Management theory application in Enron and WorldCom's global failures

Management Theory

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Over the last several years, a number of management theories have been increasingly brought to the forefront. This is because globalization is changing the way an organization is structured and operates. At which point, a variety of businesses began using different management theories, as way to effectively structure their organization, to adapt to various cultural and business traditions of a particular country. This is significant, because it highlights how the overall theories that are being used by an entity, will determine how successful they will be in the future. As result, it is essential for all executives to have a working knowledge of the different management theories. To achieve this objective, they must have a thorough understanding of the different theories and when they can be applied in specific real world situations. Together, these different elements will provide the greatest insights, as to how the different management theories are changing the way businesses will operate in particular countries or geographic regions.

Types of Management Theories

There are a number of different management theories that are used by a variety of organizations around the world. Depending upon the company and where the division / unit is located; the management theories that are utilized could be a combination of different theories / systems. Some of the most notable management theories that are used by various businesses would include: the structural theory, the behavioral theory, the contingency theory, and the systems theory. The structural approach is when you are creating an organization that will be highly centralized with decisions being made by: top managers and executives. Where, they will focus on: the task / duties of a particular position, maintaining effective command / control, establishing written policies / procedures and placing authority with the organization itself (through various committees / boards). This management theory would be useful in organizations, where employees are expected follow a particular routine as part of completing their job. In general, this would work well in establishing a basic organizational structure for a company. However, when it comes to various divisions and units, this theory could be problematic if the individual is expected to adapt to a variety of situations. This is because the structure of the organization is dependent upon guidance from managers and executives. If at any point, someone further down in chain of command needs assistance, any kind of breakdown in communication could be disastrous. As a result, this kind of management theory could be used, to provide a basic foundation within an organization. Beyond this scope, is when the use of this theory can lead to a number of problems down the road. (Lynch, 1983, pp. 6 -- 8)

The behavioral theory is when managers are acting as just one member of a large organization (the team approach). Where, they have certain amounts of clearly defined roles and responsibilities. Yet, they also have more flexibility in how they implement new ideas and strategies, to increase the productivity of the team / department. This is important, because it show how this kind of management theory would work well in organization, where managers and employees are required to improvise, as part of their jobs. It would also work well in specific departments of large corporation, where new ideas are required to dramatically improve the quality and possible design of the product. That being said, this management structure would not work well for those organizations that have a standard protocol, for producing / delivering the various products and services to customers. The reason why, is because the increased amounts of freedom and flexibility could slow the most effective procedures, for delivering the highest quality products / services to consumers. Over the course of time, this could increase the total production costs and hurt the underlying quality of the product. As a result, this theory can be used in organizations that require increased amounts of creative thinking and flexibility from managers / employees. (Lynch, 1983, pp. 6 -- 8)

The contingency theory is when managers / executives must take into account a number of different internal and external factors that could have an impact upon the situation. Where, they will weigh their various courses of action and the possible effects that their actions would have. Those actions that can help increase productivity and have the best effect on the organization are: selected as the most appropriate decision. This is important, because the flexibility of this theory; can be used in conjunction with other management theories, to adapt to various situations. Where, another theory can provide a general structure for the organization, while the contingency theory can be used to address specific issues in departments and teams. For example, the structural or behavior theories that were covered earlier provide a solid foundation for an organization. Yet, they both can only adapt to different situations to a certain extent. When you are using the contingency theory, in conjunction with one of the above two, it is giving managers the structure they require and the flexibility to adapt to a variety of situations. This is significant, because it shows how utilizing the contingency theory in conjunction with other management theories, can give executives the power to be able to adapt to the various situations they will encounter. At which point, the organization can more effectively adapt to the various internal or external issues they could be facing. (McNamara, 2010)

The systems theory is when managers are breaking their organization down into different pieces and looking at the total impact that the various parts will have on the company. Where, they will look at: the inputs (materials to produce the product), the outputs (the benefits such as: increased productivity / profits) and feedback (analyzing the total effects). This is important, because it allows managers to focus on the all of the parts of their organization, instead of one aspect. As result, this kind of management structure would work well for more structured and independent organizations. This is because; examining the total pieces of the business will help executives to identify key issues. At which point, they can implement this management theory, in place with the organizational structure that they are using. This is significant, because it gives managers another tool that they can use, to improve their ability to monitor and address various challenges. Over the course of time, this will help a business adapt to different changes that they will face. (McNamara, 2010)

Clearly, the different management theories that are being used will determine how a company will operate in a particular country or region. This is important, because depending upon the type of management structure being utilized. The different theories mentioned above, can be used to adapt an organization to the culture and business environment of a country. Where, each theory can work in conjunction with the basic structure and strategy that the company has in place. At which point, the different tools and theories will allow managers to customize their message, to specific teams / departments. When you can reach these levels within a business, it is a sign that customizing the strategy to cultural traditions will improve productivity. This is because, managers can understand the environment that they are working in and employees can understand the overall big picture. Once this takes place, the amounts of risk that company is taking will decline; as the management theory would ensure that nothing is left to chance. At which point, an organization can increase it productivity and profitability at various locations around the world.