The_Management_Failure_of_Tyco_International

Management Failure of Tyco International Felecia Robinson Organizational Leadership/531 University of Phoenix April 12, 2010 Alejandro Medina Introduction Tyco International was founded by Edward Breen in 1960 (Wikipedia, 2007). According to Wikipedia, (2007), Tyco International’s operational headquarters is in Princeton, New Jersey, and employs 247,900 employees. Dennis Kozlowski became the CEO in 1992, leading with aggressiveness acquiring several other companies into the organization (Wikipedia, 2007). In 1999, after a stock split, rumors began to spread about Tyco’s accounting habits. It was said that Tyco was producing irregular financial accounts, but was denied by Tyco’s leaders. Throughout the years of Kozlowski’s leadership, Tyco merged and bought out several companies, making their profits grow beyond 30 billion dollars, but doubled its long term debt by more than 10 billion dollars (Wikipedia, 2007). In the event of trying to pull things back together, Kozlowski caused the company more harm. According to Kay, (2002), “The American-based conglomerate Tyco International Ltd. is in deep crisis following a wave of revelations concerning the corrupt practices of the company and its top management.” As things worsened, Kozlowski resigned although the stock was plummeting. A bankruptcy for Tyco International would mean that 240,000 employees would be out of work, which would have sent shockwaves through the economy (Kay, 2002). Acquisitions and financial manipulations lead to huge profits for Tyco over a long period. Tyco faced bankruptcy because of failed tricks by its accounting section and fraudulent endeavor by the company’s leaders. Kozlowski was accused of applying millions of dollars to his personal life. His gluttony and misguidance cost the company billions of dollars, him his freedom, and money in court that was unnecessary. Management has the most important job in a company because the success is dependent upon their actions. Kozlowski’s management plan was to turn Tyco International into a large integrated company as GE. Only his plan came with his own benefits as well. No one can ever say what drove Kozlowski to commit such monstrous crimes and put so many people’s jobs in harm’s way. By studying his actions, someone can see that it is easy for a rich person to be corrupted in the eye of money also. Kozlowski broke federal laws (tax aviation) and state laws during his time as CEO for Tyco. He fraudulently transported money to New Hampshire to avoid paying taxes, stilling money to purchase his apartment, and retrieve loans through the company. Kozlowski pleaded not guilty to the charges in 2002 and a trial was scheduled for June 26th of the same year. He paid a 3 million dollar bond to regain his freedom until the trial. Kozlowski showed little ethical concern with how his actions would affect the company, or any of the people involved with the company. According to what has been written in pertaining to his criminal history with Tyco International, Kozlowski had to have made his actions a part of his plan from the beginning. When he began his reign in 1992 as the CEO of Tyco International, he began his deceit through aggressively merging smaller companies and buying out others. The deceit took place when the financial paper trail was doctored to claim the funds as asset instead of spent monies. Kozlowski’s actions were not only damaging illegally and ethically; his social responsibility was damaged too. Because it is a company’s social responsibility to do the right thing for the society; the society was not taken into regard. A bankruptcy for Tyco International would have meant the depletion of jobs for over more than 240,000 people. That is not to mention the shareholders who counted on him to be honest in the financial reports. Not all the 27 years of Kozlowski’s reign as CEO for Tyco International was corrupt. He managed bravely and enterprisingly the first few years of his time there (Business Week, 2002). Managers have to be aware of legal, ethical, and socially responsible planning. By implementing a plan in regard to these characteristics, a manager can avoid future failure. After the company’s fall, they had to rebuild with a strategic plan. A person of interest in the rebuilding of the trust in Tyco was Michael Useem, a sociologist who interviewed Kozlowski during his greater days before the fall of Tyco (Business Week, 2002). In the same article, Business Week, (2002) said, “Under Kozlowski, he says, Tyco's culture discouraged subordinates from questioning top executives and discouraged contact between directors and second-tier managers.” This was the first step toward reconstructing a strategic plan that would bring Tyco International out of its bondage. Short term activities compiled together forming an operational plan was the next step needed to regain its infrastructure. This was done by compiling ideas into products under demand. The monopoly broke in 2002 when Tyco’s Plastics and adhesives unit launched its Low-cost, high-performing tapes, which supported a broad range of applications (Thomas Net, 2007). Since then many other products have been produced by Tyco’s business units. Contingency planning was implemented to avoid running into unsuspected occurrences that may have happened in the future. Product failure was an occurrence that Tyco International would have rather avoided. To avoid another scandal such as the one Tyco and a couple other companies pulled off; President Bush signed into law the Sarbanes-Oxley Act of 2002 to restore investor confidence (Oppenheim Consulting, LLC, 2005). Corporate executives realized that long jail sentences and huge fines were promised to them if they did not abide by this Act. Conclusion Money and power can corrupt even the wisest entrepreneur when they have all of the playing cards and all of the strings to a corporation in their hands. This was proven by the actions of Dennis Kozlowski. He was not always a criminal driven individual, but became corrupt at some point during his 27 years as CEO for Tyco International. His deceitful actions caused Tyco to face bankruptcy. Social responsibility was not considered in any of his last actions although, he was CEO of Tyco International. In-fact, his objective became greed instead of ethical and social affairs. The loss and neglect of legal, ethical, and socially responsible planning led to Kozlowski’s failure as a manager. During the rebuilding of the company’s trust, they began to plan over again using strategic, tactical, operational, and contingency planning. By using all of these components, Tyco International was able to produce valuable products under an honest leadership. References Business Week, (2002), Rebuilding Trust in Tyco, Retrieved from http://www.businessweek.com/magazine/content/02_47/b3809105.htm Business Week, (2002), The Rise and fall of Dennis Kozlowski, Retrieved from http://www.businessweek.com/magazine/content/02_51/b3813001.htm Oppenheim Consulting, LLC, (2005), Sarbanes-Oxley Compliance, Retrieved from http://www.oppenheimconsulting.com/sox.htm Kay, J., (2002), Tyco: US conglomerate falls amid revelations of greed and corruption, World Socialist Web Site, Retrieved from http://www.wsws.org/articles/2002/jun2002/tyco-j18.shtm