Examining a Business Failure
G. L. Ivie
University of Phoenix
Rodney Walton, M B A.
March 18, 2012
Examining a Business Failure
This paper is a brief examination into how different variables both dependent and independent in relation to various theories of organizational behavior played a significant role in the failure of the once profitable and prominent Swiss Air Airline company. It provides specific examples of how certain organizational behavioral theories if applied before the company’s insolvency might have predicted the airlines impending bankruptcy. It also compares and contrasts the different aspects of the company’s leadership, ...view middle of the document...
6).This sudden change in the leadership’s once prudent strategic management practices, in retrospect would be considered as irresponsible and almost reckless. The authors also noted “As a result, it was one of the first carriers in Europe and the world to expand into ancillary and non-aviation activities – including but not confined to maintenance and repair, ground handling, IT, aircraft leasing, catering, duty free, hotels, aerial photography, and even agriculture, all of which by 2001 accounted for more than half of SAir-Group’s employees and most of its profits” (Knorr & Arndt, 2003, p.6). Many of the company’s acquisitions or mergers were with company of which SAirGroup had no prior working relationship with nor did the leadership of SAirGroup have any interpersonal relationships with. These situational/intervening variables would prove to be important factors when the financial health of the Swissair Division became contingent on the profitable operation and solvency of the other divisions of the SAirGroup holding company.
The LPC Contingency Model
The Least Preferred Coworker (LPC) contingency theory although weak in concept and also known to be the least preferred method for assessing leadership effectiveness the theory and its methods for testing the probabilities of leadership success or failure seems to hold true in the Swissair case. When looking at the thinking processes and behaviors of the company’s top leadership as a whole, the results of the LPC method of testing accurately predict a very probability of failure based on the some of the following factors and variables. Equity-based swaps between two company’s indicates a partnership based on financial instruments where the parent company usually has no desire to control or manage the subsidiary company. This in relation to the LPC model would indicate that Swissair’s top leadership did not consider nor desire to provide leadership or management staff to the subsidiaries. This created the created the perfect environment in which there was no interpersonal relationships between the subsidiary and parent company which resulted in the lack of situational control. This lack of control and oversight would have been possible if there had been adequate management or auditing personnel responsible for the necessary oversight of the operations of these alliances. The third variable in this model was the task structure which in this particular case where the operations of the subsidiaries were highly structured but there was no way of monitoring the quality of the product or service from which objective indicators would have given the parent company early warning signals of substandard performance.
This motivational theory would have been useful to the leadership of the SAirGroup prior to the implementation of their equity-based strategy of acquisitions and mergers from which the company believed would give them an increased market share with the minimum...