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The conviction of Martha Stewart on allegations of insider trading dented her public image as well as the image of the MSO Company. The allegations also led to loss of public trust that significantly affected employee morale and performance, company communication channels, and leadership credibility within the company.
My recommendations, to enable the company turn around and achieve profitability, revolve around enhancing employee morale, rebranding, implementing CRM, and adopting a horizontal organizational structure where, power and authority is spread among many people. Previously, the company brands had a close association with Martha’s name, who wielded a lot of influence within the company. The new management model should focus on selling the company’s image and separating the MSO identity from Martha.
Analysis of the MSO Case
Prior to the legal crisis in the late 2001, Martha Stewart had a prosperous career. However, the stock sale scandal led to legal suits that resulted to her conviction in 2004, which turned her career and her life upside down. It all began in 1999, when Martha bought shares of a biotech company, ImClone, which dealt with the manufacture of drugs.
During this period, ImClone shares were doing well in the stock market hence, Martha’s decision to invest in the company. However, subsequent events in the same year dented the financial prospects of the biotech company. ImClone’s owner, Sam Waksal, aiming at improving the profitability and revenue of the company, approved the release of a new cancer drug, Erbitux, by the company.
Before the FDA announcement date, Sam received prior information that the FDA was not going to approve the drug on the due date. Acting on advice from Sam, Martha sold her ImClone stocks. As a result, Martha faced allegations of insider trading, which led to her conviction in 2004. Consequently, the conviction tarnished Martha’s reputation and the MSO shares’ value declined significantly. Most importantly, the morale of the employees and credibility of the management were affected by these events.
Implications of Martha’s Conviction
Martha Stewart allegations involved insider trading and other business malpractices. Her conviction in 2004 had profound implications on her career and the image of her organization, MSO. Prior to her conviction, Martha enjoyed a prosperous career as the founder of MSO, a large corporation with branches in many areas including publishing, merchandising, and broadcasting.
The product offerings of the company reflected the tastes and preferences of Martha. In addition, the brand name of most of the products, that earned the respect of many in the United States, bore her name. Martha also was a writer; she published many books and magazines through MSO.
However, her conviction resulted to a crisis in her personal life, as well as to the MSO Company. The performance of MSO stocks declined tremendously in the course of her conviction. The employee morale also declined while anxiety and stress levels increased. As a result, the public lost trust in the company.
Therefore, the management should adopt a different strategy once Martha returns to the company. In my opinion, stress management training should be integrated into employee development programs. Additionally, a new organizational structure that delegates responsibility and powers on many senior executives, not only on Martha, is appropriate.
Strategies to improve Communication
The conviction of Martha caused a crisis that created extensive negative consequences in three main organizational areas at MSO management viz. communication, employee relations, and morale and leadership credibility. With regard to communication, the top management at MSO should consider a communication model that emphasizes on teamwork.
In particular, the internal communication should focus on improving consumer attitudes and influencing organizational behavior patterns within Martha Stewart Living Omnimedia (MSO). Presently, the brand name of MSO is associated with its chief executive officer.
Thus, the external communication strategies should aim at making a clear separation between personalities and the company’s identity. In this way, individual business malpractices by the management will not affect the reputation of the company. In essence, the company values override the interests of the founder(s).
In addition, the communication model should strengthen the employee performance by informing them of the current trends within MSO and align employee goals with organizational goals. Essentially, employees in any organization possess diverse skills and different cultural backgrounds.
Hence, internal communication in MSO should be open and allow participation from all employees. MSO should adopt a communication strategy, whether oral or written, that allows clear expression of expectations, concerns, or suggestions and regular feedback, both internally and externally.
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As a way of enhancing external communication and company image, the MSO management should implement a customer relationship management (CRM) strategy alongside rebranding of its products. CRM employs the Internet and social media to manage customer relationships and enhance customer loyalty and product or price differentiation.
MSO management should build a database regarding its customers so that the employees, management and other service providers can easily access customer information and align their product offerings with customer needs. Additionally, the CRM database can be used to notify customers and investors of any rebranding of the customer products or services (Payne et al., 2001, p. 197). Improvement in telesales or profits will indicate the success of this CRM strategy.
Addressing the Employee Morale and Leadership Credibility Issues
Evidently, the ImClone scandal that implicated Martha, the MSO’s Chief Executive Officer, led to loss of public trust in the company. Consequently, the employee morale and motivation, as well as performance, were adversely affected (Stajkovic, & Luthans, 2003, p. 155).
To improve on employee motivation and morale and boost performance, many organizational changes have to be implemented to address the internal problems. Firstly, the MSO management should adopt an organizational structure. With the resignation of Martha as the company’s CEO, much restructuring at the management is necessary.
Since the founder and mentor of the company has left the company, the new top management should endeavor to motivate and raise the morale of the employees, enhance proper communication channels, and align the employee goals with that of the company. According to Maslow’s theory, this will create job security and enhance employee performance.
Secondly, the company should adopt a new organizational culture that emphasizes on teamwork. In this way, employee concerns and needs can be addressed adequately. Additionally, a strong organizational culture will promote desirable morals and values that are essential in the future growth of the company.
Rebranding is another way the company can project a strong image to the public and enhance employee morale. Mason and Meyer argue that, rebranding influences company image positively especially by the external environment (2006, p. 801). In line with Maslow’s theory, good image will satisfy the self-esteem needs of the employees and enhance their performance (Stajkovic, & Luthans, 2003, p. 171).
In other words, the MSO management should identify the different levels of employee needs and take the necessary steps to satisfy them. Additionally, increased employee benefits or rewards for top performers can boost employee morale and performance.
However, the management should make careful deliberations with regard to the rebranding process as this may lead to loss of public trust and employee morale. The rebranding should aim at retaining the appealing public image projected by Martha and establishing a different identity for the company.
Mason, A., & Meyer, M. (2006).Living With Martha Stewart Media: Chosen Domesticity in the Experience of Fan. Journal of communication, 63(51), 801-804
Payne, A., Christopher, M., Clark, M., & Peck, H. (2001). Relationship marketing for Competitive advantage. Oxford: Butterworth-Heinemann.
Stajkovic, D., & Luthans, F. (2003). Behavioral management and task performance In organizations: conceptual background, meta-analysis, and test of alternative Models. Personnel Psychology, 56(18), 155-194