Leadership Failure at Tyco

William B. Lytton remembers the aura of working in the White House in 1987, amidst the power and the personalities that surrounded President Ronald Reagan. Lytton had taken leave from his Philadelphia law firm for six months to act as Deputy Special Counselor for Reagan during the Iran-Contra investigation. “I would mentally pause and think of how fortunate I was to be there,” Lytton recalled. But as if to check that emotion, he would summon the lessons of John Dean, the young White House lawyer who found himself caught up in the Watergate scandal after allowing himself to become “dazzled,” as Lytton put it, by the blinding light of power.

Speaking to several hundred Vermont Law school students, Lytton recommended they readBlind Ambition, Dean’s memoir about the Watergate years. The book, he said, would serve as a vehicle for young lawyers to question themselves on how they might behave in such a situation. Lytton’s Oct. 6 lecture, entitled “Just Say No,” laid out the ethical challenges faced by lawyers in a culture where it is often difficult to speak up to power, whether it be in a politically charged atmosphere such as the White House or in a corporate culture such as Tyco International.

Lytton stepped in as general counsel at Tyco in 2002 as the company was enmeshed in a multi-billion accounting fraud scandal. Lytton’s role was to resolve the legal issues and clean up the culture, no small feat in a $38 billion company that employed 260,000 people worldwide. His friend was among those under indictment.

In the Tyco failure, Lytton said, “They failed as leaders. They forgot that leadership was about serving others and not themselves. ” But it was also a failure of those who follow the leaders, the corporate lawyers who failed in their duty to keep the leaders in check.

Like John Dean during Watergate, Tyco lawyers wanted to please their bosses. When the scope of the corporate corruption became clear, Lytton said, the remaining questions were, “Where were the lawyers? Where was the harsh spotlight of scrutiny? ” Yet while the public clamors for criminal prosecutions in such cases, Lytton maintains that it is not illegal intent, but rather the culture of the corporate world and the pressure “to make your numbers” that often drives corporations into such scandals. Most of the people who became infamous for their misdeeds&helip;were not evil people,” said Lytton, who also serves as a VLS Trustee. As he sees it, they lost sight of the cultural boundaries, blinded by their own career advancement goals. That, he said, is where the role of the corporate lawyer becomes critical. “As a lawyer, you have a greater and a different responsibility than everyone else,” he said. While it might prove difficult to stop bad things from happening, “Sometimes,” he said, “you do need to just say no. ” A leader plays very important role in the success of the organization.

Good leader has vision and he can take the organization forward, a not so good leader finds himself unable to influence the employees and lacks vision and he may cause the failure of the organization. A good leader has exceptional quality to influence his followers . A leader has extraordinary effect on followers and followers become committed to the leader. So, if leader is taking his followers towards the organizational goal, it is positive for the organization. A good leader has power to motivate the followers to contribute individually and hence collectively to the organization.

Leader helps the followers (employees) to achieve the goals and objectives set for the organization. A participative leader includes the employees in decision making process. He encourages the employees to share their ideas and views which is considered in decision making process. It makes the decision making like a team work and employees feel themselves a part of the decision making team. So, participative style of leadership motivates the employees to contribute more and increases the belongingness. The leader has vision to foresee the future of the organization. He motivates the employees accordingly.

He has influence among employees and he leads from front. By sharing that vision with other followers, and allowing them to take part in achieving that vision, all individuals will benefit from the successful results (Bateman, & Snell, 2007). Any organization’s long term goal is more than just making profit. Organization needs to manage its resources including human resource, efficiently to achieve the set long term goal. Leader plays very crucial role in achieving the goal. He can lead the organization to success or failure.

All leadership styles try to achieve same goal, i. e. o help the employees to contribute more individually as well as collectively, and take the organization forward. Organizational culture plays major role in the success of an organization. A successful leader helps in creating healthy organizational culture which allows individual as well as organization to grow and sustain the growth. The failure of the leader is reflected in the weak organizational culture which may result in the failure of the organization. Other important factor which decides the success or failure of an organization is management and organizational structure.

Management is responsible for long term planning and setting up the goal of the organization. They have the control of the organization. Top management executes Planning function of management as per POLC model. Other activities of the organization are directed to achieve the goal set in planning phase. If top management fails in setting right long term goal of the organization, all other activities will also be directed in wrong direction and hence, organization may not sustain for long. Organization’s structure and hierarchy delegates power(authority) and responsibilities.

It dictates who will do what and who has got what level of authority. Organization’s structure tells who is in charge of taking what decision and who is responsible for a specific act and decision. A successful organization should have clearly defined delegation of authority so that if something goes wrong, management can track the responsible person and know the reason why it went wrong. Sometimes organization deliberately create the organization structure in such a way that any mischief can not be determined easily.

In short term organization may be benefited from such organizational structure, but in long term kit may be fatal for the organization’s very existence. TYCO International Tyco International is a diversified global manufacturing and service provider company, having stake in electronics and telecommunication, security, healthcare, flow control etc. Tyco Tyco has been victim of many scandals. It has been acquiring so many businesses and in year 2002 it posted extensive loss.

In an effort to cut losses, Tyco divested Tyco capital business through IPO. Tyco healthcare segment also divested its Surgical Dynamics. As a result, in 2002, turnover rose to $35 billion but company incurred a loss of $9 million, including asset impairment write-down of $3 billion. In addition to the financial woes, Tyco faced another massive scandal in 2002- Its former chairman and CEO, L. Dennis Kozlowski was charged for excesses. In 2002, Edward D. Breen was appointed CEO of Tyco for three years.

In 2004 Annual Report, then CEO Edward D. Breen said- ” Our success was based on a simple strategy: to make operational excellence a core competency, to build a platform for sustainable organic growth, to invest in our people, and to hold ourselves to the highest ethical standards… ” (Allen, & Hartman, 2008). Tyco was pursuing organic growth strategy. In organic growth, company seeks to grow by increasing revenue of existing business rather than acquiring other companies. This was a part of long term plan of Tyco. Tactical plans are made for shorter period to implement the long term plan successfully and achieve the long term goal set by the management.

Tyco started working on reviving its corporate image and enhance consumer awareness. In order to build brand value, Tyco launched a global print campaign ion 2004 – “Tyco a vital part of your world. ” Tyco started reviewing its core business and sold rest of the businesses. As a part of this strategy, Tyco sold TGN in 2004 (which was almost entirely written off by that time). In total, Tyco divested 21 businesses and liquidated 4 non-core businesses. In line of the strategic plan and tactical plan, Tyco’s operational plan was also showing same trend.

Operational . Tyco had set very good operational plan as well. [pic] Failure of Tyco was the failure of management and leadership. All wrong decisions, lack of control, absence of any internal control system, organizational structure with flaw and weak organizational culture caused the failure of the giant Tyco International. Its former chairman and CEO, L. Dennis Kozlowski and senior managements faced prosecution for “larceny and conspiracy, falsifying business records and violating business law. ” (Tyco Worldwide, 2004, 1).

They were accused of misappropriating money and assets from the company for personal use totaling in the range of $210 million dollars. cover their theft, they entered into secret contracts, further damaging the company’s integrity. The executive’s unethical behavior resulted in huge debt and decoration of the value of shareholders. Tyco reached at the verge of bankruptcy. This kind of incident indicates how weak organizational culture was prevailing in Tyco. The leader himself was involved in unethical and illegal activities. A leader can cause success or failure of the organization.

In case of Tyco, leader was the caused of the failure. Later, CEO and senior management had to resign and law indicted them. What happened in Tyco can be called failure of leadership and failure of management in checking unethical practice. All organizations have ethics code in place but it is merely a guideline. Organization should monitor how actively ethical code is followed. Moreover, a leader should take initiative and motivate and inspire the employees to follow the ethical practices so that slowly it becomes a part of the process and organizational culture.