Oftentimes in business and administration, people vested with trust and authority make decisions capable of destroying the reputation, goodwill and years of hardwork of the institution they represent. Behind these decisions, there is a grey area where fraud/corruption and “honest mistakes” meet called mismanagement. Within this grey area, the symptoms and consequences of fraud/corruption and honest mistakes are so similar that one can be easily mistaken for the other.
We take a bold and closer look at the grey anatomy of mismanagement using two case studies. Thereafter, we identify some strategies for managing mismanagement.
N.B: If you are in a hurry and looking for a quick read, you can read excerpts from the conclusion of this article via this Linkedin post: A management wakeup call.
Anyone For Tennis?
Recently in March 2016, it was announced that the highest paid female tennis player in the world for the last eleven years, Maria Sharapova, failed a drug test. She tested positive to a banned substance known as Meldonium at the Australian Open tennis championships.
Meldonium is normally administered as a medication to treat maladies like diabetes and some heart conditions, but is also thought to be capable of enhancing the performance of athletes in endurance sports like tennis. According to Maria Sharapova, she had been taking “Mildronate” (another name for Meldonium) for over ten (10) years due to health reasons, long before its ban by the World Anti-Doping Agency (WADA) which only took effect in January 2016. However, she was not aware that Mildronate and Meldonium were the same substance despite being pre-informed of its ban by the WADA. While she denies committing fraud or any wrongdoing, she admits that in effect she had made an honest mistake.
Oops, I Made An Honest Mistake
To avoid the common honest mistake of assumption and generalisation, it is instructive that we define some key concepts for a better understanding of this article. While there are several definitions for these concepts, we will adopt the following:
From the definitions above, mismanagement occurs when people entrusted with control or ability to influence, exercise their powers in a manner that results contrary to expectations. Consequently, when mismanagement is practiced intentionally with the aim of committing fraud (dishonesty) it is a crime. However when practiced unintentionally either due to an oversight, lack of attention to detail, incompetence, insensitivity, ineptitude, nonchalance, recklessness and more, these lead to honest “mismanagement” mistakes. Although honesty is said to be the best policy, with mismanagement, there is usually little policy distinction between the consequences of honest mistakes and fraudulent activities.
Guilty Until Proven Innocent
Whatever may be the underlying cause behind mismanagement, there is usually an initial suspicion of fraud, leading to a loss of goodwill amongst other negative consequences until and even after proven innocent. Concerning Sharapova’s failed drug test, three-time Grand Slam singles champion Jennifer Capriati have expressed that she is: “extremely angry and disappointed. I had to lose my career and never opted to cheat no matter what…In my opinion, if it’s all true every title should be stripped.“
Rafael Nadal, a Spanish professional tennis player currently ranked world No. 5, says that while he hopes this was an honest mistake on her part, the issue is a result of negligence and lack of professionalism on the part of her [medical and brand management] team responsible for ensuring her intake complies with the rules. She should therefore be punished for their oversight notwithstanding the honest mistake argument.
Andy Murray, the current world number two in Tennis is more critical in his opinion that Maria should get suspended for taking performance-enhancing drugs. He apparently doesn’t believe this mismanagement offence is an honest mistake but likely borders on fraud. According to him since January, 1, 2016;
“there have been 55 different athletes who have failed tests for meldonium… I find it strange that there’s a prescription drug used for heart conditions and so many athletes competing at the top level of their sport would have that condition. That sounds a bit off to me.“
In the end it is clear that whether this was a case of fraud or honest mistake, the mismanagement resulting in non-compliance with the drug test has caused Maria a significant loss of goodwill. Sponsors including Nike (Sportswear Company), Porsche (carmaker), TAG Heuer (watchmaker), and the United Nations Development Program (UNDP) have distanced themselves from her.
She has also been suspended indefinitely until a disciplinary hearing determines a suitable punishment for her which can include banishment from tennis for up to four years though a reduced sanction is possible if she can prove it was an honest mistake. According to Foxsports, since the hearing is not due till around June, the best case implication is that she will probably not be competing in any tournament until August 2016 including the French Open, Wimbledon and the Olympics.
Smart Management For Smart (phone) Company
A similar poignant case in the business world is Nokia under the management auspices of Stephen Elop. Up till the last quarter of 2010, Nokia was unarguably the market leader in mobile technology and smartphones as they were renowned for their hardware quality (battery, camera, durability etc).
According to Andrew Orlowski of The Register: “When Elop took the reins, in Q4 2010, Nokia still had a market share of 28.2 percent in phone sales, shipping 117 million units to Samsung’s 71 million and Apple’s 13.4 million. At the time, Nokia’s mobile OS of choice, Symbian, enjoyed 36.6 percent of the smartphone market – making it the largest platform – and Apple’s iOS just 16.7 percent.”
Steadily, they lost their market presence to Apple with the iphone, and smartphones with the Google android OS. These platforms were more application (app) and user experience oriented and quickly swept the mobile marketplace. While Phone makers like Samsung and Sony Ericcson were swift in adopting the android OS to grow or at least defend their market share, Nokia presumptuously stuck to status quo, perhaps unconcerned about the obvious trends in the smartphone market.
Petri Rouvinen, a researcher at the economic think tank ETLA notes that: “They had become arrogant at Nokia and as a result were too slow to react to changes in the world around them,” Michael Schrage of The Harvard Business Review agrees that the position taken by Nokia takes a peculiar ignorance or arrogance.
Before long the mobile phone giant was in a precarious position and was forced to answer the (smartphone) wakeup call. Stephen Elop, the CEO at that time, likened Nokia to a burning oil platform in the middle of the sea from which they needed to take a bold jump into the unknown and hopefully into safety. In line with that thought, rather than adopting android OS, Elop decided it was better to partner with Microsoft for Windows Phone 7 which was uncompetitive as compared to Nokia’s Symbian.
Although it was not yet too late to salvage Nokia back into pre-eminence at the time, this decision of Elop set the stage for the overthrow, collapse and eventual banishment of Nokia from the smartphone world. Their banishment was enacted following the sale of the Nokia devices and services division to Microsoft due to lack of profitability; the terms of the sale prohibits (or banishes) Nokia from making phones for at least three years (i.e. from September 2013 to the last quarter of 2016).
Using a plethora of graphs, charts and words; ex-Nokia executive and mobile industry expert, Tomi Ahonen, illustrates the plunge of Nokia into oblivion as a result of Elop’s (mis)management decisions, branding him the “worst CEO of all time” and in another article, the benchmark for “management incompetence”.
Andrew Orlowski refutes this claim commenting that Elop was not entirely to blame but was an unfortunate fall guy that took the hit for “years of comfortable mismanagement” at Nokia. He however notes Elop’s contribution to Nokia’s collapse following his burning platform analogy:
“When Elop burned his platforms, Symbian sales went off a cliff: leaving Nokia nothing compelling to offer for two years. And it couldn’t simply pull Windows Phone out of a hat like a conjurer’s rabbit, to fill the gap.”
Several others have speculated that Elop was probably a Trojan horse or Mole for Microsoft who infiltrated deliberately to mismanage the company, taking decisions that would set the stage for a cheap sell out to Microsoft. Their claims are backed by the fact that Elop was an employee of Microsoft before taking the job of CEO for Nokia and he returned back to Microsoft after the “successful operation”.
Elop himself has repeatedly denied these allegations claiming that he acted in the interest of the company and everyone on the management team was involved throughout the process.
In “Operation Elop”, a book by Finnish journalists, the authors – after interviewing over a hundred people –agree that Elop was not a Trojan horse and had no ulterior motives whatsoever. The outcomes of his decisions were “monumental” honest mistakes. Notwithstanding, they assert that his handling of Nokia puts him as “one of the world’s worst – if not the worst” CEO ever.
Some others including Tomi Ahonen have hinted that Elop may have (fraudulently) acted in his own interests as his contract terms afforded him a golden parachute of $25 Million following the sale of the company. This figure rose to $33 Million coupled with a great new job at Microsoft.
While some of these claims about Elop are not totally substantiated, it remains pertinent to note that under the umbrella of mismanagement; honest mistakes appear very similar to fraud. The key differentiation lies in the motive which is usually judged by the public. As in the case of “beauty lies in the eyes of the beholder”, members of the public can be honestly mistaken in their judgement.
A Management Wakeup Call
In practically every case of fraud or corruption, there is usually always a case of mismanagement whether honest or dishonest. Typically, fraudsters simply capitalise on the loopholes created and/or overlooked by mismanagement. The words on several blog posts of Strive Masiyiwa, the Executive Chairman and founder of Econet Wireless International, a global telecommunications group reads: “Mismanagement and corruption are identical twins where you find one, the other is always nearby”.
In my opinion, the “anatomy of mismanagement” illustration above helps us see that it is possible for mismanagement to exist on its own without fraud or corruption intended or committed (i.e. honest mistakes only). However, mismanagement opens up a superhighway for practices of fraud and corruption to be executed which would never have been possible on their own without the patriarchal oversight of mismanagement. The repercussions of honest mistakes on a manager, individual or institution can be diabolically similar to that of fraud due to the public (jury) misjudging the motive behind the mismanagement, or their intolerance of mistakes altogether.
With mismanagement, prevention is usually better than cure. It is therefore important that managers implement strategies and systems that choke it out. This can include:
- Cultivating a culture of continuous improvement and learning to remain up to date with latest business industry trends and best practices. This includes conducting regular gap analysis, market trend analysis and skill enhancement programs with a view of optimising the business system
- Maintain a proactive approach to innovation and pace setting in your industry or at least be an early adopter sensitive and responsive to market trends
- Accountability, transparency and openness in communication is a great way to keep fraud in check
- Use a reflective practitioners approach considering the decisions/actions while taking them and after taking them
- Employ and apply technology liberally, having in mind that technology is a tool to help get your (management) job done and not a substitute for management competence
- Keep your staff/subordinates motivated by giving them a sense of belonging. How you do this is up to you but as a hint you should take a look at Maslow’s hierarchy of needs
- Be flexible and humble in the event of an honest mistake, drop your ego and don’t hesitate to implement a rollback action or alternate plan. Many failing projects have resulted in colossal losses which could have been mitigated if they had simply discontinued the project.
Please note that no matter how hard anyone tries; eventually they are likely to make an honest mistake. While it is understandable that management decisions are not foolproof, it is up to decision makers to monitor the consequences of their decisions and if necessary, apply a rollback or alternative measure to mitigate the effect of any mistakes promptly. Failure to do this would constitute mismanagement by insensitivity, incompetence or recklessness. Good luck with the jury that decides your fate.
The embargo against Nokia making phones should be over by the end of this year 2016. I earnestly hope they can make a strong comeback into the mobile market and also, that Maria Sharapova returns strong into women’s tennis as well. I’m hoping for their successes and wish them all the best.
If you would like to share how you deal with honest mistakes, please leave a comment in the comment section below. Your thoughts on mismanagement or this article are also very welcome.
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