August 23, 2010
Examining a Business Failure: Tyco International Ltd. ® Many have heard the proverb, “A chain is only as strong as its weakest link.” This can be directly applied to business organizations through analysis of the three strongest and/or weakest links: managers, leaders and the organizational structure. These three areas provide the central core to any organization and are often linked to dramatic failures and consequences when weaknesses arise. In this paper, the student will discuss the 2002 failure of Tyco International Ltd. ® (Tyco) in which the Securities and Exchange Commission (SEC) filed a lawsuit claiming fraud, reporting violations, …show more content…
Organizational Structure As a result of the ever-growing number of organizations purchased by Tyco, the organizational structure became highly decentralized over time. “The more complex an organization’s environment, the more decentralized its structure” (Mitzberg, Lampel, Quinn, & Ghoshal, 2003, p. 219). In essence, a decentralized organization is similar to many small organizations (units) all operating for a common purpose, but in a separate manner. In the case with Tyco, many of the units operated with complete independence of Tyco with one exception – pressure from top management to adjust accounting procedures or figures to better align with Tyco’s main headquarters. The SEC investigation and resulting lawsuit revealed no intentional criminal acts committed by any unit of Tyco based upon the incredible influence the CEO, CFO and CCC maintained over the units. Additionally, when asked to change specific accounting information, it was identified that the units were given misinformation as to why and how the information could legally be changed (U.S. Securities and Exchange Commission, 2010).