Almost all people around the whole world dream of success in the context of their career development. They are eager to become top specialists in their field, whose opinion appears to be highly respected, and earn significant sums of money. However, this dream may appear to be a living nightmare for some individuals. Achieving high results and fulfilling audacious ambitions may not only lead a person to success, but also ruin his or her life. Some people become extremely self-confident in their abilities and skills, which prevents them from perceiving reality rationally. Their delight in themselves may result in irreversible mistakes, which may dash their achievements, and this behavior is titled hubris syndrome. An illustrative example for this thesis could be the 1920 Farrow’s bank failure. Therefore, the purpose of this paper is to describe and analyze this case, its reasons, and its outcomes.
At first glance, the success of Farrow’s Bank was overwhelming. According to Hollow (2014), “by 1913, the Bank’s nominal capital had been increased to £1,000,000, and shareholders were receiving regular dividends of upwards of 6%” (p. 6). However, during the negotiations with an investment firm Norton, Read & Co, it was revealed that the profit indicators appeared to be fraudulent (Hollow, 2014). The partner William Albert Read insisted on checking the financial situation of the company by two accountants, who found that the Bank’s reports did not match reality (Hollow, 2014). Moreover, a budget deficiency was reported and estimated approximately to £2,685,757 (Hollow, 2014). Therefore, Farrow feared breaking the image of an overwhelmingly successful company and attempted to conceal losses and failures.
First of all, this behavioral pattern may be considered to be the result of managerial hubris. It should also be mentioned that deception was an integral part of the company operation, and the staff members were involved in it as well. Consequently, it is evident that Farrow’s managerial hubris was supported by his employees, who contributed to maintaining the image of a successful company. For this reason, they demonstrated a disrespectful attitude to the standards and requirements of booking practice. Hollow (2014) claims:
“The most striking example in this respect was the revelation that, from 1908 until 1917, Farrow had left the job of auditing the balance sheets solely in the hands of the Bank’s own Chief Accountant, George Hart” (p. 8).
It is apparent that such an attitude had a considerable impact on the business environment. As Eckhaus & Sheaffer (2018) state, Farrow had a number of qualities and behavioral patterns, which present the signs of hubris syndrome. For instance, he was inadequately concerned about his self-image, and driven by this trait, he did not consider regulations at all (Hollow, 2014; Eckhaus & Sheaffer, 2018). In addition, the company head was detached from reality to some extent (Hollow, 2014; Eckhaus & Sheaffer, 2018). These qualities shaped his decision-making process considerably, which prevented him from elaborating solutions relevant and beneficial for his business in the long run (Hollow, 2014). Furthermore, his behavior may present an ethical case, as he betrayed current had potential investors, customers of the bank, and employees. The business indicator shown by the head could contribute to establishing a reliable figure in the public eye, though they did not match the real financial position.
There is a likelihood that Farrow could not resist potential pressures, which made him avoiding revealing the truth. He was aware that the current financial position may harm the credibility of the company among customers. In addition, Farrow guessed that his failures and losses would be highly discussed in the press. These pressures considerably influenced his decision-making, as he was intended to avoid being judged by society. Moreover, he was aware that his behavior is illegal and is highly likely to cause a great number of problems for him and his bank. Therefore, he preferred to conceal the truth.
However, from my perspective, whether the level of hubris syndrome of the head was less, the outcome of the situation would be different. It is apparent that even large businesses may experience considerable losses caused by poor decision-making and economic crises. Although the harm may be significant, these companies can resist the circumstances and maintain their image via the implementation of the appropriate measure. Thus, in case Farrow was not concerned about his self-image to such an extent, he could establish a truly ethical business culture. In this context, the company would be resilient to any stresses, and the outcome of the situation may be the opposite.
In conclusion, it is possible to highlight the destructive consequences of managerial hubris. It is essential to be honest while running a business and determine to establish an ethical business culture. Although it may appear to be challenging, it appears to be beneficial for the company in the long run. It makes businesses resilient to any kind of crisis and losses and contributes to a positive outcome. Therefore, managerial hubris does not match this criterion, and for this reason, it should be avoided.
References
Eckhaus, E. & Sheaffer, Z. (2018). Managerial hubris detection: the case of Enron. Risk Management, 20, 304–325. Web.
Hollow, M. (2014). The 1920 farrow’s bank failure: A case of managerial hubris?Journal of Management History, 20(2), 164-178. Web.