Tyco International – Epic Failure
Dionne Flinn
March 25, 2013
LDR/531
Thea Miller

Tyco International – Epic Failure
A business is successful not only if it has the right “product” that consumers want, but also if it is managed and lead by strong, ethical and invested leaders. In the past two decades unethical, corrupt, greedy and incompetent CEO’s have brought down multi-million corporations and cost thousands of American workers their jobs. One such CEO, Dennis Kozlowski of Tyco International, destroyed his company through his arrogance, greed, lack of ethics, and overall disdain for his company. An effective leader puts his own personal interests aside and works for the greater success of his company for their employees and shareholders.
Tyco International experienced a boom in profits in the 1990’s through continuous acquisitions of smaller companies and financial manipulation of accounting records. This resulted in rampant greed and corruption, with managers who shared the same values as Dennis Kozlowski advancing into upper management ranks. The main charges against Kozlowski involve “using company funds to purchase millions of dollars worth of artwork as well as an $18 million apartment in Manhattan. Kozlowski used company “loans” for the purchases, allowing him to avoid paying income tax on the money used” (Kay, 2002). Kozlowski allegedly transported crates of artwork to Tyco’s operating headquarters in New Hampshire to avoid paying sales tax. Instead, the crates were shipped empty to New Hampshire and the artwork was actually sent secretly to his Manhattan apartment. Additionally, the Securities Exchange Commission (SEC) investigated the company, looking into the accounting practices of the company’s many acquisitions. Numerous financial improprieties were investigated, specifically a practice called “spring-loading”, which is a “financial manipulation in which the pre-acquisition earnings of the acquired company are underreported, so as to give the merged company an artificial boost on the markets afterwards” (Kay, 2002). Other board members and executives of the company were investigated in regard to “personal” loans given from the company funds. This practice is unethical and illegal.
There are various organizational behaviors that led to Tyco’s failure. While the company was very successful during the nineties, upper level leadership let the success go to their heads and replaced what was good for the company with what was good for them financially. Sidney Finkelstein, in his book, Why Smart Executives Fail (2003), identifies four explanations for CEO behavior that contribute to a company’s failure. These four explanations are: 1. Executive Mindset Failures – breakdowns in how executives perceive reality for their companies. 2. Delusions of a Dream Company – how people within an organization face up to their reality. 3. Lost Signals – how information and control systems in the organization are mismanaged. 4. Patterns of Unsuccessful Executive Habits – how organizational leaders adopt unsuccessful behaviors (McEwen, 2013).
The CEOs of the failed companies chose not to act when their companies started to fail. Kozlowski’s greed and personal ambition clouded his business judgment and he surrounded himself with managers and executives who shared his greed and lack of ethical behavior. He clearly demonstrated organizational behaviors that clearly were taken to the extreme. His clear disregard for the welfare of his employees and the companies that he acquired during the boom years clearly show this. There are seven habits of faulty organizational behaviors with warnings signs that can signal a failure in any organization. According to Fineklstein (McEwen, 2013), they are: 1. Seeing themselves and their companies as dominating their environment. Carried to the extreme, it causes one to lose touch with reality. The key warning sign is a lack of respect. 2. Leaders identify too closely with the company, losing the boundary between personal and corporate interests. At the extreme end, the leader gains a sense of entitlement to compensate for his or her sacrifices. This can pave the way for unethical decisions. This calls into question the character of the leader and his or her effectiveness. 3. They think they have all the answers. The leader forgets to ask for input or ignores any feedback, resulting in inappropriate decisions. 4. The leader eliminates any opposition to his or her plans, eliminating anyone who isn’t completely part of his or her team. A sudden increase in executive departures can signal trouble in the upper ranks. 5. The leader is a blatant attention-seeker, constantly talking about the company and perceived to be promoting themselves more than the company. 6. Excessive optimism in the company can cause the leader to underestimate obstacles and cause a failure to accurately identify risk. 7. Refusing to contemplate change to keep the company successful. By constantly relying on what worked in the past, the company stagnates and fails to recognize problems and obstacles.
Kozlowski and the upper management of Tyco clearly exhibited some of these bad habits and because of their blind greed and ambition, set themselves up for eventual failure and destruction. The executive management clearly failed to recognize negative character traits that compounded the greed and financial misdeeds. Some of these characteristics were arrogance, melodrama, habitual distrust, aloofness, volatility and perfectionism (McEwen, 2013). Most leaders have one or two of these “derailers”’ however, if a leader and his or her team have a large amount of these traits, then the less likely others will point out any of these failure-producing characteristics.
In the final analysis, the essential reasons why Tyco International failed on the level that it did have to do more with the dysfunctional leadership styles of Dennis Kozlowski and his executive team than overall mismanagement. Kozlowski and his team clearly demonstrated that they were in it for personal gain and greed, and had little regard for the welfare of the companies that they acquired or for their employees. Some of the bad leadership styles exhibited by these leaders were incompetence, rigidity, intemperateness or lack of control, callousness and total discount of the needs of the stakeholders of the company and insularity or the disregard for the health and welfare of those outside the core group (McEwen, 2013). Not all of these characteristics are bad when combined with leadership strengths; there is a tipping point where these bad traits become more prominent. When this occurs, judgment becomes cloudy, ethics are compromised, and a leader begins the slide down into the abyss of corruption and misdeeds. An effective and successful leader and their team continue to involve their employees, solicit honest feedback from their subordinates, and constantly look for ways to minimize risk and failure. Success takes hard work, but it has to also be honest, fair, and ethical work.

References
Kay, J. (June 18, 2002). Tyco: US conglomerate fails amid revelations of greed and corruption. Retrieved from http://www.wsws.org/en/articles/2002/06/tyco-j18.html.
McEwen,B. (2013). Executive failure: a look at the dark side. Retrieved from http://www.2020executivecoaching.com/articles/execfailure.php.