‘The key to an organisation’s success is dependent on how it leads and/or manages its people.’
People management is the process through which the recruitment, training, engagement and retaining of the employees in an organisation is undertaken for purposes of talent optimisation and maximisation of productivity. The effectiveness of the people management endeavours within an organisation will determine the levels of success achievable, given that the workforce is the backbone of any organisation (Rees & French, 2016). People management is a necessary skill for the leaders within an organisation since it is the only way through which effective communication, inspiration and directing of the employees is possible, resulting in the achievement of the organizational goals (Whittaker & Marchington, 2003). Proper people management could increase the passion within the employees, hence making them give their best in all the tasks.
While effective people management positively impacts the employees and the organisation, poor people management has negative outcomes. Poor people management could result in the loss of motivation in the workforce, which could lead to the loss of the productivity required for the organisation to make profits (Leroy et al., 2018). High employee turnover could also be experienced, given that the dissatisfied employees will look for better work environments, leaving the organisations they worked in without the talents that could have propelled them towards successful outcomes (Cappelli & Travis, 2018). The toxic work environments resulting from poor people management could also affect the workers’ physical and mental health outcomes, resulting in a poor brand image that could further harm the profitability of the organisation in question (Cappelli & Travis, 2018). In this backdrop, the following essay supports effective people management and leadership as core foundations of organizational success. Incorporating course concepts like change management and others, the discussion centers on two organisations, Lego and Nokia to illustrate the standpoint.
Lego’s Success as a Result of Effective People Management
Since its inception in 1932, Lego has never experienced any losses. However, the company experienced losses and failure between 1998 and 2003. During these five years, the company’s sales were down by 30%, with approximately $800 million in debt (Geislinger, 2020). One of the reasons for the losses experienced was pointed to the lack of value-addition to the company’s portfolio, making their competitors more preferable to the market (Geislinger, 2020). Consultants hired by the organisation to alleviate the situation advised the diversification of the products they sold. Diversifying the organisation’s portfolio was a bad move, given that the products were not received well by the market, resulting in even more losses (Geislinger, 2020). Upon the fear that it had reached the end of its natural growth cycle, the company introduced new products to gain more customers and improve its profits in the process. The poor reception of the new products meant that the organisation had invested its dwindling resources into an unprofitable project, putting them into more problems.
The organisation invested more heavily in innovation to turn the negative situation around. While innovation is expected to contribute to positive outcomes in the endeavours of a business, it did not work for Lego, resulting in even more losses and the threat of closing down (Zou, 2022). Their innovative endeavours led to the development of toys such as Lego Star Wars and Harry Potter. The organisation's innovativeness threatened its brand, given that it was building on other companies' ideas and abandoning the ideas they had been built on (Zou, 2022). While the efforts employed by the organisation were made in good faith, they did not help in changing its fortunes. The organisation’s effective people management can be credited for its success, given that it is currently one of the most profitable toy companies globally.
By 2015, Lego had overcome the failures that it had experienced in the early 2000s and was among the world’s most successful brands. It boasted $600 million in profits as of 2015, making it one of the most impressive turnaround stories in the corporate world (Dahlgaard & Anninos, 2022). Through the leadership of Jorgen Vig Knudstorp, Lego regained its focus and went back to its original plans, given that too much innovation had taken them to the brink of closing down (Dahlgaard & Anninos, 2022). By regaining its focus, the organisation returned to creating the products that its target market was interested in, resulting in the success that the brand currently enjoys (Dahlgaard & Anninos, 2022). Furthermore, the organisation's leadership under Jorgen Vig Knudstorp was more focused on using the workforce to achieve the desired outcomes, hence making people management one of the keys to the organisation's success (Dahlgaard & Anninos, 2022). Through effective people management, Lego understood its target market better, making it easier for them to dominate the market and return to profit-making. Through effective leadership and people management, Lego used empathy toward the target market to truly understand their thinking processes, what informs their decision-making and how to develop a brand that would meet the customers' expectations (Dahlgaard & Anninos, 2022). By leveraging its internal and external relationships, Lego has overcome the challenges it experienced in the past and established itself as one of the industry leaders.
Effective Leadership as a Key to Lego’s Success
Lego’s success can be attributed to the efforts of Jørgen Vig Knudstorp. His role in the organisation was initially that of a consultant, but he rose to CEO within three years. This was a bold move by Lego, given that Vig Knudstorp was the first CEO of the organisation that was not from the founding family (Baum, 2019). His leadership is exceptional since he was vocal in highlighting the failures that resulted in the poor state in which he found the organisation (Baum, 2019). One of the causes of the failure within the organisation was the quick expansion that had not considered the needs and expectations of its customers. He also pointed to the shaky financial situation that the company was in as another key reason for the failures being experienced (Baum, 2019). The new CEO was better positioned to look for solutions by understanding the failures.
To solve the failures that threatened the organisation's wellbeing, the new CEO sought solutions through the search for new ideas instead of relying on the people within the organisation for a long time (Baum, 2019). He believed that the leadership in place was a part of the problem and that involving them in finding solutions would not bear fruit. He, therefore, sought solutions through interaction with employees and customers, resulting in a situation whereby he understood the internal and external factors that had led to the failure he found the organisation (Baum, 2019). the CEO introduced empathy within the company, whereby the company took time to interact with their target market and understand their expectations of the toys they bought, making it easier to align the innovations undertaken with the expectations of their customers. This way, better customer satisfaction and profitability would be more assured. Jørgen Vig Knudstorp also took strategic risks that involved the input of the workforce under him, leading to the success that was experienced in the long run (Baum, 2019). Through the involvement of the workforce in the risk-taking attempt towards improvement, the CEO motivated the employees, making it easier to overcome the challenges they faced.