The Management Practices Used At Worldcom Commerce Essay


In a 2002 Forbes article, WorldCom and its management made history with dramatic approach of how the management functionality was used. "Its time to start writing up the epic story of the Great Telecom debacle. The fall of Bernard Ebbers provides the climax for Act III, in which the hero pays for his hubris and is subjected to the ritualized humiliation of a company press release thanking him for his services" (Lewis, 2002). On April of 2002, the performance of WorldCom had come to a close. The company was remarkable in its rise and apparently unstoppable stock price that no one seems to have seen it coming. The company's managers and leaders kept their employees and customers in the dark.

Managers and leaders represent companies, by dedicating the success of a company and the achievement of the organizational goals. One of the ways that managers and leaders work to guarantee the goals are achieved and success occurs is by creating and supporting a strong organizational culture that works to accomplish organizational goals and join employee beliefs and actions. Managers do this by fulfill in using the four functions; planning, organizing, leading, and controlling. Out of these four functions, planning function is the most important. This function has been describes as the most important function of management because managers need to plan to fulfill all four of their functions (Erven, 1999). Managers and leaders need to plan carefully in which they can create a successful and effective corporate.

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While the vocabulary, manager and leader are often used interchangeably, they are not the same thing. Managers are not always leaders and leaders do not necessarily mean managers. Leaders set extensive visions and goals for an organization and then able to motivate others to follow their visions and goals that can be accomplished (Bobinski, 2004). Managers are the ones who do the work required; the planning, organizing, controlling, and leading, to ensure that the leader's visions and goals are accomplished. Indeed, managers are the ones who figure out how to achieve the objectives leaders establish (Bobinski, 2004). While a leader is the one who "takes charge, makes things happen, and translates dreams into reality" a manager is the one who takes care of the daily work to make sure the dreams do turn into reality (Ibrahim, & Cordes, 1996).

It is a leader who tends to generate the ideas or vision for the organization and who then is able to appoint others in his or her pursuit of that idea or vision. Once the leader has engaged others it will be manager's job to see to it that all of the work and actions that are needed to achieve the idea or vision take place. WorldCom provides a clear illustration of what a leader does. Bernard Ebbers is the acknowledged, former leader, of this amazingly failed company. It is said that Ebbers' vision was responsible for changing "what once was a small long-distance company into one of the largest communications providers in the world" (Lewis, 2002). An effective leader can generate such a vision and keep motivating others to achieve that vision. However, WorldCom's managers were the ones who put the practices in place that helped achieve the Ebbers' vision. WorldCom's managers fulfilled all four of their functions by making sure the company had the finances it required, that all of its newly acquired companies were well incorporated into the company's business, and that all employees were effectively and working toward achieving the company goals.

Managers were well attuned to the vision set by Ebbers and to the culture which Ebbers' vision established. Ebbers' vision shaped the goals of managers, as managers do naturally, follow their leader's visions. Because Ebbers wanted results that supported his vision which was to provided WorldCom with the financial power to make purchases and increase shareholder value, managers worked to accomplish those goals at any costs (The WorldCom Story, 2006).

Managers were aware that WorldCom's power was its roles as the world's largest telecommunications provider. Managers also knew that the only way to be the world's largest telecommunications provider was to profitably purchase smaller companies that would fuel its growth. Also, Managers knew that WorldCom could only afford to buy smaller companies if it was able to obtain the finances to make those purchases. The money to make those purchases, however, could only be obtained if WorldCom's share prices were high. This meant that fulfilling Ebbers' vision required managers to make sure that, no matter what, the company's stock price was high. This single goal, and the fear managers had of being the one to bring the company's success down, led many of them to lie, falsify, and mislead others about the true value of the company.

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In acting this way WorldCom's managers gave up on all of their functions. They had no control because they allowed unverified results and data to become more important than accurate measures of the companies performance. Organization stopped when they focused on short term stock prices and not on business profits. They certainly stopped leading when they blindly followed Ebbers' vision. Management stopped planning because they created no plan to counteract the results of their false stock price valuations. In the end, this meant that managers, leaders, and others in the company created a corporate culture where dishonesty and personal benefit were more important than organizational survival.

For example, Ebbers needed the stock prices to remain high because he had pledged his personal corporate stock to repay bank loans (The WorldCom Story, 2006). The Board of Directors needed the stock price to remain high because they had made Ebbers loans to meet his corporate obligations so that he does not sell his stock, which would then lead to a great drop in stock prices, and if the stock price dropped then the company had no way to get that money from new investors (The WorldCom Story, 2006). When managers failed to fulfill their four functions, they gave in to the need to achieve false stock price through the corporate culture. This threatened the employee's jobs if they did not agree to do this, the entire culture became self-destructive. Management team gave up on their responsibility for the success and longevity of the company and worried only about the needs of the company and themselves.

While managers engaged in this behavior they were so obsessed with only achieving their personal goals and share price that they ignored the legal issues involved (such as SEC regulations and GAAP reporting guidelines) and the ethics involved (such as those to maximize shareholder value and honestly report corporate finances). By failing to honor law and ethics, of course, WorldCom, its leaders, and managers, failed in all corporate social responsibilities. The only strategic, tactical, operational, and contingency planning WorldCom's management engaged in was to create high share prices. Ebbers' vision for the company was a factor that influenced their actions, as did the company's need for high share prices to obtain bank financing. Indeed, the company's tactical plans were to keep stock prices high at all costs, its operational goals were to buy more companies to create more "profits" to keep share prices high, and its contingency plans was to do everything necessary to keep the share prices up.

Ebbers' vision built and destroyed WorldCom. The culture he helped create failed to support any of the four functions of management and acted to bend the motivations managers when they engaged in these activities. The combination of Ebbers' vision and managers' ineffective way of managing created a self-destructive culture. If the company's managers had properly planned, they would have realized that their actions would lead them to failure - falsely overpriced stock cannot maintain an unprofitable organization. Management planned to raise stock prices, not to run an organization.