Spaghetti Organization - A story of Oticon

In the last blog, we looked at the Silicon Valley format of organizations and the related organizational learning. In this blog, we look at a unique experiment that was conducted in an organization - Oticon and the resultant term that developed called - Spaghetti Organization

Spaghetti Organization refers to a flat, loosely coupled, project based organization characterized by ambiguous job boundaries and extensive delegation of task and project responsibilities to autonomous teams. Let’s understand this with the example of Oticon.

Oticon is a Danish electronics producer operating in the space of hearing aids. It became extensively known for its s radical organizational transformation in the early 1990s. The organization was traditionally hierarchical, functional based organization, and transformed radically into a "Spaghetti Organization". It was the loss of competitive advantage in the 1980s that forced it to get into implementing this model. The advent of the digital technology had almost spelt doom on this organization. In response to this, this company underwent extensive restructuring in the 1990s - the aim was to have an entrepreneurial and creative organization. This resulted in a series of remarkable innovations in the 1990s. However, this form of organization was abandoned in 1996.

A research by Foss suggests that the reason could be the severe problems encountered in coordination and knowledge sharing due to a highly fluid and adhocratic nature of the project assignments. Employee’s commitment to the project was also another point to ponder about. Foss also argues that, the form of organization was an "internal hybrid" between elements of market autonomy and flexibility in hierarchy. It was also inherently unstable due to the motivational challenges caused by the selective intervention by the top management into project selection and coordination. The employee frustration seen due to this could have been the cause for eventual retreat of Oticon from the radical and celebrated Spaghetti Organizational model.