THE MANAGEMENT GURU: DROP THE POWER AND LET CREATIVITY GROW

MANAGEMENT THE DANISH WAY: A short distance between top and bottom, trust between management and staff, interdisciplinary collaboration – these are some of the characteristics of the Danish corporate sector which, according to the author, businessman and entrepreneur Lars Kolind, make Denmark the world’s most advanced country in terms of conditions for running a business.

Drop the hunt for quick profits and give meaning to what your company does. A meaning that creates value for the company management, the staff and society as a whole. Start seeing your staff, your suppliers and your customers as collaboration partners in your company’s development, and not as potential adversaries to be defeated. Give your staff responsibility and strengthen creativity by providing collaboration opportunities across the organisation and across disciplines. And last but not least, give up the idea that leadership is about power and instead cultivate the idea that good management is value-based.

This handful of axioms summarizes Lars Kolind’s philosophy of good management of a knowledge-based company. His topical book “The Second Cycle – Winning the War on Bureaucracy”, published by The Wharton School at the University of Pennsylvania has become a bestseller in management literature over the last year.

Saving Oticon
But Lars Kolind is much more than an author. He was the architect of one of the more spectacular company turnarounds in recent years. As managing director of the Danish hearing aid company Oticon, he pulled it out of a death spiral and gave it a platform for new growth, which has made Oticon the world’s leading manufacturer of advanced hearing aids. Lars Kolind himself applied one of his other axioms – when the company’s success was ensured, he stepped down and handed over control to others.

“There are three factors which make mature organisations easy prey for the virus that changes success into failure: size, age, and success itself,” says Lars Kolind. “It is when the company is doing well that the organisation needs to look critically at itself. Success has a habit of laying the roots of failure, if you are not awake to it.”

Redefining self-understanding
Lars Kolind became managing director of Oticon at a time when the company was dangerously close to collapse. Despite being able to offer the market’s best sound quality, Oticon hearing aids were large and clumsy. They were also expensive, and the company’s marketing strategy was ineffective. The company culture was distinctly hierarchical and conservative, with a built-in resistance to change. It was only a matter of time before Oticon would go under.

“During my first few months at Oticon, while I was acquiring an overview of how bad things really were, the first thing I introduced was tight cost control, creating a cost consciousness in all staff which was previously non-existent. Then we changed the marketing strategy. From targeting patients with reduced hearing, we now approached audiologists, who in most cases were actually the ones who decided which hearing aids patients should have. Then we redefined our self-understanding from being a manufacturer of hearing aids to being a company which helps people to live in the best possible way with the hearing they have.”

New business culture
Although the various initiatives helped to dramatically improve the liquidity situation, Lars Kolind quickly realised that Oticon’s fundamental problem was the way the company worked. That resulted in changes which echoed around the world, and which today form the basis of the management principles that have made Lars Kolind a guru in the international business world.

“From being a highly rule-based, sharply department-divided hierarchical engineering culture, Oticon became a customer-oriented, flexible and innovative business culture in a short space of time,” says Kolind.

The cultural shift was based on a number of initiatives:

• Apart from a few staff functions, the department structure was discontinued and became project-oriented
• Conventional titles were discontinued, and everyone in the company could join a project group
• All walls were pulled down and no one had permanent offices, but were in a project group
• Paper was discontinued, and Oticon became the world’s first company to be 95% computer-based
• A salary system was introduced which was based on the value the individual employee added to the company

Give up old-fashioned power
Lars Kolind coined the phrase ’Think the unthinkable’ for the new and revolutionary transformation of Oticon. The unthinkable was thought, and it worked. In the 10 years Kolind headed Oticon, revenues increased threefold. Creativity flourished, and new products set completely new standards for digital hearing aids. Enthusiasm and teamwork made Oticon one of Denmark’s best workplaces.

“In Danish companies there is a basic trust between top and bottom,” says Lars Kolind. “The social and the labour market structures we have achieved through negotiations over the last 100 years, and which form the basis for what is called the Danish model regarding social security and labour market flexibility, makes Denmark one of the most advanced countries in the world. We do not need old-fashioned management based on power. I would go as far as to say that the principles and tools for good management which I have described in “The Second Cycle – Winning the War on Bureaucracy” can be used by all knowledge based companies across the entire industrialised world.” Kolind does acknowledge however that the basic conditions for success are greater in Denmark than in most other countries: “Denmark has a tradition for flat structures. Less distance between power and people. More direct connections between managers and staff. And a distinct tendency for staff to take on responsibility themselves, and openly express their opinions to managers.”

Collaboration across demarcations
The Danish mentality, which forms the basis of company culture, has its historical roots embedded in geography: the country is small and sandwiched between large industrial nations, and so has had to survive by developing values in ways other than mass production. Through their education, Danes have developed skills in learning quickly.

“There is a sizeable element of equality-thinking in the Danish teaching system, which is also part of democratizing our behaviour. It is natural for Danes to seek responsibility and work independently. While conventional pyramid organisations kill creativity in the individual, collaboration across demarcations helps create added value. Engineers are inspired by designers, designers by sales people and sales people by engineers. It very quickly becomes a win-win situation.”

Partnership creates value 
According to Lars Kolind, managers must give up their power positions in order to create the framework for a looser company structure.

“Management by fear and rigid styles of management can create good products and good sales figures some of the time. But not all of the time. The organisation stiffens, and products that previously were good are overrun by new and innovative ones, which are shaped through dialogue and creativity by enthusiastic staff. In the old days when a company’s capital was based on the physical presence of money, labour mattered less. It just needed to be present.

Today it is the partnership between management and good staff which constitutes a company’s value.” To Lars Kolind, a good leader can be compared with a captain of a ship. Today, it is not the captain’s role to actually run the ship; that is the task of the officers and crew. The captain needs to concentrate on ensuring that the ship functions and that it arrives at its destination.

“The leader’s principal task is to give meaning to what the company does and to formulate the framework for where it is heading,” says Kolind. “The leader must define the company values in relation to society and motivate the staff.

Ensure sustainability, which becomes a matter of course if one accepts that the company primarily benefits the world around it. Sustainability must be embedded in all future work. When that happens, growth and profits come by themselves. Simply because value-based management has an in-built innovation power which is necessary to create the winners of the future.”

LARS KOLIND Born 1947, MSc in mathematics, B.Com in organisation. Management consultant. Deputy director of Risø National Laboratory. Finance director in medico company Radiometer. External lecturer in business economics and planning theory. 1988-1998 group chief executive of hearing aid company Oticon. Today, deputy chairman of the board of Grundfos, chairman of the board of Poul Due Jensens Fond, member of the board of Unimerco, deputy chairman of the board of Zealand Pharmaceuticals, member of the board of holding company K.J. Jacobs AG, Switzerland, and on the board of representatives of the newspaper Kristeligt Dagblad. Associate professor at the Aarhus School of Business. Member of the management of The Governing Board of The World Scout Foundation. In 2000, published “Vidensamfundet – Dagsorden for Danmark i det 21. Århundrede” [The Knowledge Society - Den-mark’s agenda for the 21st century] and in 2007, “The Second Cycle –Winning the war on Bureaucracy.”