(MG629) Leadership and management assignment discussing the management of Theranos under the leadership style of Elizabeth Holmes

Question

Task: Use ‘Theranos Inc.’ a health diagnostic firm to critically analyse leadership practices and firm performance using academic theory in your leadership and management assignment. You are required to discuss the leadership style of Elizabeth with reference to how well the firm performed under her reign as founder and CEO. Include leadership and management theories and evaluate the organisational performance in relation to the key performance indicators. Analyse the various risks, legal issues, ethical issues and various stakeholders’ expectation.

Answer

Introduction
Developing management and leadership is the integral part for organizational success. Effective application of appropriate leadership skills will ensure the growth of business and inspire workers to improve their engagement level (Al Khajeh, 2018.). The leadership and management assignmentwill shed light on the growth and fall of Theranos under the leadership of the company Elizabeth Holmes. The leadership and management assignmentwill evaluate the organizational context and analyze the impact of the leadership skill of Elizabeth Holmes that led to the fall of the business. Despite achieving high level success and improving the value of the company up to $9 billion, Holmes has failed to maintain its position in the market due to unethical business practices. The leadership and management assignmentwill elaborately discuss the unethical business practice that has been performed in Theranos under the leadership of Holmes and examine the factors that are responsible for this business deception.

Background of organization discussed in the leadership and management assignment
Theranos is the US based Private Corporation that aimed to revolutionize the medical industry by introducing breakthrough health technology. The company addressed in the leadership and management assignmentwas founded by Elizabeth Homes who was only 19 years back then and the business has been able to generate $700 million investment from venture capitalists and the private investors. It enabled the company to reach the market valuation to almost $10 million between 2013 to 2014 (News.miami.edu, 2021). Elizabeth Holmes has claimed that her team has devised a technology that only requires a small amount of blood to perform any type of blood test. However, Holmes has failed to continue her charade as the validity of the Theranos’ technology has come under investigation after 2015 when relevant question were raised by investigative journalist at Wall Street John Carreyrou, medical research professor John Ioannidis and biochemist specialist Eleftherios Diamandis. After that, the company discussed in the leadership and management assignmenthad to face a string of regulatory and legal challenges that affect the market value of the organization. It also affects the reputation of Elizabeth Holmes as her value has been from 4.5 billion to zero. After witnessing several legal complications, the company was finally dissolved in 2018 and the CEO and COO of the organization, Holmes and Sunny Blawani were charged with wire fraud and conspiracy (Edition.cnn.com, 2022).

Management vs Leadership
Management plays a vital role in controlling a group of individuals to achieve a defined objective or goals in an organization. As per the leadership and management assignment findings they set out to accomplish those interventions through budgeting, staffing and organizational structuring to follow towards a common mission. Management of Theranos was weak during the discovery period as the managers were aggressive and reluctant to share credit, but later on they fostered a collaborative and engaged team environment. For instance, the managers of Theranos were unable to create an aura of control in the medical health technology of blood samples relating to HIV and AIDS (Patrick, 2022). On the contrary, leadership is the ability of an individual to motivate, influence and render others contributing positively towards the organization’s success. Leaders mainly focus on thinking ahead and capitalize more opportunity to set a new direction in the group. Elizabeth Homes often paused to listen to the insights of the subordinates and build loyalty across their diverse team members. As per the leadership and management assignment the leader of Theranos believed in communication, where too much communication can confuse employees but nothing can destroy loyalty faster. Therefore, managing and leading are two stepping stones that are linked to each other within a professional setting of an organization.

Key leadership and Management Theories discussed in the leadership and management assignment
Leaders are the integral part of organizational development and under their guidance; a company can thrive towards success or face critical challenges that impact on growth of the business. For instance, it is found in the leadership and management assignmentunder the leadership style of Steve Jobs, Apple has become one of the most popular and valuable tech companies that have revolutionized the mobile phone by incorporating new and innovative features to attract target customers. On the other hand, Mark Zuckerbarg, one of the youngest inspirational leaders is another example of great leader who redefined the community connection by introducing Facebook. However, leaders are not always able to incorporate successive styles within the organization that can ensure the success. As per the leadership and management assignment one of the prime examples is the case of Theranos Company which got dissolved due to the unethical handling by its leader. Based on the research of Saputra and Mahaputra (2022), strong application of principle and ethics within the business is the primary responsibility of leaders. Leaders are responsible for encouraging employees towards affiliation and maintaining connection that will ensure the transparent exchange of vital information. It is found from the leadership and management assignment that Elizabeth Holmes once showed prominent leadership characteristics that put her in the list of 100 influential people in the Forbes List. The youngest self-made billionaire has tried to change the course of the health industry by introducing Theranos to reduce the complication in blood tests. She was optimistic in nature and possessed effective communication skills that attracted others to pay attention to her opinion. According to trait theories, it is assumed that people inherit some special characteristics and qualities that made them better candidates for leadership. Application of the theory helps in identifying the particular characteristic that is shared by leaders. For instance, self-confidence and optimistic nature could potentially link to the great leader characteristic. Elizabeth Holmes has shown promising leadership traits at a very young age that add advantage to her career and she has successfully convinced others to join her unique vision. While the research of Gandolfi and Stone (2018), has reflected the limitation of trait theories is that many people possess the trait of leadership but not all individuals can seek the position of successful leadership. On the other hand, people who lack some of the traits of successful leaders often acquire the position of leadership therefore, it can be concluded that there are no definitive traits that can ensure the success of a leader.

Opposed to the trait theories, the behavioral theoriesmentioned in the leadership and management assignmentsuggest that great leaders developed the leadership characteristic and there are no inherit qualities that can ensure the success of leaders. This theory has mainly emphasis on the action of the leader rather than the mental qualities or the internal states. People can learn leadership qualities through observation and teaching (Xieet al. 2018). In this case, Holmes has shown excise optimistic characteristics and witnessed early success in convincing investors to invest in her vision. It is found from the leadership and management assignment she also was able to motivate her team members and encourage them to be involved with the organizational activities efficiently. However, the obsessive nature of Holmes has critically affected her binding with the employees and she would perform unethical acts to cover up the flaws in the technology. In addition to that she also tried to hide information that was inconsistent to the success of the technology. Her initiative has degraded her relationship with other investors and employees that resulted in the withdrawal of Walgreen as the investor. Therefore, developing leadership characteristics is not only the solution for individuals, application of relevant strategies based on the situation is another important factor that needs to be maintained by the leaders (Purwantoet al. 2020). As per the leadership and management assignment leadership quality is majorly driven by behavior and they are responsible to be mindful about their behaviors that would motivate others to increase the engagement level of the common purpose of business. Employees have also accused the top management of Theranos of being intimidated to them and creating a fearful working environment that disables them to work freely in the organization. Contrasting nature of the behavior of Elizabeth Holmes is also considered as the major reason for the spiral down of the company at an early stage.

Application of classical management theory within the organization enables management to emphasize on the involvement of hierarchy and assign specialized roles to the workforce so the efficiency level of the business can be optimized. This theory may be less common in practice but it is still capable of developing satisfactory results for some industries. The research of Huertas-Valdivia et al. (2019), has reflected in the leadership and management assignmentthat employees must be selected based on their skill and qualities that would ensure the improvement in the overall business performance. It also provides an opportunity to streamline the operation so that the aim of improved productivity can be achieved. Elizabeth Holmes has aimed to revolutionize the healthcare industry by introducing micro equipment that will test the blood with the application of small amounts of blood. To achieve the goal, it is important for the leaders to equally contribute in the project development. However, Holmes did not possess the deep knowledge about the engineering requirements that are essential to develop the miniature blood analysis system. As per the leadership and management assignment the leadership style of Holmes is the primary example of negative charismatic leadership as she was more concentrated on protecting the image and vision of the company rather than practical application of the technology. As a visionary company, classical management theory is not appropriate for Theranos as it required equal contribution of all employees to achieve the vision. Centralized structure of leadership may hold the function of organization and allow the management to supervise the employee’s action but disable the company to emphasize on the job satisfaction and development of human relationship that is also important for the success of the establishment (Alqatawenah, 2018). It is found from the leadership and management assignment that management of Theranos has created immense pressure for their employees and restricted the implementation of ideas that may help the company to overcome the adverse outcome. Higher management of Theranos has not been able to develop a culture where employees feel comfortable to express their viewpoints. On the contrary, employees were forced to separate from each other and restricted to communicate in a transparent manner. Analyzing the leadership style of the organization, it has been clear that the organizational culture of Theranos has been filled with deception, surveillance and high levels of insecurities that affect the function of employees. As per the leadership and management assignment despite starting the journey with incorporation of strategies that value the people of business, Theranos was unable to continue the ethical practice and started firing people only because of expressing their views (Cummings et al. 2018). This type of negative authoritarian practice of leadership has encouraged employees to speak and Tyler Shultz and Erika Cheung, two of the employees of Theranos, were the whistle-blowers that ousted the fraudulent activities performed by the higher authorities of the organization.

As per the leadership and management assignment involvement of Contingency theory of leadership is integral for an organization to address the effectiveness of a leader whether the leader is contingent or not to suit a particular situation. For instance, Balwani, the chief operating officer working as a leader during the initial stages of operation in Theranos continuously yelled orders at employees and humiliated them if they did not follow his commands (Winter, 2019). This created a negative work environment and addressed the need of contingency theory to apply in the leadership skills so as to manage the contingency situation of high temper firings and turnover rate that was most predominant at that situation.

Organizational performance and key performance indicators addressed in the leadership and management assignment
Theranos was running up massive losses for several years as they instilled deceptive practices with investors about its success. As per the leadership and management assignmentreport, the value of Theranos was $10 billion as Elizabeth Homes claimed the firm to revolutionize as a blood-testing industry (Tun, 2022). The organization raised approximately $724 million of capital from private investors and venture capitalists. Net worth of Theranos also dropped from $4.5 billion to nothing in 2016. It s found in the leadership and management assignment that there was a lack ofgrowth opportunity in Theranos due to the consideration of an accumulated deficit of $376 million in 2014 and had no revenue in 2012 and 2013. The final revenue of Theranos before it had to close down was $429,000 in 2015 and faced a deficit of $585 million since 2003 (McEvoy, 2021). Theranos even started to issue private stocks at 17 cents after recovering their payroll from the 2009 financial crisis and faced increased financial trouble, burning through $1 million to $2 million in each week. According to a report, the market share of Theranos was authorized with two stocks at $54.2 million and $46.3 million in 2017 (pitchbook.com, 2018). As per the leadership and management assignment findings, the fall of market share in the organization was due to the multimillion-dollar scheme to deceive not only the investors but also the doctors and patients from the year 2010 to 2016 which was afterwards revealed during the case jurisdiction.
Market share of an organization also increases due to the exposure of the firm towards multinational enterprises and political boundaries. It was evident from the case of Theranosmentioned in the leadership and management assignmentthat most powerful politicians and business people of America were involved with the case, which subjected the organization to face a massive loss due to negative brand exposure around the international scale (Haque and Yamoah, 2021). Theranos never developed a broad customer base and had a positive customer satisfaction rate in the organization at certain times due to their inventions in pinprick technology. Moreover, as detection of 1000 objectionable substances was clearly evident from their health tests in a drop of blood, the organization's promise to revolutionize human happiness was unchecked by most of their customers (Flam, 2021). As per the leadership and management assignmentTheranos had "poor records, uncleared medical devices and was mishandling complaints regarding the auditing and supplier qualifications in their production department. Moreover, the design of blood testing equipment and tools was not validated under defined criteria or simulated use conditions. There was poor employees' retention in Theranos due to the mismanagement of the organization's leader and aggressive behavior that led to counteract agitation and toxic culture in the workplace. According to a leadership and management assignmentreport, Elizabeth Holmes also fired about 100 workers without notice that also leveraged them to pay a $500,000 penalty to the American government (Mukherjee, 2018). Though Theranos tried to keep their customers intact by emphasizing on pinprick technology but failed to retain maximum customers due to the expensive nature of their blood tests and diagnostic costs. Therefore, customer retention was low in Theranos due to which they failed to implicate long-term growth on the business intervention.

Evaluation of risks, legal and ethical issues
Leadership and management come with various risks such as possibility of reputation loss, accountability, physical harm, financial complications and failure of business deals. Effective risk management needs to be implemented to detect, assess and control threats of an organization's earnings and capital. It is found from the leadership and management assignment that several risks were faced by Theranos due to poor financial structure and mishandling of effective equipment since their years of operation. As per the leadership and management assignmentreport, Theranos raised more than $700 million by deceiving investors for years, which was one of the major legal issues in the organization (Tun, 2022). As a result of such nuisances, the leader lost control over the company and returned millions of shares to the court in terms of fraud charges and was barred from serving as a director of Theranos for 10 years. As per the leadership and management assignment findings an ethical issue was raised against the director of Theranos due to which Elizabeth Holmes and other managers were subjected to three charges of wire fraud that caused a huge breach of ethical standards and principles such as integrity, honesty and credibility (Hallinger and Kovaevi, 2021). Ethical issues mainly involved due to deceptive practices of Theranos, where they signed non-disclosure and confidentiality agreements without prior notice. As they were unable to design an ethical culture within the leadership and management structure of Theranos, there was confrontation of ethical nuisances. They also failed to meet the expectations of stakeholders by performing ethical tasks of customers about product and related aspects. Theranos did not perform social and business responsibility of corporate, including satisfactory product performance (Jurkiewicz, 2019). As per the leadership and management assignment the reason for poor stakeholder expectations from Theranos was due to the deceptive practices carried out by Elizabeth Holmes and management for several years. Thus, legal and ethical issues are potentially important under the structure of leadership and management to make a conscious decision and ensure ethical conduct in running a successful business (Bushuyevaet al. 2019).

Conclusion
It can be concluded from the leadership and management assignmentthat management and leadership are quite important in the business structure to recover legal and ethical complications in the firm. Involvement of key leadership and management theories in the organization structure is crucial to endorse strong collaboration and communication within the team members and ensure the success of leaders. Proper usage of key leadership and management theories in Theranos was important to revolutionize the medical health diagnostics and blood test kits by incorporating new and innovative features to attract target customers. It is found from the leadership and management assignment that Theranos was not able to maintain their key performance indicators such as market share, growth, customer satisfaction and customer retention rate due to which they have faced several backlashes. It was quite important for the organization to evaluate legal and ethical issues to prevent the nuisances that recuperated within their leadership and management structure.

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