Governance And Leadership Of Project Management Commerce Essay

Governance And Leadership Of Project Management Commerce EssayThe purpose of this document is to describe and evaluate the governance twist and leadership approaches currently adopted by the LEGO separate suggest advanced or additional governance structures and leadership approaches that could improve the participations performance and a observation on the propositions made in the latter half of this document.T suit commensurate of ContentsBackground1The LEGO convention is a family owned toy manufacturing attach to founded by a Danish carpenter-turned-toymaker Ole Kirk Kristiansen during the great depression in 1932. The company manufactured wooden toys because of the declining demand for building houses and furniture. In 1934 Ole combine the Danish words leg godt signification play salubrious to form LEGO. Ole founded LEGO with the motto Only the best is good enough (he recruitd toys using high quality materials and workmanship) which is let off used by the LEGO colle ction as a guiding principle.In 1947, after World War II, LEGO acquired a formative mould injection appliance, which allowed LEGO to expand its business operations to produce a relatively large volume of plastic and wooden toys, resulting in the production of the first LEGO bricks. In 1954, Godtfred Kirk Kristiansen ( atomic number 53 of Oles sons), found an opportunity to create toy products that were able to connect with products in the toy manufacturing industry, resulting in the birth of LEGO play-sets. In 1958, LEGO patented the improved LEGO brick design, also the year when Godtfred took over the company due to the death of his father. in the midst of the 1960s and 2000s LEGO continuously grew into one of the worlds top largest toy manufactures, by expanding with international sales, new innovative play-sets, sports and media licence acquisitions (i.e. franchise films, basketball, hockey, soccer), LEGO magazine subscriptions, erecting a LEGOLAND theme-park, ingress a LEGO w ebsite, and LEGO videogames. However, in the early 2000s, the company experienced a decline in sales and profit in 2003 revenues dropped 30% and continued another 10% in 2004. To overcome this crisis LEGO to a lower placewent a governance change to resolve the problems in the pre-existing direction.In 2004, Jrgen Vig Knudstrop (the director of strategic acquirement) replaced the CEO at the time, and in his first action as CEO he arranged a police squad to analyse the companys supply chain operations, from product development to production and distribution. The team discovered that although the newer products represented a large portion of annual revenues, newer generation play-sets were more elaborately designed and generated less profit product designers were creating products without total amity for material and production costs designers used their own vendors resulting in LEGO having to deal with over 11,000 suppliers inefficiencies in the organisation of the plastic mould injection machines, since separately machine was capable of producing every type of LEGO brick retooling was required, causing downtimes resulting production facilities operating at 70% capacity.To bring the company underpin on track the team bring down their product line where requirement as well as reduce the selection of colours for designs by half used production costs of to each one brick to reduce expensive products, in-turn reducing the amount of suppliers needed by 80% designers were shown the impact of using existing bricks over creating new ones for future designs certain plastic mould injection machines were assigned specific LEGO bricks on scheduled cycles to reduce downtimes and retooling costs. These changes to product development, production and distribution implemented by Knudstrops leadership resulted in the LEGO classify earning a profit of $72 million in 2005, with profits increasing by 240% in 2006.Introduction2The LEGO Group is a privately held company ground in Denmark. The company is currently owned by the 3rd and 4th generations of the Kirk Kristiansen founding family Kjeld Kirk Kristiansen (Oles grandson) and his three children. Ownership of the company is handled through KIRKBI (an investment company) and the LEGO Foundation KIRKBI owns 75% while the remaining 25% is held by the LEGO Foundation. As of 2012, the LEGO Group manufactures toys in more than 130 countries, has approximately 10,000 employees and is the third largest manufacturer of toys in the world (in toll of sales) after Mattel and Hasbro.Governance3The LEGO Groups approach to governance is focused on combining the strengths and benefits of private ownership with the applicable elements from good somatic governance for listed companies (Jensen, 2012). The certain requirements from listed companies (from the Danish Stock Exchange) are not all compatible for a family-owned company (Kjeld Kirk Kristiansen is majority shareholder) while recommendations of collecti ve governance structure and board composition still apply.The LEGO Group maintains the importance of having a strong and competent board of directors, especially because of family-ownership. To support this, the company elects a chairman among independent board members to ensure original board management. This process is regulated via ensuring a diverse and complementary board composition regular board self-assessments competitive compensation and clear specific rules mandated for each management body.Being a family owned company, the LEGO Group is exposed to risk through the handover of ownership across generations. The mediation strategy is to passing involve the undermentioned generation in company matters pertaining to ownership.Organisational StructureThe LEGO Group uses a hierarchical top-down structure with five separate departments (see Appendix A, pp. 8), this structure centralises the companys management to a functional management structure which rests the authority w ith corporate management the corporate management consists of the CEO, the CFO and quaternion Executive Vice Presidents (The LEGO Group, 2010, pp. 7). The centralised functional management structure ensures consistency in organisations, as a limited number of persons are in charge causing jobs to be simplified allowing employees to be highly specialised in their work since specialisation leads to operational efficiencies where employees become specialists within their own realm of expertise (BusinessMate, 2010).This form of governance however, can result in slow decision-making processes as decisions must pass through bureaucracy in order to get through to corporate management (Riley, 2012). A disadvantage of functional management structures is that it facilitates rigid communication among employees and corporate management employees can feel unheard and excluded from decisions that directly affect them. This lack of involvement can be detrimental to the job satisfaction, motivat ion and productivity of the employees (Jones and George, 2006, pp. 53-54).LeadershipThe current CEO (Knudstorp) emphasises a decentralised and innovative-oriented approach in contrast to the existing structure. To implement this combined strategy Knudstorp uses a managing at eye level approach, which he arranged as macrocosm able to talk to people on the factory floor, to the engineers, to marketers being at home with everyone (OConnell, 2009). Knudstorp achieves this through a relaxation of the top-down management style, allowing responsibility and decision making to be pushed as far down the hierarchy as possible (OConnell, 2009), much like McGregors (1960) Theory Y where collaboration within the company relies on leaders recognising the potential of their resources and how to realise that potential. Through the credit of the Knudstorps leadership style the LEGO Group moved away from a hierarchical organisational structure to a flatter one with cross-functional teamwork, empl oyee involvement, more frank communication lines and styles. With open communication where all the members of the company are in contact with each other in some way or another the company is able to have a stronger sense of community. The LEGO Group communicates its attitude to the responsibility of its employees through communication, health safety, people and culture policies and promises.Link between Project and Corporate scheme4The LEGO Group uses an innovation matrix a tool developed within the company to help identify, allocate resources and coordinate different innovation activities (projects) for developing new products. The strategic coordination of innovation activities is led by a cross-cultural team the Executive Innovation Governance Group (EIGG), they determine LEGOs innovation goals and strategy define the new product portfolio coordinate innovation activities ensuring they are mutually reinforcing delegate authority allocate resources and evaluate results to e nsure that all innovation activities support the corporate strategy. Using the innovation matrix allows LEGOs management to understand what resources to allocate, risks to monitor and selecting who is responsible for reviewing the innovation activities.The company divides its innovation activities into eight distinct types, and distributes the responsibility for them across four different areas of the company functional groups concept lab product and marketing development community, education, and direct. Overseen by the EIGG, the four areas work to achieve innovation activities (projects) that mutually repay each other while providing different degrees of innovativeness back to the company.Relationship with Stakeholders/ShareholdersThe LEGO Group emphasises a strong focus on ensuring the balance of the value created for the owners in equivalence to the value existence for the remaining stakeholders such as consumers, employees, customers and other partners. The company believes that creating value for the companys stakeholders will result in long term value creation for the owners.It is important for us to engage in respectful stakeholder dialogue by being transparent and ensuring an open and honest dialogue. It is fundamental to us that the relationship between our company and our host communities are based on trust, mutual respect, and a cooperative spirit. (Jensen, 2012).Shareholder RelationshipThe CEO is the head of the company, but it is a family-owned company controlled by Kjeld Kirk Kristiansen, the majority shareholder of KIRKBI the investment company with 75% control of the LEGO Group (The LEGO Group, 2012). Due to this power structure, the central management does not have full phase of the moon control, meaning that final decision do not rest solely on the CEO, but with influence from the family shareholder.Internal StakeholdersDue to the organisational structure, employees have to report back to their respective managers. However, under Knudsto rps leadership the looser control system provides employees more influence a factor which can work as a motivator. The employees in the LEGO Group are the building blocks of our success today. We strive to improve the well-being and job satisfaction of our employees. (Jensen, 2012).External StakeholdersIn 2005, Knudstorp identified the significance of customer involvement in the product development process. Knudstorp found that the adult enthusiasts could articulate the product strengths and weaknesses that young children may sense but cant express (OConnell, 2009). The LEGO Group actively engages customers to infix in the design and creation of new products and ideas. Although they lose come control over its system, the company gains knowledge from its most valued consumers.Suggested Governance and LeadershipIn 2009, Knudstorp stated that the company was pursuing organic growth, and needed to change leadership style again to continue building sales volume. Knudstorp asserted tha t the change is necessary as the company had become risk averse while focusing on survival, and that they needed to become opportunity driven, which requires taking greater risks (OConnell, 2009). In 2011, Hasbro, one of the companys major competitors planned to launch a new product called the Kre-O, which was designed to be compatible with LEGO bricks (Anderson, 2011). This poses a significant threat to the company due to the surface and brad power of Hasbro. To mitigate threats such as competition from new/existing sources, it is important for the LEGO Group to change its governance structure to help the company formulate a corporate strategy that allows the company to maintain market dominance and financial stability/success in the future.GovernanceCurrently the LEGO Group has combined the behaviour and outcome oriented approach in the overall governance of the company behaviour oriented organisations are indifferent to whether projects are managed in-house or externally so long as the process conforms with the companys policies outcome oriented organisations manage projects internally through employees with a wider skillset (Mller, 2009). The LEGO Group works with both internal and external designers as well as customers in product development (behaviour orientation) while having a board member or the EIGG overseeing the project management, and ensuring it fits in with the corporate strategy (outcome orientation).According to Mller (2009) there are four governance paradigms, the waxy economist, versatile artist, conformist and agile pragmatist. The LEGO Group currently falls under the versatile artist paradigm where the company prioritises the diverse user needs using project management methods to realise the requirements of a variety of stakeholders, as well as promoting high productivity. However, the company needs to migrate to a more behaviour oriented agile pragmatist paradigm, which also accounts for the needs of the diverse stakeholders, but allo ws for products to develop from core functionality to include additional features to enhance the flexibility and user-friendliness, especially when dealing with the gaming and computer entertainment products which include successful franchises such as LEGO jumper cable Wars, LEGO Batman and LEGO Harry Potter (The LEGO Group, 2012).LeadershipAlthough the current leadership style within the company is flatter with more open communication lines, the leadership is still sort of bureaucratic, albeit the authority for decision making has been pushed down the hierarchy as much as possible, the structure remains top-down. The LEGO Group needs to be more flexible in their leadership approach, which according to Frame (2003) and Mller (2009) bureaucratic leadership is the least flexible leadership style of the four laissez-faire, democratic, autocratic and bureaucratic. The company may experience better performance if a democratic approach was adopted, as it allows for additional flexibilit y and builds on the existing flatter communication style.Reflection