Posted: April 11th, 2015

Lehman Brothers

Lehman Brothers experienced much success and a major downfall during the reign of Richard Fuld. This was dependent on how power (authority/influence over other) is utilized. Fuld enjoyed various sources of powers in Lehman Brothers Company. To begin with, Fuld enjoyed the positional power by virtue of holding the CEO position of Lehman Brothers from 1994 until its down fall due to bankruptcy in 2008. Next, Fuld possessed expertise power. Fuld worked for as the CEO of Lehman Brothers for many years and therefore had the expertise and knowledge regarding the management of this company. This is attributed to the fact that during his reign the company experienced much growth in terms of profits and expansion. In addition to this, he was considered amongst the best Lehman managers (Daft, and Marcic, 2012).

Coercive power was another source of power for Fuld’s management. Fuld had the ability to influence his employees and other staffs. Majority of his staff and employees portrayed him as person whose appearance was intimidating and usually grunted rather than talk. For this reason, Fuld had been nicknamed as “Gorilla.” Apart from this, his explosive influence was also coined on the threats, sanctions or punishments he inflicted on his staff and employees. For instance, he once fired and berated some of his employees for improper conduct and breaking the organization rules. Furthermore, Fuld had the referent power which was coupled with reward power. In regards to referent power, Fuld maintained an interpersonal relationship with his employees and staff. This was limited to those he liked as well as those who were productive. This was followed by reward power based on positive appraisal, salary increment and promotions. This motivated and influenced workers efforts making Lehman Brothers Company one of the highest performers in the industrial sector (Seperich, and McCalley, 2006).

Besides the success Fuld integrated in the Lehman Brother’s company, he also contributed to its downfall. However, Fuld attributes the downfall to the harsh economic crises facing the United States and the world at large. Despite this notion, it is believed Fuld played a major role in this downfall. This is pegged towards his abuse of power. First of all, his excise of his position and expertise power raised much concerns amongst many of his advisors. Prior to the collapse of the company, Fuld had declined to accept offers aimed at saving the company amid advice from his advisors. On the contrary, Fuld employed measures and strategies based on his own efforts which failed terribly. Failure to involve others in decision making pertain to the critical state of the company was his greatest abuse of power (Daft, and Marcic, 2012).

On the part of coercive power, it is highly recommended to shape employees behavior and ensure organization’s rules and regulations are followed. In respect to Fuld, his coercive approach installed fear in his employees that demoralized them. This in turn affected his interpersonal relationship with the employees. Most of the employees worked or adhered to the rules and regulations not out of willingness but due to fear of victimization and losing the job. Furthermore, this was much worsened by his rewarding criteria. As earlier mentioned, his attention was directed towards those he liked and performed well. Favoritism is a bad vice which highly demoralizes the employees as well as diminish their productivity. Despite the company flourishing for a long period of time, employees’ productivity was tied to maintaining their jobs instead of company’s growth (Seperich, and McCalley, 2006).