Introduction
Twitter is a company that faces significant uncertainty and risks throughout the current year. During the last six months, media platform users publicly expressed dissatisfaction with the new Twitter policy and technical failures. The risk-taking behavior of the organization is caused by Elon Musk’s purchase of Twitter, which entailed several significant organizational changes. The sole accumulation of power, transforming a public company into a private organization, layoffs, and low awareness of previous policies have caused the company’s instability. Changes in risk management to improve profitability should include proper use of human resources, additional communication with the users, and organizational changes to help Twitter overcome the challenges.
Recent Actions with Risk and Uncertainty
Twitter has been a constant subject of public discussion ever since Elon Musk bought the company. The organization’s latest risks and uncertainties over the past six months have been caused by multiple technical failures, regardless of the efforts of technical support. As of March 2023, Twitter has experienced massive outages and global user dissatisfaction six times (Hern & Milmo, 2023).
The global failure manifested itself in the inability of users to post new tweets or images. Many users openly expressed dissatisfaction, as they assumed that Elon Musk’s requirements caused a malfunction (Hern & Milmo, 2023). The absence of technical failures is paramount, as Twitter profits from user loyalty.
The technical errors refer to the Twitter API, which allows other programs to interact with the site. Previously, Twitter banned third-party services from using the API without prior notice, rendering them unusable (Hern & Milmo, 2023). According to published reports, only one engineer was assigned to the project, who mistakenly changed the current version (Hern & Milmo, 2023). As a result of incorrect technical work, Twitter blocked its resources, and the platform could not work correctly. Constant technical failures result from two more global problems: the ignorance of the new CEO about how Twitter works and his risky actions related to the organization’s transformation.
Constant technical failures may be associated with a sharp reduction in the staff’s Twitter. This decision by Elon Musk, dictated by the desire to reduce costs, affected the company’s ability to control the operation of its systems. A new CEO has reduced the company’s workforce from 7,500 to around 2,000 (Hern & Milmo, 2023). Thus, Twitter’s technical problems arise from financial pressure on the company. The platform cannot become financially sound with cuts affecting the site’s credibility. Twitter outages are an obstacle that prevents the company from growing steadily and generating revenue.
Improving Risk Management
The causes of Twitter’s technical problems lay in big mistakes in risk management. User dissatisfaction with the new policy under the new CEO can be justified. Predominantly, the cause of technical problems is a significantly reduced staff, which can no longer perform the necessary work to maintain the platform’s stability (Hern & Milmo, 2023).
The drastic cut comes from Musk’s desire to sharply reduce spending, which was driven by a desire to speed up the deal to buy Twitter. The cost cuts led to the loss of valuable employees and caused widespread public dissatisfaction with working conditions. In addition, employees may face significantly increased control and workload due to staff changes.
Uncertainty and risk are features of the current management of Twitter, which does not make the platform more profitable and successful. This approach aims for a strong Twitter reputation and user loyalty, but these are not permanent indicators. They must be constantly maintained at the proper level. Musk is a leader who relies on his authority and charisma, which can manifest itself in excessive radicalism toward employees (Mastroeni et al., 2023). However, rigor and radicalism will be positive within the framework of improved risk management.
The risk management strategy must be radically changed to address the technical problems behind management and staffing failures. Risk management should include short-term and long-term measures to ensure the company’s stable development. The proposed short-term action is to resolve the Twitter outage issue quickly. At the same time, only a team of independent specialists can fix the problem with the source code. Therefore, it is proposed that an operational department of professionals be created to solve the problem of platform failures in detail.
As part of long-term risk management, it is necessary to establish a separate department to prevent and minimize breakdowns. Paying attention to the correct operation of the social network will be the key to increasing consumer loyalty (Hern & Milmo, 2023). Despite the significant financial cost of this strategy, it will balance the staff.
Currently, it is insufficient, and recruiting more specific specialists should be an essential part of a comprehensive improvement plan. The proposed strategy is one of the only potentially successful ones since, at the moment, Twitter does not have the human resources necessary to organize the correct operation of the platform.
An Adverse Selection Problem
The perfect deal happens when the seller and the buyer are equally knowledgeable enough to make an informed agreement. Adverse selection results from one party to a transaction having less information than the other, adversely affecting actions (Velez, 2020). An unequal balance of information is an additional risk that can adversely affect profits. In the case of Twitter, Elon Musk’s major acquisition was an example of adverse selection that negatively impacted the company’s current performance.
Initially, when preparing the deal to buy Twitter, the new CEO did not seem to understand how the network functions. Personal communication about the specifics of company policy remained limited. During the deal, Elon Musk was not interested in the peculiarities of the built-in regulation within the company, so the deal remained risky.
The public was aware of the ignorance of the new CEO, which caused widespread mass indignation. In the months following the acquisition, Twitter experienced a significant loss in share price and profitability (Mastroeni et al., 2023). The ignorance of the new owner continues to lead to uncertainty, the latest example of which is the problems with maintaining the stability of the social network.
The purchase of Twitter was initially a risky decision with unpredictable consequences. The businessman Elon Musk, who took over as head of the corporation, did not have the necessary resources to manage the organization (Hern & Milmo, 2023). The current strategy to minimize further negative impacts should be increased control and reduced riskiness in actions. It is necessary to return the staff, some of whom should be engaged in fixing and working out user dissatisfaction caused by failures, new account policies, removal of censorship, and other problems. Increasing Twitter’s reputation in the eyes of its users will allow the company to overcome uncertainty and subsequently increase efficiency.
Moral Hazard
In the case of Twitter, risk-taking behavior has become the characteristic of the company’s leadership, even as public discontent remains a deterrent. The problem of moral hazard is present when one of the parties in the organizational process may not agree to risky actions (Velez, 2020). Such behavior is justified by the danger of being held responsible for the fact that something does not go according to plan.
The burden of responsibility for the risky actions of Twitter falls not on users and shareholders but on the company’s management, in the case of Elon Musk. One of the latest moral hazard decisions involves allowing users to buy accounts with a blue check mark, a previously verified popular user marker. Adopting this risky strategy is an example of dealing with moral hazard and taking responsibility for the consequences of public displeasure.
In the technological industry, customer loyalty determines the success of a company. At the same time, corporations are often not ready to take risks since public opinion threatens the failure of the entire organization. Therefore, the best strategies to deal with moral hazards are to increase user loyalty and manage public opinion (Velez, 2020).
Apple best applies these strategies, reaching a base of loyal consumers worldwide. This is achieved by enhancing the brand image, providing guarantees and high-tech service, and quickly responding to user complaints. Twitter must also consider a high-quality customer service strategy to manage dissatisfaction when implementing risky decisions.
A Principal-Agent Problem
A principal-agent problem is associated with conflict, in which the agent may make bad decisions against the benefit of the person they work for. In large companies, this problem may arise due to an uneven distribution of power among shareholders or pressure from the board of directors (Velez, 2020). As a result, the company may choose the wrong course due to an uneven balance of power. In Twitter, most of the company’s shares are now solely owned by Elon Musk (Poon & Kohlberger, 2022). An imbalance of power can lead to dissatisfaction with other stakeholders who own a stake in the company.
Incentives are a form of benefit aimed at stimulating specific actions. Such actions include profit sharing, options, and other methods of increasing financial incentives (Velez, 2020). Companies resort to matching incentives to improve efficiency and drive profits.
Before the new CEO, Twitter provided promotions to employees and stakeholders, which effectively maintained financial stability. With the purchase of Twitter by Elon Musk, the shares had to be cashed out in exchange for cash bonuses. This approach is inevitably associated with transitioning from a public company to a private one (Jia & Xu, 2022). To ease concerns, Twitter could use other incentives to reduce uncertainty. However, the company, on the contrary, does not use effective incentive methods.
Twitter’s profit-making strategy is to capitalize on users and ads and reduce operating costs. The users did not meet the aforementioned strategy of buying blue checks. The number of advertising contracts with Twitter has dropped sharply with the arrival of the new CEO (Hern & Milmo, 2023).
Downsizing and worsening working conditions could give Twitter a share of the profits, but the reputational damage from such risky moves could be greater (Hern & Milmo, 2023). The downsizing has already led to technical failures threatening the platform’s existence. Thus, measures to improve efficiency through cost reduction and introducing new policies do not justify the risks.
The Organizational Structure
The organizational structure determines the complexities and advantages that the company must rely on when organizing activities. Previously, Twitter was a public company, and the organizational structure consisted of managing the board of directors and a precise distribution of responsibilities across departments. With the purchase of Twitter by Elon Musk, the company has transformed into a private one.
This provides several organizational advantages: Twitter no longer needs quarterly reporting, less oversight from regulators, and the ability to be subservient to one person (Jia & Xu, 2022). This means that Elon Musk can single-handedly control Twitter’s finances and politics without relying on investors’ opinions. At the same time, Twitter’s old board of directors was dissolved, while investors with less operational control entered the new board (Jia & Xu, 2022). The risks of transferring to a private company are mainly associated with accumulating power in the same hands and a greater likelihood of making wrong decisions.
Suggested Changes
To improve financial efficiency, Twitter needs new organizational changes. At the moment, the entire volume of decisions on the organization’s policy is concentrated in the hands of one party (Jia & Xu, 2022). At the same time, based on the identified adverse selection problem, the current CEO does not have sufficient information on the previously debugged internal activities of the company, which leads to external problems.
A suitable solution to this challenge is to give more power to the board of executive directors, return to a clear divisional structure, and increase the staff. The proposed changes are effective since the concentration of company management under only one person is always associated with the manager’s personality and the human factor risk. A clear division of responsibilities and an increase in the number of employees will lead to more coordinated work, which will help to minimize technical failures and establish a competent investment strategy. Well-coordinated management will increase user loyalty and help attract new advertising contracts, significantly increasing Twitter’s profitability.
Conclusion
The current dissatisfaction of Twitter users with technical failures is related to the underlying problems that the organization faces under new management. These problems are caused by the lack of awareness of the new CEO, risky new policies, layoffs, and changes in the organizational structure, which led to the accumulation of company management under a single person. The only way out of this situation threatening Twitter’s existence is to establish a clear organizational structure, increase staff to deal with technical problems, and increase user loyalty. A change in the current strategy is needed for Twitter, as risky management coupled with public discontent casts doubt on the future existence of the platform.
References
Hern, A., & Milmo, D. (2023). Rise in Twitter outages since Musk takeover hints at more systemic problems. The Guardian. Web.
Jia, Q., & Xu, S. (2022). An overall analysis of Twitter and Elon Musk M&A deal. Highlights in Business, Economics and Management, 2(1), 436-441. Web.
Mastroeni, L., Naldi, M., & Vellucci, P. (2023). Twitter and the circular economy: Examining the public discourse. Management Decision, 61(13), 192-221. Web.
Poon, M., & Kohlberger, M. (2022). Twitter as a leadership actor – A communication as constitutive of organizing perspective on a ‘leaderless’ social movement. Leadership, 18(5), 656-679. Web.
Velez, S. (2020). Banking and effective capital regulation in practice: A leadership perspective. Taylor & Francis.