Case Study: Fight at the Investment club - Essay Example

Investment Club (Case Study) 23 April The fight at the investment club (Golden Years Investment Club) was the difference in opinion between Lenn Width (club leader) and David Korn (a new club member). They are not agreed on what to do with their stock holdings in McDonalds, the former wanting to hold unto the stock as it is a solid stock (in his view) while the younger Korn wanted to sell it and buy other stocks that had given higher returns lately (20% to 30% annually). The fight could be boiled down to a difference in investment philosophy.

DiagnosisThe fight at the club was actually a clash in investment styles. Mr. Width, being older, is more conservative with his approach to investment. He is content with solid returns with no big risks involved while the much younger Mr. Korn is more aggressive, willing to take risks in exchange for higher returns than what McDonalds is presently giving its stockholders. For someone who is already retired like Mr. Width, one cannot take too much risks since he is no longer holding a job and hence there is no other income source except the income gained from stock investing.

On the other hand, Mr. Korn is much younger and still currently employed. He therefore has a backup plan just in case his investing style will result into some losses. Mr. Width has developed his own investment style based on some criteria he had crafted and he is also very fond of dividend re-investment plans (DRIPS in industry parlance). In a sense, fight at the club was sort of a power play in miniature because Mr. Width had become threatened with the way the young David Korn challenged his authority by questioning his decisions on which stocks to buy although Korn admits his intentions for the club members were good.

TheoryThe Golden Years Investment Club is supposed to be a democratic group but in reality it is being run by one person only, Mr. Width. His word at the club is the law, so to speak. No one dared to challenge his opinions, ideas or conclusions regarding the issue of which stocks are good enough to buy based on his selection criteria of 5-year public trading track record, at least gives a return of 10% and the firm must grow its sales revenues by a minimum of 15%. An appropriate theory at this point is the decision-sharing theory in which a leader solves the problem or makes the decision himself after some input from club members.

What is needed at the club was behavior modification, specifically changing Mr. Width who has ruled the club with an iron hand and he knows that he is bossy but he is not willing to listen to the others. If we use the opinion of Vroom, he did not believe that being predisposed to autocratic behavior or participative style determines a persons leadership style (Miner, 2007). In the club, what determined the actual behavior of Mr. Width was the circumstances prevailing. If he will allow Korn to go unchallenged, his leadership will eventually be undermined.

The systematic method to change behavior is through motivation and there are a number of theories such as Maslows Hierarchy of Needs, McGregors Theory X and Theory Y; also Vrooms Expectancy Theory, Clayton Alderfers Theory of Simultaneous Needs and others. Behavior modification is based on principle of cause and effect (DuBrin, 2008). Mr. Width needs to exercise a brand new type of leadership – authentic and dynamic leadership (Luthans, 2006). PrescriptionI would suggest a participative style of leadership is needed at the investment club.

It is however, not a guarantee that everything will turn out right since there are a lot of opinions that will be voiced out regarding the choice of stocks to invest in. In the end, there will be lots of recriminations if an investment choice turns out to be a bad decision. A short term solution is to decide by majority vote and a long term solution is to form an investment committee. Fallout Choosing a particular stock based on some criteria (as formulated by Mr. Width) is a good idea but it is not an iron-clad guarantee for investment successes.

However, the ultimate issue is to decide on a particular investment philosophy (aggressive or conservative style) that will reflect the majority of the members preferences. On the other hand, creating a committee is no guarantee either since its members may also not agree on certain stock issues. The final arbiter is whether the club has been able to safeguard its investments and still manage to give its members an adequate return despite Mr. Widths dull investment style. His philosophy is anchored more on preserving capital than on maximizing returns due to risk considerations.

A big way to force Mr. Width to change is for the members to constantly assess his performance and view themselves as customers of his investment service (Lakos & Phipps, 2004). Reference ListDuBrin, A. J. (2008). Essentials of Management. Mason, OH, USA: Cengage Learning.Lakos, A. & Phipps, S. E. (July 2004). Creating a Culture of Assessment: A Catalyst for Organizational Change. Portal: Libraries and the Academy, 4 (3), 345-361.Luthans, F. (2006). Organizational Behavior. Columbus, OH, USA: McGraw-Hill. Miner, J. B. (2007) Organizational Behavior: From Theory to Practice, Vol. 4. Armonk, NY, USA: M. E. Sharpe.