The role of management in an organization is very important if long term objectives are to be attained. For a company to succeed, management must be at the forefront in articulating the company’s purpose and the correct road map to follow. Management must therefore set the goals and also put in place the strategies that will achieve these goals (Mcnamara, 2008). Within a well formulated strategic plan, management must properly allocate the various tasks and activities in the different segments of the organization.
Additionally, it must budget for resources to be used, for example, the people needed to accomplish the short and long term goals, the materials, equipment and finance that is necessary. Importantly too, is overseeing the whole process to make sure that all pieces fit and work together for one common goal, and to intervene periodically when certain problems threaten to obscure the company’s vision. The issue of planning is therefore important when considering the problems that beset Worldcom in 2002.
The telecommunications giant created by Bernie Ebbers was bankrupt and had filed for protection under chapter 11 bankrupcy proceedings. Chief among the reasons for its collapse were the SEC investigations that had been going on with regard to irregular accounting practices. Between 1999-2002, Worldcom had engaged in irregular accounting practices to the tune of 9 billion dollars. Among other things, they had reported operating expenses as capital expenses in violation of generally accepted accounting practices (GAAP).
These had been improperly endorsed by auditor Arthur Andersen. There were also a host of ethical issues that Worldcom was confronted with. Planning 2 1. While Worldcom was in operation, senior executives had acquired questionable loans. For example, Bernie Ebbers had been allocated a $341 million loan at extremely low interests which were a poor return on company assets (Dennis & Edward, (2003).. 2. Influence peddling was rampant. At one tine, Bernie Ebbers was able to acquire a loan from Travellers Inc.
, a citigroup unit, who were the bankers for Worldcom, for a timber company he had interest in. 3. At the time Worldcom share price was at its peak, analysts like Jack Grubman of Salomon Smith Barney would regularly hype Worldcom stock value to investors with no real factual data but misconstrued facts in order to win over gullible consumers who invested and subsequently lost. To cap it all, Worldcom did not have a coherent corporate social responsibility ethos as part of its culture.
Five years of acquisitions had created a disconnect between the sixty five entities which had not been properly assimilated. Consequently, customer relations were totally neglected, duplication of services was rampant and expensive to maintain, and all along the investors had been duped into buying into Worldcom by believing unethical analysts. According to TakingItGlobal (2008), corporate social responsibility represents “the integrity with which a company governs itself, fulfills its mission, lives by its values, and engages with its stakeholders”. Worldcom failed on all counts.
It misled its stakeholders and concentrated on acquisitions at the expense of proper consolidation. All companies they acquired, including MCI, were not meshed in properly with the rest. As a result, there was intense rivalry among the Planning 3 employees, needless use of numerous maintenance centers opened without properly planning to avoid duplication. Three factors have influenced the company’s strategic, tactical, operational and contingency planning. The first is that the company vision was railroaded by Bernie Ebbers’s single minded thirst for acquisitions. Also read about J ack Grubman
He acquired without pausing to consolidate, hence the assimilation of the companies did not take place. Contingency planning was severely influenced by the underreporting of accounts receivable. This meant that money reserves to cover debt were low and therefore financial reports would show higher earnings, an illusion. Additionally, operational plans were influenced by the CEO himself, Bernie Ebbers. He paid scant attention to operational detail, meaning that the ship of the company lacked strong leadership from the helm.
The details were left to the juniors. Worldcom failed tactically too, because if they had concentrated on building a strong unified company, without acquisitions they were incapable of consolidating, they may have maintained a strong lead in the market. Instead, their position was maintained by the illusion of high share prices which were only high because of their last acquisition. The downfall of Worldcom is indeed a lesson in improper management. It teaches that management is not an individual. A huge organization must move forward with one common vision.
Additionally, acquisition as a strategy in and of itself cannot succeed. If companies are to acquire others, then they must also merge and be a single entity that promotes the former diverse goals into one common vision. Management must put in place plans that are sound and include mechanisms that will act as checks and balances against such improper acts as irregular accounting procedures that finally brought Worldcom down. Planning 4 References Business-Plans-Guide (n. d. ). “Business Operational Plan”.