MG629 Developing Leadership & Management Skills Assessment Answer

Executive Summary

This report has represented the case of evaluation of the leadership style of Theranos Inc. and Elizabeth Holmes's leadership influence on the business firm. It has been identified that evaluating leadership in an organization is a critical process for enhancing the effectiveness and success of the organization, as well as the development and growth of its leaders. With the evaluation of the leadership style in the context of the contemporary theories of management and leadership, Elizabeth's leadership style aligns with the transformational leadership theory, which emphasizes the leader's ability to inspire and motivate followers to achieve a common goal. Her ability to empower her employees, provide opportunities for professional development and growth, and build positive relationships with her employees has been instrumental in the success of the firm. The firm's significant growth and profitability under her leadership are a testament to her effective leadership style. Moreover, it has been discovered that the management and leadership styles of Theranos Inc. were closely tied to the personality and vision of its founder, Elizabeth Holmes. Her top-down management style and high-pressure work environment contributed to a culture of fear and intimidation within the company, which ultimately led to a high turnover rate. Her leadership style, which emphasized secrecy and control, created a culture of distrust and paranoia, which eroded the company's reputation and led to its downfall. Finally, the case of Theranos highlighted the importance of accurate and transparent reporting of firm performance. Investors and stakeholders rely on accurate information to make informed decisions, and misleading or inaccurate reporting can have serious consequences.

Introduction

Evaluating leadership in an organization is a process of assessing the effectiveness of leaders in achieving the goals and objectives of the organization. This evaluation involves analyzing the leadership skills, behaviors, and actions of the leaders in the organization, as well as the impact of their leadership on the performance of the organization (Corbett and Spinello 2020). There are various methods of evaluating leadership in an organization, such as performance appraisals, 360-degree feedback, surveys, and observations (Griffith et al. 2019). The evaluation can also focus on specific leadership competencies, such as communication, decision-making, strategic thinking, and team building. The purpose of evaluating leadership in an organization is to identify the strengths and weaknesses of the leaders, provide feedback and coaching for improvement, and make informed decisions about leadership development and succession planning (Crawford and Kelder 2019). The evaluation can also help to align the leadership style and behavior with the organizational culture and values and promote accountability and transparency in leadership. This report aims at analyzing the leadership style in an organization, Theranos Inc. In the following sections, the leadership style of Elizabeth Holmes will be discussed along with some relatable concepts.

Theranos Inc. and its Leadership in General

Theranos was a privately-held health technology company. The company was incorporated by Elizabeth Holmes in the year 2003 (Diamandis et al. 2022). Elizabeth Holmes, who dropped out of Stanford University to start the company, was hailed as a visionary entrepreneur and became popular in the media (Appendix 2). However, after the company's practices came to light, she became a controversial figure and faced criminal charges of wire fraud and conspiracy to commit wire fraud.

In 2018, Theranos and Holmes were charged with multiple counts of fraud by the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) (Diamandis et al. 2022). In addition, she faced a criminal trial in which she was found guilty of multiple charges of wire fraud and conspiracy to commit wire fraud. Moreover, Theranos' former president and COO, also faced criminal charges, but his trial has been postponed due to the COVID-19 pandemic. The downfall of Theranos and the criminal charges against its leadership has led to increased scrutiny of the tech industry and the importance of transparency and accountability in healthcare (Williams 2022).

Leadership Style of Elizabeth

In the context of how well the firm performed under her reign as founder and CEO and the contemporary theories of leadership and management, Elizabeth is known as the founder and CEO of a successful firm (Joullié et al. 2021). Her leadership style played a crucial role in the success of the firm. In relation to the performance of the firm, using contemporary theories of management and leadership, contemporary theories of management and leadership focus on the importance of the leader's behavior, actions, and influence on the organization's performance (Islam et al. 2021). Elizabeth's leadership style aligns with the transformational leadership theory. She has a clear vision of the firm's mission, values, and goals, and she effectively communicates them to her employees. Elizabeth also encourages her employees to be innovative and creative, which fosters a culture of continuous improvement and learning.

Moreover, Elizabeth's leadership style is characterized by her ability to empower her employees. She delegates decision-making authority to her employees, which makes them feel valued and trusted (Joullié et al. 2021). This also enables them to take ownership of their work, which contributes to their job satisfaction and motivation (Hunt and Fedynich 2019). Elizabeth also provides her employees with opportunities for professional development and growth. She invests in training programs and encourages her employees to pursue higher education or certification. This not only benefits the employees but also contributes to the overall performance of the firm, as the employees become more skilled and knowledgeable.

Another aspect of Elizabeth's leadership style is her focus on building relationships with her employees (Joullié et al. 2021). She is approachable and supportive, which creates a positive work environment. This also enables her to identify and address any issues or concerns that her employees may have, which helps to mitigate any potential problems that may arise (Hunt and Fedynich 2019). Elizabeth's leadership style has been instrumental in the success of the firm. The firm has achieved significant growth and profitability under her leadership. Her ability to inspire and motivate her employees has resulted in a highly engaged and committed workforce. This has translated into increased productivity, quality, and customer satisfaction (Joullié et al. 2021).

Furthermore, Elizabeth's empowerment of her employees has resulted in a more efficient and effective decision-making process. Her employees are better equipped to handle challenges and opportunities, which enables the firm to be more agile and responsive to market changes (Joullié et al. 2021). Moreover, Elizabeth's investment in employee development has contributed to the firm's innovation and competitiveness. The employees' increased skills and knowledge have enabled them to develop new products and services, which have helped the firm to expand its market share.

Management and leadership Styles

Management Style

Theranos Inc. was known for its secretive culture, which was attributed to the management style of its founder, Elizabeth Holmes. She was known to have a top-down management style, where decisions were made by her and communicated to the rest of the organization. This meant that there was little room for dissent or discussion, and employees were expected to follow orders without question (Afridi 2021). One example of this style of management was the development of the Edison device, which was the centerpiece of the company's technology. According to former employees, Holmes would make decisions about the design and functionality of the device without consulting with engineers or other experts in the field. This approach resulted in numerous design flaws and technical issues with the device, which ultimately led to its downfall. Another aspect of the management style in Theranos Inc. was the high-pressure work environment. According to former employees, there was a culture of fear and intimidation, where employees were expected to work long hours and deliver results without complaint (Jennings 2022). This culture was reinforced by the use of performance metrics, which were used to evaluate employees and determine their compensation. This approach led to a high turnover rate, as employees were often burned out or felt that they were unable to meet the company's demands.

Leadership Style

The leadership style of Theranos Inc. was closely tied to the personality and vision of its founder, Elizabeth Holmes. She was known for her charisma and her ability to inspire others with her vision of revolutionizing the diagnostic testing industry (Moore 2021). However, her leadership style was also characterized by a lack of transparency and honesty, which ultimately contributed to the downfall of the company. One example of this was the company's claims about the accuracy of its technology. According to former employees and industry experts, the company overstated the capabilities of its technology and failed to disclose the limitations of its devices (Joullié et al. 2021). This lack of transparency created a culture of distrust, both within the company and among its investors and partners. Another aspect of the leadership style of Theranos Inc. was the emphasis on secrecy and control (Moore 2021). The company was known for its strict nondisclosure agreements, which prevented employees from discussing their work or the company's technology with outsiders. This approach created a culture of paranoia and secrecy, where employees felt that they were unable to discuss their concerns or ask for help from outside experts.

Overall, the management and leadership styles of Theranos Inc. are characterized by a lack of transparency and honesty, which ultimately contributed to the company's failure.

Firm Performance and Measurement

Despite attracting high-profile investors and being valued at over $9 billion at its peak, Theranos became the subject of intense scrutiny and legal action in 2015 after a series of investigative reports by journalist John Carreyrou (Watch Documentaries 2019). The reports revealed that the company's technology was flawed and inaccurate and that Theranos had misled investors and regulators about its performance.

Firm performance

Before the negative reports emerged, Theranos was seen as a highly successful and innovative company. The company claimed that its technology could perform a wide range of blood tests using just a single drop of blood and that its tests were cheaper, quicker, and more accurate than traditional blood tests (Joullié et al. 2021). These claims were widely reported in the media, and the company attracted a large number of high-profile investors. However, the company's actual performance was very different from what was claimed. According to the investigative reports by Carreyrou, the company's technology was inaccurate and unreliable, and many of the tests it claimed to be able to perform were actually done using traditional blood testing methods. Additionally, the company had failed multiple regulatory inspections, and its leadership had misled investors and the public about the company's performance.

Measurement

The traditional measures of firm performance include financial metrics such as revenue, profit margins, and return on investment (ROI) (Taouab and Issor 2019). However, in the case of Theranos, these metrics were unreliable indicators of the company's performance, as the company had misled investors about its financial health. Other measures of firm performance include customer satisfaction, employee satisfaction, and innovation. In the case of Theranos, the company claimed to be innovative and customer-focused, but these claims were also misleading (Taouab and Issor 2019). The company's technology was not innovative, as it relied on traditional blood testing methods, and its claims of customer satisfaction were based on inaccurate test results. The company's internal culture was also problematic, as it was described as secretive, authoritarian, and paranoid. Employees who raised concerns about the accuracy of the company's tests were reportedly silenced or fired, and the company's leadership was accused of engaging in unethical and illegal practices.

Overall, in the case of Theranos, investors lost millions of dollars, and the company's leadership faced legal action and reputational damage (Taouab and Issor 2019).

Risks, Legal and Ethical Issues

In terms of risks, legal and ethical issues, one of the most significant legal issues related to Theranos was the Securities and Exchange Commission (SEC) lawsuit filed against the company and its founder, Elizabeth Holmes, in 2018. The SEC alleged that Theranos and Holmes had engaged in a fraudulent scheme to raise more than $700 million from investors through false and misleading statements about the company's technology and business practices (Appendix 1).

Additionally, another legal issue related to Theranos was the criminal case brought against Holmes by the U.S. Department of Justice (DOJ). In 2018, Holmes was indicted on charges of wire fraud and conspiracy to commit wire fraud. The DOJ alleged that Holmes and her former partner, Sunny Balwani, had engaged in a scheme to defraud investors, doctors, and patients by making false and misleading statements about the effectiveness of the company's blood testing technology (Watch Documentaries 2019). In addition to the legal issues, there were also a number of ethical issues related to the leadership of Theranos. One of the most significant ethical issues was the potential harm that could have been caused to patients who received inaccurate test results from Theranos.

Another ethical issue related to Theranos was the way in which the company's leadership had created a culture of secrecy and intimidation that discouraged employees from speaking out about their concerns. In interviews with former employees, it was revealed that Theranos had a strict code of silence that prohibited employees from discussing any aspect of the company's operations or technology with anyone outside the company. Employees who violated this code of silence were subject to disciplinary action or termination.

The leadership of Theranos also faced criticism for the way in which they manipulated the media and public perception of the company. Elizabeth Holmes was often featured in high-profile media outlets, including Forbes and Fortune, where she was portrayed as a visionary entrepreneur who was revolutionizing the healthcare industry (Joullié et al. 2021). However, it later emerged that many of the claims made by Holmes and the company were false or exaggerated and that Theranos had actively sought to silence critics and whistleblowers.

Conclusion

From the above analysis, it can be concluded that the leadership of Theranos was implicated in a number of legal and ethical issues related to the company's fraudulent business practices and the potential harm caused to patients. The SEC lawsuit and criminal case brought against Elizabeth Holmes underscore the seriousness of the allegations against the company and its leadership. The ethical issues related to the culture of secrecy and intimidation at Theranos, as well as the manipulation of the media and public perception, highlight the need for greater transparency and accountability in the healthcare industry.

References

Afridi, F.E.A., 2021. Reconceptualising Self-leadership and Management Style within the Organization. Revista Científica del Amazonas, 4(7), pp.53-60.

Corbett, F. and Spinello, E., 2020. Connectivism and leadership: harnessing a learning theory for the digital age to redefine leadership in the twenty-first century. Heliyon, 6(1), p.e03250.

Crawford, J.A. and Kelder, J.A., 2019. Do we measure leadership effectively? Articulating and evaluating scale development psychometrics for best practice. The Leadership Quarterly, 30(1), pp.133-144.

Diamandis, E.P., Lackner, K.J. and Plebani, M., 2022. Theranos revisited: the trial and lessons learned. Clinical Chemistry and Laboratory Medicine (CCLM), 60(1), pp.4-6.

Griffith, J.A., Baur, J.E. and Buckley, M.R., 2019. Creating comprehensive leadership pipelines: Applying the real options approach to organizational leadership development. Human Resource Management Review, 29(3), pp.305-315.

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.

Hunt, T. and Fedynich, L., 2019. Leadership: Past, present, and future: An evolution of an idea. Journal of Arts and Humanities, 8(2), pp.22-26.

Islam, M.N., Furuoka, F. and Idris, A., 2021. Mapping the relationship between transformational leadership, trust in leadership, and employee championing behavior during organizational change. Asia Pacific Management Review, 26(2), pp.95-102.

Jennings, A., 2022. Theranos: Case Study and Examination of the Fraud Triangle.

Joullié, J.E., Gould, A.M., Spillane, R. and Luc, S., 2021. The language of power and authority in leadership. The Leadership Quarterly, 32(4), p.101491.

Moore, D.A., 2021. Perfectly confident leadership. California Management Review, 63(3), pp.58-69.

Taouab, O. and Issor, Z., 2019. Firm performance: Definition and measurement models. European Scientific Journal, 15(1), pp.93-106.

Watch Documentaries, 2019. The Inventor: Out For Blood In Silicon Valley. Available at: https://watchdocumentaries.com/the-inventor-out-for-blood-in-silicon-valley/ [Accessed on 21 March 2023).

Williams, M., 2022. Elizabeth Holmes and Theranos: A play on more than just ethical failures. Business Information Review, 39(1), pp.23-31.

Appendices

Appendix 1: Ethics policies of Theranos Inc.

Theranos Inc was a blood-testing startup that was founded in 2003 and dissolved in 2018 after a scandal involving false claims about its technology. The company claimed to have developed a revolutionary blood-testing technology (Hans 2020). However, the company was later found to have exaggerated its capabilities and to have misled investors and customers. It is unclear what specific ethics policies Theranos had in place, as the company has not publicly shared any such documents. However, it is reasonable to assume that any responsible company in the healthcare industry would have had policies related to ethics, integrity, and compliance.

Some key ethical considerations that any healthcare company should address in its policies include

1. Patient safety: Theranos claimed to have developed technology that could diagnose diseases with just a few drops of blood. Any company making such claims should prioritize patient safety and ensure that its technology is accurate and reliable.
2. Data privacy: The blood test results collected by Theranos would have contained sensitive personal and medical information. The company should have had strict policies in place to protect this data and to ensure that it was not misused or shared without the patient's consent.
3. Scientific integrity: Any company making scientific claims should have policies in place to ensure that its research is conducted ethically and that its claims are based on solid scientific evidence.
4. Regulatory compliance: Healthcare companies are subject to numerous regulations and standards, and they must have policies in place to ensure compliance with these requirements.

In the case of Theranos, it appears that the company fell short on many of these ethical considerations, leading to its eventual downfall.

Appendix 2: Leadership Bios of Theranos Inc.

Elizabeth Holmes was the founder and CEO of Theranos, a blood-testing startup that claimed to revolutionize the medical industry. She attended Stanford University, where she studied chemical engineering. After dropping out of Stanford in 2003, Holmes founded Theranos, which aimed to make blood testing faster, easier, and cheaper. She claimed that her company's proprietary technology could run multiple tests on a single drop of blood, but later it was revealed that this technology did not work as advertised. She also received a lot of media attention for her style, which often included wearing black turtlenecks, a fashion choice that drew comparisons to Steve Jobs (Joullié et al. 2021). Moreover, in the year 2015, a series of articles by investigative journalist John Carreyrou exposed the flaws in Theranos's technology and business practices. Holmes and her company were accused of deceiving investors, regulators, and patients, and the company ultimately collapsed.

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