Tyco Inc.’s Case of a Business Failure

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Table of Contents

Introduction
Tyco Inc. and organizational theories
Conclusion
References

Introduction

An organization works with the help of various resources like people, physical infrastructure, and financial resources among others. As an outcome of the research done by the experts and researchers, various organizational theories have evolved that explain the behavior of the human resources and how they can be modified if, not controlled (www.organizationalbehaviours.com, 2009). Most of these studies are explanatory in nature and explain some behavior or incident that happened in an organization.

Though such theories exist still due to changing dynamics of the nature of business and human capital; business and business world faces debacles and then theories are drawn to explain them. Some of such recent cases include that of Tyco Inc., Enron Inc., or the WorldCom. To understand how organizational theories could have helped forecast or explain such cases this paper takes up the case of Tyco Inc.

Tyco Inc. and organizational theories

Tyco is a business group that has grown with numerous mergers and acquisitions. The largest business unit for Tyco is its electronics division which manufactures items like connectors, and printed circuit boards. It also runs units like fire and security services, health care, and telecom. Tyco came under scanner in 1997 when it was incorporated in Bermuda, expressly to safeguard itself from the U.S. corporate tax net. Numerous mergers facilitated Tyco’s growth that enabled the company to enjoy complicated, but legitimate, tax avoidance plans (www.mgmtguru.com, 2009).

Tyco’s accounting system could not inspire confidence and had an adverse effect on its stock prices. The acquisition of a financial services firm; CTI Group surfaced additional problems. It was disclosed at a later stage that a Tyco director received USD 10 Million in kickbacks to facilitate this acquisition, where the director held substantial stocks. This was a case of “insider trading”. Classical organizational theory like the Weber’s bureaucratic theory proposes that rigid processes and system of rewards and punishment ensure proper execution of processes though this theory was explored with limited scope in 1947 by Max Weber (Walonick, 2009). Still this theory could have checked the whole CTI debacle as strict processes could have filtered this act.

The systems theory explains how the processes and components in an organization are interrelated. Here in case of Tyco; a problem in a division caused upheaval in the whole organization. Maslow and Herzberg in their work examined the relationship between internal needs and the effort expended to fulfill them. Victor Vroom separates effort (which arises from motivation), performance, and outcomes. Vroom hypothesizes that in order for a person to be motivated effort, performance and motivation must be linked. In Tyco’s case if the expectation of the workers and organization was in sync this issue would not have arisen. The management failed to manage expectations and synchronize efforts with its plans of expansion.

Conclusion

These organizational theories and models while helping the process also allow customization of the model to fit individual cases and must be used to manage organization properly.

References

Arrods’ Website. (2009), Expectancy Theory of Motivation.
Management Guru Website, (2009), Failure of Corporate Ethics.
Organizational Behaviour Website, (2009), Theories Governing Organizational Behaviour Studies.
Walonick, David S. (2009), Organizational Theory and Behavior.

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Tyco Inc.’s Case of a Business Failure

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