Lecture Notes The Concept And Assessment Answer

Introduction

Groupthink is defined as the emotional experience in which people strive for harmony within a group. It is the one of the primary reasons for knowledgeable people who take catastrophic decisions, which has a negative impact on the business (Benabou 2012).

The Swissair Crisis

The Swissair airlines had a major crisis in the year 2000. It had a loss of over 2.9 billion francs, which depleted its entire capital reserve. The plan of Swissair was to become the fourth largest airline in Europe by building up partnerships with Sabena, a Belgian airline company and many other small airlines industry, which had financial concerns due to stiff competition from rivals. The plan turned out to be futile because the passengers were well behind the numbers that the company had expected, thus making the company go into a pile of debt. Banks such as the United Bank of Switzerland did not give further credits to the airlines to re-organize their organization (Hassan 2013). Without the financial support, the head of the Swissair Group decided to cut short their employees but that was not enough to stop the debts that had already piled in the organization. The employees of the company were paid best in class for whatever services they provided. Such high payments lead to the cash crunch that the company faced after that. The subsidiary company under them, Crossair developed a new airline group which was making good profits for the Swissair Group. They paid half the amount of what Swissair is used to pay to its pilots and one-thirds of what Swissair gave to its cabin crew members. On seeing this, the banks made an agreement of giving 250 million francs as an interim credit to the Swissair Group in lieu of shares worth 260 million francs of Crossair. Due to the delay in transferring of funds by the bank, the company did not have money to buy fuel and pay taxed to the airport authority. This ordered for the sudden shutdown of the company and declare bankrupt (Nasir 2012).

Failure of Swissair due to Groupthink

Swissair also known as ‘Flying Bank’ is a primary example of the groupthink concept. The company was very successful and financially stable in its early days and used to control the entire European aviation industry. Some wrong decisions by the company proved fatal for the downfall of the company. The thought of being superior in the industry gave them the edge that they were correct in ways possible and their confidence was something that can never let the company down (Amankwah-Amoah and Zhang 2015). They believed that their decision making group was impenetrable and that whatever decision they would take it will be for the greater interest of the company. The group had a very high moral, which prevented them from discussing any decisions with their other employees. When the decision of cutting down its employees due to cash crunch was made, the brand image of the company was lost due to the infamous decisions that it made. When the company wanted to regain its lost honor, they thought of reducing the company’s board of directors, which resulted in loss of expertise. The persons with high knowledge and valuable inputs had to lay down due to the resizing of the board, which further caused a problem in the decision taken by the new board. The wrong decisions happened due to some of the group members were silent about the opinion. They thought that the decisions that were taken earlier were beneficial to the company, so these new ones would turn out to be just like that (Nasir 2012). Some of the members acted as bodyguards and prevented the inflow of information by others in to the group.

Conclusion

Groupthink can be controlled in many ways. To minimize the risks of group thinking, the group needs to have a leader who will be in charge to evaluate the opinions that the other members may have in the group. The leader needs to listen silently to the opinions of others when the task has been assigned to the group and should not jump to the conclusion that he may have. The individual needs to set up a number of groups to look after the same problem so that the pressure does not fall on any one group (Sunstein and Hastie 2015). All possible alternatives need to be carefully examined while the decision is being made. The group needs to have experts from outside so that they can put in their valuable information in the opinion and thoroughly examine the decision before it is put in to effect. To eliminate groupthink from an organization these few steps need to be followed which will ensure the safety of the organization in the future from faulty decisions.

Reference List

Amankwah-Amoah, J. and Zhang, H., 2015. “Tales from the grave”: what can we learn from failed international companies?. Foresight, 17(5), pp.528-541.

Bénabou, R., 2012. Groupthink: Collective delusions in organizations and markets. The Review of Economic Studies, p.rds030.

Hassan, G., 2013. Groupthink principles and fundamentals in organizations. Interdisciplinary Journal of Contemporary Research in Business, 5(8), pp.225-240.

Nasir, S.B., 2012. Dynamics of governance and ethics (Swissair–Airline Sector).

Sims, R.R. and Sauser, W.I., 2013. Toward a better understanding of the relationships among received wisdom, groupthink, and organizational ethical culture. Journal of Management Policy and Practice, 14(4), p.75.

Sunstein, C.R. and Hastie, R., 2015. Wiser: Getting beyond groupthink to make groups smarter. Harvard Business Press.