Examining a Business Failure: WorldCom
Over the past 15 years there has been numerous business failures in the United States and most of these failures have been because of inadequate organizational behavior techniques. According to The Great American History Fact-Finder, the WorldCom bankruptcy was the “largest corporate fraud and business failure in the United States” (WorldCom Bankruptcy, 2004). Prior to their fall in 2002 WorldCom was the nation's second-largest long distance and data services provider. They were also known as one of the largest Internet providers in the world and a provider of critical applications for the United States ...view middle of the document...
Although most of the problems associated with the bankruptcy of WorldCom could have been avoided had the senior executives followed legal accounting practices and made ethical decisions there are other factors to consider when assessing who is to blame in this type of situation. Some of these factors include the organizational structure and the effectiveness of leaders and managers at WorldCom. After reviewing information regarding the WorldCom bankruptcy, I have concluded that WorldCom follows the structure of an entrepreneurial organization in which there is direct supervision and both vertical and horizontal centralization throughout (Mintzberg, Lampel, Quinn, & Ghoshal, 2003). My assumption was confirmed in an article by Zekany, Braun, and Warder (2004) where they stated that “WorldCom was managed in a rather autocratic fashion,” meaning that all the decision-making power is left to the senior executives of the organization and “Ebbers and Sullivan created a corporate culture in which leaders and managers were not to be questioned or second-guessed.” This autocratic style of management is the most likely reason that lower-level employees did not question any of the accounting discrepancies or financial decisions made by upper-management until it was too late.
Zekany, Braun, and Warder (2004) also stated that “Ebbers was a powerful leader who was able to attract admirers to his Board of Directors, his management team… stockholders, members of the investment community, and the press. He was a risk-seeking, free-spending, over-zealous, deal maker whose accomplishments gained him tremendous respect.” Customers, stockholders, and employees viewed Ebbers as a successful businessman with great deal of ideas, who wasn’t afraid to take financial risks and therefore people trusted him to make informed and ethical business decisions. Ebbers effectively performed the managerial activities of traditional management and networking but lacked in communication and human resource management skills (Robbins & Judge, 2007). Therefore, it can be concluded that Ebbers served well as a manager but lacked the critical leadership skills necessary operate a business successfully.
After reviewing information regarding the WorldCom scandal, I believe that if the management practices observed at WorldCom had been studied using the power-influence approach, in which researchers examine the influence processes between leaders and other people both within and outside the organization (Yukl, 2006), then the accounting discrepancies found at WorldCom would have been reported sooner. Due to Ebbers and Sullivan’s strong personalities and disregard for employee input many employees were scared to speak up or thought that if they...