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The intent of this papers is to depict and measure the administration construction and leading attacks presently adopted by the LEGO Group ; suggest new or extra administration constructions and leading attacks that could better the company ‘s public presentation ; and a contemplation on the propositions made in the latter half of this papers.

Table of Contentss

Background[ 1 ]

The LEGO Group is a household owned toy fabricating company founded by a Danish carpenter-turned-toymaker Ole Kirk Kristiansen during the great depression in 1932. The company manufactured wooden playthings because of the worsening demand for edifice houses and furniture. In 1934 Ole combined the Danish words ‘leg ‘ & As ; ‘godt ‘ significance “ drama good ” to organize LEGO. Ole founded LEGO with the slogan “ Merely the best is good plenty ” ( he produced toys utilizing high quality stuffs and craft ) which is still used by the LEGO Group as a guiding rule.

In 1947, after World War II, LEGO acquired a plastic mold injection machine, which allowed LEGO to spread out its concern operations to bring forth a comparatively big volume of plastic and wooden playthings, ensuing in the production of the first LEGO bricks. In 1954, Godtfred Kirk Kristiansen ( one of Ole ‘s boies ) , found an chance to make plaything merchandises that were able to link with merchandises in the plaything fabrication industry, ensuing in the birth of LEGO play-sets. In 1958, LEGO patented the improved LEGO brick design, besides the twelvemonth when Godtfred took over the company due to the decease of his male parent.

Between the 1960s and 2000s LEGO continuously grew into one of the universe ‘s top largest plaything industries, by spread outing ; with international gross revenues, new advanced play-sets, athleticss and media license acquisitions ( i.e. franchise movies, hoops, hockey, association football ) , LEGO magazine subscriptions, raising a LEGOLAND theme-park, establishing a LEGO web site, and LEGO videogames. However, in the early 2000s, the company experienced a diminution in gross revenues and net income: in 2003 grosss dropped 30 % and continued another 10 % in 2004. To get the better of this crisis LEGO underwent a administration alteration to decide the jobs in the preexistent direction.

In 2004, Jorgen Vig Knudstrop ( the manager of strategic development ) replaced the Chief executive officer at the clip, and in his first action as CEO he arranged a squad to analyze the company ‘s supply concatenation operations, from merchandise development to production and distribution. The squad discovered that although the newer merchandises represented a big part of one-year grosss, newer coevals play-sets were more intricately designed and generated less net income ; merchandise interior decorators were making merchandises without entire consideration for stuff and production costs ; interior decorators used their ain sellers ensuing in LEGO holding to cover with over 11,000 providers ; inefficiencies in the administration of the plastic mold injection machines, since each machine was capable of bring forthing every type of LEGO brick retooling was required, doing downtimes ensuing production installations runing at 70 % capacity.

To convey the company back on path the squad: reduced their merchandise line where necessary every bit good as cut down the choice of colors for designs by half ; used production costs of each brick to cut down expensive merchandises, in-turn cut downing the sum of providers needed by 80 % ; interior decorators were shown the impact of utilizing bing bricks over making new 1s for future designs ; certain plastic mold injection machines were assigned specific LEGO bricks on scheduled rhythms to cut down downtimes and revising costs. These alterations to merchandise development, production and distribution – implemented by Knudstrop ‘s leading – resulted in the LEGO Group gaining a net income of $ 72 million in 2005, with net incomes increasing by 240 % in 2006.

Introduction[ 2 ]

The LEGO Group is a in private held company based in Denmark. The company is presently owned by the 3rd and 4th coevalss of the Kirk Kristiansen establishing household: Kjeld Kirk Kristiansen ( Ole ‘s grandson ) and his three kids. Ownership of the company is handled through KIRKBI ( an investing company ) and the LEGO Foundation: KIRKBI owns 75 % while the staying 25 % is held by the LEGO Foundation. As of 2012, the LEGO Group manufactures toys in more than 130 states, has about 10,000 employees and is the 3rd largest maker of playthings in the universe ( in footings of gross revenues ) after Mattel and Hasbro.

Administration[ 3 ]

The LEGO Group ‘s attack to administration is focused on uniting the strengths and benefits of private ownership with “ the applicable elements from good corporate administration for listed companies ” ( Jensen, 2012 ) . The certain demands from listed companies ( from the Danish Stock Exchange ) are non all compatible for a family-owned company ( Kjeld Kirk Kristiansen is bulk stockholder ) while recommendations of corporate administration construction and board composing still use.

The LEGO Group maintains the importance of holding a strong and competent board of managers, particularly because of family-ownership. To back up this, the company elects a president among independent board members to guarantee professional board direction. This procedure is regulated via: guaranting a diverse and complementary board composing ; regular board self-assessments ; competitory compensation ; and clear & A ; specific regulations mandated for each direction organic structure.

Bing a household owned company, the LEGO Group is exposed to put on the line through the handover of ownership across coevalss. The mediation scheme is to extremely affect the following coevals in company affairs refering to ownership.

Organizational Structure

The LEGO Group uses a hierarchal top-down construction with five separate sections ( see Appendix A, pp. 8 ) , this construction centralises the company ‘s direction to a functional direction construction which rests the authorization with corporate direction – the corporate direction consists of the CEO, the CFO and four Executive Vice Presidents ( The LEGO Group, 2010, pp. 7 ) . The centralized functional direction construction ensures consistence in administrations, as a limited figure of individuals are in charge doing occupations to be simplified leting employees to be extremely specialised in their work since “ specialization leads to operational efficiencies where employees become specializers within their ain kingdom of expertness ” ( BusinessMate, 2010 ) .

This signifier of administration nevertheless, can ensue in slow decision-making procedures as determinations must go through through bureaucratism in order to acquire through to corporate direction ( Riley, 2012 ) . A disadvantage of functional direction constructions is that it facilitates stiff communicating between employees and corporate direction: employees can experience unheard and excluded from determinations that straight affect them. This deficiency of engagement can be damaging to the occupation satisfaction, motive and productiveness of the employees ( Jones and George, 2006, pp. 53-54 ) .


The current CEO ( Knudstorp ) emphasises a decentralized and innovative-oriented attack in contrast to the bing construction. To implement this combined scheme Knudstorp uses a ‘managing at oculus degree ‘ attack, which he defined as “ being able to speak to people on the mill floor, to the applied scientists, to sellers – being at place with everyone ” ( O’Connell, 2009 ) . Knudstorp achieves this through a relaxation of the top-down direction manner, leting duty and determination devising to be pushed as far down the hierarchy as possible ( O’Connell, 2009 ) , much like McGregor ‘s ( 1960 ) Theory Y where coaction within the company relies on leaders recognizing the potency of their resources and how to gain that potency. Through the realization of the Knudstorp ‘s leading manner the LEGO Group moved off from a hierarchal organizational construction to a flatter one with: cross-functional teamwork, employee engagement, more unfastened communicating lines and manners. With unfastened communicating – where all the members of the company are in contact with each other in some manner or another – the company is able to hold a stronger sense of community. The LEGO Group communicates its attitude to the duty of its employees through communicating, wellness & A ; safety, people and civilization policies and promises.

Link between Project and Corporate Strategy[ 4 ]

The LEGO Group uses an invention matrix – a tool developed within the company – to assist place, apportion resources and organize different invention activities ( undertakings ) for developing new merchandises. The strategic coordination of invention activities is led by a cross-cultural squad: the Executive Innovation Governance Group ( EIGG ) , they determine LEGO ‘s invention ends and scheme ; specify the new merchandise portfolio ; coordinate invention activities guaranting they are reciprocally reenforcing ; delegate authorization ; allocate resources ; and measure consequences to guarantee that all invention activities support the corporate scheme. Using the invention matrix allows LEGO ‘s direction to understand what ; resources to apportion, hazards to supervise ; and choosing who is responsible for reexamining the invention activities.

The company divides its invention activities into eight distinguishable types, and distributes the duty for them across four different countries of the company: functional groups ; concept lab ; merchandise and selling development ; community, instruction, and direct. Overseen by the EIGG, the four countries work to accomplish invention activities ( undertakings ) that reciprocally reinforce each other while supplying different grades of innovativeness back to the company.

Relationship with Stakeholders/Shareholders

The LEGO Group emphasises a strong focal point on guaranting the balance of the value created for the proprietors in comparing to the value creative activity for the staying stakeholders such as: consumers, employees, clients and other spouses. The company believes that making value for the company ‘s stakeholders will ensue in long term value creative activity for the proprietors.

“ It is of import for us to prosecute in respectful stakeholder duologue by being crystalline and guaranting an unfastened and honest duologue. It is cardinal to us that the relationship between our company and our host communities are based on trust, common regard, and a concerted spirit. ” ( Jensen, 2012 ) .

Stockholder Relationship

The CEO is the caput of the company, but it is a family-owned company controlled by Kjeld Kirk Kristiansen, the bulk stockholder of KIRKBI: the investing company with 75 % control of the LEGO Group ( The LEGO Group, 2012 ) . Due to this power construction, the cardinal direction does non hold full control, intending that concluding determination do non rest entirely on the CEO, but with influence from the household stockholder.

Internal Stakeholders

Due to the organizational construction, employees have to describe back to their several directors. However, under Knudstorp ‘s leading the looser control system provides employees more influence – a factor which can work as a incentive. “ The employees in the LEGO Group are the edifice blocks of our success today. We strive to better the wellbeing and occupation satisfaction of our employees. ” ( Jensen, 2012 ) .

External Stakeholders

In 2005, Knudstorp identified the significance of client engagement in the merchandise development procedure. Knudstorp found that the grownup partisans could “ joint the merchandise strengths and failings that immature kids may feel but ca n’t show ” ( O’Connell, 2009 ) . The LEGO Group actively engages clients to take part in the design and creative activity of new merchandises and thoughts. Although they lose come control over its system, the company additions knowledge from its most valued consumers.

Suggested Governance and Leadership

In 2009, Knudstorp stated that the company was prosecuting organic growing, and needed to alter leading manner once more to go on constructing gross revenues volume. Knudstorp asserted that the alteration is necessary as the company had become “ risk averse while concentrating on endurance ” , and that they needed to go “ chance driven, which requires taking greater hazards ” ( O’Connell, 2009 ) . In 2011, Hasbro, one of the company ‘s major rivals planned to establish a new merchandise called the ‘Kre-O ‘ , which was designed to be compatible with LEGO bricks ( Anderson, 2011 ) . This poses a important menace to the company due to the size and brad power of Hasbro. To extenuate menaces such as competition from new/existing beginnings, it is of import for the LEGO Group to alter its administration construction to assist the company explicate a corporate scheme that allows the company to keep market laterality and fiscal stability/success in the hereafter.


Presently the LEGO Group has combined the behavior and result oriented attack in the overall administration of the company: behavior oriented administrations are apathetic to whether undertakings are managed in-house or externally so long as the procedure conforms with the company ‘s policies ; outcome oriented administrations manage undertakings internally through employees with a wider skillset ( Muller, 2009 ) . The LEGO Group works with both internal and external interior decorators every bit good as clients in merchandise development ( behaviour orientation ) while holding a board member or the EIGG supervising the undertaking direction, and guaranting it fits in with the corporate scheme ( outcome orientation ) .

Harmonizing to Muller ( 2009 ) there are four administration paradigms, the: flexible economic expert, various creative person, conformist and nimble pragmatist. The LEGO Group presently falls under the various creative person paradigm where the company prioritises the diverse user demands utilizing undertaking direction methods to gain the demands of a assortment of stakeholders, every bit good as advancing high productiveness. However, the company needs to migrate to a more behaviour oriented nimble pragmatist paradigm, which besides accounts for the demands of the diverse stakeholders, but allows for merchandises to develop from nucleus functionality ; to include extra characteristics ; to heighten the flexibleness and user-friendliness, particularly when covering with the gambling and computing machine amusement merchandises which include successful franchises such as LEGO Star Warsa„? , LEGO Batmana„? and LEGO Harry Pottera„? ( The LEGO Group, 2012 ) .


Although the current leading manner within the company is level with more unfastened communicating lines, the leading is still rather bureaucratic, albeit the authorization for determination devising has been pushed down the hierarchy every bit much as possible, the construction remains top-down. The LEGO Group needs to be more flexible in their leading attack, which harmonizing to Frame ( 2003 ) and Muller ( 2009 ) bureaucratic leading is the least flexible leading manner of the four: laissez-faire, democratic, bossy and bureaucratic. The company may see better public presentation if a democratic attack was adopted, as it allows for extra flexibleness and physiques on the bing flatter communicating manner.


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