Lessons from Lehman Brothers

Topics: Organizational studies, Organization, Control Pages: 2 (317 words) Published: November 18, 2013

Case Application: Lessons from Lehman Brothers: Will We Ever Learn? MGT/521
University of Phoenix
Prof. Elsie Jimenez

Will We Ever Learn?
Lehman Brothers, a financial services firm, filed for bankruptcy on September 15, 2008. This is still considered the largest bankruptcy filing in US history. The company held over $600 billion in assets (Mamudi, 2008). There were a lot of problems that contributed the the company downfall. One of the top issues discovered was the type of culture and reward structure that was established within the organization. Organizational culture has been described as the shared values, principles, traditions, and ways of doing things that influence the way organizational members act (Coulter, 2012). Lehman Brothers adopted a reward system that recognized employees that took excessive risks. They were often considered as conquerors and heroes. By rewarding excessive risks, employees of Lehman Brothers began to make decisions that were out of the companies own control limits. Controlling is the process of monitoring, comparing, and correcting work (Coulter, 2012). Control limits are there for a reason, to ensure the accomplishment of goals and protect the organization and its assets. It was management responsibility to identify that this type of culture was not beneficial to their organization. They knew about the situation and decided not to take the necessary corrective actions. Based on the organizational culture that was adopted, anyone who attempted to say something or stand in the way was overruled. This lead to “questionable” deals by the employees of the company, who’s only interest was to receive compensation. The company lost all sense of social obligation. Coulter (2012) describes social obligation as actions taken to fulfill certain economic and legal resposibilities. Employee actions were driven by personal interests and did not take into consideration any of the company goals or...

References: Coulter, S. P. (2012). Management, Eleventh Edition. Prentice Hall.
Mamudi, S. (2008, September 15). Retrieved from Markewatch: http://www.marketwatch.com/story/lehman-folds-with-record-613-billion-debt?siteid=rss
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