Leadership Failure - Assignment Example

 Leadership Failure The erstwhile investment banking giant of the United States, Lehman Brothers, saw its doom in the fall of September 2008, with which it accompanied major economic loss, vast loss of jobs and loss of public investments. Although this downfall has been attributed to various economic and financial reasons, responsibility of its leadership in this vast doom cannot be ignored. For instance, McDonald of Lehman Brothers blamed corporate dysfunction and hubristic leadership that led to the bank’s fall in his narration of Lehman Brothers’ story (cited by Carter, 2009). Many factors, from a leadership perspective, have been accounted for Lehman brothers’ downfall that burst out by the end of 2008. Foremost, the executive leaders of the institution seemed to be unaware of the market complexities that had changed drastically over the last few decades. Leadership can be well executed only if the leaders are proactive with respect to all aspects of the organization and changing behaviors of people, customers, market and shareholders. Kelly and Csorba’s (2009) extensive report on leadership gaps at Lehman Brothers clearly identifies reasons for its failure. In short, this report points at factors such as leadership autonomy, inappropriate human resource practices, hierarchy versus authority, personal character and values of leaders, inappropriate decisions with respect to alignment of individual goals and objectives with that of organization’s objectives. Bill George (2008) of Lehman Brothers also pointed at the critical decisions made by leadership that focused on short-term monetary targets and incentives and lack of risk assessment. Incidences of resistance from leadership level towards risk assessment have also been reported in the Lehman’s history. This not only indicates lack of risk assessment, but also lack of shared leadership concept that is extremely important to run large organizations (O’Toole, Galbrath & Lawler, 2002). Leaders need to have the courage of taking risks, however taking uncalculated risks can be potential threat to the organization at large. Investment in complex and highly uncertain areas were some of the most critical leadership decisions that changed the plight of the organization and all its stakeholders. Leaders need to develop careful judgment of risks and strategize appropriate risk management practices to save the organization when faced with risky situations. Leaders need to possess an ability to make strong strategies for doing good business and developing their people. These strategies should not only focus on short-term gains and long-term sustainability, but also attract minimal risk. Owing to the versatility of market and customer demands, leaders should be courageous to face the changes. A very important responsibility of leaders is to create leaders by selecting right people for the right job. Leaders should be able to instill sense of responsibility in these leaders who can eventually stand accountable for their initiatives and actions (Maxwell, 2006). Lack of courage to face reality can lead to failure of leadership decisions. For instance, leaders in the executive positions in Lehman Brothers did not seem to be open to suggestions, feedback or discussion with other members of the organization. This in turn masked the warning signs, and kept the leaders devoid of market reality in terms of investment behavior, customer requirements and actual competition. In other words, people in the leadership role were disguised in arrogant pride by virtue of their position and stake in the company. In the present era, leadership is not about one person; leadership needs to be driven by the entire team, rather entire unit (O’Toole, Galbrath & Lawler, 2002). This would require an expansion of leadership capacity in terms of empowerment, authority, accountability and an inclusive style of leadership; all of these were lacking in Lehman Brothers’ leadership culture. A shared leadership could have avoided much of its losses. For instance, shared leadership could have provided enough platform for other employees to voice their opinions, observations and knowledge regarding financial behavior of the organization’s investments in the market. Consideration of the risk advisor’s opinion could have saved the leadership from much disgrace. Leadership success determines organization’s success and vice versa. The most important requirement for leadership success is character that is based on values greater than self-centered motives, ambition and egotism. By virtue of their values, leaders should be able to develop a personal commitment larger than self such as sustainability and long-term growth of the organization (Kelly & Csorba, 2009). Ethical and moral characters of a leader decide the kind of decisions taken. In case of Lehman Brothers, leaders involved in critical decision making should have focused on long-term organizational sustainability through implementation of sound lending practices and by avoiding unqualified mortgage lending. Although McDonald’s observation of mortgage brokers’ attitude was exposed to the top heads, it was ignored. Leaders who make strategies need to do a periodic ground level check for two reasons: to check for strategic effectiveness, and to monitor their implementation. Leadership responsibility goes much beyond making rules and policies, which the leaders should have realized. Leaders need to ensure all strategic decisions adhere to legal, ethical and moral codes of business and management. Character of a leader matters most in sustaining organizational growth and success. As quoted by Kelly and Csorba (2009; p.4), ‘Leadership is a question of character, not just performance and competence,’ selfishness in nature cannot make a leader. Working towards fulfilling self-centered motives was one of the reasons for failure of Lehman Brothers. Executive leaders are said to have focused on earning large bonuses by setting goals that aimed at earning more income in short span of time. Apart from this, leaders at the top lacked humility and instead exhibited arrogance. George (2008) describes this as high-profile, ego-driven leaders who drive for power ahead of their responsibilities as leaders. Inclusive leadership helps in bringing people together and connecting with them through appropriate dialogue. This will also appraise leaders of internal and external forces that may adversely affect the organizational performance. Leaders have to be adaptable to situations, but firm on decisions that drive people towards doing the right things for the organization. Relationships play a significant role in an organizational success, and leaders stand in central point in driving positive relationships between business partners, employees, and other stakeholders. This also helps in building shared leadership as well as orienting all people towards a common goal. This quality of leadership could have faded during the latter years of Lehman Brothers, as evidenced by the huge number of people leaving the organization for different reasons. For instance, self-absorption of the top executives led to veiling of other employees’ opinions, and this eventually caused loss of veteran employees who were critical to the business (cited by Carter, 2009). In conclusion, leadership is a quality that an individual must possess, but not limited to fulfilling the individual’s desires, motives, or goals; it is more about taking decisions and doing actions that contribute to the development of business through all people associated with the business. Leadership is determined by character of the person that is driven by principles and values. Leaders have to possess high dignity and integrity, a futuristic and long-term insight, and an ability to connect with people by building appropriate relationships. Leaders need to be proactive in performing actions that fulfill their responsibilities; should have the courage to take risks and an un-assuming nature with respect to assessing situations; and should be able to accept responsibility for the outcomes of the risks. Leaders should be able to relate past, present, and the future of all decisions made with emphasis on the fact that these decisions in some way may be dependent and independent of each other. Finally, leaders should trust in the ability of their people and be able to gain their people’s trust through their own actions. References Carter, A. (2009, July 23). Lehman Brothers: Wall Street's Titanic. BUSINESS WEEK. Retrieved, http://www.businessweek.com/magazine/content/09_31/b4141061588943.htm George, B. (2008, October 3) Wall Street's Latest Crisis of Leadership. BUSINESS WEEK. Retrieved, http://www.businessweek.com/managing/content/oct2008/ca2008103_709013.htm Kelly, K & Csorba, L.T (2009). Leadership matters. Heidrick & Struggles International, Inc. Retrieved, http://www.heidrick.com/NR/rdonlyres/EDA66180-B8B3-441E-8A34-AF358769DC5F/0/HeidrickLeadershipMattersscreen01.pdf Maxwell, W. J. (2006). Leaders developing leaders. Human Resource Planning, 29(4), 5-7. O'Toole, J., Galbraith, J., & Lawler, E. E., II. (2002, Summer). When two (or more) heads are better than one: The promise and pitfalls of shared leadership. California Management Review, 44(4), 65-83. Read More