Management is to an organization what a driver is to a car. The decisions made by the management team are vital in the direction that the organization takes. Any pitfalls that an organization might face are resultant from the decisions that management might have made or failed to make. It is therefore imperative that management assumes leadership styles that reflect an understanding of the important roles that they play (Keyton, 2011). This paper will analyze a case of management issues in an organization that have had far and wide reaching implications for the organization as a whole, the immediate surroundings and the globe.
In March of the year two thousand and eleven, the Far East was hit by a catastrophic earthquake measuring 9.0 on the Richter scale. Japan was the epicenter of this devastating earthquake and most of the effect was felt on this industrialized country. The country was also hit by a forty five foot tsunami that wrecked havoc in the regions bordering the shores of the Pacific Ocean. This catastrophe caused damages worth billions of dollars to commercial and residential property.
The catastrophe also damaged a nuclear reactor that was managed and run by Tokyo Electric Power Company. This caused dangerously high levels of radiation to be emitted into the atmosphere. A month later, the Tokyo Electric Power Company reported the biggest loss by a non-financial company amounting to a net of fifteen billion dollars worth of damage at the Fukushima nuclear plant.
This tragedy highlighted the management issues facing the Tokyo Electric Power Company. This paper will analyze the management issues at the Tokyo Electric Power Company and offer a solution and recommendations.
Analysis of the management issues at Tokyo Electric Power Company
It is ridiculous to expect that Tokyo Electric Power Company would have foreseen the devastating earthquake and tsunami and made contingency measure to avert the loss that was. However, it is as evident as daylight that major corporations and financial giants have a responsibility to carry out a rigorous risk assessment in order to decipher causes of action in disaster preparedness and mitigation.
The Tokyo Electric Power Company ought to have been better prepared for such an occurrence which surprisingly caught them unawares. A few years prior to the disaster, expatriate experts in geology and seismology had warned the Tokyo Electric Power Company that the Fukushima nuclear plant was precariously at risk of damage even by a mid-sized tsunami or earthquake. However, the electrical company did not implement any strong contingency measures to brace itself for any occurrences.
This is attributable in part to the fact that Tokyo Electric Power Company does not have independent board members or risk experts. This brings about the lack of independence in decision making. It is not expected that management can vet its own decisions, hence the need for an independent body, in this case an independent board of directors, to vet and critique decisions made by the executive management at the company. There also needed to be an independent body of risk experts to give an independent assessment of the alleged risk that the Fukushima plant faced.
This incident shows the need for proper corporate governance in an institution. Risk management does not entail attempts to predict future occurrences. Contrary to popular opinion, risk management entails preparedness in the right places where it is most important. The Fukushima catastrophe exposes serious flaws in the risk analysis process, design of interventions and the approval process. Japan is an earthquake prone zone with seismologists and geologists positing that the country is located on multiple fault lines (Flannery, 2011).
This notwithstanding, the Tokyo Electric Power Company located the nuclear reactor along the coastline of the Pacific Ocean. The company designers also located all their backup generators in locations that they were well aware that they were at the risk of damage if the coastline was hit by a meager twenty foot tsunami. In addition to this, the company constructed the plant’s cooling facility in a lowly elevated site compared to the nuclear reactor, a decision that has played a significant role in the disaster (Flannery, 2011).
This shows total disregard to the due process by the management at Tokyo Electric Power Company. This is especially because in the previous year, Japan’s Nuclear Energy Safety Organization, an organization commissioned by the Japanese government, pointed out that a fifteen meter high tsunami would almost damage the reactor core at Fukushima nuclear plant. The fourteen meter high tsunami that hit the Fukushima nuclear plant caused a devastating damage to the Tokyo Electric Power Company nuclear facility as projected by the report the previous year.
The report by the government commissioned organization ought to have been heeded to and contingency measures taken to implement the recommendations of the expert task force. This would have prevented the accident that emanated from the catastrophe that hit the Japanese coastline. T would have saved the company the billions is dollars that were used to rehabilitate the nuclear facility. It would also have prevented the environmental nightmare that resulted for the leaking of gamma radiation from the nuclear reactor.
Secondly, the Company ought to institute a separate and independent risk management board committee. This committee is responsible for critiquing and questioning decisions made by the management. This will benefit the company because the committee will also provide alternate ideas to augment those made by the management. This will give the managers and the directors of the company a fiduciary responsibility to the shareholders to fit into place a rigorous risk management planning process. This will increase the preparedness of the company to events that are beyond their control (French, 2011).
Thirdly, the company ought to implement internationally recognized best practices in full operation. This is especially when it comes to board accountability and corporate governance. By this, the company will institute the checks and balances that ensue that the shareholder value is protected and that the risk to ‘black swan’ events is reduced. By doing this, the company will embrace the ideals of god corporate governance. The organizational culture of the company will also be informed by accountability, integrity and transparency in decision making process and implementation. This will benefit the company in that the whole workforce will be synchronized in the new organizational culture hence increased output.
Finally, in addition to increasing the number of independent board members in the company, the management out to appoint a board-level committee charged with the task of overseeing enterprise risk management. This will offer the management alternative perspectives in the boardroom. The presence of these two aspects would have given the management sufficient independent voices who would have been more predisposed to call into question the company’s risk exposure.
This is especially important to the company given the fact that the entire non-boards level risk management and planning committee of the company is comprised of executives. Furthermore, the twenty man board of the Tokyo Electrical Power Company is made of only two independent members. Such a board is ones-sided and does not offer the checks and balances that are important in good decision making at an organizational level. Instituting these changes will solve the management issues that are in dire need of lasting solutions at the electrical power company.
Through the seven weeks, organizational structure and change have taken center stage. The organizational structure at an institution is of paramount significance in the day to day operation of an organization (Bauer & Erdogan, 2010). It is the winning formula to a successful organization. The organization culture in a workplace should not be undermined. The bottom line is that embracing good corporate governance and instituting all the elements it encompasses increases responsibility and accountability in an organization. This is required if the organizations envisions success.
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