Paper

Examining a Business Failure Lakessa Monroe University of Phoenix LDR/531 January 3, 2011 Dr. Paul Sam Abstract This paper will demonstrate the research obtained about the failure of a large organization such as Enron. The organization failure could have been predicted or explained by the specific organizational behavioral theories. Leadership, management and organizational structures will also be compared and contrasted. These also can contribute to an organizations failure. Examining a Business Failure In the past, present and future organizations have failed for numerous reasons. In order for organizations to be successful there needs to be key individuals in place to operate and oversee the production and services of the employees. The manager is the most important individual in the organization. A manager is defined as “an individual who achieve goals through other people” (Robinson & Judge 2011). He or she has five major functions as a manager. The functions are planning, organizing, commanding, coordinating, and controlling (Robinson & Judge 2011). The manager helps individuals of the organization to achieve the goals of the project. The planning and organizing function are defined as “a process that defines goals, developing plans, to coordinate and determine what tasks are to be done by the individual, who the report person” (Robinson & Judge 2011). The commanding, coordination and controlling function are just as important because these are used by managers to ensure that the project is completed on time, it allows the individual to give direction about the project, and to motivate the individuals during the project until it is completed. Managers have several roles when managing a project or an organization. The roles are Interpersonal, informational, and decisional. These roles allow the manager to be a motivator, leader, and liaison. For example, once a project is determined the manager must then give the information to the team. Although the team is working on the project the manager must keep the team motivated until it is completed. The manager must also be able to be monitor, disseminator, and spokesperson. An example is the manager should be able to receive information and transmit it to the team. The decisional role of the manager is the ability o be a negotiator, resource allocator, disturbance handler, and entrepreneur. Examining a Business Failure In additions to roles the manager must also have certain management skills. The skills include technical, human, and conceptual. For example, the project consists of using individuals with different skill sets and he or she should be able to assist in the project in all areas. The manager will need knowledge, possess the ability to work with all types of individuals, and making key decisions. The five functions are used in conjunction with the organizational business behavior theories, leadership, management, and organizational structures. These could be used to predict or explain an organizational business failure. The organizational business behavior theories are defined as “actions and attitudes of individuals and groups toward one another and toward the organization and its effects on the organization’s functioning and performance (Business Dictionary, 2011). The theories encompass individuals, groups, and structure. Systematic behavior can help organizations predict the outcomes of the individuals, groups, or business structure. Systematic behavior theory states that a prediction of an individual’s behavior in the workplace or intuition of an individual. The areas of the theory stem from Psychology, Social Psychology, Anthropology, and Sociology. Each area plays a role in the organization structure, leadership, and management. The failure of Enron is a prime example of how if these theories of organizational behavior could have predicted the company’s failure. Enron Corporation was formed after a merger occurred between Houston Natural Gas and Internorth. It was the first natural gas pipeline network that was on a national level. The organization began by focusing on regulated transportation of natural gas to unregulated energy trading market. The leader’s of the organization believed that there was more money in buying and selling financial contracts than to own the physical assets. The organization had reported annual revenues of $10 billion to $101 billion in a 10 year business span. The company was innovative, but it lacked the ethical practices needed to remain a success. The organizations leaders were said to be arrogant in their decision making. The diversity was also a poor business practice and the unethical administrative practices. The issues of the organization were facilitated by the bankers of Enron; information was missed by the company’s board of directors and watchdogs (Harvard College, 2011). The business organization theory of sociology and the anthropology could have predicted the failure of the organization. The sociology theory is defined as “the study of individuals in relation to their social environment or culture” (Robbins and Judge, 2011). For example, the president of Enron Jeffery Skilling was selected by Ken Lay even though he did not have the proper training to oversee the new innovations that were occurring. The two individuals had worked together before and were in the same social environment. Ken Lay chose him because he knew him from his work ethics of previous endeavors. He did not make the appropriate decision when diversification needed to be done. He became power mover and motivator. The anthropology theory could have been used also. Anthropology is defined as the “study of human beings and their activities, it consists of values, attitudes, and behavior of individuals within different organizations” (Robbins and Judge , 2011). He convinced key individuals to look the other way as he sold overvalued, underperforming assets. This went against the Securities Exchange Commission rules. He was able to use his influence within his network to get individuals to offset the balance sheets. The network consisted of bankers and advisors (Harvard College , 2011). The theories help to explain that an individual that is a leader or manager can guide the individuals, the organization, and other groups to do unethical practices. There should be a checks and balance system in place to oversee one individual or a group of individuals in the organization. The comparison and Contrast of leadership, management and organization structures can also contribute to organization failure. Leadership is defined as “an act or instance of leading; guiding or directing a group (Dictionary Reference, 2011). In comparison leadership and management go hand in hand. A leader of an organization must be able to manage it. He or she will need certain talents, skills, knowledge and experience to motivate his or her employees. The leader will also need to sale the vision and mission of the organization. Management is defined as “being in charge of; oversee or watch over” (Wordnet, 2011). This will help the employees to stay focused and to remain productive. The organization structure must also have a leader in order to manage it. Organizational structure is defined “formal and informal framework of policies and rules within, which an organization arranges its lines of authority, communication, and allocates rights and duties “(Business Dictionary, 2011) .The organizational structure breaks down who is in charge and who makes decisions regarding the project. It also help to communicate decisions that are needed to be made. In contrast if the leadership of the organization is not there the individuals will be lost and the project may not be completed. If the leadership is unethical this can cause problems for the organization. The organization could lose it affiliates and network partners. The employees will not want to remain at the organization due to unethical leadership and management. The management is crucial to the team and the project because it needs to be overseen so that it will remain on task. The organizational structure can also have a negative effect on the business organization if the rules or guidelines are not followed by the leader or the management. This can cause poor morale in and out of the organization. For example, if the organization has contracts with outside staff and management allows them to follow a different set of rules the outside staff will not be productive. In conclusion, individuals and organization can learn a great deal of information from a company that has failed. The majority of the time the organization fails due to poor leadership, management, organizational structure. The theories of organization behavior can predict why or if an organization will fail due to sociology and anthropology psychology. Once an organization sees the trend between social culture, values, ethics, communication, power, group decision making, and organizational culture the organization can began to implement a checks and balance system so that the organization can be a success. References Business Dictionary. (2011, January). Organizational Structure. Retrieved from http://businessdictionary.com/html Reference, D. (2011, January). Leadership. Retrieved from http://dictionary.reference.com/leadership Robbins, S. P., & Judge, T. A. (2007). Organizational Behavior (12th ed.). New York, NJ: Prentice Hall. Wordnet. (2011, January). Wordnetweb. Princeton.ed. Retrieved from http://wordnetweb.princeton.ed/perl/webwn