Responseto Managerial Hubris Case Study
Responseto Managerial Hubris Case Study
Howdid corporate culture, leadership, power, and motivation affectThomas level of managerial hubris?
Corporateculture influences the behavior of leaders (Casson, 2014) thus,misunderstanding in the organizational culture can cause failure ofbusinesses and in this case the fall of Farrow Bank. Itis imperative to note that organization culture helps inunderstanding what happens in the organization and gives direction onhow to run the business. After he had founded the Farrow Bank, hisdisregard of organizational culture is evident after he became moreand more detached in the daily operations of the bank despite himbeing the chairperson and the managing director of the bank.
Sincehe had hired incompetent staff, such as Assistant Managing Director,a Board of Directors who left him to do as he wished since most ofthem were selected out of intimacy rather than professionalexperience, there was no one to question neither his leadership stylenor his methods of operations (Hollow, 2014). Instead of recruiting aqualified accountant to oversee books of accounts, he had only onefinancial analyst, George Hart, who had the responsibility of drawingup the annual balance sheets as well as provisional investmentledgers. After his death, the position went to his son who had noqualification except what he had learned from his father (Hollow,2014). This show Farrow’s disregards corporate culture andrecruitment procedures.
Fromthe interviews with most of the staff, it was evident that Farrownever interacted with them. Whenever he was in the office, he lockedhimself in the boardroom, and this lowered their motivation andinterest in the everyday operations of the bank and this eventuallyspeeded up the fall of the bank (Hollow, 2014).
2.Relate managerial hubris to ethical decision-making and the overallimpact on the business environment.
HubrisSyndrome is an acquired personality change that affects powerfulleaders. Since the individuals who develop the syndrome possesspower, the effects of their decisions can be extremely damaging toother people as well as the organization they lead. Persons with thehubris Syndrome possess the following characteristics or symptoms:
Accordingto Owen (2015), they are self-absorbed and have the tendency to viewthe world as an arena through which they exercise their powers andseek fame. Before he founded the Farrow Bank, Thomas had the innateinclination of seeing himself as above the law, and he was not afraidof expression his opinions. Despite his lack of knowledge ofeconomics or finance, he was very outspoken when criticizing thebanking sector unwillingness to provide the poor with loans orcredits. In a bid to cast himself in a good light with the community(Owen, 2015), he opens a mutual credit and deposits Bank that catersfor the underprivileged in the society and later founded the FarrowBank.
Peoplewith Hubris Syndrome have a great contempt for advice and criticism,the reason why Farrow recruited incompetent staff and a Board ofDirector who neglected their supervisory responsibility. Notably, hisincreased talk of the bank being a divine mission, which would beexulted to greater heights and success. According to Owen (2015),they tend to refer to themselves in the third person of which isevident as Farrow refers to himself as “we” when addressing thebanks growth and development. Finally, after being found in thewrong, he refuses to recognize his mistakes and believed to be theonly person who could rescue the bank from the downfall.
Individualspossessing the Hubris managerial Syndrome prefer to have overallcontrol of the organization, and this most often leads to thecollapse or failure of the business since there is no one tosupervise, control, monitor, or question the way the organization ismanaged.
3.Explain the pressures associated with ethical decision-making atFarrow Bank.
Ethicalconduct helps in maintaining high behavioral standards in anorganization and for it to be effective it must be communicatedthroughout the organization structure. Corporate leader’s behaviorshave a significant impact on an organization, and it is his/herresponsibility to instill a code of ethics in the organization(Jacqueline& Michael, 2014). However, the pressure of Farrow Bank to besuccessful in the public eye leads Thomas Farrow the bank chairmanand Managing director to make some unethical decisions duringrecruitment of staff and Board of Directors. He hires incompetentAssistant Managing Director who has no knowledge of economics and aBoard of Directors based on intimacy instead of professionalqualifications (Hollow, 2014). They allow him to make decisionssingle-handedly, which eventually lead to the bank`s bankruptcy.
Notably,the accountant has the duty of making an ethical decision ofinvolving additional staff when drawing up balance sheets andinvestments ledgers and, inviting external auditors to inspect theirbooks before presenting their yearly statements to the public.However, due to the pressure from the management to maintain apositive image of the bank, he disregards accountant’s code ofethics and falsifies figures presented to the public on the balancesheets (Hollow, 2014).
Doyou think that if Farrow`s Bank had a genuinely ethical businessculture, the level of managerial hubris would have been decreased?Could this have affected the outcome of Farrow Bank? Explain yourposition.
Iconcur that the level of managerial hubris in Farrow Bank would havereduced if the bank had sound ethical business culture. Thomas Farrowwould have to separate leadership and power byobserving the codeof ethics when hiring staff by recruiting qualified staff for theposition of Assistant Managing Director, accountant, and Board ofDirectors(Jacqueline& Michael, 2014). Additionally, the management together with theboard of directors would have worked together to strengthen theethical environment of the bank by developing and enforcing strictcorporate codes of ethical behavior (Carson, 2013). Consequently,Thomas Farrow would have been more involved in the daily managementof the financial institution, overseeing operations, and inspectingbooks of the account while interacting with the staff. This wouldhave enhanced employee motivation and increased their interest in thebank operations. Notably, the accountant would practice transparencywhen drawing up books of accounts by inviting external auditors toaudit their books before presenting their end of year statement tothe public. The delegation of duties would minimize Farrow’s powersand eventually reduce the level of managerial hubris (Casson, 2013).
Casson,J. (2013). A Review of the Ethical Aspects of Corporate GovernanceRegulation and Guidance in the EU. Instituteof Business Ethics,6-11. Retrieved fromhttps://www.ibe.org.uk/userassets/publicationdownloads/ibe_report_a_review_of_the_ethical_aspects_of_corporate_governance_regulation_and_guidance_in_the_eu.pdf
Hollow,M. (2014). The 1920 Farrow`s Bank failure: a case of managerialhubris? Journalof Management History,20(2),164-178. http://dx.doi.org/10.1108/jmh-11-2012-0071
Jacqueline,B., & Michael, P, L. (2014). What does Ethics Have to do withLeadership? Journalof Business Ethics,124(2),226-240. Retrieved fromhttp://search.proquest.com/business/docview/1566247974/29DA62297745484BPQ/4?accountid=45049
Owen,D. (2015). Creon’s Fatal Flaw. TheWorld PostRetrieved fromhttp://www.huffingtonpost.com/lord-david-owen/creons-fatal-flaw_b_5959646.html