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Theranos Leadership: Examining Corporate Ethics in Technology Startups Case Study By Native Assignment Help.
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Performance of a company is directly impacted by a leader's actions. Sound decision, creativity, as well as staff motivation are all aided by effective leadership. Together with improving financial performance as well as fostering a long-term culture of success, strong leaders foster a great work environment in addition to forge connections with clients (Öz?ahin, 2011). Thus, one of the main reasons behind conducting this study is to show hoe the company Theranos Inc. performed under the leadership of Elizabeth who was considered to be the founder as well as the CEO of the company. The analysis will be done considering the three parameters which are management and leadership style, firms’ performance and measurement and risk , legal and ethical issues.
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With Theranos, a business that spent significant time in building minuscule labs for blood testing, Elizabeth Holmes planned to upset the clinical area. It had a $9 billion worth at its level. Because of Holmes' endeavours, Steve Occupations and other Silicon Valley innovators were contrasted with her, and the task at last flopped because of extortion charges. The outcomes of the company's destruction go past Elizabeth Holmes' standing. Additionally, it could for all time adjust how clinical innovation is advanced (WatchDocumentaries, 2022).
Elizabeth Holmes, the founder and former CEO of Theranos, has been a subject of much scrutiny in recent years due to the company's downfall and her subsequent legal troubles. However, her management and leadership style have also been analysed and debated by business experts and scholars. In this essay the use of Transformational Leadership Theory to analyses Elizabeth Holmes' management and leadership style will be done.
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Order AI-FREE ContentThe Transformational Leadership Theory, developed by James MacGregor Burns, posits that effective leaders inspire and motivate their followers to achieve a common vision by transforming their beliefs, values, and attitudes. The theory identifies four key components of transformational leadership: idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration (Miami, 2023). Idealized influence refers to the leader's ability to serve as a role model and gain the respect and trust of their followers. Inspirational motivation involves communicating a compelling vision that inspires followers to work towards a common goal. Intellectual stimulation encourages followers to think critically and creatively, while individualized consideration involves providing support and guidance to each individual's unique needs and goals (Kandel, 2020).
Elizabeth Holmes' management and leadership style can be analysed through the lens of the Transformational Leadership Theory. First, it is clear that Holmes had a compelling vision for Theranos. She aimed to revolutionize the healthcare industry by developing a technology that could run a wide range of medical tests on a small amount of blood. This vision was communicated to investors, employees, and the public, inspiring many to support and invest in the company. Holmes' leadership style was also marked by idealized influence. She presented herself as a visionary leader who was willing to take risks and disrupt the status quo. Her personal story and charisma added to her appeal as a leader. Many employees, investors, and partners looked up to her and saw her as a role model. However, as the story of Theranos unravelled, it became clear that Holmes' management and leadership style had significant flaws. One of the key criticisms of her leadership was her lack of transparency and honesty. She reportedly kept her employees in the dark about the true state of the technology and the company's financial situation.
This lack of transparency eroded trust and undermined her idealized influence. Holmes' leadership style also lacked individualized consideration. She was known for her intense focus on the company's goals and was reportedly unwilling to listen to feedback or concerns from employees. This created a culture of fear and mistrust within the company, as employees felt that they could not speak up without risking their jobs. Another criticism of Holmes' leadership style was her lack of intellectual stimulation (Reilly Charles A. O’and Chatman, 2020). The company's culture was reportedly focused on following orders rather than encouraging creativity or independent thinking. Employees were expected to work long hours and were not given the freedom to explore new ideas or challenge the company's assumptions.
Also, considering one particular management style, Elizabeth Holmes' management style at Theranos can be analysed through the Contingency Theory of Management. Her leadership style can be described as directive and task-oriented, as she was highly focused on achieving the company's goals and was known for her intense work ethic. However, her leadership style was not effective in the context of the situation at Theranos (Pazzanese, 2021).
Overall, it can be said that, Elizabeth Holmes' management and leadership style at Theranos can be analysed through the lens of the Transformational Leadership Theory. While she had a compelling vision and was able to inspire and motivate many people, her lack of transparency, individualized consideration, and intellectual stimulation ultimately undermined her leadership effectiveness. As a cautionary tale, Holmes' experience at Theranos highlights the importance of balancing a strong vision with transparency, accountability, and a culture of innovation and creativity. In addition to this, while her directive and task-oriented style may have been effective in some contexts, it was not well-suited to the complex and rapidly changing environment at Theranos (Dundes, 2019).
Understanding a company's success and spotting prospects for development depend on measuring its performance. There were a number of performance indicators used to gauge the success of Theranos, the blood testing firm founded by Elizabeth Holmes. As a result of the fact that many of these actions were taken based on inaccurate or deceptive information, the business failed utterly. Sales growth was one of Theranos' primary performance indicators. The business asserted that it had created a ground-breaking blood testing technique that would upend the market and bring in billions of dollars. Nevertheless, it turned out that the technology did not deliver on its promises, and the business was never able to make a sizable profit from its blood testing services. Sponsorship was another metric used by Theranos to assess performance. Based on its claims of a ground-breaking technology and a significant market opportunity, the company was able to secure nearly $700 million in funding from investors. The investors ultimately lost billions of dollars since a large portion of this funding was based on inaccurate or deceptive information (Rourke, 2017).
For Theranos, staff retention as well as involvement were crucial performance indicators. The business was renowned for its strict work environment, which placed a strong focus on loyalty and confidentiality. Elizabeth Holmes was frequently commended for her capacity to uplift and encourage her staff, and the business attracted top talent from esteemed institutions of higher learning and businesses. Yet, the harsh working environment and the absence of accountability and transparency ultimately resulted in a high rate of employee turnover and poor leadership.
Theranos asserted that its blood testing technology had significantly reduced costs in terms of financial performance. The business argued that its method would make blood testing less expensive and complicated because it just needed a little volume of blood. These assertions were later refuted, and it was made evident that the business had not actually realised any major cost reductions or efficiencies. Customer satisfaction was a significant non-financial performance indicator for Theranos. The business asserted that it had created a technology that would deliver quicker and more precise blood test results, enhancing patient outcomes and lowering healthcare expenses. Later on, it became evident that the technology did not deliver on its promises and those numerous patients had received false or deceptive test results.
Essentially, Theranos' performance metrics were based on inaccurate or deceptive data, which led to the company's eventual failure. It was simple to overstate the company's capabilities and prospects due to the concentrated concentration on fundraising and revenue growth, as well as the absence of openness and accountability. Theranos' demise serves as a reminder of how crucial it is to use precise and trustworthy performance indicators and to be honest and accountable when sharing those indicators with partners (Rourke, 2017).
The agency theory is one hypothesis that is important for comprehending Theranos' performance. According to the agency hypothesis, there are always two parties participating in commercial transactions: the principle (such as stockholders) and the agent (such as executives). The principal appoints the agent to represent them and take actions that will be advantageous to the principal. The agent might, however, have motives and interests of their own that conflict with those of the principal.
With in the case of Theranos, Elizabeth Holmes served as both the organization's founder and CEO, making her the representative of the company's investors. There were, however, few checks and balances in place to guarantee that Holmes was operating in the best interests of the stockholders and Holmes exercised considerable control over the corporation. Because of this, Holmes was in a position to overestimate the potential of the technology and deceive investors without facing consequences. Furthermore, the lack of openness and accountability, along with the extreme concentration on revenue development and fundraising, produced a situation in which it was simple to inflate the company's potential. According to the agency argument, this resulted from an improper alignment of incentives between shareholders and executives.
The shareholders had an incentive to invest in a business with a high potential for development and profitability, while the executives had a motivation to maximise the value of the company (and their own salary). The executives were able to make decisions that benefited them personally at the expense of the shareholders due to the misalignment of incentives.
The leadership of Elizabeth Holmes at Theranos was marked by a series of risk, legal, and ethical issues that ultimately led to the company's downfall. Here are some of the key issues:
Overall, it can be said that, the leadership of Elizabeth Holmes at Theranos was marked by a series of risk, legal, and ethical issues that ultimately led to the downfall of the company. The lack of transparency and accountability, combined with the misalignment of incentives between executives and shareholders, created an environment in which it was easy to exaggerate the capabilities of the technology and mislead investors and patients. To avoid similar situations in the future, it is important to ensure that there are checks and balances in place to ensure that executives are acting in the best interests of the shareholders, and that the measures of performance used by the company are accurate and reliable. It is also important to prioritize the ethical and legal implications of the technology and its impact on patient outcomes, privacy, and safety (Dundes, 2019).
The risk, legal, and ethical issues at Theranos under the leadership of Elizabeth Holmes can be analysed through the lens of the Agency Theory. In the case of Theranos, Holmes exercised tremendous control over the business, which allowed her to put her own interests ahead of those of the stockholders and customers. Due to the incentives being out of balance, Holmes was able to overestimate the potential of the technology and deceive investors without being held responsible. Additionally, the company's lack of accountability and openness made it difficult to address the hazards and moral dilemmas related to the technology. According to the Agency Theory, this is because there is an information gap between executives and shareholders, with the executives knowing more about the business than the stakeholder. Theranos is led by Elizabeth Holmes, and the Agency Theory offers a framework for comprehending the risk, legal, and ethical challenges. It emphasises how crucial it is to set up efficient monitoring systems and align incentives to make sure that CEOs are behaving in the best interests of shareholders and stakeholders. By putting this idea into practise, we can try to learn from Theranos' mistakes and work to avoid them from happening again.
Conclusion
From the overall study it can be concluded that the case of Theranos and the leadership of Elizabeth Holmes provides important insights into the risks and challenges associated with innovation and entrepreneurship, as well as the need for effective governance, accountability, and ethical leadership. The study of Theranos highlights the importance of validating new technologies and ensuring that they are based on sound scientific principles before making claims about their capabilities. The case also underscores the need for transparency and accountability in business, particularly when it comes to issues of data privacy, patient safety, and regulatory compliance. The leadership of Elizabeth Holmes at Theranos demonstrates the dangers of unchecked power and the risks associated with a lack of effective governance and oversight. The case highlights the importance of establishing clear contractual agreements and monitoring mechanisms to ensure that executives are acting in the best interests of the shareholders and stakeholders. The study of Theranos also underscores the importance of ethical leadership and the need for entrepreneurs and executives to prioritize the ethical and legal implications of their products and services. This requires a strong commitment to transparency, accountability, and social responsibility, as well as a willingness to listen to feedback and make changes when necessary. Overall, the case of Theranos and the leadership of Elizabeth Holmes provides important lessons for entrepreneurs, executives, investors, regulators, and policymakers. By learning from the mistakes made at Theranos, we can strive to promote innovation and entrepreneurship while also ensuring that new technologies are safe, reliable, and ethically responsible(Miami, 2023).
References
Dundes, L., 2019. Bad Witches: Gender and the Downfall of Elizabeth Holmes of Theranos and Disney’s Maleficent, s.l.: University of California.
Kandel, D., 2020. Elizabeth Holmes and the Theranos Scandal, s.l.: London Metropolitan University.
Miami, 2023. Theranos trial highlights the dark side of leadership. [Online]
Available at: https://news.miami.edu/stories/2021/09/theranos-trial-highlights-the-dark-side-of-leadership.html
[Accessed 01 April 2023].
Öz?ahin, M., 2011. Linking leadership style to firm performance: The mediating effect of the learning orientation. Procedia - Social and Behavioral Sciences, 24(4), pp. 1546-1559.
Pazzanese, C., 2021. The Trial of Elizabeth Holmes: Visionary, Criminal, or Both?. [Online]
Available at: https://hbswk.hbs.edu/item/the-trial-of-elizabeth-holmes-theranos-visionary-criminal-or-both
[Accessed 01 April 2023].
Reilly Charles A. O’and Chatman, J. A., 2020. Transformational Leader or Narcissist?, s.l.: Stanford University.
Rourke, J. O., 2017. Theranos, Inc.: Managing Risk in a High-Flying Biotech Start-Up, s.l.: University of Notre Dame.
WatchDocumentaries, 2022. The Inventor: Out For Blood In Silicon Valley. [Online]
Available at: https://watchdocumentaries.com/the-inventor-out-for-blood-in-silicon-valley/
[Accessed 01 April 2023].
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