Introduction
Many successful businesses today can attribute their prosperity to the bold actions taken by their leaders. In many cases, organizational leaders are forced to make drastic decisions that change the direction of a firm and revert a crisis threatening to bring down a business. Today, many observers believe that there are vital lessons to learn from Lego after Jorgen Vig Knudstorp took over the company in 2004 (Ross, 2021; Ng, 2017). Before his arrival, Lego was making an estimated $1 million losses a day and posted a net loss of $220 million in 2004 (Ekstract, 2021). The turnaround for Lego has resulted in some people labeling Jorgen a better model for innovation than Steve Jobs (Davis, 2017). Regardless of the commentaries, Jorgen’s reign as Lego’s CEO illustrates how change and leadership drive success.
The focus of this paper is to explore leadership and change using Lego as a case study, specifically after 2004 when Jorgen helped resolve a crisis. The position taken is that the changes made were a necessity and a recognition of leadership problems and gaps that were filled by Jorgen. Additionally, the leadership approach by Jorgen is explored in detail using various theories and concepts to illustrate the role of leadership in change management.
Literature Review
Leadership and change management are two subjects that have been studied together in the recent past to outline how successful change implementation is subject to the efficacy of organizational leadership. Both of these concepts are founded on various theories and models that govern how each of them applies to the organizational context. Leadership is the process of influencing people to understand and agree on what needs to be done and facilitating individual and collective efforts towards shared goals (Xu, 2017, p. 155). Therefore, the primary role of a leader is to help establish goals and guide the organizations towards their achievement (Preston-Cunningham, Elbert, and Dooley, 2017, p. 135). Today, leadership remains one of the topics of interest in management literature focusing on how corporations respond to challenges and opportunities posed by the global context (Vasilescu, 2019, p. 47). As such, managers and top executives can be examined in terms of their styles of leadership and the leadership models or theory they deploy in their daily activities and interactions with the rest of the company.
Leadership theories and styles have dominated scholarly research in the recent past. Additionally, new theories keep emerging as the leadership discourse evolved through time. Transformational leadership is one example of theories associated with certain organizational contexts, including where change is needed. In this case, transformational leadership involves creating visions and goals, motivating staff and providing them with a sense of direction, and shared leadership across the entire team (Daniëls, Hondeghem, and Dochy, 2019, p. 117). Other such theories as trait and contingency define leadership in terms of leader characteristics or leadership situations respectively. Either way, leadership theories have emerged as a result of scholarly observations of the roles and behaviors, as well as characteristics of individuals in leadership positions. The contingency theory suggests that the environment or situation dictates what an effective leader would be (Cherry, 2021). On the contrary, trait theories propose that some individual characteristics make people better leaders than others.
Different leaders use different styles, but scholars have not established the rationale behind each leader’s choices. As such, some of the styles include autocratic, transactional, charismatic, democratic, transformational, and bureaucratic (Al Khajeh, 2018, p. 1). The transformational style focuses on developing the followers and paying attention to their needs. The charismatic style entails leaders developing a vision and asking followers to follow and execute it. transactional leaders are described as those willing to give something in return, for example, pay rise or promotion to followers. The democratic style involves engaging workers in the decision-making processes. The autocratic style comprises leaders that fit the description of classy and bossy in that they do not involve workers in decisions. Lastly, bureaucratic styles are more concerned with processes and procedures.
The concept of change management remains critical in organizational management literature since business environments can be dynamic and rapid changes require urgent responses. According to Ash and Serrat (2017), John Kotter is one of the most respected theorists on change management. He developed the 8-step model of change management which has remained one of the most relevant models in change management practice and discourse (Athuraliya, 2021). Many case studies on change management tend to use this model to illustrate the efficacy of its successful deployment in real-life scenarios (Sittrop and Crosthwaite, 2021, p. 1). In a nutshell, businesses implementing change tend to have a good reason for it, considering that not everybody likes change. As such, one of the challenges that leaders have to face is resistance and how to overcome it. Besides Kotter’s model, other theorists have developed other frameworks that have become a mainstay in research. Examples include Lewin’s 3-step model which involves unfreezing, achieving a new level, and re-freezing (Rosenbaum, et al., 2018, p. 288). This model describes how firms offset their current position, pursue change goals, and settle after the goals are achieved.
The role of leadership in change management has attracted scholarly attention for decades. Some of the studies have focused on exploring how various theories and styles help achieve successful change management. Transformational leadership is one of the styles and models associated with change (Alqatawenh, 2018, p. 17). Transformational leadership entails behaviors that are revolutionary and where leaders display the need to keep moving forward or to change a situation with the firm that does not yield the desired outcomes. According to Al-Ali et al. (2017, p. 723), change-oriented leadership positively and directly affects planned change and significantly and indirectly influences emergent change. The difference between these two types of change is that the former is deliberately sought by the firm while the latter occurs unpredictably and without prior deliberate planning. Regardless of the type, leaders who believe in continuous growth and development will be more change-oriented as opposed to those who seek to retain the status quo.
Overall, organizational leadership is responsible for change management practices and the success in implementing changes depends on the behaviors, styles, and characteristics of the leaders. Other factors may affect these processes, including culture and gender. However, it is important to acknowledge that the corporate culture is a reflection of the leader and the practices and behaviors he or she promotes within the company. Innovation and change have become critical criteria for evaluating leadership (Holmes, 2017, p. 15). Not all managers or leaders are innovative and, when the need for change emerges, not many of these leaders can be successful.
Organizational Analysis
Lego Group is a privately-owned firm based in Billund, Denmark, which has been owned by the Kirk Kristiansen family since it was founded. Lego was formed in 1932 and is engaged in developing children’s creativity through playing and learning. The Lego brick is the most important product by the firm, which prides itself on being named Toy of the Century twice. Over the years, the company’s products have undergone extensive development, with the present form of the Lego brick having been launched in 1958 (Lego, n.d.). the company has been majorly successful over the years until the early 2000s when the company started making losses. The company’s turnaround after Jorgen took over in 2004 is regarded as one of the most famous business stories of the century (Boston Consulting Group, 2017). This case scenario can be explored from a leadership and change management standpoint.
Jorgen can be considered to be a transformational leader since his primary objective upon becoming CEO was to transform the company and reverse the crisis that Lego was in. As mentioned earlier, the company had registered losses of up to $220 million in 2004, which indicated major problems with the company’s processes and strategy (Ekstract, 2021). For Jorgen, he believed that growth would come naturally if Lego’s leadership stuck to the core paradoxical principle that the best play involved learning. Therefore, even though the crisis brought about emergent change and Jorgen believed that restructuring was a necessity, there was a need to stick by the core principles that have made the company successful for so long. In other words, Jorgen understood that Lego was doing too many things at the same time, which meant it deviated from its core capabilities (Boston Consulting Group, 2017). Therefore, the change initiated by Jorgen can be described as taking the company back to its basic principles and leaving out every activity that restrained its primary motive.
As a transformational leader, Jorgen had a vision for the company, which was going back to basics and the core business that has been successful. According to Davis (2017), Jorgen rescued Lego by rebuilding it methodically. The rebuilding involved dumping businesses in which the company lacked expertise. For instance, the LegoLand parks were sold to Merlin Entertainments, which is a British company. Additionally, the company’s inventory was halved from 13000 to 6500 (Davis, 2017). These shifts could be viewed as regressive considering that they sought to minimize the company’s businesses as opposed to expanding them. on the contrary, these businesses were a problem that was recognized and addressed, which means that the change management was a success. The vision that Jorgen developed was that Lego should re-strategize and go back to the basics. The followers bought into this vision and gave Jorgen the support he needed to effect this change.
Innovation and change have been described as key criteria for evaluating leadership. In this case, the success of Lego’s new CEO, Jorgen Vig Knudstorp, can be evaluated in terms of how change and innovation were received, implemented, and facilitated the growth of the company. Most importantly, Jorgen took over the company when it was in crisis as illustrated by millions of losses incurred daily. Even without Jorgen, observers note that Lego is an innovative company manifested by its ability to create new movies, entities, and TV shows. After Jorgen took over as CEO, the company started to make hit toys again, which hint at Jorgen’s innovativeness (Davis, 2017). This observation validly labels Jorgen as change-oriented considering that change was the tool used to overcome the crisis. The contingency theory of leadership described earlier illustrates that the contexts or situations shape a leader. It can be argued that any individual who may have taken over the CEO job at Lego in 2004 could have been forced to effect change. The rationale is that the situation was dire and change was a necessity.
Even though the contingency theory highlights how leaders emerge based on the situation, it can be argued that different individuals could have pursued different pathways and achieved different levels of success. For example, Jorgen’s solution was to divest from businesses that were not core to the company. A different person may have tried to ensure that all segments became successful without divesting considering that the conventional wisdom is that expansion means more room for profitability. Jorgen’s charisma may have played a key role in facilitating the entire company to embrace his ideas. For example, he has been labeled as an officer of happiness or the dancing CEO after his recent stunt of dancing before a group of journalists (Frandsen and Joy, 2020, p. 155). However, these behaviors can be interpreted to mean that Jorgen is a charismatic leader who uses his charm to attract followers and make them embrace his vision.
The change model used by Jorgen may be difficult to describe, but it can be argued that Lewin’s 3-step model is most applicable. The rationale is that this model simply seeks to move a company to the desired position and then cement it. Unfreezing and refreezing processes described by Rosenbaum et al. (2018, p. 288) apply in that the previous situation was changed and the company now thrives on the new one. In this case, Jorgen understood what the best situation and outcome for the company was and undertook measures and steps towards it. Once it was achieved, it became cemented within the company in the form of core businesses and processes that redefined Lego.
Recommendation and Conclusion
The key conclusion made from this case study is leadership plays a critical role in change management. This position manifests itself in the role played by Jorgen in delivering Lego from a crisis to profitability. Leadership styles and theories have been discussed in the literature review, and they help understand how Jorgen facilitated the change. Change models and theories are visible in the case study, including emergent change and Lewin’s change model and how it applies to Lego.
The key recommendation for Lego Group in their continued search for success in the future (2020 onwards) is to remain true to the core business. as illustrated in the case study, Lego’s crisis was resolved by divesting from other businesses and retaining what the company was good at. Another recommendation is that even though retaining core business is important, innovations will become critical determinants of future success. For example, online gaming is increasingly becoming popular, especially with such technologies as virtual reality and artificial intelligence. The design and development of future toys may be subject to these advances where the success of Lego could be determined by the extent to which the company integrates these technologies.
Reference List
Al Khajeh, E., (2018) ‘Impact of leadership styles on organizational performance’, Journal of Human Resources Management Research, 2018(2018), pp. 1-10.
Al-Ali, A. et al. (2017) ‘Change management through leadership: The mediating role of organizational culture’, International Journal of Organizational Analysis, 25(4), pp. 723-739.
Alqatawenh, A., (2018) ‘Transformational leadership style and its relationship with change management’, Business: Theory and Practice, 19, pp. 17-24.
Ash, P. and Serrat, O. (2017) ‘Fast and effective change management’, In Knowledge Solutions. Singapore: Springer, pp. 367-374.
Athuraliya, A. (2021) The easy guide to Kotter’s 8 step change model. Web.
Boston Consulting Group, 2017. At Lego, growth and culture are not kid stuff: An interview with Jørgen Vig Knudstorp. Web.
Cherry, K. (2021) The major leadership theories. Web.
Daniëls, E. et al. (2019) ‘A review on leadership and leadership development in educational settings’, Educational Research Review, 27, pp. 110-125.
Davis, J. (2017) How Lego clicked: The super brand that reinvented itself. Web.
Ekstract, S. (2021) From almost bankrupt to most profitable toy company; Lessons from lego. Web.
Frandsen, F. and Joy, W. (2020) ‘The dancing CEO. New Perspectives on the leader: Performer, chief happiness officer or seducer?’, Advances in Public Relations and Communication Management, 15, pp. 155-168.
Holmes, J. (2017) ‘Leadership and change management: Examining gender, cultural and ‘hero leader’ stereotypes’, in C. Ilie and S. Schnurr (Eds.). Challenging leadership stereotypes through discourse. Singapore: Springer, pp. 15-43.
Lego (n.d.). The Lego Group history. Web.
Ng, D. (2017) How a rookie brought Lego back from the brink. Web.
Preston-Cunningham, T., Elbert, C. and Dooley, K. (2017) ‘Defining leadership: Collective women’s learning circles: a qualitative approach’, Journal of Leadership Education, 16(1), pp. 133-147.
Rosenbaum, D., More, E. and P., S. (2018) ‘Planned organizational change management: Forward to the past? an exploratory literature review’, Journal of Organizational Change Management, 31(2), pp. 286-303.
Ross, L. (2021) Lessons from leaders: ørgen Vig Knudstorp. Web.
Sittrop, D. and Crosthwaite, C. (2021) ‘Minimising risk – the application of otter’s change management model on customer relationship management systems: A case study’, Journal of Risk and Financial Management, 14(10), pp. 1-20.
Vasilescu, M. (2019) ‘Leadership styles and theories in an effective management activity’, Annals – Economy Series, Volume 4, pp. 47-52.
Xu, J. (2017) ‘Leadership theory in clinical practice’, Chinese Nursing Research, 4(4), pp. 155-157.