Worldcom’s Organizational Culture

Worldcom’s Organizational Culture One of the primary purposes a leader has in an organization is to maintain the characteristics that make up the organization. One of the main characteristics that make up an organization is the culture in which the organization operates and the code of ethics (Robbins & Coulter, 2012, p. 165) by which the organization expects its employees to follow. But, what does organizational culture really mean? What influence does it have on an organization and the people within the organization? How do managers/leaders build, influence or alter an organization's culture?
Influence of Culture in an Organization Organizational culture has been defined as, "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization" (Hill & Jones, 2001). Our book defines code of ethics as, “a formal statement of an organization’s primary values and the ethical rules it expects its employees to follow” (Robbins & Coulter, 2012, p. 165). In the case of Worldcom, it is clear that the organizational culture was heavily impaired and nearly non-existent. The company did not have a formal statement of values or ethical rules it expected its employees to abide by. This is the underlying issue that eventually led to the demise and bankruptcy of Worldcom. As a leader, you are expected to lead by example and set your organization up for long term success. When CEO of Worldcom, Bernard Ebbers, was told about an internal effort, from with Worldcom, to create a corporate code of conduct, he stated that the project was a, “colossal waste of time” (Kaplan & Kiron, 2007, p. 3). It’s clear that the organizational culture within Worldcom was condemned from the beginning. Any values or ethical beliefs were corporately unstructured and left to individual morals of the Worldcom employees.
Cultural Influences within an Organization Worldcom’s organizational structure was one of pandemonium and complete lawlessness. Worldcom’s CEO, Bernard Ebbers, stated, “Our goal is not to capture market share or be global. Our goal is to be the No. 1 stock on Wall Street” (Kaplan & Kiron, 2007, p. 4). Ebbers was so enthralled with the intention of creating the highest possible stock value for the company that he never thoroughly thought out the structure by which his growing corporation needed to operate under. Kaplan & Kiron state (2007) that Worldcom’s growth through acquisitions led to a hodgepodge of people and cultures. One accountant recalled, “We had offices in places we never knew about. We’d get calls from people we didn’t even know existed.” By this it’s clear to see that Worldcom did not have a defined organizational structure that allowed its employees to share the same organizational culture. By having so many people in various locations, it was impossible of every accounting group in the company to know what each accountant was altering or being force to alter.
Influences of Organizational Culture Ebbers and Scott Sullivan, the Chief Financial Officer at Worldcom, frequently granted compensation beyond the company’s approved salary and bonus guidelines for an employee’s position to reward selected, and presumably loyal, employees especially those in the financial, accounting, and investor relations departments (Kaplan & Kiron, 2007, p. 3). Ebbers and Sullivan directly influenced the organizational culture by which Worldcom’s employees operated in by having them revise the accrual releases and adjust the expense capitalization reports in order to make the expense-to-revenue ratio reflect the desired 42%. At first, the practice of altering the expense-to-revenue reports was met with great confrontation from individual employees. These employees seemed to contain an embedded personal ethical belief that would not allow them to participate in unethical business practices. However, since the organizational culture had become ignoble, entrenched by the senior leaders, these employees satisficed (Robbins & Coulter, 2012, p. 211) to the changes against their better judgment and distorted the reports. It’s evident that the tainted organizational culture that the once loyal and moral employees at Worldcom operated in finally had influenced them into unethical business practices. Leaders in today’s world have many difficult challenges. They have to create the means and the opportunities to infuse their employees with new ways of looking at themselves and their capabilities. Leaders' ideologies and values must be communicated effectively, accepted by employees, and then translated into productive methods of thinking and working. The useful techniques for overcoming these challenges fall within the domains of evaluating and transforming organizational cultures. Worldcom was once one of the most powerful and influential companies in the telecommunications industry. It’s because of unethical organizational culture imposed upon the employees of Worldcom by their senior leaders that Worldcom no longer exist today. An understanding of culture, and how to transform it, is a crucial skill for leaders trying to achieve strategic outcomes. Leaders have the best perspective, because of their position in the organization, to see the dynamics of the culture, what should remain, and what needs transformation. This is the essence of success.
Steps Worldcom Could Have Instituted to Prevent Fraudulent Reporting In today’s world the story of fraudulent accounting practices are becoming all too common. The article on Worldcom is just one example of many unethical businesses that are operating in the global economy today. So how could Worldcom have prevented fraudulent accentuating practices from running ramped? The first step would be to screen your personal thoroughly before hiring them. In the case of Worldcom, CEO Bernard Ebbers lacked leadership the technology experience that was needed to ethically run a multi billion dollar corporation. Ebbers may have been an excellent sales man, but should never have been given total control of the company and be able to only allow certain people access to financial records. This leads me to my next step, which would be implement internal controls to reduce risk. Worldcom did use an outside individual, Arthur Andersen, to do an internal audit review. However, Andersen was heavily restricted on his access to internal accounting information. As good practice, there should be several employees who share the responsibility of corporate accounting. One easy way to uncover an unethical employee is to mandate that all accounting employees take at least one consecutive week of vacation from their duties. Typically, fraudulent employees will resist taking extend time off for fear of other people discovering their wrong doings. My next step to prevent fraudulent accounting at Worldcom would be to implement an anonymous theft reporting system. Employees at Worldcom felt they did not have an independent outlet for expressing concerns about company policies or behavior (Kaplan & Kiron, 2007, p. 3). Every company should implement an anonymous system that is easy for employees, vendor, and contractors to report fraudulent behaviors. Finally, the most effective way Worldcom could have prevented fraudulent practices is to have the leaders lead by example. An effective way to prevent fraud in your business is to create a positive work culture. It is important that the business owner and senior management serve as role models of honesty and integrity. If the individuals at the top take a careless approach toward company policies and procedures, they are inviting their employees to do the same – or worse (Maryland Associates of CPA’s, 2007).
References
Hill, C.W.L., & Jones, G.R. (2001) Strategic Management. Houghton Mifflin.

Kaplan, R.S., & Kiron, D. (2007, September). Accounting Fraud at Worldcom. Harvard business school, 9-104-071, 1-18.

National Defense University. (2001). Strategic Leadership and Decision Making. Retrieved from http://www.au.af.mil/au/awc/awcgate/awc-thkg.htm#critical
Maryland Association of Certified Public Accountants, Inc. (2007). Money Management. Retrieved from http://www.macpa.org/Content/16215.aspx
Robbins, S.P., & Coulter, M. (2012). Management. Global Edition, Pearson.