Modern Management Skills - Essay Example

? Companies Failure to Reach Pre and Post-tax Return About a decade before the financial crisis, many listed companies failed to reach the pre and post-tax return on capital employed targets. Organization management played a crucial role in the organizational failure and frustrations of the institutional investors. The ethical standards of managing the companies were said to be extremely low. This led to poor accounting, auditing and preparations for any oncoming crisis. This essay seeks to address these challenges organizational critically. The ethical standards among financial advisers and some institutional investors were attributed to most of the organizational failures in the decade. Flaws in the ethical dimension of the management led to unhealthy approach to organizational preparedness. Most of the listed organizations lacked strong governance and sustainability elements. The long-term economic, social and environmental performances were negatively impacted. This gave rise to poor operations and stakeholder communications in the listed companies. Sustainable companies tackle issues upfront. Most of the organizations failed to understand that their survival was bound by other factors other than economic. For the last ten years or more, organizational success has been function of environmental and social success (Thornhill et al 2003). Macroeconomic factors had a profound effect on investor and stakeholder confidence in the listed companies. Sustainable performance is a collection of economic, social and environmental results that all organizations to succeed in the long-term. It should be an integral part of the listed companies. The effectiveness of sustainable performance in the companies was compromised by the poor stakeholder communications (Braksick 2007). Most of the listed companies had sustainability programs which were never deliberated at the organizational level. A telling example is fragmented financial reporting leading to governance disclosures. Modern management skills entail holistic and integrated business reporting to strengthen the fundamentals of the organizations (Cameron & Green 2004). A decade before the financial crises, few organizations has functional outside-in and inside-out approach when it come to managing performance. Technology and innovation was creeping into the market (Thornhill et al 2003). Therefore, some stakeholder contributions were perceived to be less important. Coupled with market dynamics, rising globalization and resistance to change, it increasingly became clear that pre and post-tax return on capital targets were hard to be achieved. Most of the listed companies lacked the necessary creativity and innovation to respond to the strategic needs of the organizations. Rather, most of the listed companies focused on traditional approaches for organizational management. Traditional approaches are primarily focused on understanding the micro business performance solely (Drummond 2009). This created insufficiency in achieving the targets set by institutional investors (Thornhill et al 2003). Managing listed companies demands creation and optimization of stakeholder value. A major objective of the management must to win stakeholder confidence since this is likely to attract increased revenues. The management of listed companies must be constituted and structured to achieve the balance between conformance and performance (Thornhill et al 2003). Over the last decade before the beginning of the 2008 financial crunch, many stakeholders were not conversant with the organizations’ business models (Davis at al 2001). This involved operating environmental and creation of sustainable stakeholder value. Studies show that stakeholder involvement in vital in achieving the organizational targets. Most of the listed companies had weak institutional capacity to ensure periodic measurement of the organizations strategic direction. This made it difficult to take drastic measures when the organization was heading in the wrong direction. Most of these weaknesses came to light through the crisis (Garcimartin & Vrellis 2008). A study by IFAC before five years before the 2007 financial crises observed that poor organizational governance was a major factor affecting the listed companies. Executive remuneration structures showed little sensitivity to the long term sustainable plans of most of these listed companies. Most of the organizations appeared to the rewarding failure and were involved in reckless risk taking (Scarborough at al 2009). The management of the companies was not bold enough to eliminate incentives that encouraged short-term opportunism. Transparency lacked in the process of executive compensation (Cameron & Green 2004). At the same time, exceptional performance was not rewarded through bonuses. In the United Kingdom, the government proposed legislation to regulate executive remuneration (Garcimartin & Vrellis 2008). Research by IFAC 2007 observed the need to constantly review executive remuneration. Most of the professionals working in these companies lacked protection. This led to increased turnover rate. Many listed companies found it hard to attract and retain competent personnel (Scarborough at al 2009). This made it the boards to concentrate on compliance with regulations as opposed to addressing the economics of achieving the organizational targets. There is a growing expansion from shareholder to stakeholder perspectives in running organizations (Davis at al 2001). Most of the companies failed to appreciate the numerous roles that an individual can play in the process of organizational success. A telling example is when a person is a client, an employee, investor and a neighbor to a specific company. Traditional approaches of running listed companies encouraged a narrow view of stakeholders, even in the face of the conflicting perspectives (Garcimartin & Vrellis 2008). Many listed companies remained optimistic that the traditional strategies would work even when the signs of international fiscal melt down become apparent. Some of the listed companies have not taken social and environmental as a necessary ingredient to organizational success. However, this is sighted as one of the reasons why many listed companies failed to achieve pre and post tax return on capital employed targets. Few companies consider stakeholder value to involve the consideration of economic, environmental and social factors (Scarborough at al 2009). However, different stakeholders have different contributions to organizational success based on the uniqueness of their interests. However, the stakeholder roles are interdependent (Drummond 2009). Most of the organizations that suffered losses over the period lacked values-based cultures (Cameron & Green 2004). In the previous decades, organizational culture of excellence was perceived to be secondary because the conservation organizational management was functional. Therefore, many listed companies failed to formulate values through a code of conduct that is integrated in the organizational operations. This caused shareholders to be less pro-active in their ownership roles (Mitroff 2000). This culminated in organizational losses and organizational culture lacked a clear sense of appeal. This was coupled by dysfunctional communications with stakeholders and employees (Noe 2012). External reporting and narrow focus on organizational goals coupled by resistance to change lead to poor financial results. Most of the listed companies lacked mechanisms for regular review. Management processes for indentifying and creating attractive market opportunities demand investigation before investment. Over the last decade before the financial crunch, many listed companies lacked strategic alternatives that can generate the highest returns (Noe 2012). This entailed researching for existing markets and the knowledge on which markets to either enter or retract. Listed companies can fail because of poor market intelligence (Mitroff 2000). As the financial crises approaches, with changing global fiscal dynamics, listed companies needed to increase their competitive intelligence or plunge into losses. Service portfolio and internal analysis of products must be ascertained on a regular basis. A telling example is the impact of fuel prices on market dynamics and consumer purchasing power. Companies that relied on old statistics and findings failed to capture the consumers’ current expectations and demands. Most of the listed companies failed to withdraw from unproductive markets and launch into new markets (Lowe 2010). The willingness to invest in new markets can have direct benefit to stakeholders and lead to increased pre-tax profits for listed companies. This failure gave room to new entrants whose prices and products were logical to the bargaining power of the consumers. At the same time, switching costs and cost advantage index greatly favored some new entrants, unlisted companies (Hedley 2011). The companies have less bureaucracy in the organizational models. This means they could easily make changes that respond to the organizational and market needs. This increased the buyer propensity to buy substitute goods making it hard for the listed companies to achieve their pre and post-tax return on capital targets. Research indicates that the relative price performance of substitute goods and the growth of substitute market have a negative impact on the established brands. Over the last decade, the market share for the large companies had been decreasing leading to decreased profitability and viability (Scarborough at al 2009). Furthermore, increase in marketing cost and the intensity in supplier differentiation resulted in decreased organizational revenues. Most of the listed companies failed to design business infrastructure that could have delivered increased value to the customers. This is one of the ways of increasing profitability. This is central to having a productive value chain. Most of the listed companies needed financing strategies, divestment strategy and revamped product portfolio to ensure competitiveness and increased revenues (Lowe 2010). However, most of the listed companies stuck with a fixed plan over the years leading to failure to achieve pre and post-tax return on capital employed targets (Scarborough at al 2009). The situation was compounded by the impeding global financial meltdown. The purpose of this model, scenario analysis and what-if modeling was to reveal the changes in the market early enough to avoid organizational losses. Listed companies failed to make use of IT effectiveness standards and the only markets continued to grow (Hedley 2011). This has a negative impact in the shareholder value. Research shows that companies that fail to keep up with changes in the market, they cause customers to leave. This has a negative impact in organizational revenues. Listed companies are required to adopt planned contributions to the goals of the company. Leading organizational is known to integrate business planning processes. Most value drives are value oriented not process oriented. This calls for flexibility in executing both vertical and horizontal integration. Listed companies had weak management processes when it came to analyzing deviations from organizational targets. This made it difficult to adjusts or take the necessary measures. The purpose of analysis management processes is to look into the variations between plans and execution. This would draw the necessary responses that would ensure the organizational targets are fully on course. The listed companies failed to address the marketing campaign effectiveness, employer attractiveness and backorder time in the process of delivery. This failure made is difficult to predict unwanted outcomes. Listed companies are required to have ensured that competencies are inversely proportional to revenues. Poor organizational management models gave room to incompetence, low morale and unpreparedness leading to decreased sales among the listed companies. In future, stakeholders must be actively involved. Moreover, functional business models must be flexible and profitable to the company. References Braksick, L. W. 2007. Unlock behavior, unleash profits: Developing leadership behaviour that drives profitability in your organization. New York: McGraw-Hill. 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Managing crises before they happen: What every executive and manager needs to know about crisis management. New York: AMACOM. Noe, R. A. 2012. Human resource management: Gaining a competitive advantage. New York: McGraw-Hill Irwin. Scarborough, N. M., Wilson, D., & Zimmerer, T. 2009. Effective small business management: An entrepreneurial approach. Upper Saddle River, N.J: Pearson Prentice Hall. Thornhill, S., Amit, R., & Statistics Canada. 2003. Learning from failure: Organizational mortality and the resource-based view. Ottawa, Ont: Statistics Canada, Analytical Studies Branch. Read More