‘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.
The leadership of Jørgen Vig Knudstorp introduced a new lease of life to Lego through the effective approach he took toward people management. He got the workforce to rally behind him by selling the ideas he had to them in a way that influenced and motivated them toward overcoming the company's challenges. Furthermore, effective leadership helps an organisation achieve success through the relationships built along the way (Ladkin & Spiller, 2013). Jørgen Vig Knudstorp developed a strong relationship between the organisation and its customers, which made it easy for the organisation to understand its customer base and enjoy more profits (Ladkin & Spiller, 2013). Building relationships with the workforce is also an important part of people management, given that the workforce is likelier to be more motivated when the leadership respects them and involves them in making steps towards the improvement of the organisation (Eva et al., 2021). Without proper relationships, an organisation could experience low motivation and commitment from its employees, resulting in poor performance and the inability to gain a competitive advantage that could take them to the next level.
Transformational Leadership in People Management as a Key to Lego’s Success
Through transformational leadership, Lego could reinvent itself and overcome the challenges it experienced. Transformational leadership involves employees applying changes to an organisation (Geislinger, 2020). Without the involvement of the workforce, change management could be difficult since the employees could feel like outsiders and may not be invested in the endeavours (Geislinger, 2020). By understanding the important role that employees play in the achievement of effective change, Lego involved them in the processes undertaken, resulting in the impressive outcomes achieved in the long run. For example, Lego used transformational leadership to achieve empathy that helped overcome the challenges it had experienced in the past (Geislinger, 2020). The organisation, through its designers, observed a family whose children were fond of their toys for a week to understand what their market expects from them fully.
Risk-taking is an important aspect of transformational leadership. Involving employees in the endeavours supposed to bring effective change to the organisation is a big risk that requires the commitment of the leaders and the workforce being led. Jørgen’s risk-taking can be seen in his approaches, such as listening to the employees on how to apply the changes that would improve the organisation’s fortunes (Geislinger, 2020). By reducing the number of products that the organisation produced and concentrating on the ones that were well-received by the market, he was also taking a risk, given that the organisation had invested heavily in the personnel and technology required (Geislinger, 2020). The risk-taking paid off, given that Lego overcame the challenges it experienced at that time and is now one of the most successful companies.
Transformational leadership helps leaders inspire and motivate their followers to work toward the common good without micromanaging them. The leadership hopes that through the excellent examples set by them at the executive level, the workforce will develop a strong sense of corporate culture, ownership and independence within the organisation (Holten & Brenner, 2015). Through the traits that are developed within the workforce, it becomes easier for the organisation to overcome any challenges it may face, resulting in achieving successful outcomes in the long run (Holten & Brenner, 2015). Risk-taking and trust are required in transformational leadership, given that the leadership is expected not to micromanage its employees but rather let them be independent in their assigned tasks and make decisions (Holten & Brenner, 2015). This requires the employees to be highly motivated, trained and experienced, given that unmotivated, poorly-trained and inexperienced employees may make poor decisions that could result in losses and other poor outcomes.
Transformational leadership results in the workforce's positive development, resulting in sustainable performance within an organisation. When employees can make independent decisions and work without being micromanaged, they become more competent in their assigned tasks. They can help an organisation to grow and develop towards the desired levels of success (Holten & Brenner, 2015). By building the capacity of the employees, an organisation under transformational leadership reduces its turnover rates. It increases its chances of hiring and retaining top talents that will ensure the best outcomes and overcome any challenges that may be experienced.
Effective Change Management as a Key to Lego’s Success
Lego can attribute its success to effective change management. The organisation challenged the status quo and sought new and innovative ways of improving its performance and overcoming the challenges that it experienced at that time (Sommer, 2019). The organisation had reached its peak and could not find effective ways to maintain its market competitiveness. The measures that had been implemented to ensure its success failed, resulting in a situation whereby losses were being made, and the organisation's existence was threatened. The disruption of the status quo that the organisation had enjoyed for a while can be attributed to the success that it currently enjoys, given that the organisation had to reinvent itself and come up with new ways of gaining a competitive advantage (Sommer, 2019). One of the changes that had to be implemented was taking the organisation back to its original plans and stopping the excessive innovativeness that had worked against them. The change management had to recognize the issues the organisation faced and the goals that had to be achieved for positive outcomes (Sommer, 2019). This being the case, the change management undertaken within Lego helped redefine the organisation and set it up for the successful outcomes it currently enjoys.
Change management helps organisations to redefine themselves by changing the internal and external processes that it undertakes. Change management is an important part of any organisation and involves internal and external stakeholders. The implementation of change management is a challenging process that requires the cooperation of different organisational stakeholders to achieve desired outcomes (Burke & Ng, 2006). A beneficial transition from an organisation's old processes toward more rewarding processes is required. It can only be assured through implementing a strong change management process that can easily overcome the challenges experienced and provide insights on how to handle them when they are experienced in the future (Burke & Ng, 2006). Change management needs to identify and prepare for any resistance experienced internally or externally, given that some stakeholders could be against the idea of giving up the status quo that may have favoured them (Burke & Ng, 2006). Strong leadership can help an organisation transition from its initial condition to the desired state. It can also help develop a favourable environment that will not resist the proposed changes.
An effective change management process has distinct characteristics that set it apart from others. First, change management is specific on what changes are to be implemented. Change management is a specific process and involves identifying the pain areas within an organisation so that the steps taken will be specific and contribute to improving the situation within the organisation (Bryman, 2011). Also, effective change management is a result of proper planning. Change management can only be successful if the necessary steps are planned and the expected challenges are identified beforehand (Bryman, 2011). By identifying the possible challenges, it will be easier to make the necessary preparations to reduce the likelihood of the planned changes failing (Bryman, 2011). Without proper planning, an organisation may experience unexpected challenges that will render their endeavours useless and impossible to produce positive outcomes in the long run.
Ethical Business Practices as a Key to Lego’s Success
One of the key ways through which Lego has achieved success is through professionalism and its adherence to ethical business practices. Before delving deep into this discussion, it is vital to understand that ethics is an important element of people management. Lego is committed to protecting the rights of its employees and the environment, making it one of the most ethical and socially-responsible organisations globally (Lego, 2022). By undertaking ethical business activities, the organisation has been able to build a strong brand image that has, in turn, increased the number of profits it makes and the competitive advantage it enjoys (Lego, 2022). While the organisation uses plastic to make its products, it is known for its use of sustainable methods that will protect the environment from the negative impact that plastic has on it (Lego, 2022). This being the case, the organisation produces safe toys for children to play with by designing them to reduce the likelihood of their products being choking hazards to the children that use them. Also, the organisation has been working towards phasing out single-use plastic materials used in making their products so they can be recyclable, reducing the dumping of plastic and the negative impact it has on the environment (Lego, 2022). Finally, the organisation’s ethical practices can be seen in the inclusive, safe and motivating environment that it has provided its employees, further helping them cement its position as one of the most successful companies globally.
Business ethics help define the morally right and wrong courses of action that an organisation can take in any given situation. Through business ethics, organisations can undertake right and acceptable behaviours, even when the government does not recognize non-compliance to such actions as illegal (Tourish & Vatcha, 2005). An organisation develops a culture of integrity through business ethics that will ensure they will be on course to achieve the best outcomes irrespective of the challenges they may experience (Tourish & Vatcha, 2005). Business ethics play an important role in the achievement of the desired outcomes from the endeavours undertaken by an organisation. For example, business ethics can help in laying the foundation for the strategic decisions that the organisation makes (Tourish & Vatcha, 2005). Through business ethics, organisations understand the acceptable and unacceptable courses of action they can take and will not compromise their actions to be politically correct or to gain an advantage from their undertakings (Tourish & Vatcha, 2005). Without business ethics, an organisation may be compromised since it may cut corners and look for ways of benefitting itself at the expense of others (Tourish & Vatcha, 2005). An organisation’s stakeholders know the acceptable decisions through an ethical business framework and will stick to them irrespective of the opportunity costs involved.
Ethical business practices also contribute to developing a strong reputation and brand image. Contemporary customers are more informed, meaning they are likelier to research the ethical background of an organisation before establishing a relationship with them (Marchington & Grugulis, 2000). Ethical business practices also mean that the customers will not be exploited, resulting in their satisfaction and increased likelihood to buy from such an organisation, increasing their profitability in the process (Marchington & Grugulis, 2000). Finally, business ethics will ensure that an organisation will create conducive internal conditions that will contribute to the productivity of the workforce (Marchington & Grugulis, 2000). Through ethics, the employees will not be exploited, resulting in their motivation and increased likelihood of contributing towards improving organisational performance.
Nokia’s Failure as a Result of Poor People’s Management
Nokia established its position as one of the market leaders in the 1990s, with its dominance almost amounting to a monopoly. The company’s involvement in the telecommunications, infrastructure, development and licensing within the industry meant that they controlled a significant portion of the market and successfully achieved their goals (Doz, 2017). Nokia’s innovativeness was also a significant reason for its success since it was the pioneer in developing key innovations such as GSM, 3G and LTE networks (Doz, 2017). Through the effective manner in which Nokia operated, more customers bought their products and became loyal to the brand due to its high quality. The availability of Nokia phones globally also helped popularise the brand, given that the organisation boasted of an excellent supply chain that ensured that all markets supplied their high-quality products.
Despite the success enjoyed by the organisation in the past, it is currently suffering from failures and the threat of being phased out of the market by other companies that have gained a bigger competitive advantage over them ( Andersen, 2018). While Nokia’s failure could be attributed to the aggressive marketing efforts employed by its competitors, this would be ignorant of the poor decisions and strategies that led to the collapse of the company and the loss of the control it had on the market. The organisation’s complacency could be attributed to the failure that it experienced ( Andersen, 2018). This is because the company settled instead of being relentless in its pursuit of improvements that would ensure that it remained the market leader to date. Poor adaptation to the technological changes experienced in the market was also another major cause of Nokia’s failure ( Andersen, 2018). Nokia’s failure to use the wide resource base to increase its grip on the market resulted in its current deplorable condition. Nokia’s fall from grace can be attributed to its poor people approaches to people management, as will be discussed below.
Poor Leadership as a Reason for Nokia’s Failure
One of the instances where Nokia went wrong was in its approach to leadership of the organisation. The indecisiveness in the leadership choice saw the tech giant change its CEOs twice in five years, leading to the destabilization of the organisation. The change of top leadership meant that the workforce had to adapt to the new leadership’s goals, vision and leadership style. This could have resulted in some resistance and required time, which cost the organisation its position as a market leader (Huy & Vouri, 2015). Also, poor leadership costs the organisation, as their deal with Microsoft shows. The company made an ill-informed decision to partner with Microsoft when Microsoft was making losses and was not performing as well as they were (Huy & Vouri, 2015). This was a poor decision, given that Nokia’s competitors were taking steps in the right decisions, overtaking them quickly. Poor leadership contributed directly to Nokia’s failure through the changes and decisions made, leaving them behind while their competitors enjoyed success within the industry.
Poor leadership can lead to the failure of an organisation despite the levels of success it enjoys. One of the negative outcomes of poor leadership is the lack of motivation in the workforce. Poor leadership can create a poor work environment and culture that could make the workforce lose motivation and the drive to work towards improving the organisation’s performance (Schaubroeck et al., 2012). The loss of motivation means that the organisation will not perform at the same levels it did before, resulting in the loss of productivity and the competitive advantage it may have held in the past (Schaubroeck et al., 2012). Poor leadership could also result in the loss of initiative, transparency and a sense of ownership of the organisation. Poor leadership fails to instil discipline within the employees, making them careless and losing the sense of accountability and responsibility required for success to be achieved (Schaubroeck et al., 2012). Poor decision-making is also a result of poor leadership, with some decisions failing in a business and losing the competitive advantage that it may have held.
Slow and Ineffective Change Management as a Reason for Nokia’s Failure
Nokia’s overconfidence contributed to its reluctance to undertake the changes required. The organisation was almost a monopoly in the industry and did not feel the need to change its operations until it was too late (Huy & Vouri, 2015). Technological improvements introduced software-driven phones that were efficient and preferred by the market. Still, Nokia insisted on the continued production of traditional phones that were rendered useless once other companies such as Samsung and Apple released their groundbreaking products (Huy & Vouri, 2015). By the time Nokia responded to the changes by releasing Symbian and MeeGo operating systems, their competitors had already produced more effective products, leaving Nokia with no significant market share (Huy & Vouri, 2015). A bigger mistake made by Nokia was their failure to switch to android. Nokia forewent the possibility of partnering with Google to produce android phones, opting to produce phones with their unique operating systems (Huy & Vouri, 2015). This was a shortsighted move, given that android phones were preferred due to their speed, simplicity and the free availability of applications on their app stores. It would have helped Nokia retain its position in the market.
Poor change management could cost an organisation its position within the market and the competitive advantage that it may have enjoyed in the past. One of the negative effects of ineffective change management is the loss of productivity in an organisation (Burke & Ng, 2006). Effective change management introduces new ways of doing things to an organisation. Therefore this means that ineffective change management could reduce the productivity of an organisation and its likelihood of achieving positive outcomes in both the short and long runs (Burke & Ng, 2006). The employees' motivation could also drop due to an organisation’s failure to adapt to change. The workforce may feel that their experience and skills are underused and may opt to move to other organisations where they can be more productive and enjoy their contribution to organisational success.
Poor Performance Management as a Cause for Nokia’s Failure
Nokia had many internal issues that slowed down its performance and the likelihood of maintaining its strong grip on the market. The company experienced much internal strife, whereby politics took centre stage instead of the innovativeness that had helped them achieve success in the past (Huy & Vouri, 2015). The different departments within the organisation did not coordinate, resulting in poor overall performance. Also, rivalries rocked the organisation, with the different divisions competing against each other instead of coordinating and taking the organisation to the next level (Huy & Vouri, 2015). The division within the company was evident when the research and development teams in charge of developing the Symbian and MeeGo operating systems insisted that their creations were more superiors to the other instead of collaborating and coming up with a superior product that could help in cementing the company’s position as a market leader.
Poor people management could be detrimental to the performance of an organisation. One of the key downsides of poor people management is the loss of productivity. An organisation could spend more time handling sideshows instead of pooling all of its resources towards achieving the common good, resulting in poor performance in the long run (Collings et al., 2018). Organisational politics are the main reason behind the sideshows that could take an organisation’s focus from their main goal to the sideshows, leading to the loss of the competitive advantage they may have enjoyed before (Collings et al., 2018). Poor performance and people management could also result in the loss of motivation in the workforce. Members of the workforce could lose their motivation if they feel that the leadership does not emphasise their input much but rather sideshows (Collings et al., 2018). They may also look for other ways of gaining the leadership's approval, given that the leadership may have resorted to playing politics instead of focusing on performance as the main determinant of merit within the workplace (Collings et al., 2018). When the leadership loses focus, the whole organisation fails, leading to poor organisational outcomes that may threaten its long-term wellbeing.
Poor Organisational Design as a Reason for Nokia’s Failure
Nokia’s switch to the matrix organisational structure also contributed to its failure. The matrix organisational structure that the organisation followed required the teams within the organisation to report to different leaders (Huy & Vouri, 2015). This approach required open communication and coordination among the workforce members, and since there were internal strife and competition within the organisation, the organisational structure couldn't be successful (Huy & Vouri, 2015). Most of the top talent in the organisation was dissatisfied with the organisational structure change and opted to leave the organisation for other companies where their talents would be recognized and rewarded better (Huy & Vouri, 2015). While the change in organisational structure was supposed to improve the organisation's agility, the internal conditions did not allow for its effective implementation, resulting in the poor outcomes that were experienced.
The poor organisational structure could paralyze the performance of an organisation and result in a loss of focus. The poor organisational structure could confuse the workforce, given that the roles may not be clearly defined and lead to misunderstanding in the organisation. It could also negatively affect the coordination among workforce members, given that the structure could pit the different people in the organisation against each other instead of facilitating their cooperation and achieving the desirable outcomes (Greenwood & Miller, 2010). When the coordination of the members of the workforce is affected, productivity will also be affected, resulting in poor outcomes that could hinder the likelihood of achieving positive outcomes in both the short and long terms (Greenwood & Miller, 2010). Slow decision-making could also be experienced as a result of poor organisational structure. An organisation is supposed to be effectively structured to ease decision-making, failure to which the decisions made will not have been discussed by all the stakeholders, leading to dissatisfaction and the creation of more rifts within the organisation (Greenwood & Miller, 2010). The poor organisational structure could determine the success or failure that an organisation will achieve. Therefore, more effort should be invested in setting up a more solid structure that will guide the organisation toward its desired ends.
Conclusion
In light of the foregoing, effective leadership and people management are critical aspects of any organisation’s existence and success. By effectively harnessing people management, an organisation’s leadership can easily communicate, inspire and direct its workforce towards achieving the desired outcomes. On the other hand, poor people management could result in the loss of productivity and the possibility of the organisation in question making losses and losing its competitive advantage. High employee turnover due to dissatisfaction from poor management could also be experienced, leading to an organisation losing the experienced and skilled employees that would have propelled them towards the growth and development they seek.
Lego is an example of a company that effectively used people management to its advantage. The company had been making losses and turned its fortunes around by leveraging its people management skills to its advantage. The organisation can attribute its success to the effective leadership of Jørgen Vig Knudstorp, who used transformational leadership to address its failures and develop working solutions. Also, effective change management has played an important role in the organisation’s success, given that they used disruption to bring sanity back into their operations and regain their grip on the market. Ethics and professionalism in their operations also led to the positive performance that the organisation has been posting, making it one of the most successful organisations globally.
On the contrary, Nokia is an example of an organisation whose poor people management contributed to its failure. The once successful company failed due to its poor leadership practices. The leadership could not handle the internal struggles and involved itself in politics, which led to rifts within the organisation. The company’s slow response to adapt to the needed change also led to losing its position in the market. Ineffective people and organisational performance management also contributed to the dismal outcomes experienced. Contrasting these two companies has succinctly demonstrated this essay’s position that the key to an organisation’s success is dependent on how it leads and/or manages its people.