#1: How complex is your organization internally? Place your organization on the following chart. Defend your responses and reference sources.
Organizational Complexity: The LEGO Group is a moderately complex firm with 13,974 employees globally (www.statista.com, 2015). The company is internationally present with headquarters in Billund, Denmark and main offices in: Enfield, USA, London, UK, Shangai, China, and Singapore. The firm has a flat structure with high horizontal differentiation (21 divisional subunits) and low vertical hierarchy (four layers) (www.lego.com, 2016). After analyzing the organizational chart below, one notices the high level of divisions involved to effectively and efficiently run the organization.
Horizontal Differentiation: High, with 21 different divisions, each with their own management (www.lego.com, 2016).
Vertical Differentiation: Low, with three tiers (not including the board of directors) of management starting at corporate management, which are divided into five different groups that have their own top managers. These top managers are overseen by the CEO and the Board of Directors (www.lego.com, 2016).
#2: Locate your organization on the figure, what is the complexity?
The LEGO Group is Flat, with high organizational differentiation and low vertical differentiation.
#3: Does your organization’s complexity fit its structural configuration?
Circle one of the types in each of the following categories (i.e., look back to your previous work):
|Type 1||Type 2||Type 3||Type 4|
|Strategy types||Reactor||Defender||Prospector||Analyzer with/without innovation|
|Organizational goals||Neither||Efficiency||Effectiveness||Efficiency and Effectiveness|
#4: Is there “fit” across the organization’s components? What do we know now about how our organization aligns across these categories? What would make them more effective? Should your organization change its structure based on its complexity?
The LEGO Group has a flat organizational complexity with a divisional configuration, due to the fact that tasks are segmented into independent groups, and those groups report to top management in their respective division. The environment is locally stormy due to the fact that there is a low level of complexity when it comes to the type of product that is offered (construction toys), but there is a fairly high level of unpredictability with new competitors entering the market and other industries (video games) acting as a new form of competition. These three facets align with the structure of the organization.
The two categories that do not align with the Flat structure are the company’s strategy type and organizational goals. Due to the fact that The LEGO Group is constantly trying to maintain its position as one of the top toy companies in the world (and the top company in the construction toy category) it has adopted a Defender mentality. In the past The LEGO Group has tried to branch out into different areas and this over-innovation has caused financial troubles, this is where the Defender strategy was developed (Miller and Gilson, 2014). The LEGO Group is also focusing both on efficiency and effectiveness. Its multiple, high quality products are the main source of revenue for the company, and therefore effectiveness will most likely never be disregarded. The company is also taking an initiative to be more eco-friendly and expand the number of factories it is building across the world, which makes them efficiency focused as well (Perella, 2014; www.lego.com, 2016).
Although the fit is not perfect, I would not recommend that LEGO change anything they are doing currently. The company is put into a unique position due to the power of their brand and the challenges they face. The decision to spread out horizontally was made in 2011, current LEGO CEO Jorgen Vig Knudstrop explains this thought process below:
“We reduce the number of organizational layers and thus flatten the organization; this allows us to achieve both a broader and a deeper perspective on the realities of our business, while making it simpler and faster to make decisions – all of which are key to increasing our adaptability” (Trangbaek, 2011).
This change has allowed The LEGO Group to grow to new heights and surpass Ferrari as the world’s most powerful brand (Enajalde-Ruiz), showcasing that adaptability seems to be LEGO’s key to success in today’s business world.
About Us. (n.d.). Retrieved from http://www.lego.com/en-us/aboutus
About Us. (n.d.). Retrieved from http://www.us.lego.com/en-us/aboutus/lego-group/management
About Us. (n.d.). Retrieved April 10, 2016, from http://www.lego.com/en-us/aboutus/news-room/2015/october/factory-expansion
Average number of employees LEGO Group 2009-2015 | Statistic. (n.d.). from http://www.statista.com/statistics/292314/number-of-employees-of-the-lego-group-worldwide/
Elajalde-Ruiz, A. (n.d.). Lego unseats Ferrari as world’s most powerful brand. Retrieved April 10, 2016, from http://www.chicagotribune.com/business/ct-lego-powerful-brand-0218-biz-20150217-story.html
Perella, M. (2014). Lego: How the signature brick is going green. Retrieved from http://www.theguardian.com/sustainable-business/lego-design-sustainability-circular-economy
Trangbaek, R. R. (n.d.). About Us. Retrieved April 24, 2016, from http://www.lego.com/en-us/aboutus/news-room/2011/september/lego-group-expands-top-management