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BUMGT5970 Leadership Assignment describe the Analysis and problem diagnosis. In this case study we will focus on authorities of company were determine on their personal benefits.
Enron is a US company which is incorporated in 1986 which provide the products and services related to natural gas, electricity and communication. Ken lay was the chairman of the board and Jeff Skilling was the CEO over 22000 employee’s staff. The company failed because of many reasons which are lost confidence in the market, aggressive accounting in which an illusion of excess profits made by the company, unethical practices, inefficient leadership, and culture ofthe company.The corporate culture of USA basically follows the statement that time is money. The general belief in the country is that anyone can be rich and successful by crossing the limits of hard work (Meng, 2014). The performance of individuals and initiatives taken by them are highly valued.All the activities and collaborations are done to increase the profits of the company and to reduce tax liabilities (Swanson &Macmillan, 2014).
Analysis and problem diagnosis
The company was failed because of several reasons but the bad leadership was one of the main reasons. The leading authorities failed to maintain proper leadership and lack of employee’s participation in the company (Kumar, Adhish & Deoki, 2014). Following are the leadership theories and their causes and effect which leads to inefficient leadership and resulted as failing of the company.
This leadership theory focuses on the behavior of the leader which includes their physical, mental and social characteristics. These characteristics make a leader to concern with the task and people.The leader should be concern with its employees and the work done by them. And lead them in every kind of mismanagement in their work. Provide them acceptable working condition and positive environment.The leader should make its employees feel their participation in company by retaining the loyalty of employees (Offord, Gill & Kendal, 2016).
But in the given case study top authorities and executives were making employees work beyond the limits and employees were working having a belief that they are important for the future of company and their participation is appreciable in growth of company. But on the other hand employees were fired by appointing better employees. This is because of the greed to be the biggest and richest company. This was becoming a reason for the lack of confidence of employees in the company (Offord, Gill & Kendal, 2016).
This theory defines that there should be a quality in leader that he can handles the entire situation by varying its style of leadership. In this changing environment it is required to adopt the change and control situations. The leader has to flexible to control their employees in every situation.
The top level do malfunctioning activities to achieve the target and goals and beyond them. They include employees in the execution of these malfunctioning activities. Rewards and appraisal were given to employees were also a part of the manipulation of profits. The top level executives and employees were earning profits at bad times of company by manipulating performance appraisal schemes. This was a reason which leads employees to involve in these kinds of activities and focus on profit earning (Northouse, 2015).
The Transactional Theory is based on the relationship between the leaders and employees. According to this theory there should be a positive and mutually beneficial relationship should be there between the both parties. In the given case study top executives do not let the employees know about the illusion of excessive profits in company and make them work beyond limits to achieve the targets. They also manipulate the performance appraisal policies for earning profits for their personal benefits. They did not consider benefit of their employees (Northouse, 2015).
This theory is based on the relationship between leader and employee in which the impact of leader can transform their relationship with increased trust and motivation. In the given case study the impact of leaders was bad as in they were involved in the unethical activities, malfunctioning and insider trading. They transformed their employees to do unethical activities and focuses on their personal benefits. These activities of leaders in company influence and gave courage to employees to do unethical functioning.And this leads the company to a situation of bankruptcy (Northouse, 2015).
Theory and practice
Organizational Culture- Culture can be defined as the ways and patterns which are followed to do business in any organization. The values and beliefs to handle activities and customers in the organization are treated as culture to do business. The ways to treat its employees and patterns for decision making, hierarchy levels and communication channels are included in the organization culture (Chen, 2013).
Leadership can affect culture: The culture and leadership have direct relationship with each other. Leader can influence its employees in a way that they can be foundation for a better culture in organization. A leader can affect culture by negative leadership.When employees lead to the directions of effective customer handling and better application of policies will make a positive culture in an organization and vice versa. So now we can state that negative leadership can affect organizational culture. When leaders are not able to set an example by their performance they cannot influence employees to follow the culture of organization (Givens, 2012).
Culture as a function of leadership: In the process of leadership organizational culture works as a function. This helps to provide a framework for the selection of leadership techniques. These techniques vary from culture to culture.The ethics plays an important role to define the culture of any organization. A code of conduct should be formed to guide all the activities in ethical way. The leader motivates its employees to follow the code of conduct and business ethics to meet the requirement of organizational culture. The leader can create the involvement and participation of employees in organization by motivating them for their role in company and scope of the organization. Leadership skills can be developed when a person understands how to create and execute the organizational culture (Wyer, Chiu & Hong, 2009).
Can remove obstacles for cultural change: In the present business scenario the change is must. Companies keep changes their culture by changing the technologies, policies and strategies. There emerge many obstacles in company which restricts proper implementation of these changes. These obstacles can be resistance to change because of ego, non-involvement of employees. It depends on the leader that hoe can he motivates its employees to accept these changes and work for their adoption in the organization.Positive leadership can help to achieve goals and targets of the company. Effective leadership also helps to maintain interest of employees in the changing environment by giving them proper training. These trainings increase performance of employees (Wyer, Chiu & Hong, 2009).
Positive affect of leadership on culture: Leadership and organizational culture have a positive relationship with each other. Leadership makes an impact of organizational culture on its employees by motivating to follow them. In an organization performance of employees depends on their motivation level.By giving rewards and appraisals a leader motivates employees to give their level best and also ensures their participation in company.This motivation can lead to do innovation and take initiatives in the employees. The recruitment should of quality people which can lead toincrease in the employee retention.Leadership can influence the applicability of ethical behavior in activities of employees. Leaders and top management are the examples for employees. The ethical behavior of these person followed by employees and this helps to influence them (Givens, 2012).
So we can conclude by this analysis that there is a positive relationship between leadership and organizational culture. Leadership can create and influence culture and organizational culture works as a function or tool for positive leadership and provides a framework. The culture of any organization is the base for every activity. If a company do not have ethical leadership then it becomes impossible for company to achieve the mission and vision of company.
In the case of US company Enron we have analyzed that there are many reasons for its failing, which are malfunctioning of profits, aggressive accounting, manipulation of performance appraisal policy and negative leadership. The unethical behavior was emerged due to negative leadership. A proper remuneration should be given to manage their growth and must not manipulate the performance appraisal policies. Transparency should be created for the proper understanding of activities in company. In case of companies which do not allow transparency can create a proper management of activities and business ethics. There should be control by monitoring and evaluating the performance of employees by leader which helps to decrease level of variances in performance.There should be policies and practices which can be executed by proper research and analyses of the requirements of the company. These policies can be stated as benchmarks for the evaluations of performance and adoption of ethics in the company.
The recruitments should be in accordance with the requirement and quality of peopleThere should be a self-check and balance policy in the organization in place of executing any committee or authority for it. This will help to decrease any legal responsibility on the organization and make the employees trust and confidence in company.Trainings and skills should be provided by company to enhance the quality of performance. When the company will able to follow its culture by ethical leadership then it becomes easy to achieve vision and mission of the company.
According to the given case study the company Enron has authorities which are focused to increase their share price and their personal benefits. There should be leaders appointed which follows the approach of collectivism instead of individualism. He should think about the overall benefits of the company. This helps to retain employees and customers in the company. The top level authorities are the persons who should set an example by following proper code of conduct in their activities and motivate employees by influencing them. So we can conclude that there should be a proper leadership process in an organization and maintain the trust and confidence for company in market.
Chen, J. 2013, "Discussion on the relationship between language and culture", Theory and Practice in Language Studies, vol. 3, no. 6, pp. 963.
Givens, R.J. 2012, "THE STUDY OF THE RELATIONSHIP BETWEEN ORGANIZATIONAL CULTURE AND ORGANIZATIONAL PERFORMANCE IN NON-PROFIT RELIGIOUS ORGANIZATIONS", International Journal of Organization Theory and Behavior, vol. 15, no. 2, pp. 239.
Kumar, S., Adhish, V.S. & Deoki, N. 2014, "Making sense of theories of leadership for capacity building", Indian journal of community medicine : official publication of Indian Association of Preventive & Social Medicine, vol. 39, no. 2, pp. 82-86.
Meng, J. 2014, "Unpacking the relationship between organizational culture and excellent leadership in public relations: An empirical investigation", Journal of Communication Management, vol. 18, no. 4, pp. 363-385.
Northouse, P.G. 2015, Leadership: theory and practice, Seventh edn, SAGE Publications, Inc, Thousand Oaks.
Offord, M., Gill, R. & Kendal, J. 2016, "Leadership between decks: A synthesis and development of engagement and resistance theories of leadership based on evidence from practice in Royal Navy warships", Leadership & Organization Development Journal, vol. 37, no. 2, pp. 289.
Swanson, D.L. & Palgrave Macmillan 2014, Embedding CSR into corporate culture: challenging the executive mind, Palgrave Macmillan, New York, NY.
Wyer, R.S., Chiu, C., & Hong, Y., 2009, Understanding culture: theory, research, and application, Psychology Press, New York.
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