Worst Management Team - Term Paper Example

? Worst Management Team Worst Management Team Management can be assumed as the accomplishment of the company’s objectives in an effective and efficient way. In order to achieve this purpose, managers constitute teams in the organization and then assign them goals which they are supposed to attain in a specified time. There can either be a single large team in an organization or there can be several small teams, depending on the nature and type of organization. However, the function of all such management teams is to play their role in the progress of the company, thereby, contributing towards its success. One such management team also existed at Lehman Brothers Holding Inc, which used to be an international financial services organization, also the fourth biggest investment bank of the United States of America dealing in investment banking along with private banking, equity, research, returns trading and investment management. In my opinion, the management team of the Lehman Brothers during the 2006-08 periods is the worst management team ever to have functioned in the history. This is because in this firm, greatest quantity of capital was demolished in the shortest amount of time. In a dramatic manner, the firm underwent the largest bankruptcy in the history of United States, with its stocks plummeting drastically, customers opting their way out and assets being heavily undervalued by the official credit rating groups of that time. Finally, a significant portion of the company was bought by Barclays in September 2008 (Summe, 2011). Lehman Brothers was mutually established by the three brothers, Henry Lehman, Emanuel Lehman and Mayer Lehman. Since its foundation, it was considered to be a very reputable institution in which people used to place trust. With the passage of time, the popularity of the firm increased tremendously and it became one of the most reliable financial service companies in the United States, with the launch of its various subsidiaries such as Aurora Loan Services, Crossroad Groups, etc. Since 1993, the company was being led by Richard S. Fuld, Jr, who can be construed as a typical traditional leader with a top down command and control approach. He used to be very daunting in his demeanor and often commanded respect and devotion from his employees on the basis of power. He had a large management team along with him comprising of senior managers and board of directors who always aided him in forming corporate level policies, core business strategies and decision making. Up till 2007, this team did reasonably well as far as the monetary records are concerned. The company even reported a staggering $4.2 billion profit in the year 2007. However, the consequences of following a superficial policy based on narrow scope and risky business were soon revealed when the company suffered the biggest financial turmoil of USA’s history which also triggered the late 2000’s recession. The responsibility of this crisis which resulted in the destruction of one of the most established names in the world of international finance lies directly on the management team of Lehman Brothers which consisted of several heavyweights. This management team was headed by a very impolite and fiery Chairman and CEO, Richard S. Fuld, Jr (Birkinshaw, 2010). The other members of the management team were : “Riccardo Banchetti - Co-Chief Executive Officer of the Middle east and Europe regions; Jasjit S. Bhattal – Chief Executive Officer of Asia-Pacific region; Gearld A.Donini – Global Head of Equities; Eric Felder – Global Co-Head of fixed income; Scott J. Freidheim – Co-Chief Administrative Officer; Michael Gelband – Global Head of Capital Markets; David Goldfarb - Chief Strategy Officer; Alex Kirk – Global Head of Principal Investing; Hyung S. Lee – Global Co-Head of Fixed Income; Stephen M.Lessing – Head of Client Relationship Management; Ian T. Lowitt – Chief Financial Officer and Co-Chief Administrative Officer; Herbert H.McDade III – President and Chief Operating Officer; Hugh E. McGee III – Global Head of Investment Banking; Christian Meissner – Co-Chief Executive Officer for Europe and Middle East; Thomas A.Russo – Vice Chairman/Chief Legal Officer; George H.Walker – Global Head of Investment Management”. It is also imperative to mention the names of the members of Board of Directors who were also responsible for devastating a very trustworthy and prosperous firm. The Board of directors comprised of: “Richard S. Fuld, Jr; Michael L.Ainslie; John F. Akers; Roger S. Berlind; Thomas H. Cruikshank; Marsha Johnson Evans; Sir Christopher Gent; Jerry A. Grundhofer; Roland A. Hernandez; Henry Kaufman and John D. Macomber”. These were the names of the personalities who themselves made millions of dollars, unsympathetic of the wounds they inflicted to a 158 year old respectable and thriving firm (“Lehman Brothers, Leadership and Business Bankruptcy”, 2012). In my view, this management team did more than a few things wrong. First of all, it failed to accomplish the primary task of a financial services management team which involves managing risk. Consequently, it is fair to state that the risk management ability of the Lehman Brothers management team was not just poor but terrible. It failed to calculate the risk affects of the numerous real estate investments in which it was involved. For instance, in July 2007, transaction risk parameters of the company set by its risk managers were grossly violated in more than 30 cases (Summe, 2011). The management team also took the issue of mortgage based securities in a very trivial manner, thereby not foreseeing the accompanying risk. Instead of using personal intuition and rationale, the managers followed the traditional rules and regulations, putting aside any thoughts of reconsideration and reviews. The rigid, selfish, impersonal and somewhat relaxed attitude of the team caused the company’s downfall. Secondly, the team exploited the vicious incentive systems designed by itself to its full advantage. Not only the management team, but the employees also knew as to what actions would yield them bonuses. The big flaw in the system of incentives formulated by the management team of Lehman Brothers was that the interests of the employees were not aligned with the company’s long term interests. As a result, in achieving their goals, the employees often deviated away from the objectives and aims of the company. Moreover, the culture at Lehman Brothers was such that it rewarded individual performances instead of teamwork, thereby providing the ideal environment to the employees for making malicious attempts of being selfish and downgrading others. In this manner, the entire purpose of teamwork and coordination was in disarray at the Lehman Brothers and individual benefits became the priority of everyone, from CEO to the staff. The ultimate losers were the shareholders as the management purposely failed to fulfill its responsibilities of maximizing shareholder wealth. This led to huge losses for the shareholders and investors who had put their money in what they believed to be a responsible financial service firm. However, their faith was completely shattered by the malpractices and unprofessional attitude of the management team of Lehman Brothers (Higgins, 2008). Thirdly, vision of the company seemed to be missing. Though it desired to lead the industry by 2012 but this can be regarded as a rather lofty imaginative thought, much in disparity with reality. In fact, there was no unifying factor in the company which would have fused the departments and the people of the company to achieve the mutual goals. In other words, discrepancies and inconsistencies can be considered to be the chief features of the company. This led to very low motivational levels among the employees to work for the betterment of the organization, in effect, it coaxed them to reap personal profits, which they actually did in a rather colossal manner (Birkinshaw, 2010). Analyzing the failure of this management team, it can be aptly said that there is very little which the team did correctly. The irony is that while the plot of this failure was being developed, the only thing that was being done in the right way was the program initiated by Lehman Brothers to combat environmental and social issues by preparing a framework of sustainability principles. These principles seemed rather too flamboyant and unpractical as they aimed at reducing the negative impact of the financial activities of the company on the society and environment. Along with it, they also planned to solve the ongoing environmental and social problems existing in the country through efforts not only from the management team but also employees. Furthermore, they wished to bring in innovation and creativity in framing the solutions of such problems and also endeavored to act as a dependable investment bank, thereby creating social and environmental opportunities for the people. This Sustainability Report was published in the website of Lehman Brothers. However, sooner than later the company crashed and collapsed terribly in all aspects. I believe that the analysis of the situation reveals that the intention of the company might have been good with regard to environment and society; however, it failed severely in even achieving its primary goals of providing efficient services to its customers. As a result, the secondary goals and plans such as the sustainability report were bound to be unsuccessful. In the end, looking at the collapse of the company, this report seems to be a very amusing story. (“Lehman Brothers, Leadership and Business Bankruptcy”, 2012). In my opinion, the management team of Lehman Brothers has to be regarded as the worst team in history for all the reasons stated above. In addition to that, I believe this is the only team in history in which the entire management and board of directors was thoroughly united and integrated not for the good of the company, but for its downfall. Such selfish attitude of not only the team members but also the leader which made them millionaires overnight is certainly not found in any other scenario in the history of business. For several years, the management team kept on concealing the facts and earned profits through peculiar and risky means. The incentive systems encouraged the employees to think of themselves first, instead of the company. Moreover, the overall atmosphere in the company seemed to be a carefree one in which everyone was independent to work the way he or she liked, irrespective of the goals and objectives of the company. The team planned to carry on with such practices and keep on surviving and earning undeserved profits; however, the inevitable was bound to happen and when it did, it took the world by surprise, triggering one of the most dreadful economic downturns of all times. Considering the impact which the failure of Lehman Brothers had in the international arena, I can state with confidence that the Lehman Brothers management team of the 2007-08 period is certainly the worst team in the history. References Birkinshaw, J. M. (2010). Reinventing management: Smarter choices for getting work done. San Francisco: Jossey-Bass. Higgins, J. (2008). CBSNEWS.COM. Retrieved from: http://www.cbsnews.com/8301-505123_162-33040102/lehman-bad-risk-management-in-a- sea-of-financial-excess/ Lehman Brothers, Leadership and Business Bankruptcy. (n.d.). Retrieved February 07, 2012. Retrieved from: http://askthemanager.com/2008/09/lehman-brothers-leadership-and-business-bankruptcy/ Summe, K. (2011, November 28). Stanford Law Review. Retrieved from: http://www.stanfordlawreview.org/online/misconceptions-about-lehman-brothers-bankruptcy Read More