1. What do you think have caused the collapse of Barings?
Different elements are at the root of Barings’ collapse. Those elements deal with four fundamental Organizational Behavior frameworks/concepts: “congruence model”, “coaching the alpha male”, “motivation” and “corporate culture”.
Congruence model
The Barings’ case is a perfect example of the consequences that incongruence, or lack of alignment between strategy and the four organizational building blocks (critical tasks and work flows, formal organizational arrangements, people and culture) can have on a company’s performance.
Formal organization and Culture. Barings apparently has a risk-averse culture and it’s perceived as a financial institution of the highest standing. In spite of this culture, Leeson earns incredibly high bonuses even though he is clearly not risk adverse. He is not disciplined after one drunken incident. He is made head of trading, but at the same time he is retained as head of future and options settlements. Leeson is not questioned too closely about what he was doing even though his requests of money from the London office are huge. Senior manager set up control systems to manage risks when it’s too late (“Why interfere with such a profitable trader?”).
People and Critical Tasks. Peter Norris, although skilled and intelligent, doesn’t have enough experience of the business that he has to manage. Senior managers don’t seem to understand well the future markets. Although Leeson is not qualified to trade, he soon is in control of a team. Leeson doesn’t even use a simple model for pricing the volatility of the market.
Tasks and Formal organization. Managing reporting lines are complex. Leeson is both the head of trading and the head of future and options settlement. Organizations usually get what they measure and reward. For this reason and organization’s formal reward, measurement and control system must be consistent with its critical tasks. At Barings, it is said that risk avoidance is a must, however people like Leeson are rewarded highly not only with money but also with public praise.
People and Culture. Nick Leeson does not fit with Barings’ culture even though he has technical and business skills. He takes more risk than is authorized. He doesn’t care about being part of the company; he only cares about money and to be a “star”. Moreover, he constantly behaves unethically.
Coaching the Alpha male
Bearings totally fails to “coach” Leeson. Leeson shows some of the Alpha male characteristics. He is impatient and wants his promotion at any cost.
Not only were millions of Americans been put out of work due to these manager’s actions, the American financial markets themselves were pushed to the brink of collapse. Despite the fact that the global financial markets, in reality, are not perfectly efficient, there is a corrective mechanism built into the day-to-day trading in the market. When prices are driven down by large sells, either by large investors or a movement in a stock, there are usually new buyers for these stocks at the cheaper price. Managers of...
Jordan Belfort starts off his first day on Wall Street eager to make it to the top, only to be told he is nothing more than lowly scum by Thomas Middleditch’s character. Mark Hanna takes Jordan out to lunch later that afternoon to show him the “real” way of making money. Mark explains that there is only two ways of being a stockbroker without losing your mind, and that is with cocaine and prostitutes. Mark incepts that making money is the only goal one should have. He tells Jordan that his only objective is to move money from the client’s pocket to your pocket. Jordan is first hesitant about cheating his client’s money away from them, but puts his skepticism aside and joins in on Hanna’s power chant. Jordan faces an internal conflict similar to what many have felt; should I choose to make money even if I know my actions to obtain that money is morally wrong? Like Jordan most people selfishly continue to make money, and push away their morals aside.
David Fletcher was not experienced in human resource management or the fundamentals of running an effective team. He had not be...
Arthur, A., Thompson, Margaret, A., Peteraf, John, E. Gamble, A., J., Strickland III. (2014). Crafting & Executing Strategy: The Quest for Competitive Advantage 19e: Concepts & Cases. C6-C25.
This cell-like structure was heavily influenced by the philosophy of Graham Turner, the founder and CEO of Flight Centre (Dunford et al, 2002). His ideas of rewarding initiative, empowering employees and fostering the spirit of a large tribe throughout the company were developed into the organizational culture. Flight Centre’s culture was formed first and it is comprised of their values, such as their people, their customer, the brightness of future, taking responsibility and egalitarianism and unity (Flight Centre, 2017). Its culture influenced the creation of their unique structure. They had to consider major factors, such as whether the organization would be mechanistic or organic, whether it would stress differentiation or integration, and how its strategy would affect its structure. The culture dictated that the structure would be organic because it promotes cooperation and flexibility. Similarly, the structure is differentiated because the culture values smaller teams. Lastly, Flight Centre had to determine the link between its strategy and its structure. The strategy is the organization’s plans to achieve its goals, which is facilitated by both the culture and structure. Although an organization’s culture influences its structure, together the culture and structure help provide the necessary framework for the organization to achieve its
In conclusion, Jordon Belfort has had a major influence on today’s world. Belfort changed the way that people today see Wall Street and the world of stockbrokers. He lived at the top of the food chain but fell back to being “pond scum” (“The Wolf”). He even proved to all that a successful life isn't always the most perfect. Belfort served his time and is even a motivational speaker now. Now, Belfort is an example of how drastically one’s life can change within minutes, days, months, or
Not all strategies “fit” within the companies activities, some are hit and misses such as when Stewart placed Charles Koppelman to the board, where “he became chairman of the board in 2005, where he negotiated a paid consulting arrangement for himself. He was viewed as enabling Stewart’s self-regard as much as tending to th...
Transactional leader accomplishes goals by bounties workers UN agency convene potential (Bass, 1990). These rewards are available the form of recognition pay will increase and advancement. Such transactions the promise of reward permanently performance and restraint for poor performance.
Wall Street in the 1980s had big competition among the brokers to make money in legal and illegal ways. Although, making money was easy and quick, but nothing can compare to Bud’s guilty feelings. Bud causes loss of
At the time of its collapse, Barings Bank had a reported capital of $615 million. This was in sharp contrast to its trading obligations, thanks to Nicholas Leeson. Nicholas Leeson was responsible for trading in the global financial markets to maximize his employer's bottom-line results. In February 1995, a financial reporter was curious enough about his financial trading activities to question him "about rumors that the Englishman was making huge purchases on the Japanese and Singapore exchanges on behalf of his London-based investment bank. Nicholas Leeson coolly explained that he was 'buying Nikkei futures here and selling them there'” . On February 27, 1995, Barings had outstanding theoretical futures positions of $27 billion on Japanese equities and interest rates, $7 billion of the Nikkei 225 equity contract, and $20 billion on the Japanese Government Bond and Euroyen contracts.
Morgenson, G. (2005, September 17). Clues to a Hedge Fund's Collapse. In The New York Times. Retrieved November 1, 2013
Many people believe that in order to succeed in a business that is having difficulties, it is important to focus on a particular area in order to be better productive in each of them, and be able to reach the goal. Instead, Goldratt and Jonah demonstrates that is important to focus on the company as a whole, but at the same time, it shows that it is incorrectly to only focus in an specific manufacturing department, or one plant, or a department within the plant, because people should not be concerned in local optimums.
This case study is not about Ms. Stewart direct participation with illegal insider trading as the media had steered the public to believe. To begin, Ms. Stewart received a phone call from Ann Armstrong, her assistant, stating that Peter Bacanovic, her stockbroker, “thinks ImClone is going to start trading down.” (Arnold, Beauchamp, Bowie, 2013, p. 390) Although Ms. Stewart was not able to get a hold of Peter, she talked to his assistance, Douglas Faneuil,
According to Wart (2013), this theory states that leaders can succeed in instituting changes in structure, procedure, ethos, technology, or production (557-558). From this, we can gather that some people are better at being leaders during a transitional part of a company. When a company is going through changes either through infrastructure, how they operate or adapting to technological changes, there has to be someone in charge in order to keep order and structure during these times. This might be a chaotic time period for the company and without a strong leader at the helm, it can go bad really quickly. An example of this could be when the internet was starting to take off in the United States. During this change in technology companies had to quickly adapt and change how they operated. No longer would they just be local or get the word of mouth about their products through the news or word of mouth. Now they had new venues to spread the word and sell their products. Several studies have been done over the past few years on leaders under this theory and the results show that they share some characteristics that are not often found under other theories. Some of these theories include according to Wart(2013), energy, determination, vision, and risk taking (558). This is interesting because our world is constantly changing and people need to adapt or risk being irrelevant. Also without having the energy or drive a company can falter and lose customers. It is why leaders should always strive and continue to try new things, reach new heights, and never being satisfied with their current
That reminded me from the case study the director how to plays round of the company to succeed this Colombian Memorial Hospital. External control view of leadership, situations in which external forces where the leader has limited influence determine the organization 's success. Strategy, the ideas, decisions, and actions that enable a firm to succeed. competitive advantage firm 's resources and capabilities that enable it to overcome the competitive forces in its industries. Operational effectiveness, Performing similar activities better than rivals. Intend strategy, strategy in which organizational decisions are determined only by analysis. Realize strategy, strategy in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource limitations, and changes from managerial preferences. Strategy analysis studies of firms ' external and internal environments, and there with organizational vision and goals. Strategy formulation, decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage.