Developing Leadership and Management Skills Case Study

Introduction - Leadership Failures at Theranos: A Deep Dive into Ethical Issues

Effective leadership and management skills should be used in the organization which will help in improving the effectiveness and efficiency of company in carrying out their work. This will help in improving the overall profitability of the firm and leads to enhancing its operations. This report is based on Theranos Inc which operates as clinical laboratories. Pediatrics, Geriatrics and oncology are the areas which have been specialist by company. This report is based on analysis of leadership style used by Elizabeth and its impact on performance of enterprise. This assignment will also help in determining all legal and ethical issues which are prevailing in the company and how these issues have been impacted the performance of organization.

Analysis existing leadership style

Theranos Inc was establishing by Elizabeth Holmes in 2003 as a consumer healthcare technology which aim at bringing changes in blood testing industry. For starting the company Elizabeth raises funds through venture capitalist and private investors. On the basis of cited case, 700 million U.S. dollar has been raised from venture capitalized and rest form other sources which lead to the valuation of company at 9 billion dollar (Financial position of Theranos, 2022). The company claimed that they identify new and innovative technology through which they can conduct various blood tests by using small amount of blood which later on proved to be false. Various researches has been conducted to determine the accuracy of the technology been launched and it has been proven that result obtained from the technology is not effective. In 2022 all the three founder were founded guilty and were sentenced to prison for 11 year and 3 month. This show that the company adopts all unfair measure to became profitable which impact the growth of organization.

Leadership style which was used by Elizabeth wasn’t effective as she focus on putting various restrictions on employees. She focuses on controlling thoughts and behaviors of individual by placing too many restrictions on them. Company has focused on setting up of computer model by which employees could not share information among them and all the sources for chats was blocked (Cowden et al, 2020). There was strict restraint on working as cross functional team as this involves communication between employees which she regards as inappropriate. She believes that if employee’s interpersonal relationship improves than they will distract from their goal and will have negative impact on the success of organization. Working environment in Theranos could be understood by following points:

Confidentiality

Elizabeth believes that employees should not include or disclosed to all the meeting in the organization. She believes on keeping the entire information secret to the employees and do not focus on conducting open communication within firm. All meeting were held in windowless room from where information could not be gone out of room (Dundes, Buitelaar and Streiff, 2019). Contracts were signed with employees regarding non-disclosure of meeting information to other employees. This type of leadership impacts communication within organization and lead to reduction in the coordination of employees. This shows that transparency was not followed in leadership style of Elizabeth. This type of behaviors has negative impact on the performance of employees as they well not feel as part of organization and lead to reduction in their motivation level.

Daunting

Successful leaders believe that employees should be provided fearless environment which will help in improving their performances. Unlike other, Elizabeth believes that employee’s performance could be improved as well as enhance if they work under pressure and fear (Fiala and Diamandis, 2019). This led to formation of rigid rule regarding the non completion or delay in completion of work. Meeting was always held as a verbal battleground in which if someone object her decision than they need to face many penalties. This daunting behavior of Holmes leads to reduction in innovation within company and creates a venomous work environment. This type of work culture will lead to reduction in the performance of employees as this will result in increasing stress and anxiety level of workers.

Duplicity

Holmes misguides the employees regarding the purpose of work they are doing. This involves huge number of lies to all employees, investors and general public regarding the working of bold testing devices produce by Theranos. It has been identified that Holmes covers their fraud work by connecting their work to noble causes. In meeting with staff members Elizabeth convince people by saying that company is working toward building religion (Impact of Elizabeth leadership on Theranos, 2023). She also claimed that bold testing technology which is been created by company will be best gift for humans and anyone not want to work for humanity can leave organization (Furlow, 2022). This misleads employees towards main objective of company and breaks trust of employee.

Follows micromanagement

Employees should be allowed to take some decision according to their role and allow describing reason behind such decision. Elizabeth follows concept of micromanagement which provides rights to manger in taking decision regarding all aspects of workers at an extreme level. She focuses on monitoring and involvement at every minute in organizational operation which create a negative environment for worker (Hans, 2020). It has hampered creativity within organization and left no scope for employee’s development and growth. This has also impacted the performance of employees as their motivation and satisfaction level has been reduced because they will not provide scope regarding their development. It has also leaded to reduction in creativity and innovation of employee’s which will eventually impact growth of the organization.

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Apathy nature

Leaders should focus on improving working environment for employees that will enhance employees’ productivity. In Theranos, Holmes did not focus on maintaining work- life balance of employees. She lacks sympathy towards employee’s condition and only focuses on finding measures by which organization’s profit could be increased (Jeske, 2020). There were no fixed working time period for employees and they were forced to work overtime. Holmes believes that excessive pressure will improve employees’ performance so she used to create pressure on employees for completion of task. This results into reduction in employee’s morale and impacts performance adversely.

Sense of superiority

Holmes believes that success of organization was linked to her handwork and dedication. This makes her ignoring the work of employees and importance of their feedback in effective working of the organization. She believes that her decisions are best and there is no need to take advices of other employees relating to particular task (Kesgin, 2020). Holmes recognized that there is no one better in the decision making process than herself which make her ignoring interest and concern of other regulators and investors. This type of sense of superiority made employees feel left out and create no scope for their overall development. It will lead to reduction in innovation and creativity level of individual as workers are not allowed to develop new skills and techniques.

Unwilling to accept responsibility

Effective leaders aim at taking responsibility regarding performance of employees and try to find solution for improving their performance. Instead to taking responsibility, Elizabeth turns on blame games which involving blaming others for failures in the company. A leader should take responsibility for both success and failure but Holmes only takes ownership of success and during failure she blames it on others (McGinn, 2022). Employees should be provided with appreciation which will help boosting morale of them and help in increasing their productivity.

Lack of transparency

Leadership styles which Holmes follows involve lack of transparency to the employees regarding company’s financial position. Employees are interested in knowing financial position of company which will help in improving their trust & confidence regarding salary and growth of the firm (Trautman et al, 2022.). This had negative impact on working of organization as it leads to reduction in employee’s engagement in the operation of firm. She does not focus on taking proper and appropriate feedback from employees that reduces their motivation level and reduce their productivity.

Rigidity

Holmes believes that policies which ones help in succeeding should be followed for the longer period of time (Witek and Klein, 2023). After conducting research and evaluating existing strategy it was determined that company needs to bring changes in their policies for maintaining stability in their working. She also focused on preparing strict rules for employees which make it difficult for employees to focus on developing new skill by try out new things.

Lack of accountability

The biggest issue in the leadership style adopted by Elizabeth that she lacks the quality of accountability. Good leaders always take responsibility for all success and failure within organization (Meng, 2021). This has negative impact on working of organization as it leads to reduction in morale and trust of employees. This will hamper effective implementation of strategies which results in instability of firm.

From the above evaluation it was identified that Holmes believes in pressurizing employees for improving their performances. Elizabeth uses autocratic leadership style in organization which was not optimum and have negative impact on performance and productivity of employees. She did not believe in improving interpersonal relation between employees and focuses on creating rigid rule and regulation for their working. This is having negative impact on organization’s working as employees were dissatisfied with work culture. This leadership style aims at reducing involvement of employees in decision making process which lead to reduction in motivation and satisfaction level of employees (Nurkidam et al, 2020). Under Elizabeth Leadership, Company was able to gain high amount of profit till 2015. There was high employee’s turnover rate in the company which shows that employees were not happy in working in such environment.

Risk, Legal, ethical issues in Theranos:

Each organization focuses on effectively and efficiently following all ethical and legal rules and regulation. This helps in effective working of organization and maintains scope for sustainable growth. Elizabeth Holmes’s leadership style was not effective which results in generation of ethical and legal issues in firm.

Ethical issues: Various type of ethical issue which has been faced within the Theranos is as follows:

Breaking trust of investors: Company was aiming at producing the devices by which blood test could be carrying out with less amount of blood. They also claim that result obtained from the devices is accurate and results could be shared within an hour after taking test (Ethical issues faced by Theranos, 2023). Through such claims company was able to gain high amount of investment which amount to $724 million. Later on product was found to be fraudulent which lead to incurring huge loses for investors.

Violation of human rights: Every human should be treated with respected in organization. In the leadership of Holmes, she did not focus on improving work condition of employees and only paid focus toward improving company’s profitability (Rogal, 2020). Employees were not provided with right to express their point of view and feedback as open communication was not promoted within organization. Company was not having definite time for the working of employees and mainly forced employee to work for long time period which led to exploitation of workers.

Technology creates impact on human lives: Company should focus on introducing products which will not have negative impact on the health of the individual. Technology which has been produced by Theranos was not optimum which result in providing inappropriate medical result (Tourish and Willmott, 2023). It has been identified that many individual has lost their life as their treatment was based on blood test report which was provided by Theranos technology.

Following Intimidation culture: Employees in Theranos were not satisfied with the culture prevailing in organization. It has been identified that Holmes focus on creating a culture of fear and pressure which will help in enhancing and improving employees performance. This was the unethical act done by Elizabeth as fear will only lead to reduction in the quality of work and will lead to reducing satisfaction among employees.

Legal issues: Theranos faced various legal issues in working of company. Some of legal issues are as follows:

Unavailability of compliance officers: Company was incorporated in 2003 but they did not appoint compliance officer till 2016 (Straker et al, 2021). Compliance officer helps in identifying changes which has been made by government and advices on changes which should be done in policies of the company. The company was not having compliance officer for 13 years which create problem in complying with various rule and regulation.

Not conducting compliance program: It is duty of directors of company to provide all necessary and important information regarding compliances to its employees. These will help in directing their actions in the way which do not create any legal issue. Theranos directors did not conduct any compliance program which could improve employee’s knowledge level and guides them regarding direction in which they need to work (Yu and Campbell, 2021). These later on creating legal issues as policies formed by manager did not compile with existing rule and regulation in country.

Not complying with employ welfare Act: It has been identified that Theranos follow the culture of fear at their work place. There are various employee protection act which have been formed by government which involve Equal pay, Civil right Act etc which aimed at providing right amount of wages to employees. Company faces this issue as they were not following any of the welfare acts and working environment of employees was not accurate.

Breach of contract: Holmes claim that technology produced by company was accurate and have high growth potential. She has gained high amount of investment from them and later on claimed were identified as false (Williams, 2022). Company faced the legal issue of breaching contract with investors as investors suffered from high amount of loses because of false claims.

Theses were various ethical and legal issues which have been faced by company. Because of this entire act Elizabeth Holmes was found guilty for deceit investors for million dollars. She was sentenced for prison in 2018 for 11 years and 3 month because of fault blood testing technology.

Conclusion

It has been concluded form report that effective leadership and management skill should be implementing in organization for ensuring growth and stability. It has been identified that Elizabeth Holmes, CEO of Theranos did not follow effective leadership styles which leads to reduction in satisfaction level of employees. It has been identified that Elizabeth focuses toward improving profitability of company and ignores working condition of employees. Along with this, it has been articulated that Holmes lacks the quality of taking responsibility and blame others for failure. She did not believe in maintaining transparency within company and did not allow open communication between employees. This has been identified that this lead to creation of various ethical and legal issues in organization. Company breaks trust and confidence of investors and general public and did not compile with accurate employee’s welfare regulations.

Refeernces

Books and Journals

• Cowden, B.J., Bendickson, J.S., Bungcayao, J. and Womack, S., 2020. Unicorns and agency theory: Agreeable moral hazard?. Journal of Small Business Strategy (archive only), 30(2), pp.17-25.
• Dundes, L., Buitelaar, M.S. and Streiff, Z., 2019. Bad witches: Gender and the downfall of Elizabeth Holmes of Theranos and Disney’s Maleficent. Social Sciences, 8(6), p.175.
• Fiala, C. and Diamandis, E.P., 2019. Theranos: Almost Complete Absence of Laboratory Medicine Input. The Journal of Applied Laboratory Medicine, 3(5), pp.749-752.
• Furlow, B., 2022. Theranos: the proof that public regulation matters. The Lancet Oncology, 23(2), p.204.
• Hans, G.S., 2020. How and Why Did It Go So Wrong?: Theranos as a Legal Ethics Case Study. Ga. St. UL Rev., 37, p.427.
• Jeske, M., 2020. Lessons from Theranos: Changing Narratives of Individual Ethics in Science and Engineering. Engaging Science, Technology, and Society, 6, pp.306-311.
• Kesgin, B., 2020. Turkey’s Erdo?an: leadership style and foreign policy audiences. Turkish Studies, 21(1), pp.56-82.
• McGinn, R.E., 2022. Startup Ethics: Ethically Responsible Conduct of Scientists and Engineers at Theranos. Science and Engineering Ethics, 28(5), p.39.
• Meng, A., 2021. Winning the game of thrones: Leadership succession in modern autocracies. Journal of Conflict Resolution, 65(5), pp.950-981.
• Nurkidam, N., Sewang, A.M., Pababbari, M. and Syamsuddin, D., 2020. Leadership In The Kingdom Of Mandar. Journal of Research and Multidisciplinary, 3(1), pp.215-221.
• Rogal, L., 2020. Secrets, Lies, and Lessons from the Theranos Scandal. Hastings LJ, 72, p.1663.
• Straker, K., Peel, S., Nusem, E. and Wrigley, C., 2021. Designing a dangerous unicorn: Lessons from the Theranos case. Business Horizons, 64(4), pp.525-536.
• Tourish, D. and Willmott, H., 2023. Despotic leadership and ideological manipulation at Theranos: Towards a theory of hegemonic totalism in the workplace. Organization Studies, p.01708406231171801.
• Trautman, L.J., Foster, I.I., Larry, D., Koretz, L., McNeil, C., Yordy, E.D. and Salinas, A., 2022. Ethical Failure at Theranos. Available at SSRN 4040181.
• Williams, M., 2022. Elizabeth Holmes and Theranos: A play on more than just ethical failures. Business Information Review, 39(1), pp.23-31.
• Witek Jr, T.J. and Klein, D., 2023. Governance basics for the physician-scientist considering business ventures. Lessons from Theranos. Discover Health Systems, 2(1), p.29.
• Yu, H.H. and Campbell, T.M., 2021. Teaching leadership theory with television: Useful lessons from Game of Thrones. Journal of Public Affairs Education, 27(2), pp.141-175.

Online

• Financial position of Theranos. 2022. Online. Available through:< https://www.integrityline.com/expertise/blog/elizabeth-holmes-theranos/>.
• History of Theranos. 2023. Online. Available through: < https://www.medicaldevice-network.com/features/theranos-ldt-regulation/>.
• Impact of Elizabeth leadership on Theranos. 2023. Online. Available through :< https://www.forbes.com/sites/benjaminlaker/2023/06/18/elizabeth-holmes-fall-from-grace-a-case-study-in-leadership-strategy-and-corporate-accountability/#:~:text=The%20failure%20of%20Theranos%20not,the%20company's%20inaccurate%20blood%20tests.>