Introduction in groups than on their own was first

Introduction

 

The widely held belief that people perform
better in groups than on their own was first challenged by Irving L. Janis. He
developed the concept of groupthink which describes the effect that occurs when
concurrence-seeking in cohesive groups exceeds the rationality of its members. Groupthink
appears in various environments, such as in politics, the military or the
corporate world. It is especially critical if the managerial levels of an
organization are affected. The purpose of this paper is to carefully consider how
mismanagement leads to groupthink which may cause a company crisis and whether
its consequences are fatal.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

In Section 1 the paper first depicts how
the role of groupthink affected the collapse of the airline Swissair and second
applies scientific methods to it, while Section 2 covers the same aspects with
regard to British Airways and Marks & Spencer.  Section 3 relates the Empirical Cycle to the
before mentioned real-life examples.

 

 

Section 1: Swissair: The “flying bank”

 

Until
its declared bankruptcy in 2002 Swissair was for most of its 71 years of
existence the national airline of Switzerland. It was thought to be so
financially stable that it was nicknamed the “flying bank” (Hermann, & Rammal,
2010). While external factors like the terrorist attacks of September 11th, 2001 did play a
role in Swissair’s downfall, Hermann and Rammal (2010) argued that if ??? had
not been for the previous mismanagement of the company, Swissair would have
been able to survive said external factors.

 

Section 1.1: The Role of Groupthink in the Collapse of
Swissair

According to Janis (1971),
a key characteristic of groupthink is that group members remain loyal to the
group by sticking to previously made decisions and concepts even though they
are not working out. This is exactly what happened to Swissair’s supervising
board and its CEO. Not only was the number of members on the supervising board
reduced from 26 to only ten members by Jeffrey
Katz, the CEO of the time, it also
did not have a single member with experience or expertise in the airline
industry (Hermann, & Rammal, 2010). This elimination of expertise acted as
self-censorship which is one of the eight symptoms of groupthink as
defined by Janis (1971). Since all of the board members were from somewhat
similar backgrounds, either political or financial, the risk of someone
deviating from the group’s consensus was much slimmer. Furthermore, the board and its
CEO refused to learn from past mistakes. In the 1990s Swissair initiated the
“Hunter Strategy”, according to which instead of forming an alliance with other
airlines, Swissair acquired small airlines to grow its market share (Hermann, & Rammal,
2010). However, the small airlines acquired, such as Sabena, only recorded
losses, yet the board continued investing money in them. This demonstrates a
number of Janis’ (1971) symptoms. The group collectively seemed to have
constructed rationalizations to write off warning signs, such as the reported
losses. An overall illusion of invulnerability led the group to become over-optimistic
and willing to take extraordinary risks. Had there been just one expert on the
board, he or she would have been able to point out the warning signs. By
eliminating all experts from the board, the illusion of unanimity was created.
According to Janis (1971), it describes the false assumption that
anyone who does not speak up against the decisions made is fully agreeing with
them. However, in the case of Swissair, anyone who just so much as had the
knowledge to speak up was eliminated.

 

Section 1.2: Concepts Applied to Swissair

When
Katz reduced the number of directors, who then were no longer experts in the
airline industry, but only politicians and financial experts, this led to a
lack of essential knowledge which was not compensated by the transfer of tasks
to experts (Hermann, & Rammal, 2010). When the then chairman Eric Honegger
mentioned that “the management has the know-how to lead the airline” (Ruigrok,
2004, p. 58), this can be explained by means of the method of
authority mentioned by Gravetter and Forzano (2009). Following this concept,
people trust in the supposed expertise of others, often without questioning
those (Gravetter, & Forzano, 2009). According to them, not all experts are
reliable, they might be biased or subjective which can be seen in the Swissair
case when Honegger relied on the decisions made by Katz. Among others, Katz
elected Lukas Mühlemann who was presumably biased due to his former position. Nonetheless,
no concerns were mentioned by the executive board (Hermann, & Rammal, 2010).
Furthermore, Katz and the executives refused to cooperate with Crossair, like
Swissair owned by SAirGroup, and as a result, forfeiting profit. A reason,
therefore, might be that Katz wanted to take the market share from Crossair and
thus receive more power and influence in the company (Hermann, & Rammal,
2010). This can be explained by the conflict paradigm mentioned by Babbie (2004),
when conflicts occur due to competing interests of different groups and because
people want to dominate others but not be dominated themselves, like Katz in
the Swissair case. Another explanation for the behavior of Katz and the board which
aggravated the crisis repeatedly could be the illogical reasoning. Following
Babbie (2004) every person sometimes makes decisions upon illogical reasoning,
this might have happened to Katz in this case.

 

 

Section 2: British Airways and Marks & Spencer

 

The second example contains two cases which both happened in the British
corporate management. British Airways (BA) as well as Marks & Spencer (M
& S) were both well-known and successful companies that never really had
any serious issues in their tough markets. Whereas “M & S was the top UK
retailer of quality food and clothing” (Eaton, 2001, p. 185), BA was an
international airline that also made good profits. However, these success
records were interrupted around 1996 when both managements became
over-optimistic in regard to expansion and globalization. The senior managers
agreed to ruinous decisions and “their corporate strategies were business
policy fiascos” (Eaton, 2001, p. 184).

 

Section 2.1: The Role of Groupthink in the Downfall of British
Airways and Marks & Spencer

In
the case of BA and M & S symptoms of groupthink defined by Janis (1971) were
apparent. The most striking characteristic was that both organizations
encountered the illusion of invulnerability (Eaton, 2001). They were
“over-optimistic and keen to take unjustifiable risks causing them to fail to
respond to warning signals” (Eaton, 2001, p.!!!).
Although sales and profits fell sharply, BA and M
& S insisted to keep their global strategies. Competition grew and
profitability fell due to globalization, causing the prices of BA’s
shares to fall from 740 to 300 and M & S’s from 590 to 300 during 1998-1999
(Eaton, 2001). The illusion of invulnerability provided them with reassurance
to keep to the strategy instead of preventing a further decline of their market
value, as both companies had the idea that their past years of success will be
continued. “Such an attitude is congruent with groupthink in that there
develops an unquestionable belief in the morality and self-righteousness of the
in-group” (Eaton, 2001, p.!!!). Another striking
characteristic of groupthink in the examples of BA and M & S is the illusion
of unanimity, defined by Janis (1971, p.!!!) as
an illusion “shared within the group concerning almost all judgments expressed
by members who speak in favor of the majority view”. The
firms’ managements felt attacked by criticism and had a negative view of
competitors. Accordingly, “unanimity was fostered as senior managers insulated
themselves from outside views” (Eaton, 2001, p. 191). When BA, for example, was confronted with criticism about
their patriotic image which did not fit anymore, the senior management just
ignored it which resulted in their train of thought that there is complete
agreement. Thus, BA’s organizations’ boards continuously tried to prevent any
non-consensus, without understanding that their policy might fail.

Wie gings weiter?

 

Section 2.2: Concepts Applied to British Airways and Marks & Spencer

The method of authority described by Gravetter and Forzano (2008) can be
applied to BA and M & S. Both were successful companies and the
“consistently high profits led to managers believing their own rhetoric and
invincibility” (Eaton, 2001, p. 187). Employees mostly accepted their policies
since they seemed to be more acquainted with that area than the workers themselves.
Nevertheless, there were some critics who strongly remarked their doubts but these
concerns were not taken seriously by the management. The senior managers
adhered to their strategies which can be linked to another concept. The method
of tenacity describes belief perseverance or superstition even though there is
contrary evidence (Gravetter, & Forzano, 2008). Once the managements of BA
and M & S decided to launch their strategies of globalization, “they
disregarded all contrary evidence and, indeed, mainly omitted either to seek
verification of the facts they were given or to call for new evidence” (Eaton,
2001, p. 184).  This, later on, contributed
to the crisis situations of both companies.