Executive Summary
The leadership cases of Walmart Inc. and Lehman Brothers are compared and contrasted in this research to provide information on the factors contributing to the two companies’ contrasting fortunes. Walmart’s success may be attributed mainly to the company’s solid and adaptable leadership style and culture. In contrast, the bankruptcy of Lehman Brothers can be attributed to the firm’s hierarchical and risk-taking leadership strategy and its toxic culture. The study concludes with suggestions for improving the two companies’ leadership, including emphasizing ethical decision-making and cultivating a welcoming work environment for all employees. These changes may help Walmart Inc. maintain its success and avert the failure of other companies like Lehman Brothers in the future.
Introduction
This report will compare the leadership scenarios of Walmart Inc and Lehman Brothers, two organizations with contrasting outcomes. In the future, Walmart is expected to continue its success as a multinational retail corporation, while Lehman Brothers’ bankruptcy during the 2008 financial crisis is a cautionary tale (Wiggins and Metrick, 2019a). The report will begin by discussing two themes: leadership style and decision-making processes, and then critically examine how the two organizations can apply these factors differently. Finally, the report will provide recommendations for improvements in both Walmart and Lehman Brothers to enhance their effectiveness and success in the future.
Organization Summary
Walmart Inc is a multinational retail corporation that is highly successful due to its strong leadership and effective business strategies. The company is known for efficient supply chain management and innovative technology, streamlining operations, and improving efficiency. As a result, Walmart has consistently been successful and continues to dominate the retail industry. On the other hand, Lehman Brothers was a global financial services firm that failed in 2008 due to poor leadership and risky investments. The firm engaged in high-risk mortgage-backed securities, which ultimately led to its bankruptcy.
Leadership Style
Explanation
Organizational success or failure may be directly attributed to the leader’s approach. It encompasses how leaders steer their followers toward a common objective. Leaders might use various leadership styles, including authoritarian, democratic, and laissez-faire approaches (Jony, 2019). Engaged and productive workers result from an organization’s emphasis on cultivating a good culture (Ciulla, 2020; Paais and Pattiruhu, 2020). Democratic leaders include subordinates in decision-making, whereas autocratic leaders are directive and maintain control over their employees (Bonsu and Twum-Danso, 2018). Transformational leadership stimulates and encourages workers towards a shared vision, fosters personal growth, and promotes innovation and creativity (Hansbrough and Schyns, 2018). Maslow’s hierarchy of needs is a theory of motivation that proposes distinct wants in people must be met to reach a state of self-actualization (Lussier, 2019). Understanding organizational leadership and customer needs is crucial to achieving optimal success.
Application
One leadership theory noticed at Walmart is transformational leadership, which stresses the leader’s capacity to inspire and encourage people to realize their full potential. Sam Walton, the founder of Walmart, was renowned for his transformational leadership style (Adama, 2020). He urged his staff to be inventive, take risks, and continuously attempt to improve the company’s performance. During the 2008 financial crisis under Richard Fuld, Lehman Brothers’ leadership was a renowned autocratic style that put short-term profits ahead of long-term viability (Nick, 2019). Walmart’s leadership style has resulted in an enthusiastic and dedicated staff that consistently exceeded customers’ expectations (Pandey et al., 2021). Richard Fuld’s management style accelerated Lehman Brothers’ collapse as it went bankrupt due to its fixation on short-term earnings and failure to adjust to market shifts (Mieszala, 2019; Luo, Peng and Zhang, 2020). These styles heavily contributed to the outcomes evident in the organizations they led.
Implication
Walmart clearly understands the needs of its clients and the leadership approach that can improve its profitability. It has focused on satisfying customers’ physiological and safety needs by offering affordable and accessible products. The decentralized management structure at Walmart gives store managers considerable discretion over day-to-day operations while ensuring that they adhere to the company’s ultimate goals (Cuofano, 2022). Better customer service and earnings might result from a company-wide emphasis on innovation and flexibility (Chima and Gutman, 2020; Wikhamn, 2019). On the other hand, decisions at Lehman Brothers were made almost exclusively by upper-level executives, with limited opportunity for input from lower-level workers due to the company’s highly centralized management structure (Wiggins and Metrick, 2019b). This method led to a breakdown in internal communication and coordination, which had a role in the company’s delayed response to the early warning indications of the financial crisis (Ball, 2018). As a result, it is vital to evaluate the effect on organizational results considering the leadership styles at all levels of management.
Critique
However, there are constraints to the idea of a leadership style that must be considered. According to the principles of contingency theory, the most successful method of leadership changes from one circumstance to another (Ayman and Lauritsen, 2018). The situational leadership theory stresses the need to tailor one’s approach to the demands of every given scenario (Troy, Lewis and Vaughn, 2021). Although leadership style is important, other elements, such as company culture and decision-making procedures, are more crucial.
Decision-Making
Explanation
The ability of an organization to make sound decisions is essential to its survival. Choosing the best option from a set of potential outcomes is an important part of decision-making (Julmi, 2019). Rational decision-makers systematically evaluate available options using objective criteria before settling on the optimal one (Suomala, 2020). On the other hand, intuitive decision-making is making choices based on one’s confidence and past experiences (Hodgkinson and Sadler-Smith, 2018). Using one’s position of power and influence to further the interests of one’s faction is a hallmark of political decision-making.
Application
Walmart is well-known for its data-driven decision-making approach, where choices are determined after extensive data research. For instance, Walmart has found that implementing data analytics into its supply chain management has increased productivity while decreasing overhead expenses. However, Lehman Brothers’ failure can be traced back to the company’s decision-making process, marked by a high-risk appetite and a concentration on short-term rewards (Crosina and Pratt, 2019). The organization failed during its financial crisis due to poor risk management, leaving the business vulnerable to hazardous investments.
Implication
The outcomes at Walmart and Lehman Brothers can largely be attributed to the companies’ decision-making processes. In part, Walmart’s achievements can be credited to the company’s data-driven rational approach to making choices (Smithson, 2020). The company uses the massive amounts of data it collects and analyzes customer behavior, market trends, and other risks to guide its choices. On the other hand, Lehman Brothers went bankrupt because its intuitive decision-making did not consider risks (Chari, 2022). The leaders did not find risks earlier enough so that their leaders could mitigate them.
Critique
Despite their significance in the organization, decision-making processes have limitations. Access to all relevant information and the ability to objectively evaluate that information is prerequisites for making rational decisions (Leicht-Deobald et al., 2022). Therefore the decision-makers may lack the appropriate data to make effective decisions for their organizations. Decisions made based on intuition may be faulty due to the effect of one’s prejudices and emotions.
Conclusion
Walmart and Lehman Brothers could use a more holistic and varied approach to their decision-making processes. The former has been praised for its rational decision-making; however, relying mainly on quantitative data may not account for all of the market’s intricacies or customer behavior (Alsharari, 2021). Given this, Walmart could adopt a more intuitive decision-making method that considers the perspectives and insights of workers and consumers. Contrarily, Lehman Brothers’ collapse was partly attributable to the firm’s overemphasis on quantitative data and neglect of risk management (Bishop, 2019). They would have performed well if they had adopted a more systematic and reasonable approach to decision-making that considered the whole range of possible risks and their potential consequences.
In terms of leadership style, Walmart and Lehman Brothers could benefit from adopting a more servant leadership approach. Although Walmart has benefited much from the transformational leadership style, the company might do even more to foster employee empowerment and loyalty by adopting a servant leadership style. On the other hand, Lehman Brothers fell victim to Richard Fuld’s aggressive management style (Wiggins and Metrick, 2019b). Hence, moving toward a more servant-oriented leadership style could have facilitated the restoration of trust and the growth of an atmosphere conducive to teamwork and mutual support.
Walmart may benefit from the theory of transformational leadership. This method encourages and inspires workers to improve performance and collaborate toward a common goal (Budur, 2020). However, there are limitations to these improvements that organizations aim to make. It may be resource-intensive and not always lead to a consensus or effective decision (Scott Kruse et al., 2018). Organizations may mitigate restrictions by providing staff with the training and assistance they need to acquire the knowledge and mindset shifts necessary to adapt to new circumstances. Moreover, continuous review and feedback may assist in finding areas for development and guarantee that these changes have the intended effect.
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