Oticon's Spaghetti Organization: no departments, no titles, best profit since 1904

Oticon, the Danish hearing-aid maker founded in 1904, lost market share through the late 1980s and slid into losses. New CEO Lars Kolind first proposed moving headquarters and rebuilding it around knowledge work; managers and employees revolted against the move.

Replace hierarchy with self-organization: no departments, job titles or paper — every employee reads shared scanned mail and joins projects they can pitch and sell.

Kolind abandoned the move but in 1990–1991 installed the 'spaghetti organization': departments, middle managers and job titles were removed, everyone works in one open-plan office with wheeled desks, and all incoming mail is scanned into a shared information system that anyone can read. Staff carry a 'job card' of competences and join whichever projects they can propose or get recruited into.

Within six months of Kolind bringing in a new managing director, profitability was restored, and by 1993 Oticon posted its best profit since its 1904 founding — a case that won a 1994 EFMD award. IMD's later retrospective credits the model with growing Oticon's top line for almost two decades while the company stayed a dominant hearing-aid player.

Oticon, Denmark's leading hearing-aid manufacturer since 1904, entered the late 1980s slow to react to changing market conditions, losing market share and slipping into losses. In 1988 the board appointed Lars Kolind, a former academic and management consultant, as CEO. His first plan — moving headquarters and rebuilding the company around knowledge sharing — was resisted by managers and employees alike, so he dropped the move but kept pushing the underlying idea.

What Kolind installed instead became famous as the 'spaghetti organization'. Beginning in 1990–1991, the formal structure was removed: no departments, no middle managers, no job titles. Everyone worked in a single open-plan office with desks on wheels, and every piece of incoming mail was scanned into a shared system so all information was freely accessible. Employees kept a 'job card' describing their competences and joined whichever projects they could pitch to colleagues or be recruited into — a deliberately tangled, project-driven structure with no vertical hierarchy or physical barriers.

The turnaround followed: after Kolind brought in a new managing director to address the finances, profitability was restored within six months, and by 1993 Oticon enjoyed its greatest profit since the company was founded in 1904. The 1994 IMD/Harvard case documenting the experiment won an EFMD award, and the model grew the top line for almost two decades, during which Oticon remained a dominant player in hearing aids with a continuous stream of product innovations.

Scanned, shared mail meant anyone could spot a problem or opportunity — information no longer traveled only up and down a chain of command.

Job cards and open project pitches turned employees into internal entrepreneurs who had to recruit colleagues and sell their ideas.

Removing titles and private offices erased the status and physical barriers that stopped people from crossing functions.

The redesign treated headquarters overhead as the problem and employee knowledge as the asset, cutting bureaucracy instead of adding process.

Removing boxes and titles is only half the idea; the other half is open information and a visible internal market for skills, so initiative — not the org chart — decides what gets done.

The spaghetti structure was partially abandoned around 1996 as Oticon grew, and Kolind stepped back when Niels Jacobsen succeeded him as president in 1998. IMD's 2014 retrospective judged the experiment successful at growing the top line for almost two decades but said it gradually became too fragmented and costly as the company scaled, prompting a redesign toward technological innovation within defined competence domains. Oticon remained a dominant hearing-aid player through the late 2000s, when the global financial crisis and shifting industry dynamics forced another strategic review.