could take place; product, business, communication, and process. This led to more responsibility down the hierarchy instead of it just being the top-managers who were responsible for innovation taking place. The LEGO Group was therefore moving to the Incubator culture, where the culture is more person-oriented and egalitarian. Creativity is in focus and the employees of the company are expected to come up with ideas of their own to further development. As stated on the LEGO website “We call it clutch power: open, supportive collaboration across a boundless global community where people continuously connect and re-engage in different work r elations. One of the first things you‟ll notice about us is that we interact in a straightforward way built
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around honesty, trust and the fact that we truly care about every single individual within t he LEGO Group” (LEGO.com – About Us – Jobs – Working at the LEGO Group ). Trompenaars and Hampden-Turner state that a company will not succeed if it concentrates exclusively on one quadrant in the Four Corporate Cultures model, but should instead be combining aspects of the different cultures in the model. The LEGO Group is still using aspects of the Eiffel Tower culture, as the structure in the company is still shown as hierarchical. The company is therefore placed both within the Eiffel Tower culture but has recently moved towards the Incubator culture (cf. appendix 6). It can be argued that the culture within the LEGO Group shows aspect of the two remaining cultures in the discussed model; The Guided Missile and the Family culture. The Guided Missile is an egalitarian, task-oriented culture where team presentations are in focus. The LEGO Group do focus on resolving the tasks within the organizations as a unit, but as it is a functional organizational structure the company is build upon, this culture is not in focus. Looking at the Family culture, it can also be argued that the LEGO Group has shown aspect of this. The Family culture is very hierarchical and person-oriented and who you are, is more important than what you do (Trompenaars and Hampden-Turner, 2004, p. 26). It can be argued that the LEGO Group started within Eiffel Tower culture with aspects of the Family culture as the family focus was highly emphasized when it was the founder, who worked as CEO. The Family culture puts high emphasis on the fact that the or ganization is familyowned and on the hierarchical gap between parents and children. This could be argued to be the case before the new CEO entered the company in 2004, but as Knudstorp is not part of the Kirk Kristiansen family who founded the company, the Family Culture is being oppressed and replaced with aspects of the Incubator culture, as stated previously. If taking a look at the optimal management style within the culture at the LEGO Group, it i s important to focus on the above-mentioned shift. That being said, the culture within the LEGO Group has aspects of both the Eiffel Tower culture and the Incubator culture. Fulfilling the job description within the company is in focus as we still see the functional organizational structure. But also managing by shared excitement is in focus in the LEGO Group. As stated on its website, the LEGO Group puts high emphasis on a free combination of ideas and people, and about caring for every single individual within the LEGO Group. Furthermore,
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the phrase „Working Together‟ is seen as an important approach, which is hig hly focused upon when new employees are entering the company (LEGO.com – About Us – Jobs – Working at the LEGO Group ).
Looking at the power orientation within the LEGO Group, power is an attribute of the formal position, which can be traced back to the original state of the company. As the LEGO Group moves towards the incubator culture, the power orientation changes from dealing with power position to the power of ideas. Thereby, it becomes possible for all LEGO employees to contribute with ideas to the innovation process, regardless of their position in the hierarchy. The innovation process at the LEGO Group shows how the employees, as well as the customers, are getting more involved in the development of ideas. By giving them the opportunity to create their own LEGO figures and come up with new ways of innovating and further developing the LEGO Group and its brand, the company, and here the managers of each department, and its employees are working together to continuously improve the LEGO brand. But as the LEGO Group has not fully moved from the Eiffel Tower culture, the power direction still comes from the CEO and the managers of each department, even though the employees have been given more responsibility and saying as part of the development of the company. The source of cohesion, as a part of the typologies suggested by Trompenaars and HampdenTurner (cf. appendix 4) within the LEGO Group shows how employees are held together by common subordination to a boss or manager. But also the shared breakthroughs are shown within the LEGO Group; innovating and discovering new ideas and products in unison are important criteria for the LEGO Group and its employees. As stated by Trompenaars and Hampden-Turner (2004), “every culture has its own Guiding Star or Watchdog” (p. 34). When discussing this typology, the LEGO Group is showing more of an Incubator culture here, as innovation is the ongoing purpose of the company (cf. appendix 4). As the four cultures within the quadrant vary in their definition of excellence, it is important to look at how this is shown within the LEGO Group (cf. appendix 4). Here, the company is leaning towards the incubator culture, as the excellence here lie in the personal creativity and genius. This can again be drawn back to the innovation philosophy of the LEGO Group and how important the creation of new ideas and innovative solutions is.
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The LEGO Group puts high emphasis on job satisfaction among its employees. An annual employee survey is conducted and the last one (from 2010) showed that the total job satisfaction increased from 75 to 76 % out of a total of 100 (cf. appendix 5, p. 14). Within this annual survey, different factors are being measured, such as gender diversity, motivation and satisfaction and work-life balance (cf. appendix 5, p. 17). It is important for the LEGO Group to keep a continuous overall work satisfaction from its employees. When discussing HRM in general, as Trompenaars and Hampden-Turner incorporate in their Four Corporate Culture model, the overall job satisfaction shown within an organization is an important factor – it is what HRM is aiming towards as this can both serve as a motivation factor but indeed also as an indicator for the organization and its managers to see where, and if, improvement is needed.
It is clear to see how the LEGO Group is moving from the Eiffel Tower culture towards the Incubator culture, while still having aspects of both. Moving completely to one of the cultures is not where the LEGO Group is heading because, as stated in the beginning, solely focusing on one culture will leave the culture within the company in trouble. By having aspects of both cultures, the LEGO Group has created a strong culture, and is contributing with an innovative edge to its company philosophy. This is shown by the use of the Incubator culture, where the employees are given more influence in the company. That being said, the LEGO Group should not move completely away from the Eiffel Tower culture, since this is part of its identity of the core values reflecting the importance of traditions in the company.
4.5.3 Subcultures An interesting thing to notice when discussing management strategy in the LEGO Group, is
the fact that no country has advantages over another – this also includes Denmark and its headquarter in Billund. The philosophy of the LEGO Group puts emphasis on the fact that the business strategy and production facilities in the LEGO companies outside Denmark should be run by its own country nationals (Holden, 2002, p. 163). One could argue that the policy of playing down its Danish origin and letting each country incorporate the LEGO Group values according to the cultural and national standards each country has, creates several subcultures within each country. Subcultures that central management does not have the ability to fully control.
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Managing these different subcultures can therefore be a challenge. The LEGO Group therefore puts high focus on its traditional values and identity and makes sure its managers and employees are fully aware of these. It is therefore up to each country to interpret these values and transform them so they can be recognized and received in a way that fits the respective country. As stated by import/export manager, LEGO operaciones de Mexico, Celina Perales “in this way, we are trying to adapt the LEGO culture to our own local ways of working” (cf. appendix 5, p. 15). The main challenge for the LEGO Group and its managers is to not only make sure that every department globally is fully aware of the vision, mission and philosophy of the company but indeed also to make sure they are innovative and follow the globally changing trends of the children today. The LEGO Media International is a subsidiary company based in London with the purpose of developing interactive software and marketing it on a worldwide scale (Holden, 2002, p. 168). As stated by Holden (2002) the challenge in the LEGO Media is to ensure that they “full y understand the values embodied by the company identity and work with them accordingly” (p. 169). This can be seen as a part in initiative from the LEGO Group, to manage and keep track of the different subcultures within the organization that are taking place in the diff erent departments globally. The LEGO Group believes that the company has a uniform image all over the world. But as Holden (2002) states the “(...) employees of LEGO Media do not entirely share this belief. In their experience, the LEGO image in the USA i s significantly different from the image in Europe. (...) Perception of the company image is strongly associated with how employees in the company interpret the company‟s identity (p. 177). But the LEGO Group do seem to be aware of the fact that it needs to differentiate the way it expresses its identity towards the stakeholders and consumers, by letting each department/country interpret and adapt the values of the company and then make it fit.
4.6 Motivation (MTJ)
By primarily using a motivational theory of McClelland, the following section will analyze how motivation factors are perceived within the organization of the LEGO Group, both from
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the perspective of employees and the management. Furthermore, it will be accounted for, how motivation is connected to the process of implementing the company philosophy with aspects of innovation.
When trying to implement a strategy of innovation and employee involvement, employees must be motivated to participate actively in the development of the company. First of all, a psychological contract exists between the LEGO Group and its employees. A psychological contract is “(...) an implicit set of obligations and expectations concerning what the individual and the organization expect to give to and receive from each other” (Jørgensen, F. (2010). Organizational Behavior, Week 6[PowerPoint slides] Retrieved from campusnet.asb.dk). It is not possible to include and specify all aspect of employment in a written contract, but a psychological contract can cover these aspects, which for example could be unwritten guidelines on how to behave within the organization. Both the employer and the employees have interest in the psychological contract because they both expect something from it. In the case of the LEGO Group, the LEGO company as an employer expects its employees to live up to the motto of „only the best is good enough‟, meaning that employees‟ work effort must result in quality products. Additionally, by delegating more responsibility down the hierarchy, the company clearly shows its trust in and reliance upon employees, and it is also a sign that the LEGO Group expects its employees to be committed to the organization. On the other hand, the employees in the LEGO Group are expecting fair treatment, personal development and continued employment.
Continued employment is hard to expect in days where markets change rapidly, and organizations often need to make great organizational changes in order to keep up with their demanding consumers. It has at the same time also become more acceptable that organizations have increased their employee turnover, simply because changing jobs more often is an accepted part of working life nowadays, compared to fifty years ago where loyalty was more in focus. Even though some expectations from employees or employers can be hard to live up to, it is still important that the psychological contract does not breach. A breach can lead to decrease in job satisfaction, poor working performance and breach of trust, which will naturally hinder a healthy working environment in an organization and which can have fatal
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consequences for the production and thereby the future of a company (Jørgensen, F. (2010). Organizational Behavior, Week 6[PowerPoint slides] Retrieved from campusnet.asb.dk). In order to ensure continuous motivation among its employees, the LEGO Group has created a so-called „People Promise‟, where it has set out goals to r each within areas such as workinglife balance, motivation and satisfaction, safety, and gender diversity (Cf. appendix 5). In terms of motivation and satisfaction, the LEGO Group has a purpose of securing “(…) highly motivated and satisfied employees by e.g. focusing on securing the LEGO image and an exciting daily work experience” (Cf. appendix 5). In order to measure results within the field of motivation and satisfaction, the LEGO Group has developed a benchmark, the “LEGO EEI”, where results for the total LEGO Group can be compared. The LEGO EEI is calculat ed as a weighted average of the EEI (European Employee Index) results for the eleven largest LEGO employee countries (Cf. appendix 5). In the year 2009, the goal was to r each an employee score for motivation and satisfaction that was equal to or above +10 to global benchmark (LEGO EEI). The actual result was +11, so the 2009 target was well met. Furthermore, it can be examined how well the LEGO Group motivates its employees by looking at David McClelland‟s needs-based motivational theory. McClelland argues, that he believes that “(...) certain types of needs and desires are acquired durin g an individual‟s lifetime” (Dyck & Neubert, 2008, p. 420). McClelland does not, in comparison to Maslow‟s Theory of Needs, order the needs in a hierarchical order. McClelland additionally takes into account that the intensity of the needs will vary from individual to individual. This approach of considering differing individual needs is very suitable for the LEGO Group, who has a large workforce spread over several countries. Personal and cultural differences can result in different prioritizing of motivation needs, and therefore the McClelland theory is suitable for the analysis of motivation needs within the LEGO organization.
Looking at the need for achievement, the LEGO Group clearly states on its job section on it s website, that the company operates in a “(...) highly competitive and fast-moving market” (LEGO.com – About Us – Jobs – Working at the LEGO Group), and that the company‟s ability to act is a main reason to its success, i.e. a lot of hard work is needed in order to maintain a successful position on the market. The focus on an innovative approach mixed
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with a playful dimension originating from the LEGO philosophy, creates an organizational setting where focus is on employees developing through innovative processes, but where learning through fun and play is essential. With the organizational changes in 2004, where power and influence in the LEGO organization became more decentralized, the LEGO Group made it possible for its employees to join the decision-making processes and make an impact. Thereby, employees are motivated to actively participate in the organization, and they are more willing to do so because they feel involved. Some employees may have the need to have a certain personal status, and for these, involvement of the employees is an important way to fulfill t his need. Finally, the LEGO Group considers the need for affiliation by creating an organization, where the community is in focus. The LEGO Group states on its website, that when it comes to working in the organization, succeeding together is vital (LEGO.com – About Us – Jobs – Working at the LEGO Group). Placing such a statement on the website, where people interested in working for the LEGO Group will search for information, shows the importance the LEGO Group adds to close working relations, and that it is an aspect of the organization that the LEGO Group uses to differ itself from other companies and attract employees. The LEGO Group also ensures to strengthen the relationships between its employees by arranging events. An example of such an event is the November 2010 festivities, where the LEGO Group employees all over the world celebrated the shared vision strategy of the company. These events create a sense of belongingness and celebrate the unity of the LEGO employees. Brooks (2009) also emphasizes the relationship between motivation and communication, and especially underlines the importance of a two-way dialogue in order to enhance the motivation of employees (p. 101). A motivational theory such as the expectancy theory centers around “(...) how people are motivated by attempts to achieve desired outcome” (Brooks, 2009, p. 101). When it comes to desired outcome, communication plays an essential role, as employees must communicate to their manager what they wish to achieve in terms of work outcomes. In addition, a manager must also be able to clearly communicate what he or she expects from an employee, so that there is an actual coherence between expectations from both parties and the actual execution of achievement from the work. This feedback process is present in the organization of the LEGO Group, where the focus on innovation actually has initiated a more constructive dialogue. The LEGO Group has realized that in order for an
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innovative environment to thrive, the organization must grant space for the development of ideas to happen, and this involves an open communication process where feedback and room for mistakes is incorporated.
To summarize, the LEGO Group shows good effort in order to keep its employees motivated. The company‟s focus on growth and innovation ensures employees a work place where they can be challenged, developed and get a chance to achieve personal goals. This personal process of self advancement furthermore takes place in a universe characterized by fun, play and creativity, which can be recognized as the LEGO values. The LEGO Group emphasizes that the best way to produce creative products is in a creative environment, where employees can feel relaxed and comfortable, while performing. Therefore, the physical surroundings in LEGO offices are characterized by having meeting spaces and an informal style in the form of living room-like furniture (Kuang, 2009, p. 1. Cf. appendix 17), and meeting rooms where there always is a bowl of LEGO bricks on the table, just to tease the curiosity and imagination of the employees (Doke, 2004. Cf. appendix 11). Finally, the LEGO Group follows up on its responsibility toward employees by annually making surveys that account for the motivational needs for the employees and how the LEGO Group progresses in trying to create a setting where employees can achieve these needs. Overall, this approach means that the LEGO Group approach to motivating employees rely both on the philosophy of fun and creativity but certainly also on innovation, as it creates many opportunities for the further development of employees as well as the organization.
4.7 Conclusion (MTJ & SBH)
The analysis of the different aspects of the LEGO Group organization shows, that the company clearly emphasizes its core values with the back-to-basics strategy. Creativity is still a key component of the organization, and developing through play exists both externally, in the form of the products for consumers, both also internally, in the wa y employees works and interacts. Newer initiatives do however also influence the organization, something which is also characterized by the move from Eiffel Tower culture to Incubator culture. Thereby, the
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LEGO Group acknowledges that innovation is essential in order to continuously develop the company and its products. This fact can also be seen in the organizational changes which have taken place, where a looser structure has been created in order to advance a dynamic and innovative decision-making process.
5. The future of LEGO: can core values from the 1930’s exist in a modern setting? (MTJ & SBH) The philosophy of creating products based on a strategy of play and creativity is fascinating, and it is still as present in the organization of the LEGO Group today as it was when the company was founded in 1932. This creative universe, where only the imagination is a limit, is appealing to both consumers as well as employees. The organizational changes which started in March 2004 was however as far from the philosophy of the LEGO Group as possible. With his new management approach, CEO Jø rgen Vig Knudstorp created a “(…) simplified management structure and tried to foster a more commercial culture through a performance-based pay scheme and frank communication between management and employees.” (Unknown author, 2006. Cf. appendix 21). Additionally, the LEGOLAND theme park division was sold, thousands of employees were laid -off, and the process of developing ideas was cut in half, “(…) going from idea to box in j ust 12 months.” (Schwartz, 2006, p. 46. Cf. appendix 22). All these initiatives were in contrast to how the culture of the LEGO Group had been so far. Knudstorp described it as a culture with an attit ude of “(…) „we‟re doing great stuff for kids – don‟t bother us with financial goals‟. It was the culture where delivering what was promised wasn‟t critical.” (Schwartz, 2006, p. 45. Cf. appendix 22). The changes were an abrupt wake up for the LEGO employees, but the radical changes of Knudstorp worked and the company has performed very successfully ever since. An advantage of Knudstorp‟s strategy of cutting the culture of the LEGO Group back to the bone; the core values, is the fact that the LEGO Group succeeded in creating a common understanding of the corporate identity internally. Where employees before felt the company had drifted to far away from core values, the new management style of Knudstorp made sure that everybody
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was one the same page, that “(...) innovation needed to be refocused back on the creative building experience” (Hjuler & Robertson, 2009, p. 1. Cf. appendix 14). CEO Jørgen Vig Knudstorp decided upon a two-pronged approach as a solution to the critical state the company was in, when he took over in 2004. This means that on one side, the LEGO Group concentrates its effort on a back-to-basics strategy, meaning that the core values of the company are being emphasized throughout the organization and are connected to the products. On the other side, the LEGO Group acknowledges the entry and popularity of modern technology, and knows that the future of the LEGO Group also has to be online. In terms of the back-to-basics strategy, it definitely has certain advantages. The strategy plays upon the history of the LEGO Group, which is something many employees can relate to, as they themselves have grown up with the LEGO products, and associates the LEGO brand with something well-known. Furthermore, the strategy creates coherence in the company, by ensuring that the identity from the beginning in 1932 still plays a part in the organization anno 2011. In addition, the core values are good values that represent good qualities of the company such as fun and quality, which are easy to communicate to both consumers and employees. However, a back-to-basics strategy can also be a hindrance because a focus on old elements can be difficult to adapt into a modern setting. Even though the values of the LEGO Group may seem timeless, it is still important that they are represented in a new wrapping so they are digestible for a new generation of employees and not just considered old-fashioned. Knudstorp‟s new strategy definitely has changed the organizational structur e of the company, and made it more modern, which is beneficial for both employees. The new structure makes communication in the organization more flowing, and gives employees much more responsibility; important aspects when an organization wants to attract creative and innovative employees. The other dimension of the strategy, innovation, is easier to grow in an or ganization where responsibility is divided among people, and where communication openly takes place between the different levels of the organization. An innovative work place creates a challenging environment for employees, where they themselves have the opportunity to develop along with the company. When dealing with innovation, it is however not sufficient to solely look at the internal side of the LEGO Group organization. The decisions the
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company has made regarding innovation and a changed product range, do not only affect externally in the form of consumers, but are also reflected back to the organization. Although this thesis primarily focuses on the LEGO Group organization internally, external stakeholders must therefore also be considered, when discussing the abilit y of the LEGO Group to complement core values with newer initiatives. Firstly, it can be argued whether a back-to-basics strategy is even enough in order to differentiate the LEGO Group in a stagnated toy market full of offers? Being a child is different today than it was seventy years ago. Children of today grow up a lot faster, which has resulted in falling product cycles for the LEGO Group (Fishman, 2001, p. 1. Cf. appendix 13). In addition, the choice of toys and entertainment commodities has exploded, which causes children to be bombarded with offers every single day, resulting in a „shopping around‟ culture. The children simply do not stay loyal to a brand in the same way as their parents or grandparents did. Therefore, as a company, you must have something very special to offer in order to gain but also maintain their attention. The LEGO Group puts high emphasis on its brand and how it is l inked to the traditional values and in combination these elements basically works as a key part of the identity of the company. People associate the LEGO brand with quality, creativity and wholesome play for children. These values have worked as an acknowledging recognition factor for the brand, but the question is whether values are enough to create an image that differentiate a company in a packed and highly competitive market? The back-to-basics strategy can also be considered as an easy solution for the LEGO Group. It could be expected of a company of world-class creative builders that it could create something new and modern, instead of returning t o something well-known. This aspect leads to the focus on innovation, which the LEGO Group has. As a part of the innovation process, the LEGO Group has actually created products relatively different from what would normally be associated with the company. Knudstorp has focused on licensing agreements, such as the cooperation with Lucasfilm Ltd. on LEGO® STAR WARS™ products. The LEGO Group has previously been criticized for keeping the production too much in own hands but with the partnership with Lucasfilm Ltd., the company has taken a new approach to product development (Fishman, 2001, p 3. Cf. appendix13). The approach with these licensing products or IP products (Intellectual Property) emphasizes the role of the LEGO Group in the
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virtual space, which obliges a wish from consumers of bringing the LEGO universe to the virtual scene where they e.g. can share the passion for the LEGO Group in online communities. Thereby, the innovation process has not only contributed to an exciting development in the product range of the LEGO Group but has also given the LEGO Group a foundation of building relationships with consumers. Additionally, being online has given the LEGO Group a greater opportunity of involving consumers in the company, e.g. by listening to their opinions about products and modifying the products according to their wishes. Innovation is undoubtedly a necessary part of re-inventing the LEGO Group and ensuring the further competitiveness of the company. But the shifts the LEGO Group has taken in the process of advancing creative and innovative ideas, have also met criti cism from some of the most loyal customers of the company. They are concerned about how much the brand can be innovated, if it can actually be extended too much. Previously, LEGO products emphasized creativity and imagination without limits and therefore did not have instructions or pictures of how the final products should look like, the so-called building instructions. Instead, it was up to the consumer to decide the look of the final product i tself, i.e. there were no right solutions. With the entry of licensed products, the LEGO Group has shifted to an approach focusing on storytelling. Here, characters and the setting are decided in advance, and the play itself is structured from the beginning, as consumers know the characters from movies and games, and thereby have a knowledge of how the story evolve around the characters. In that way, it can be argued that the LEGO Group has left its philosophy of free creativity and play, and instead replaced it with a more theme-based and structured approach to play. The LEGO Group has a slogan of “nurturing the child” (Schwartz, 2006, p. 45. Cf. appendix 22), but by putting creativity into a frame, it can be argued that the LEGO Group deviates from its own principles, and actually robs children their opportunity of freely exploring their imagination. These external issues naturally affect the internal organization of the LEGO Group. The involvement online and the focus on storytelling are part of a newer and broader product range, and although they have been very successful, they need to be transferable back to the back-to-basics strategy, which is embedded in the internal or ganization. Cohesion has to exist between what is communicated internally versus externally. Also, the organization of the LEGO Group faces great challenges when it comes to involving consumers in the decisionmaking process. Only recently, with the organizational changes in 2004, did employees
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become an essential part of this process and it requires some structural coordination and a lot of growing in a short time, in order for the LEGO Group organization to fully embed consumers in its process of developing ideas and benefit from it. Although the LEGO Group wishes to preserve certain traditions from the history of the company, e.g. the hierarchical structure, which reflects its past as a family business, the organizational structure may need further revision in order to successfully gain something from the creative inputs which come from all directions. As the organization is structured today, there are simply too many divided levels of management, which slows down the idea developing process. The LEGO Group is all about quality, but if Knudstorp wishes to go from idea to box in a year, creativity has to flow more easily across of the levels. There is no doubt about the importance of the legacy of the LEGO Group. The challenge is how to adapt it to modern times. The legacy ensures the company a connection to consumers in many different age groups, which is an essential part of the LEGO Group being an established brand. Obviously, a great pressure lies on the LEGO Group and especially on CEO Knudstorp, of continuing the company in a successful matter. It seems as if Knudstorp is well aware of the danger of diluting the popular and well -known brand, and so far he has managed to balance the relationship between core values tr acing back to the “old” LEGO with modern technology and innovation from the “new” LEGO, in a highly successful way. Only time and the demand from the consumers of the toy market will show, if the LEGO Group can continue with its fine equilibrium or if it has to make radical changes to its identity in order to maintain a competitive position. The question then is, whether the brand can survive a reformation. The LEGO Group can prepare, develop and innovate to infinity but in the end, it will be the consumers who decide the future of the company. By allowing these consumers participation in the decision-making process, the LEGO Group creates a feeling of responsibility towards the company from the consumer‟s side, and thereby motivates them to stay loyal. This form of customer-relationship building is likely to be very beneficial for the company, and the setting in which it takes place, shows that there can exist a cohesion between the philosophy and the innovation in the LEGO Group. The innovation aspects in the form of virtual relationship-building help strengthen the core values in a way so the t wo elements melt together in a symbiosis, where the interdependent relationship between the two is emphasized.
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6. Conclusion (MTJ & SBH) The thesis have now analyzed and discussed how the LEGO Group implements its company philosophy, while simultaneously taking the concept of innovation into consideration. This has been done by thoroughly examining the organization of the LEGO Group, especially in terms of the organizational structure, the vision and mission statement, the organizational communication, the organizational culture, and also the motivational factors of the organization. The analysis has revealed that the LEGO Group makes a great effort in order to stay true to its core values. They are emphasized throughout the entire organization, but are also an important part of branding the company to external stakeholders, e.g. trough the vision and the mission statement on the website. The LEGO Group experienced an identity crisis in 2004, which led to changes in the organization. The new CEO emphasized a more innovative-oriented approach to the organization‟s structure and management but also chose a back-to-basics strategy, focusing on values such as quality and creativity, which are implemented into all aspects of the LEGO Group. The organizational culture within the LEGO Group puts high emphasis on its identity and its core values. The analysis has revealed that the LEGO Group is moving from the Eiffel Tower culture towards the Incubator culture, which is a clear example of the changes that has taken place since 2004. This embrace of several cultures within the company creates a strong culture and contributes with an innovative edge to the company philosophy. Additionally, the looser structure in the organization has also made it easier to involve more employees in innovation and communication processes, which strengthens the organizational cultures as well as the competitiveness of the company. The core values are also embedded in the work of the employees, which are thereby ensured a creative workplace – something which is of great importance when dealing with motivation. The fact that the LEGO Group also emphasizes an innovative approach, gives the employees an opportunity for being stimulating through an exciting and challenging idea
development process. Thereby, the LEGO Group creates a work place where motivational needs are taken into consideration, even though these differentiate from individual to individual.
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The use of methodological hermeneutics has made it possible to analyze the organization from a perspective of the LEGO Group, and thereby examine how the management style affects the entire organization. Additionally, the hermeneutic circle makes it possible to analyze back and forth between the parts and the whole, i.e. in the case of the LEGO Group it can be concluded that the core values and the newer innovation approach are inter-dependent elements, which are equally present in the organization. The LEGO Group is currently experiencing success with its products, and a part of the explanation to this, is definitely to be found in the successful combination of well-known quality values and newer, innovative initiatives. How this combination will evolve in the future, depends greatly on the initiatives the LEGO Group has in mind. Although continuous innovation and development is a key part of ensuring growth in a company, then it is important for the LEGO Group to always keep its legacy in mind, and make sure that there is a connection between the new products and the core values, which are the identity of the company.
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7. References 7.1 Books Brooks, I. (2009). Organizational Behaviour: Individuals, Groups and Organization . Essex, UK: Pearson Education Limited.
Conrad, C. & Poole, M. S. (2005). Strategic Organizational Communication: In A Global Economy. Belmont, CA, U.S: Thomson Wadsworth Publishing.
Daft, R. L. (2004). Organization Theory and Design (8th ed.). Cincinatti, Ohio, U.S: SouthWestern Educational Publishing.
Dyck, B. & Neubert, M. (2008). Management: Current Practices and New Directions . Boston, U.S: Houghton Miffling Harcourt Publishing Company.
Hampden-Turner, C. & Trompenaars, F. (2004). Managing People Across Cultures. West Sussex, UK: Capstone Publishing Ltd.
Holden, N. J. (2002). Cross-cultural Management: A Knowledge Management Perspective. Essex, UK: Pearson Education Limited.
Jørgensen, F. (2010). Organizational Behavior, Week 6 [PowerPoint slides] Retrieved from campusnet.asb.dk
Miller, K. (2009). Organizational Communication: Approaches and Processes . Boston, U.S: Wadsworth Cengage Learning.
Newson, D. & Haynes, J. (2008). Public Relations Writing. Belmont, CA, U.S: Thomson Wadsworth Publishing.
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Sherratt, Y. (2005). Continental philosophy of social science: Hermeneutics, Genealogy and Critical Theory from ancient Greece to the Twenty-first Century . Cambridge, New York, U.S: Cambridge University Press.
7.2 Online materials Cheng, Y. (1989). Organizational culture: Development of a theoretical framework for organizational research. CUHK Education Journal, 17, 128-147.
Doke, D. (2004, May 04). The world in their hands . Retrieved from
Eaton, K. (2010, August 13). The Most Popular Toy Ever Made Is Lego: Survey . Retrieved from
Fishman, C. (2001). Why Can‟t Lego Click? Fast Company, (50) , 144-157. Retrieved from Business Source Complete database.
Hjuler, P. & Robertson, D. (2009). Innovation Governance in Action: The LEGO Group . Retrieved from
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Ind, N. & Schultz, M. (2010, July 26). Brand Building, Beyond Marketing . Retrieved from
Kirkbi A/S. (2010). About Us – Board of Directors . Retrieved from
Kuang, C. (2009, March 09). Inside the LEGO-plex: No Wonder They Hatch Such Great Ideas. Retrieved from
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Kure, N. (2008). Philosophical hermeneutics [PowerPoint Slides]. Retrieved from
McGinn, D. (2007). Fit, either you have it or you don’t; Culture Matter A Lot. The Financial Post, FP WEEKEND , FW3. Retrieved from LexisNexis® Academic database.
Naiman, L. (2008, April 21). Jørgen Vig Knudstorp on LEGO Group Innovation . Retrieved from
O‟Connell, A. (2009, January). Lego CEO Jørgen Vig Knudstorp on leading through survival and growth. Retrieved from
Unknown Author. (2006). Picking Up the Pieces. The Economist, 381,(8501), 76. Retrieved from Business Source Complete database.
Schwartz, N. D. (2006). One Brick at a Time. Fortune, 153, (11), 45-46. Retrieved from Buisness Source Complete database.
7.3 The webpage of the LEGO Group LEGO.com - About Us -Facts and Figures – Company Profile
LEGO.com – About Us – Corporate Responsibility – Progress report 2010
LEGO.com – About Us – Jobs – Working at the LEGO Group
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