Leadership Style of Serco - Case Study Example

Introduction The presented paper discusses leadership style of Serco in conditions of tagging scandal with electronic monitoring that happened in . The importance of this problem for the company causes no doubt. As international company, Serco obtains 100,000 employees in 30 countries; however, the core of its business is situated in UK (almost two thirds of business) (WeOwnIt 2014). Hence, even though the company was among the key actors on UK and global markets, the above-mentioned scandal left it without the key source of corporate profits. Thus, the task of this paper is to represent the essence of this problem, investigate the exact measures Serco management of different levels applied because of the crisis, and discuss the future of the chosen leadership style for this outsourced company. Problem statement After the years of company’s activity, Serco gained the title of a firm that “makes a difference to the lives of millions of people around the world with a customer base spanning national and local governments and leading companies” (Linkedin 2013). Nevertheless, contemporary challenges reduced the number of Serco’s clients by excluding governmental institutions from it. As material from the Guardian informs, Serco had to refund the Ministry of Justice (MoJ) because of the issue of overcharging the taxpayer for electronic tagging (Monaghan 2013). In detail, incorrect registering of prisoners caused the need of repayment for Serco Company, even if governmental representatives found it is the only doubtful contract (Monaghan 2013). Resulting from this accusation, Serco has to hand over all its responsibilities to its main rival on service market, Capita (Meikle 2013). The whole situation means significant losses for the company, both in terms of reputation and finance. In a short-term perspective, company lost its prominent position of winning new governmental contracts with six-month ban (Wright 2014). Furthermore, the current position of the company is not as preferable as it used to be. In 2014, the majority of UK respondents thought the company should not have a right to compete public service (WeOwnIt 2014). In detail, Appendix 1 shows the cloud of words for public reactions on Serco; among them, ‘rubbish’, ‘useless’, and incompetent’ are the most common associations. Consequently, the overall situation inevitably led to long-term lowering of share price and profits for Serco. In addition to above-mentioned refunds, Capita uses Serco systems and equipment with no direct role for Serco on its maintenance (Meikle 2013). Thus, tagging scandal is the crucial challenge for Serco’s management and leadership even though it happened two years ago. Serco’s response to the tagging scandal On its highest level, Serco’s corporate management has taken all the responsibility on itself. For instance, the company instantly publicized that it “had been working with MoJ and Capita to ensure a smooth and effective transfer of the contact” (Meikle 2013). In this context, the corporate management provides image of charismatic leadership for their stakeholders (Huczynski and Buchanan 2013). For instance, Serco values its allowance for their motivated and inspired employees to openly share their ideas and take responsibility as one of its core principles (Serco Group 2015a). Furthermore, company’s management realizes the necessity to introduce radical change in response to recognized problem. Starting with new appointments of Angus Cockburn as CFO and Kevin Craven as runner of the Central Government division (Serco Group 2014, p. 3), corporate management created the public image of radical reformation and innovation. In this respect, Serco’s management behave as rather leaders than managers, because they appear as visionaries that find new solutions to the problems that company currently faces (Huczynski and Buchanan 2013, p. 654). For instance, it cooperates with Linkedin in using social media while recruitment process (Linkedin 2013). Hence, Serco invests in the development of their business and it is attentive to the modern trends on market that enable its innovativeness. In this context, it seeks for the new markets while UK contractors are temporary hardly available. Recently, Serco contract with Saudi Railway Company owned by government (Serco Group 2015b). In particular, this incentive fits Fiedler’s task for all the leaders “to change their context” (Huczynski and Buchanan 2013, p. 668) and corresponds with opinion of Snowden and Boone that “leaders have to adjust their style to suit the context” (Huczynski and Buchanan 2013, p. 670). In this respect, this change creates an opportunity of setting new goals, dealing with the problem as the past, and turning back public faith and respect.. On the level of middle management, the critical positions that prevail in UK social environment forced Serco to transform its leadership style in relations between middle managers and its workers. In order to prevent the repetition of this situation in future, company introduced advisors and new members to examine management practices, teach new code of conduct and renew trust from UK government (Plimmer and Smith 2013). What is more important, company started to demonstrate more control over the working process (Plimmer and Smith 2013). Because of crisis, the company changed its democratic leadership style that aims on building consensus and getting contributions to a coaching style as controlled developing of new people within the company (Huczynski and Buchnan 2013, p. 670). In other words, Serco’s middle managers contribute by their own example to the development of experienced responsibility within their personnel. In dealing with the crisis, Serco’s middle-level leaders demonstrate both style-counselling and context-fitting perspectives of leadership (Huczynski and Buchanan 2013, p. 655). In this respect, company aims to increase motivation of its employees by guaranteeing transparent corporate culture and team building. In contrast to pre-crisis times, Serco’s reports in 2014 demonstrate readiness to introduce controls in improving working capital and stop concentrating solely on winning new contracts (Kunert 2014). In addition, they indicate of the presence of job feedback within the corporate organisational design (Serco Group, 2014). In sum, there exists recognition of the problem on the lowest level of corporate management. Finally, Serco demonstrates openness to innovative solutions. In short, leaders of Serco fit the concept of perceptual selectivity or selective attention as ability to concentrate on the most important elements (Thompson and McHugh 2009, p. 263) and find advantages for the company in the overall context of its “financial crash” (Loewenstein 2014). Discussion on leadership in outsourcing company On further discussion on the specifics of management and leadership in Serco in its future, it is important to refer to the nature of its business. On market, it is common to deal with Serco as one of the key players in outsourcing. In fact, Domberger et al. (2002) investigate the potential of outsourcing to reduce the costs for private entities; precisely, they analyse both transition and transaction costs (p. 149) in order to present more comprehensive picture of the impact of outsourcing practice. As a result of this research, present-value framework shows significant savings in terms of labour-saving technical process, reductions of capital and labour slack, and terms and conditions of employment (Domberger et al. 2002, p. 166). Because of this, it is common to deal with outsourcing as one of the most useful tools for company to achieve cost reductions (Morgan 2012). Thus, the potential of growth for Serco is the key feature of the nature of business it holds. Notwithstanding these perspectives, do governmental actors share this attitude on outsourced companies? While analysing the case of New Zealand, Domberger et al. (2002) start with governmental economic reform in order to demonstrate the effect of macroeconomic processes on the activity of private firms (pp, 150-152). Correspondingly, to reflect the situation with Serco it is necessary to represent the attitude of UK government on the essence of corporate activity. On outsourcing market, it is evident that UK is a forerunner in “large, long-term, multi-service strategic partnership contracts” (Whitfield 2014, p. 6). In other words, overall trend on domestic market is highly favourable for Serco outsourcing activity, since both public companies and governmental entities appreciate it. In this context, Public Private Partnership (PPP) is the part of third phase of neoliberal transformation of public services and the welfare state (Whitfield 2014, p. 7). In its essence, this phenomenon encourages decentralization and freedom of market, which corresponds with the spirit of outsourcing as a business practice. Due to this, Serco Company deals with governmental actors as business collaborates in such liberal background, since it agreed to refund the government almost 70 million pounds on electronic monitoring contracts (Whitfield 2014, p. 9). In the given circumstances, the future of cooperation between UK government and Serco does not seem so pessimistic. On its perspectives, the most recent opinions state that previous active cooperation between Serco and government makes this company “too big, too important to this country’s Government services, to fail” (Moore 2015). Thus, company’s leaders should not stop bidding contracts with the government, since the prevailing values encourage long-term relations with outsourcing firms. On discussion on the negative aspects of outsourcing, it is relevant to mention that these types of companies are highly dependent on the people who work in outsourcing. As Morgan (2012) states this, “as with all business processes, outsourcing depends on people to make it work, yet it is these people that receive the least attention when outsourcing deals are struck” (Ch. 1). In its essence, outsourcing business creates challenges in terms of organisational design and motivation with a team. While it provides financial advantages for the firm, the core of the asymmetry within its power relations provides difficulties for corporate management (Pugalis et al. 2014, p. 89). For lower-rank management, the fact of huge number of Serco’s employees makes it hard for the company to maintain crisis-oriented leadership style. In other words, identified by Goleman coercive and authoritative leadership styles (Huczynski and Buchanan 2013, p. 670) are not effective for Serco’s middle managers in circumstances of outsourcing company. Even though these two styles do not guarantee successful management of the crisis even in theory, that is the reason why Serco chooses more flexible “working atmosphere” which does not lead to fast and predictable results for its managers. In the circumstances when its leaders provide either democratic or coaching style, it is hard to control whether employees are satisfied and committed to key values and mission of organisation (Yap and Webber 2014, p. 134). Thus, corporate management must enable lower managers to pay special attention to outsourced workforce by creating strategic people plan, where it should deal with external employees as with internal ones (Yap and Webber 2014, p. 141). At the same time, hard times for Serco require from its leaders to exercise its ability to shape corporate culture by choosing decisional role in Mintzberg’s management roles framework (Huczynski and Buchanan 2013); in this context, it is crucial not only to inspire but also to solve the critical situation in a creative manner. Serco needs true leaders from great man theory on all the levels of management. In fact, they should understand contemporary trend of being charismatic, visionary, and transformational and help the company to remain influential and continue providing services for UK government. Conclusion In order to sum up, this paper analyses how tagging scandal in UK influenced the leadership of Serco Company. In particular, it showed how the company deals with the loss of trust from its main stakeholders because of its inappropriate usage of electronic monitoring. The severity of the problem reveals in both reputational and financial terms, which evoked the radical change within the organisation. After taking the responsibility for the problem, corporate management introduced new appointments, revised expectations, and openness to innovations. At the same time, essence of outsourcing business that Serco demonstrates requires from corporate middle management to pay specific attention to the working conditions for employees. In fact, current leadership style relies on personnel without the ability to control it. Even though there are hard times for the company, comprehensive choice of managers who will behave as leaders will deal with the problems and use favourable position of outsourcing in current UK environment to win enough contracts and stabilize the internal financial situation in the company. References: Domberger, S., Jensen, P., and Stonecash, R. (2002). Examining the Magnitude and Sources of Cost Savings Associated with Outsourcing. Public Performance and Management, 26 (2), pp. 148-168. Huczynski A. and Buchanan D. (2013). Organizational Behaviour: An Introductory Text, 8th edition. London: FT/Prentice Hall. Kunert, P. (2014). It’s a bad day to be Serco’s CEO… or an investor, come to that. The Register. 11/10/2014. Retrieved from: http://www.theregister.co.uk/2014/11/10/serco_4th_profit_warning/ [Accessed 7 July 2015]. Linkedin (2013). Serco: Serco’s Recruitment team becomes a Global Centre of Excellence Thanks to Linkedin. Business Linkedin. Retrieved from: https://business.linkedin.com/content/dam/business/talent-solutions/global/en_US/site/pdf/cs/linkedin_serco_case_study_us_en_130702.pdf [Accessed 3 July 2015]. Loewenstein, A. (2014). Serco Is Failing, But It Kept Afloat Thanks to Australia’s Refugee Policy. The Guardian. 11/11/2014. Retrieved from: http://www.theguardian.com/commentisfree/2014/nov/11/serco-is-failing-but-is-maintained-afloat-thanks-to-australias-refugee-policy [Accessed 4 July 2015]. Meikle, J. (2013). G4S and Serco Hand Over Offender Tagging Contracts Over Fraud Claims. The Guardian. 12/12/2013. Retrieved from: http://www.theguardian.com/uk-news/2013/dec/12/g4s-serco-tagging-contracts-fraud-allegations-monitoring-criminals [Accessed 3 July 2015]. Monaghan, A. (2013). Serco Raises Estimated Hit from Electronic Tagging Scandal. The Guardian. 19/12/2013. Retrieved from: http://www.theguardian.com/business/2013/dec/19/serco-electronic-tagging-scandal-overcharging [Accessed 3 July 2015]. Morgan, S. ed. (2012). The Human Side of Outsourcing: Psychological Theory and Management Practice. Hoboken, New Jersey: Wiley-Blackwell. Moore, J. (2015). Playing the Markets: Our 2015 Ten to Follow for Share Success. Independent. Retrieved from: http://www.independent.co.uk/news/business/analysis-and-features/playing-the-markets-our-2015-ten-to-follow-for-share-success-9953667.html [Accessed 4 July 2015]. Plimmer, G. and Smith A. (2013). Serco’s purge of senior management aimed to rebuild relationship. Financial Times. 17/10/2013. Retrieved from: http://www.ft.com/intl/cms/s/0/0b4aaac8-3676-11e3-8ae3-00144feab7de.html#axzz3fCXBtzZj [Accessed 7 July 2015]. Pugalis, L., Liddle, J., Henry, C., and Marlow, S., eds., (2014). Enterprising Places: Leadership and Governance Networks. Bingley: Emerald Group Publishing Limited. Serco Group (2014). First Half in Line with Revised Expectations; Net Debt Substantially Reduced; Management Team Strengthened. Stock Exchange Announcement. 12/8/2014. Retrieved from: http://www.serco.com/Images/Serco%20SEA%20-%20HY%202014%20results_tcm3-45695.pdf [Accessed 4 July 2015]. Serco Group (2015a). Governing Principles. Serco Official Website. Retrieved from: http://www.serco.com/about/culture/principles/ [Accessed 4 July 2015]. Serco Group (2015b). Serco Secures First Major Rail Contract in Saudi Arabia. Stock Exchange Announcement. 23/2/2015. Retrieved from http://www.serco.com/Images/Saudi%20Railway%20Company_tcm3-46364.pdf [Accessed 4 July 2015]. Thompson, P. and McHugh, D. (2009). Work Organizations. Fourth edition. London: Palgrave Macmillan. Whitfield, D. (2014). UK Outsourcing Expands Despite High Failure Rates. European Services Strategy Unit. Retrieved from: http://www.european-services-strategy.org.uk/publications/public-bodies/strategic-service-delivery-partnerships/uk-outsourcing-expands-despite-high-failure-ra/ppp-strategic-partnerships-database-2012-2013.pdf [Accessed 2 July 2015]. WeOwnIt (2014). What’s the Problem With Outsourcing Companies? We Own It. Retrieved from: http://weownit.org.uk/privatisation-doesn%E2%80%99t-work/whats-problem-outsourcing-companies [Accessed 4 July 2015]. Wright, B. (2014). Capita and Serco: Why Outsourcing Is a Good Thing for the Taxpayer. Telegraph. Retrieved from: http://www.telegraph.co.uk/finance/economics/11029547/Capita-and-Serco-why-outsourcing-is-a-good-thing-for-the-taxpayer.html [Accessed 3 July 2015]. Yap, Q. and Webber, J. (2014). Developing Corporate Culture in a Training Department: A Qualitative Case Study of Internal and Outsourced Staff. Global Governance on Business and Finance Proceedings, 9 (1), pp. 132-145. Appendix 1. Word cloud for Serco Read More