Contemporary Management Problem - Essay Example

? Contemporary Management Problem Table of Contents Table of Contents 2 Business Management 3 Contemporary Management Problems 4 Business Ethics 5 Nortel Networks Corporation 7 Management Problems for Nortel Telecommunication 8 Impact of the Problem on the Business 9 Final Consequences 9 Application of Management Theory 10 References 11 Business Management Business management is a broad term used by management researchers to define various elements of business operation. Not only has the private sector given importance on managing business but other types of organizations (NGOs, public sectors) also give importance on this subject. Business management is important to counterbalance any types of organizational disruptions or inconveniences. Organizational sustainability depends on efficiency of management team. The organization is not a mere set of employees or top management. Organizational sustainability depends on synchronization between top level management, middle level management and lower level management. Business management helps to integrate functions of each department to increase the efficiency of service delivery. Business management plays a cordial role to solve critical organizational issues (labour related problem, irregular trade practices, employee disruption, maintaining transparency between each department’s works, designing vision and mission statement and maintaining a stable organizational hierarchy). Many companies use Business Crisis Management (BCM) and Continuity Management (CM) to identify and solve business related problems. Centrality of management functions revolves around few departments of the organizations. Various departments (like production, marketing, finance, operation) play pivotal role to decide the dynamics of business management. Business management plays important role in solving people related issues of management. Many organizations have failed due to poor performance of top level management in last few years. Corporate ethics play an important role to create a sustainable organization. Human resource management is an important part of business management. Human resource management helps the organization to solve employee related issues (recruiting, training and staffing) (Shaw, n.d.). Contemporary Management Problems Contemporary management can be described from the view point of learning organization concept. Learning organization concept has been used by many management research scholars to distinguish between successful and failed organizations. Learning organization can be described in the following manner. The organization gives importance on acquiring or creating and transferring information and knowledge (Porth and McCall, n.d.). Four key things are important for a learning organization. They are- 1-problem solving in an ethical and systemic manner, 2- encouraging new thoughts or process to change the management functions, trying to learn from past mistakes committed by other organizations, 3- trying to maintain equilibrium between good business practise by other organizations and self evaluation, 4- maintaining transparent communication dynamics across the organization. Free flowing communication model helps to spread the knowledge across every department of organization (Garvin, 1993, p. 81). Many organizations failed to maintain a steady business policy to create a sustainable organizational structure. Various management problems are explained in the following section. Organisational structure (problems regarding management hierarchy, board members are not very clear about their responsibilities, lack of communication between different functional departments). Leadership (organization is running without any mission and vision statement, organization is managing business without any long term objectives). Motivation (lack of motivation among employees to perform a particular task, lack of support from the top level management creates communication gap between them and employees). Business ethics (many companies fail to maintain fair business practices and the situation creates problems like unfair trade practices and bankruptcy). Cross cultural workplace communication (employees in a organization might come from different cultural backgrounds and for this reason problems like communication gap between them might arise, problems like ethnocentrism can create huge impact on business success of any organization). Corporate sustainability (maintaining a stable organization for a long time is a problem due to change of organizational culture with respect to time). Above mentioned issues can be termed as critical factors to decide the success of organizations. In the following study, business ethics will be described as one of the key issue to design a successful organizational framework. Business Ethics There is a huge gap between self interest and ethics in the business. Keeping self interest works completely opposite against maintaining business ethics in organization. Many business executives give importance on keeping self interest (doing business to fulfil personal prosperity) against maintaining a transparent business policy (doing business for betterment of society). Major objective for business ethics is to set a guideline for the organization to compete with other players without getting involved in any kind of fraud or deception (Hooker, 2003). Business ethics in terms of maintaining fair trade practices can be described in the following manner. 1- Doing business in a fair way without getting involved in accountancy fraud or any kind of financial fiasco. They need to maintain a fair incentive and remuneration structure for top level managers. 2- The business needs to maintain share holders interest. Share holders are the largest asset for any organization. The organization needs to work for betterment of the investors. Inter level management practices should be fair enough to motivate employees to perform according to industry standards. 3- Some times few organizations have emerged as a business leader in the particular industry. They try to create monopoly in the industry and creates barrier of entry for small organization. They create price discrimination within the industry and ultimately consumers pay the price (consumers are forced to pay higher price for a particular product with respect to industry standard) for such kind of unethical trade practices. The following diagram shows evolution of the concept of business ethics over the last few decades. Source: Utah state university Business ethics can be dissected into two parts. 1- Descriptive Business Ethics- morality of a business is described by this policy. Ethical ground for fair trade policy is justified with descriptive model. 2- Normative Business Ethics- this is a supporting model to justify after work required to counter balance unfair trade practices. Ethical business model is designed by a combined frame work of political issues, legal framework of the system, moral values of business leader and economic responsibility of the business (Brenkert, 2004, p. 188). Management ethics can be analysed from the view point of morality. 1- Immoral Management- poor organizational leadership quality. In this case, organization practices a business model completely unethical from moral back ground. 2- Moral Management- In this case, organization practices legal and ethical business process completely valid from the view point of morality. They have high regards among common people of society and shareholders. 3- Amoral Management- small organizations lacks in moral and ethical issues of business management. They are completely ignorant about ethical issues of business. They fail to create a sustainable business structure and as a consequence whole operation ceased after few years (Ingram, LaForge, Avila and Williams, 2012, p. 218). Next part of the study will analyze the reasons of failures for Nortel (A Canadian Telecommunication Company) from the view point of business ethics. Nortel Networks Corporation Nortel Networks Corporation is a famous telecommunication company. The company has head quarter in Mississauga, Ontario, Canada. The organization was founded by Charles Fleetford Sise Sr in the year of 1882. They have pioneered telecommunication boom in Canada during 1990s. Market capitalization of the company was more than $300 billion Canadian dollars during 2000s. The company has accounted for more than 37 percent of the Toronto Stock Exchange during 1990s. They specializes in various telecommunication services like wireless and broadband communications, global networking solutions etc. Share price of the company was increased by 300% during 2001. The Canadian company has expanded business in North America very quickly. They have revolutionized the concept of internet application in telecommunication industry. Market capitalization of Nortel telecommunication has touched a record $398 billion in September 2000. Management Problems for Nortel Telecommunication Nortel was using unfair trade practices to show a profitable picture to share holders in each quarter. The company used unethical trade practice like bill-and-hold (in this model customers place order in current quarter but company has the flexibility to deliver the order in next quarter). Nortel took the opportunity record revenue of current quarter for future payments. They not only used illegal transaction method but also encouraged customers to use transactions like bill-and-hold by providing sales promotional incentives like discounts, extended billing period. The company acquired small business organizations (like Qtera) by investing huge amount of money without giving proper justifications to shareholders. They have shown Earnings per Share (EPS) value much higher with respect to base price. Projected sales growth rate was vague and at sixty percent lower than original sales volume. Business leaders and board of directors manipulated earning statements to earn greater incentives. They are the “People” factor behind failure of the company. Top management of the company did not have proper financial knowledge to understand market condition. Earning profit for personal profit played as driving force for CEO and other board members. Transient ownership in Nortel telecommunication was increased from 2.5 percent to 13 percent within few years (1997 to 2000). Percentage rise of transient ownership created a huge pressure on board of directors of the company. They were forced to show a profitable picture of the company to share holders due to fund mismanagement. Nortel telecommunication used street earning method to calculate earnings per share (EPS). Street earning method excluded different items like extraordinary charges, unusual items, depreciation and charges from mergers. The method is an example of manipulating legal financial management process. They used the method to show a higher EPS value with respect to the base value. In this way they have tried to disguise poor financial performances (Fogarty, Magnan, Markarian and Bohdjalian, 2007). Impact of the Problem on the Business Nortel telecommunication has experienced a sudden fall in market capitalization in the year 2002. Market capitalization of the Canada based Telecommunication Company slashed down to only $5 billion in august 2002. The accounting system and top level management of the company has failed to produce a stable business environment. Share price of the company was decreased by three times with respect previous quotation. Final Consequences Many of the board of directors resigned during the tumultuous period. American Government seized the trading in Nortel stock. Securities and Exchange Commission (SEC) has lodged fraud charges against the company. CEO of the company John Roth resigned in November, 2001. Finally the company ceased to exist from January, 2009. Application of Management Theory The problem of Nortel can be resolved by using Kantian approach of business ethics. The theory gives importance on personal duty of the person or organization. This theory gives importance on good will of person to do the duty without any self interest. The duty to perform business ethics depends on desire of the organization to work for betterment of society. Nortel should practice business ethics to protect share holders interest. They need to consider each share holder as a person rather than a mere investing unit. In this way they can enhance image of the organization among shareholders. References Brenkert, G.G., 2004. Corporate Integrity and Accountability. California: SAGE. Fogarty, T., Magnan, M., Markarian, G., and Bohdjalian, S., 2007. Inside Agency: the Rise and Fall of Nortel [pdf] Available at: < http://www.hec.edu/var/fre/storage/original/application/d66004490598eb466a08bf18049dc5dc.pdf> [Accessed 3 September 2012]. Garvin, D. A., 1993. Building A Learning Organization. Harvard: Harvard Business Review. Hooker, J., 2003. Why Business Ethics? [pdf] Available at: [Accessed 3 September 2012]. Ingram, T.N., LaForge, R.W., Avila, R.A., and Williams, M.R., 2012. Sales Management: Analysis and Decision Making. Armonk: M.E. Sharpe. Porth, S.J., and McCall, J., No Date. Contemporary Management Theories and Catholic Social Teaching [pdf] Available at: [Accessed 3 September 2012]. Shaw, G.L., No Date. Business Crisis and Continuity Management [pdf] Available at: < http://www.gwu.edu/~icdrm/publications/ShawTextbook011105.pdf> [Accessed 3 September 2012]. Read More