Organizational Behavior in Swissair Failure
Introduction
Swissair or the “Flying Bank” was considered a national symbol due to its stability as well as its being one of the major international airlines in the country. In the late 1990s, the airline started an expansive project known as “Hunter Strategy” which was adversely affected by the September 11 terrorist attacks in the United States and the assets of the company were grounded quite fast due devaluation. Increased liberalization in addition to high prices for jet fuel inflicted huge losses to the national carrier and before long the company was selling most of its major assets as a way of boosting their operations. The failure of “Hunter Strategy” is largely blamed on poor management keeping in mind that most directors of Swissair were politicians with little or no knowledge on management. Prior to the crisis at Swissair, members of the managerial team were involved in a series of fraud cases in addition to forgery as well as presentation of false financial records.
Discussion
Organizational behavior and its impact of the Swissair failure
Failure to incorporate the other employees of Swissair in decision-making could have been one of the reasons why the national icon collapsed. At the height of the firm’s prosperity, decisions were solely made by higher offices which were led by politicians. Most of these decisions involved financial commitments such as buying 35.5 percent of Sabena’s stocks which amounted to billions of shillings. The company stakeholders were not informed of such a decision as it was meant to benefit the directors only and not other beneficiaries of the company (Swissair, 2010).The commitment made the company to make huge payments to Sabena during the crisis a sit still owed the firm quite a large amount of money.
The Hunter Strategy did cost Swissair a lot especially when it was on the verge of being declared insolvent. The situation could have been different had stakeholders being included in such critical decisions as some would have questioned the credibility of such undertakings (Swissair, 2010).This deal only came out in the open after the firm was hit by the financial crisis and in the process of retrieving lost finances; the strategy was laid out bare. Such deals could have cost the firm less had it been discussed by all such that every member would have given their opinions predicting the outcome of the commitment. Therefore Swissair failed terribly in managerial ethical decision making procedures and it caused adverse effects on the company as well as the country (Mileski and Nwabueze, 2008).
The contribution of Swissair leadership structure to the failure
The leaders of Swissair practiced autocratic leadership style which does not recognize the contribution made by individuals who are not part of the managerial team. This leadership style is quite complicated especially in profit making organizations such as Swissair which indulge in various partnerships which may require the stakeholders to exercise their rights on various aspects. Some of the areas where stakeholders have a right include how their company will be run and where their money should be invested. This right could have saved Swissair a lot of problems such as poor market expansion strategies like the one in which it bought quite a number of shares in Sabena. Had the leaders in Swissair carried out democratic leadership style, some of the opinions raised could have indicated more strategic ventures to increase market share rather than invest in little known airlines which would only cost the national icon more (Mileski, 2008).
The autocratic leadership styles usually do not heed ideas which originate from lower ranks but rather pay more attention to any opinion from high offices which are mainly manipulated by politicians who have interests in the firm. This was the same case in Swissair where politicians raised their ideas concerning the move and the directors of the firm had little objection to the decision. Research has shown that most political leaders always use autocratic leadership styles hence rarely ask for opinions from other members (Hollway, 2005).The leaders in Swissair failed to heed the requirements of functional leadership theory which calls for satisfaction of group interests which are often beneficial and democratic. In such a case the leader is always responsible for executing the ideas and objectives which are raised by stakeholders while in the case of Swissair the leaders ignored the opinions raised by other members and they carried out the director’s wishes (Mileski, 2008).
Contribution of Swissair management structure to its failure
Managers or the managerial team is usually entrusted with the planning, controlling as well as coordination of an organizations activities, employees and clients. Therefore, management should be held accountable for any action which contradicts any of the above while subsequent success as a result of proper integration of such activities is attributed to excellent management in a firm (Hollway, 2005).After the crisis which struck Swissair prior to implementation of “hunter strategy”, the entire Swissair management team was aligned in court facing various charges such as; fraud and lack of transparency. This shows that prior the crisis, the actions of the managers were not quite straight as is required of them. Cases of fraud often occur when the individuals who are given the mandate of helping the company achieve it goals sabotage their actions and instead they engage in tasks which put the firm in grave financial situations (Rosenbaum, 2007).
Management in profit-oriented companies such as Swissair are often given the mandate to increase the profit margin so that the shareholders may be satisfied with the company’s performance in addition to creating better high quality products for clients. Similarly, the responsibility of ensuring that all employees are presented with rewarding workplace opportunities which are comfortable as well as safe for the various tasks which are delegated to the employees (Rosenbaum, 2007).Failure to meet the expectations of these three diverse groups of individuals who benefit from the firm may affect the performance in terms of sales as well as reduced client loyalty hence a company is unable to sustain its operations. The case of Swissair saw its management fulfilling the needs of the shareholders and in the process of achieving the objective lost the grip of other stakeholders. Management has a critical role to play in determining the success or failure of any company such that the failure of Swissair was substantially due to poor managerial decisions which did not reflect the mission of the national icon (Rosenbaum, 2007).
Contribution of organizational structure to the failure of Swissair
Effective organizational structures are usually fundamental in establishing appropriate working relationships among management and employees such that there is flow of information as well as enhanced communication in both directions. High levels of transparency as well as frequent monitoring of the firms’ performance are essential in predicting the outcome of certain business undertakings. Transparency especially in the high management levels is equally crucial as this position is usually concerned with major company proceedings (Hollway, 2005).The organizational structure at Swissair did not consider transparency in business activities which could have contributed towards its failure. Bankruptcy in the airliner was due to reduced accountability as well as lack of permanent monitoring of the firms business deals which is exemplified in the discovery of payments which were being made to Sabena in the verge of Swissair’s collapse (Mileski, 2008).
Conclusion
In as much as the terrorist attacks of September 11 2001 were to blame for the downward plunge experienced by Swissair, the overall organization played crucial roles in the failure of the company. Poor management decisions as well as misappropriated goals led to the demise of a national icon while incorporation of politicians acted as a catalyst for the plunge. Therefore, the structure of Swissair is the sole cause for its bankruptcy rather than the incidences which occurred during that period.
References
Hollway, W. (2005), work psychology and organizational behavior: managing the individual work. Sage Publications
Mileski, J. and Nwabueze, U. (2008), the challenge o effective governance: a case studyof Swiss Air. Journal of Corporate governance. vol. 8, iss. 5, pp. 583-594
Harry Rosenbaum (15 January 2007). “Swissair executives assert innocence at first day of Switzerland’s biggest corporate trial”. International Herald Tribune. http://www.iht.com/articles/ap/2007/01/16/business/EU-FIN-Switzerland- Swissair-Trial.php. Retrieved on June 8, 2010.
Swissair (2010), Swissair facts and figures. Retrieved on June 8, 2010 from: www.swiss.com/web/EN/about_swiss/…/facts_figures.aspx
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