Essay on "Management Planning: The Failure of Worldcom"

Essay 4 pages (1317 words) Sources: 3 Style: APA

[EXCERPT] . . . .

management planning: The failure of WorldCom

(A lack of) management planning: The failure of WorldCom

The former corporate behemoth 'WorldCom' has become such an infamous symbol of accounting fraud that it is easy to forget the company was once one of Wall Street's hottest commodities during the dot.com bubble. But its investors were not simply victims of the 'irrational exuberance' of the late 90s/early 21st century boom and bust. WorldCom's presentation of its financial status to its investors was a blatant fraud. Lackadaisical management of the increasingly unruly conglomerate, deregulation that permitted conflicts of interest between investment banking firms and the organization, and 'creative' accounting that inflated the corporation's net worth were all factors in the losses suffered by innocent investors and employees.

Management planning: Strategy

WorldCom, as well as the center of an accounting scandal, was also a case of "failed corporate governance" (Moberg & Romar 2008). Its CEO, Bernie Ebbers, was famous for challenging the supremacy of AT&T and leading WorldCom through what was later called a dangerously aggressive acquisition strategy. This strategy briefly brought WorldCom to the status of the second-largest long distance telephone company in the United States and one of the largest companies worldwide (Moberg & Romar 2008). "Aggressive" may be insufficiently strong a term: WorldCom spent over $60 billion in pursuit of 65 acquisitions from 1991 and 1997. The planning function of management is often said to be "looking ahead and chalking out future courses of action" by setting goals but Ebbers' goal mainly seemed to be designed to inflate the company's stock price by any means possible (Planning function, 2009, Management study guide). By 1997, WorldCom's stock had risen from pennies to over $60 a share and during the height of the Internet boom, it was a media darling. "As the stock value went up, it was easier for WorldCom to use stock as the vehicle to continue to purchase additional companies" (Moberg & Romar 2008).

WorldCom's strategy of 'acquire at all costs' was breathtakingly expansive not just because of the number of businesses it acquired, but the range of services. According to its own website at the height of its popularity, WorldCom provided communications services for tens of thousands of businesses, carried more international voice traffic than any other company, a "significant amount" of the world's Internet traffic, and operated a global IP (Internet Protocol) connection in more than 2,600 cities and in more than 100 countries and 75 data centers on five continents (Moberg & Romar 2008).

Management planning: Operations

The rapid acquisition of all of these companies revealed the organizational weaknesses of Ebbers' strategy. Integrating businesses as large as MFS Communications and MCI Communications into WorldCom's fold proved an insurmountable challenge for Ebbers' slapdash management style. Customer service was one of the organization's greatest weaknesses, a critical flaw in a communication company, as millions of dollars can depend upon reliable communication between users: "One business customer's service was discontinued incorrectly, and when the customer contacted customer service, he was told he was not a customer. Ultimately, the WorldCom representative told him that if he was a customer, he had called the wrong office because the office he called only handled MCI accounts" (Moberg & Romar 2008). "Dozens of conflicting computer systems remained, local systems were repetitive and failed to work together properly, and billing systems were not coordinated (Moberg & Romar 2008).

Management planning: Tactics and corporate ethics

WorldCom's management style was sloppy -- and its accounting strategy was downright unethical. "In an effort to make it appear that profits were increasing, WorldCom would write down in one quarter millions of dollars in assets it acquired while, at the same time, it "included in this charge against earnings the cost of company expenses expected in the future. The result was bigger losses in the current quarter but smaller ones in future quarters, so that its profit picture would seem to be improving" (Moberg & Romar 2004).… READ MORE

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