Washington_Mutual_Failure

  The Washington Mutual Bank Failure Introduction In September 2008, California based Washington Mutual (WAMU) was seized by Federal regulators and sold to New York based J.P. Morgan Chase after a three quarter loss totaling over $6.3 billion dollars. Ineffective management controls and poor lending standards were the major causes of the savings and loan failure. The bad loans and ineffective lending not only hurt Washington Mutual and their shareholders, it also had a very negative impact on home owners given home loans they could not afford which ended in foreclosures. This was the largest bank failure in the United States history. For over 18 months after the bank seizure a U.S. Congressional team and the Federal Deposit Insurance Corporation (FDIC) investigated the failure of Washington Mutual. Unfortunately, they put in place an incentive plan that rewarded employees for closing and originating loans based on volume, the quality of the loans were irrelevant. There were a number of unethical business practices the CEO and the management team was guilty of which filtered down to most of the banks employees. Organizational Behavior Theories As referenced in the article (Smith, & Sidel, (2010), respectable successful business will strive to establish ethics within their organization that must be communicated and enforced by senior management, and followed by employees at every level. Companies make many statements about what is ethical, but unless the ethical rules are written and followed, they are not practiced and to some extent, remain a matter of personal opinion. This is clearly the reason WAMU failed, poor business ethics and a lack of an effective organizational structure and leaders. This was a perfect example is the business of commercial and personal banking where poor leadership contributed to the failure of a very large organization. Personal and commercial bankers are employed to represent the bank and serve their customer and shareholders in a manner that should be within the code of ethics of the bank. There are a number of organization-behavior theories WAMU could have implemented that may have prevent the bank from failing. Better communication between the CEO, his senior executives, and the shareholder was a major issue. Also management did not follow the beginning ethics and strategy of the organization by allowing the employees to make as many loans as possible regardless of the risk. Making bad mortgage loans was more important than helping the community and protecting their shareholder investments. Organizational Structure It is imperative to have a solid organizational-behavior theory that will help the organizational structure, establish a positive organizational culture, abide and enforce corporate governance, and policies to avoid controversies or question in the banks operation. It is necessary for every level of the organization to be involved in the everyday production workflow the good ethical decisions to create a more competitive work environment. For an organization to be competitive and successful in today’s business world with modern technology, it is necessary for the employees to see good leadership at all times. Many large companies have regular meetings and communication with all employees to make certain the entire workforce is aware of what the organization has done, and where they are headed in the future. Unfortunately, Washington Mutual had a very different organizational structure. The CEO was more concerned with making money at the time no matter how he made it or who would suffer in the near future. It is imperative to have a grounded organization structure, establish a positive organizational culture, abide and enforce corporate governance and policies to avoid controversies or question in operations. Leadership effectiveness is another aspect of the structure of the organization. Researchers and social science behavior analyst made attempts to discover the traits, abilities, behaviors, and sources of power or aspects of the situation determine how well a leader can influence followers and accomplish task objectives (Yukl, 2010). In an effective organizational structure the CEO of the organization and the entire management team must do everything possible to display the company’s competencies and their employees will respond accordingly Conclusion Organizational behavior is important in understanding how employees within the organization work together. An effective organizational structure is very important to understand strategic planning in order to meet the company's expectations as well as display appropriate behavior to the employees. Managers are always expected and responsible for enforcing the ethical values of the organization and encourage their employees to practice good values as well. This is an effective way to establish trust and respect from employees and customers. Many organization offer ethics training and awareness classes to their employees to make certain everyone is aware of his or her ethical responsibilities and the ethical values of the organization. It is the manager’s responsibility to create a positive work environment and let the employees know unethical performance will not be tolerated. However, it is the employee’s responsibility to work together following the organizational structure and core values. Managing ethics is definitely possible as long as the organization and its management staff follow the code of ethics daily. Employees will trust and respect their executive and management team and also build positive ethical relationships among themselves. Ultimately they should strive to develop people who follow and adhered to the organizations values and cultures. They are also totally committed to protecting the organizations reputation. They must be dedicated leaders with the ability to manage their responsibilities within the organization as well as make certain their commitment to their customers is a major priority. Lead by example and recruit hard-working, self-motivated people, and support their growth in an environment that allows them to reach their full potential as the organization profits and grows. Unfortunately, WAMU was an organization that failed to show a commitment to ethical behavior to succeed. At the end they did not use or understand organizational behaviors are important to put maintain good company values and also to maintain profitability. References Smith, R., & Sidel, R. (2010). U.S. bank failures hit 279 since washington mutual failure. Daily Bankruptcy Review, , n/a. Retrieved from http://search.proquest.com/docview/755013198'accountid=35812 (MLA 7th Edition) "The Lost Bank: The Story of Washington Mutual--The Biggest Bank Failure in American History." Publishers Weekly 5 Mar. 2012: 61. Literature Resource Center. Web. 27 Jan. 2013. Yukl, G. (2010). Leadership In Organizations (7th ed.). Retrieved from The University of Phoenix eBook Collection database.