Virgin, Richard Branson’s successful brand and organization, has become a very successful business and has grown into many sectors varying from music, to mobile networks and transportation like Virgin Atlantic. This has created a variety of branded companies all over the world, having tens of thousands of people employed within it. These people and much of its profits are highly dependent on Branson’s management styles and his ethical behaviours. Even though he has become so successful at what he does, he has faced many challenges due to poor implementation of his management functions.
Within this business report, Sir Richard Branson’s highly successful company – the Virgin brand – will be scrutinized with reference to Fayol’s four functions of management, these being planning, organizing, leading, and controlling. Particularly, two major problems that took place within his organization, which could have been avoided if proper planning and controlling were implemented correctly, caused disruptions in the operations of the entity.
One of these problems occurred during the year of 1984. Within the initiation of his airline – Virgin Atlantic – a major problem caused by lack of rational planning nearly resulted in the complete downfall of Virgin as a whole. Due to the inefficient planning of finances, Coutts Bank would not allow the company to acquire a loan of ï¿½300 000, which was required to purchase a new engine to replace a damaged engine for his only aircraft, which was not initially planned for when he leased the aircraft to start Virgin Atlantic.
Another problem regarding Virgin Atlantic was during the year of 1992, Branson unwillingly sold the Virgin Records group to EMI in the hopes of maintaining his airline. This was likely due to poor controlling of the airline, which failed to make profits during the financial year. He should have been more ethical in the controlling of the airline, or this may never have taken place. Thus one can see the importance of management. If only the functions of planning and controlling were ethically implemented correctly and in the correct time frame, these problems would not have occurred or would not have been as severe.
Richard Branson is a successful entrepreneur who owns the highly acclaimed Virgin brand. “Virgin, a leading branded venture capital organisation, is one of the world’s most recognised and respected brands. Conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow very successful businesses in sectors ranging from mobile telephony, to transportation, travel, financial services, leisure, music, holidays, publishing and retailing. Virgin has created more than 200 branded companies worldwide, employing approximately 50,000 people, in 29 countries. Revenues around the world in 2006 exceeded ï¿½10 billion (approx. US$20 billion).” (About Virgin, 2009).
The success of this company is predominantly due to his irrational way of thinking and planning, but he often maintains an ethical approach to business. Ethics is the socioeconomic view of management’s social responsibility going past the goal of just making profits to include improving and protecting the welfare of society (Robbins, Bergman, Stagg, & Coulter, 2009, p. 167). This can be done be doing what one thinks is morally correct and understanding what behaviours are ethical or non-ethical.
Within this report, two problems that occurred in the organization will be discussed. Ethical planning and controlling functions will then be described in order to fix or prevent such situations from occurring in the future, but still allowing Virgin to maintain their social responsibility and have this system improved at the same time. The one problem that will be described took place within the initiation of his airline – Virgin Atlantic – a major problem caused by lack of rational planning nearly resulted in the complete downfall of the entire Virgin organization. Due to the inefficient planning of finances, Coutts Bank would not allow the company to acquire a loan, which was not initially planned for when he started Virgin Atlantic.
The other problem that will be discussed regards Virgin Atlantic during 1992; Branson sold the Virgin Records group to EMI in the hopes of maintaining his airline. This was likely due to poor controlling of the airline, which failed to make profits during the financial year. It will be illustrated how he should have been more ethical in the controlling of the airline, or this may never have taken place.
Within any organization, problems are bound to be encountered at some juncture during the lifetime of the business. It is thus essential to plan in advance for organization specific problems in order to be prepared for any predicament the organization might face and eliminate the margin for failure. In 1984 Branson experienced a challenging situation which could have ultimately resulted in the downfall of the entire Virgin brand.
Richard Branson has stated throughout his life that he relies “far more on gut instinct than researching huge amounts of statistics” (Branson, Losing My Virginity, 2006). This approach to business lead Branson straight into the eye of the storm of a major problem. The year of 1984, saw the year when Virgin Atlantic was about to take-off. During the initial test flight of the newly leased aircraft for the company, a number of birds had been literally ‘sucked’ into one of the engines, resulting in the complete destruction of a ï¿½600, 000 engine (Branson, 2006, pp. 229-230). Unfortunately Branson had only planned for success and thus the company was immediately placed into a financial dilemma. Correct planning would have salvaged the company from this situation immediately and prevented jeopardizing the ethical values and practices of the Virgin brand.
Planning Function as an Ethical Solution Generally, the planning function of management incorporates the actions of; defining the organisation’s goals, establishing a generalized strategy to aid in attaining these goals, and developing a detailed set of plans in order to integrate as well as coordinate organisational work as averred by Robbins et al. (2009, p. 246). Planning can be either formal or informal. Sir Richard Branson adopted a more informal approach to planning – a more short-term focus on company goals, and relating only to the managers vision of the company, as he acted at the spur of the moment. This is evident when he was offered the chance to start up Virgin Atlantic, as did not hesitate to immediately seize the opportunity. Thus, Branson relied on his intuition for making the decision.
In order for an organization to attain their goals, decisions must be made when faced with a particular problem. Managers at all organizational levels make decisions between two or more alternatives to eradicate the problem at hand; however the way in which the managers come to a conclusion varies. As previously mentioned, Richard Branson generally makes a decision based on his ‘gut’ feeling. This type of decision making is referred to as intuitive decision making.
This is an “unconscious process of making decisions on the basis of experience and accumulated judgement” (Robbins et al., 2009, p. 224). Due to a lack of planning Branson required 600, 000 of which he only had 300, 000 as stated by Branson himself (2006, p. 235). Coutts Bank was unwillingly to loan the company the money required as Virgin would exceed their overdraft limit. Fortunately Branson was able to retrieve the money by combining all the funds from the Virgin Records subsidiaries overseas.
As illustrated with the predicament Branson has encountered it is evident through his decision of solving the solution that he does not utilize a systematic or thorough analysis of the problem to determine the correct solution. Instead he utilizes his intuition. However this can have a negative effect. Firstly, it is not as sure a method as utilizing another decision making method, but more importantly it could have had a severe effect on the ethical values and practices of the business if Branson were unable to gain the funds needed for the new engine. This ‘irresponsible’ approach could have seen 3000 people from the Virgin enterprise lose their jobs.
Customers who would have paid for the service would be let down and become frustrated and dissatisfied with the company. In addition, Virgin’s reputation was put out on the line. Had Branson not have been able to receive the funds needed to purchase a new engine, the Virgin brand would have collapsed. As can be seen, Branson did not place others at his highest priority level when it came to making decisions. In order to prevent this, the manager – Richard Branson, should have utilized the rational decision-making process.
The Rational Planning Process To ensure organisational success, a business must reach its planned goals and eliminate as many problems as possible, which it could encounter along the way. Planning ahead is a major aspect that all companies should embrace. As previously stated, Sir Richard Branson utilizes a more informal approach to planning- thus dealing more with short-term goals, and personal visions of success. Unfortunately, Branson did not reserve any space for failure. He believed that Virgin Atlantic would be smooth sailing throughout its lifetime. He was mistaken. This can be shown by the loan problem he was faced with in the year of 1984.
Branson should have planned for some common problems the airline might have been plunged into during its existence, such as a financial crisis. In order to plan ahead and find a solution to specific problems, the rational decision-making process should have been utilized, as opposed to the Intuitive Decision making process. This would have assisted him in determining the better choice to resolve problems the company would stumble upon, as it is a systematic approach to making a decision with clearly defined steps.
The rational decision-making process comprises of eight systematic steps which include, identifying a specific problem, selecting an alternative to resolve the problem, and an evaluation of the decision’s effectiveness (Robbins et al., Decision Making: The Essence of a Manager’s Job, 2009, p. 216). The eight steps of this decision making process are illustrated by figure 1 (Robbins & DeCenzo, Foundations of Decision Making, p. 129).
a) Step 1: Identifying a problem – As shown above, there are eight steps in the rational decision-making, the first being the identification of a problem. A problem is defined as a “discrepancy between an existing and a desired state of affairs” (Robbins et al., Decision Making: The Essence of a Manager’s Job, 2009, p. 216). A typical problem all businesses face is that of financial debt. A financial crisis can have an adverse effect on the business. Even though Richard realized the financial problem he was in at the time it occurred, he was not sufficiently prepared for it.
b) Step 2: Identifying decision criteria – After the realization of a problem, certain factors must be accounted for in order to make an informed decision. Branson should have calculated the general cost of a serious financial crisis, the failure rate of airline companies, and the growth potential of this type of organization. By doing so he could have determined the outcomes and effects of general problems the company would be faced with in the future, such as his loan predicament.
c) Step 3: Allocating Weights to the Criteria – this step involves placing a value of importance to decision criteria in order of priority. Richard would have been able to determine which future problems would be most important to resolve at an earlier stage and thus assisted in maintaining the success of Virgin Atlantic.
d) Step 4: Developing Alternatives – This step pertains to listing possible alternatives in order to resolve the problem. If Branson were to have used this decision making process he would have developed the long-term options of setting aside a budget for any financial dilemmas the company would be placed in or ensuring accountants provided updated and relevant financial statements could be utilized to determine the organizations performance. In addition, a different bank could have been selected which would suit Branson’s needs better.
e) Step 5: Analysing alternatives – The analysis of each step is of utmost importance. The manager should review the strengths and weaknesses of each alternative utilizing the decision criteria from step 2, as well as the weights of these criteria from step 3. Branson would have been able to determine which choice of alternative would be most effect in preventing future problems of the airline and thus prevent any unethical behaviour.
f) Step 6: Selecting an Alternative – As previously mentioned, by analysing the various alternatives, Branson would have been able to choose the better alternative in resolving the imminent problems of the company.
g) Step 7: Implementing the Alternative – The chosen alternative from step 6 must be placed into action in order to be effective. To achieve this, the effected personnel must become aware of the decision made by the manager. Hence Richard would need to inform his colleagues of his decision. Step 8: Evaluating Decision Effectiveness – This step entails the evaluation of the outcome of the decision selected in resolving the problem. It is the final step and determines whether or not the decision made by the manager was effective.
Via utilizing these steps in making a rational decision, Richard Branson would have been adequately prepared for the problems he was experiencing during the year of 1984. Having chosen the decision of budgeting for a financial crisis, the cost of replacing the engine would have been covered. In turn this would have covered the ethical values and practices of Virgin, since people would not have been put at risk by the loss of their jobs, customers would be protected from business complications, and the Virgin brand would not be threatened.