(MG629) Leadership assignment on leadership practices and its impact on ‘Theranos Inc.’

Question

Task: Critically analysein your leadership assignment the leadership practices and firm performance using academic theory to underpin your work using a real leader and business as the focus for your work. Your task is to analyse the leadership style of Elizabeth in relation to how well ‘Theranos Inc.’ a health diagnostic firm performed under her reign as founder and CEO. Write about management and leadership styles, firm performance and measurement and risks, legal and ethical issues.

Answer

Introduction
For any organisation, leadership and management are very crucial. The future or success of an organisation depends on the leadership practices and approach. As per theleadership assignmentfindings there are different theories which underline the leadership and management practices. The appropriateness of these theories depend on the organisational context and purpose (Podsakoff and Podsakoff, 2019). The theories however cannot be critically analysed in the leadership assignmentuntil they are applied to real life settings. In this leadership assignment, Theranos Inc., a health care diagnostic organisation would be considered for analysing the leadership practices and its impact on the overall organisational performance. The company, Theranos Inc. at one point of time valued more than $9bn. This health care diagnostic company, almost revolutionized the health care system by introducing its innovative system of blood tests. The organisation was taken to heights by its efficient leader and CEO, Elizabeth Holmes. However, during the tenure of Elizabeth Holmes, the company also saw its fall (Purkayastha, Dutta and Chakravarty, 2020). The leadership style of Elizabeth Holmes will be analyzed in this leadership assignment. The leadership assignmentkeeps aside the fraud conviction of Elizabeth and closely studies her leadership approach. Elizabeth knew business psychology if not anything else. The way leadership can impact an organisation and its performance will be evaluated considering the case of Elizabeth Holmes and Theranos Inc. The various management and leadership theories will be discussed, the risks, legal and ethical issues faced by firm will be highlighted in the leadership assignment.

Background to the organisationdiscussed in the leadership assignment
Theranos Inc. was a privately held corporation from America. This company evolved to become the breakthrough organisation in the health care industry. The company addressed in the leadership assignmentwas founded in the year 2003. The founder and CEO of the company was Elizabeth Holmes, a 19 year old girl. The company, Theranos Inc. raised more than 700 million US dollars from private investors and venture capitalists which led the firm to reach a valuation of around 10 billion US dollars during the years 2013 and 2014 (TALA KHALIFEH, 2022). The company gained its popularity because the blood tests they had developed required very small quantities of blood and could perform accurate tests rapidly. Theranos Inc. used the devices which were compact automated. However, later it was found out that the claims which the firm made were false. In the year 2015, the company faced a turning point. The validity of the claims and blood tests by Theranos Inc. were questioned by investigation journalist of The Wall Street Journal, John Carreyrou and medical research professors, John Ioannidis and Eleftherios Diamandis. The technology used by Elizabeth in Theranos diagnosticswas disregarded and the CEO was found guilty as a fraud (Trautman et al, 2022). This led the firm to get doomed. The findings in the leadership assignment prove of how poor leadership or poor leader could devastate an organisation.

Management vs Leadershipin the leadership assignment
According to Paais and Pattiruhu(2020), management and leadership might sound and seem same but they have a fine line of distinction. The role of management as per the leadership assignmentis to control the group of individuals working in an organisation. The group is managed so that it can collectively achieve the organisational goals. Leadership on the other hand goes beyond simple management. Leadership refers to the ability of a person to motivate, inspire, influence and facilitate others to make significant contributions towards organisational performance and success. Leadership and management are equally important for an organisation. The leadership as perOreg and Berson (2019), exists at the base of an organisation. For a successful organisation, effective leadership is a prerequisite. The vision and passion of the leader has to be harnessed and incorporated into the disciplined organisational process. Management is crucial and the related management skills are the first step towards development of leadership and its skills. It is found in the leadership assignmentthat while leadership works with group of people, management is only concerned with specific responsibilities they are given, like money and finance, IT, advertisements, etc. As opined by Cortellazzo, Bruni and Zampieri(2019), leaders are unique but managers only mimic their rivals. The leaders can take risks, while managers are risk averse. The former looks forward to learning and growing while the latter focuses on attaining perfection in proven and existing skills. Leadership facilitates relationship building while management only concentrates on organisational objectives and goals.

Key leadership and Management Theories addressed in the leadership assignment
When it comes to managing and leading people, there are two main types of leadership management and leadership. It is analysed in this leadership assignmentthat management leaders focus on running the organisation effectively, while leadership leaders focus on inspiring others to do their best.

Behavioural theories:
Behavioural theories on Elizabeth Holmes focus on her decision-making process and how she interacts with her team. According to this theory addressed in the leadership assignment, Holmes is a high-performance individual who is able to make quick decisions in an emergency. In order to be successful, she must be able to trust her gut and act quickly. One behavioural theory state that high-performing individuals are those who are able to take advantage of their strengths. For Holmes, this may include being able to make quick decisions and having a keen sense of business. She also takes advantage of her network, which helps her get information quicklyRandhawa et al. 2019). Overall, it appears that Holmes was successful in building a strong team around herself and taking advantage of her strengths as a leader. Her ability to make quick decisions likely helped her achieve success early on in her career. She also communicated well with her team members and set clear goals for them.

Knowledge Management Theories:
Knowledge management theories on Elizabeth Holmes focus on how she manages her information and the decisions she makes(Denicolet al. 2020). According to this theory addressed in the leadership assignment, Holmes is a high-level thinker who is able to process large amounts of information quickly. She uses this ability to make quick decisions and stay ahead of the competition.Overall, it appears that Holmes was successful in managing her information and making quick decisions. Her ability to process large amounts of information quickly likely helped her achieve success early on in her career. She also communicated well with her team members and created a shared understanding.

Figure 1: Knowledge management theory cycle
(Source: Denicolet al. 2020)

Trait theories of leadership:
Trait theories of leadership are generally based on the assumption that there are certain personality traits or behaviours that are more likely to lead to success in a particular field. Trait theorists believe that these qualities can be measured and identified and then used as a basis for developing leadership styles. One of the most well-known trait theories is the triad model of leadership, which was developed by Theodore Levinson(Cooper, 2019). The trait model addressed in the leadership assignmentasserts that there are three core traits that are essential for success as a leader: charisma, competence, and toughness. Each of these traits has its own strengths and weaknesses, and a leader needs to combine them in order to be successful. Other popular trait theories include the seven Habits of Highly Effective People, developed by Stephen R. Covey; the four P’s theory of personal effectiveness, developed by John C. Maxwell; and the five abilities model, developed by Donald Sulloway. Each of these models mentioned in the leadership assignmenthas its own set of principles and advice for becoming a better leader. There is no one right way to be a successful leader and different people will respond best to different types of leadership strategies.

Leadership qualities
The second most common type of leadership theory is the theory of leadership qualities. This theory holds that there are a number of different qualities that are necessary for success as a leader and that these qualities can be measured in various ways(Geminoet al., 2021). Some of the most well-known leadership qualities mentioned in the leadership assignmentare charisma, intelligence, integrity, and persuasiveness. Each of these qualities has its own set of strengths and weaknesses, and a leader should carefully select the quality that is most appropriate for the situation. Leadership qualities can also be classified according to their focus: individual focus, team focus, or combined focus. Each focus has its own set of benefits and drawbacks, and a leader should carefully consider which focus is best for the situation.

Leadership skills
The third most common type of leadership theory is the theory of leadership skills. This theory holds that there are a number of different skills that are necessary for success as a leader and that these skills can be learned in a variety of ways. Some of the most well-known leadership skills are communication skills, problem-solving skills, decision-making skills, and teamwork skills(Rouyre and Fernandez, 2019). Each of these skills mentioned in the leadership assignmenthas its own set of strengths and weaknesses, and a leader should carefully select the skill that is most appropriate for the situation. Leadership skills can also be classified according to their focus: individual focus, team focus, or combined focus. Each focus has its own set of benefits and drawbacks, and a leader should carefully consider which focus is best for the situation.

The Five Factor Model is a popular trait theory that uses five factors to describe personality: Extroversion, Agreeableness, Conscientiousness, Neuroticism and Openness. Holmes reportedly scores high on all five factors.The Five-Factor Model addressed in the leadership assignmenthas been found to be successful in predicting job performance. It has been used in studies of managers and executives. The model has also been found to be predictive for teams and organisations.

The Enneagram is another popular trait theory that uses nine types of personalities: 1) the Warrior (dominant), 2) the Priest (inferior), 3) the Mage (mediocre), 4) the Lover (average), 5) the Guardian (deficient), 6) The Seeker (superior), 7) The Thinker (inferior), 8) The Artist (average). Although Holmes reportedly does not fit into any specific type, she may have some elements of each type. For example, she seems like a Warrior with the qualities of a Guardian.

Classical theory of management:
According to the classical theory of management, a good CEO should have strong leadership and management skills. One of the key tenets of this theory is that a good leader should be able to motivate and inspire their team, as well as make sound decisions based on data. Additionally, a good CEO should have a clear vision for their company and be able to articulate it to the rest of the team(Homan, 2020). Another key skill as per the leadership assignmentthat a good CEO should possess is decision-making. They need to be able to weigh all the pros and cons of a given decision and make the best possible choice for their company. CEOs also need to be able to handle crisis situations effectively, as they can often lead to dramatic changes in business operations. Finally, a good CEO needs to be organised and efficient in their work.

Figure 2: Classic Management theory
(Source: Homan, 2020)

They need to keep track of all the different aspects of their company's operation so that they can make informed decisions quickly.Classical theory of management mentioned in the leadership assignmenthas been used to analyse the leadership and management skills of Elizabeth Holmes. Throughout her career, she has demonstrated strong abilities in both areas(Henkel et al., 2019). Her early years as a computer programmer and businesswoman set the stage for her future success. She was able to capitalise on her intelligence and work ethic to build one of the most successful start-ups in recent history. One of the key aspects of the classical theory is its focus on managerial action. This means that managers must understand their customers and competitors in order to make effective decisions. Holmes exhibited this trait throughout her career at Theranos Inc. She was able to identify potential threats to her company and respond quickly by addressing them head-on. It is found in the leadership assignmentthat this allowed her company to stay ahead of the competition for a period of time. Another aspect of the classical theory that can be seen in Holmes's career is her focus on efficiency(Haessler, 2020). She was always looking for ways to increase throughput and reduce costs while maintaining quality product delivery. This approach led to Theranos achieving some impressive results despite being a start-up company.

Organisational performance and key performance indicators
"Theranos Inc. - A Silicon Valley Start-Up Facing Serious Questions" by Wall Street Journal reporters John Carreyrou and Toni Preckwinkle, allegations of fraud and misconduct have rocked the company. The WSJ article reports in the leadership assignmentthat "internal emails, financial records and other documents" obtained by Carreyrou and Preckwinkle reveal that Theranos executives warned that its technology couldn't be trusted in early 2015, months before it raised more than $700 million from investors(Kock and Gemünden, 2019). The WSJ also reports that since early this year, Theranos has been struggling to raise new money as it comes under investigation by federal prosecutors in California and Arizona. In a statement to the WSJ, Holmes says she is "relieved" that the company is being investigated but denies any wrongdoing.

Figure 3: KPIs of an organisation
(Source: Kock, and Gemünden, 2019)

The key performance indicators for Theranos included in the leadership assignment:
Growth: According to the WSJ article, Theranos' growth was impressive until recently, with its peak year in 2014 reaching $9 billion in revenue while its net loss narrowed significantly from 2013 to 2016(Scott-Young et al. 2019). However, according to SEC filings released in March 2018 (the most recent data available), Theranos Inc reported quarterly revenue of only $98 million for Q1 2018, which indicates a dramatic decline in growth over the past few years

Customer satisfaction: The WSJ reports that customer satisfaction ratings for various aspects of customer service were low throughout 2017, with complaints about product quality dominating overall ratings
Employees’ retention: The WSJ reports that employees have been leaving the company in significant numbers in recent months (around 50% of the total workforce has left within the past 12 months as per the leadership assignment data), which may be in part due to allegations of fraud and misconduct. Customer retention: According to the WSJ, Theranos had a high customer retention rate until recently, with around 95% of its customers staying for at least two years(Cluleyet al. 2020). However, since the allegations of fraud and misconduct started to emerge, customer retention rates have decreased significantly and are now closer to 60%.

Based on the key performance indicators and organisational performance, it can be inferred from the leadership assignmentthat Theranos has been facing significant challenges since the allegations of fraud and misconduct started to emerge(Roehrichet al. 2019). The organisational performance indicators indicate a decline in growth, customer satisfaction ratings and employee retention rates, which may be in part due to the allegations of fraud and misconduct. It is unclear how long these challenges will continue, but it is likely that the company will struggle to recover in the near future.

Theranos Inc's revenue growth has slowed down in recent months, reaching a rate of just over 20% in the last quarter of 2018. It should be noted in the leadership assignmentthat this slowdown does not reflect a change in customer behaviour; rather, it is likely due to lower prices for blood testing services as a result of competition from other providers (including Quest Diagnostics).

Evaluation of risks, legal and ethical issues
As the founder and CEO of Theranos Inc, Elizabeth Holmes faces many risks and legal issues. The evaluation of these risks, legal issues, ethical issues, and stakeholders' expectations should be considered by the leadership and management.

Risks mentioned in the leadership assignment
There are several significant risks associated with Elizabeth Holmes's role as CEO of Theranos. First and foremost, there is the risk that Theranos may not be able to deliver on its promises. Second, there is the risk that Holmes may have engaged in fraud or deception in her earlier roles(Lee, 2021). Third, there is the risk that Theranos may not be able to survive a financial crisis. Finally, there is the risk that regulators or other third parties may take action against Theranos for any number of reasons.

Legal Issues
Theranos Inc. faced several legal problems. Elizabeth Holmes, the founder and CEO of the company was accused and later proven guilty of being a fraud. The company, Theranos Inc. claimed that they had some high-tech driven blood testing system which needed very small amounts of blood sample from the people. They said that their technology could give reports very fast and that too with complete accuracy (Das and Drolet, 2022). However, their claims were all false. It is found in the leadership assignment that Holmes convinced the educated to avail their testing and the wealthy to invest in their business. The fraud conviction of Elizabeth Holmes swept off the existence of Theranos Inc. The legal bindings on the company led to the downfall of the business.

Ethical Issues
The business of Theranos Inc. was surrounded by ethical issues. The foundation of the business was on a fraud concept. The CEO and founded Elizabeth Holmes convinced people wrongly to believe in her business. As per the leadership assignment the customers as well as the investors were cheated. There was no integrity and honesty in the business. The psychopath entrepreneur understood business psychology very well, which helped her to get away with her unethical business initially (Williams, 2022). Neither did the business keep its claims or promises, nor did anyone benefit from the diagnostic services. Theranos Inc. was unethically collecting blood samples from people for testing, promising results which had no validity.

Conclusion
It can be concluded from the leadership assignmentthat an organisation depends on its leaders, leadership practice and approach for achieving their organisational goals. The organisation, Theranos Inc. failed completely due to its fraud leader. Though Elizabeth Holmes was punctual, direct and decisive, nevertheless she was a fraud. She had a fake plan and false business. She did not meet her commitments towards the customers, failed her investors and finally after several lawsuits was proven guilty. This case of Theranos Inc. mentioned in the leadership assignmentis an example which should make the organisations and their followers aware that poor leaders or bad leadership could ruin an organisation.

List of references
Cluley, R., Green, W. and Owen, R., 2020. The changing role of the marketing researcher in the age of digital technology: Practitioner perspectives on the digitisation of marketing research. International Journal of Market Research, 62(1), pp.27-42.
Cooper, R.G., 2019. The drivers of success in new-product development. Industrial Marketing Management, 76, pp.36-47.
Cortellazzo, L., Bruni, E. and Zampieri, R., 2019. The role of leadership in a digitalized world: A review. Frontiers in psychology, 10, p.1938.
Das, R.K. and Drolet, B.C., 2022. Lessons from Theranos–Restructuring Biomedical Innovation. Journal of Medical Systems, 46(5), pp.1-3.
Denicol, J., Davies, A. and Krystallis, I., 2020. What are the causes and cures of poor megaproject performance? A systematic literature review and research agenda. Project Management Journal, 51(3), pp.328-345.
Gemino, A., Horner Reich, B. and Serrador, P.M., 2021. Agile, traditional, and hybrid approaches to project success: is hybrid a poor second choice. Project Management Journal, 52(2), pp.161-175. Haessler, P., 2020. Strategic decisions between short-term profit and sustainability. Administrative Sciences, 10(3), p.63.
Henkel, T.G., Marion Jr, J.W. and Bourdeau, D.T., 2019. Project manager leadership behavior: Task-oriented versus relationship-oriented. Journal of Leadership Education, 18(2), p.1.
Homan, A.C., Gündemir, S., Buengeler, C. and van Kleef, G.A., 2020. Leading diversity: Towards a theory of functional leadership in diverse teams. Journal of Applied Psychology, 105(10), p.1101. Kock, A. and Gemünden, H.G., 2019. Project lineage management and project portfolio success. Project Management Journal, 50(5), pp.587-601.
Lee, M.R., 2021. Leading virtual project teams: Adapting leadership theories and communications techniques to 21st century organisations. Auerbach Publications.
Oreg, S. and Berson, Y., 2019. Leaders’ impact on organizational change: Bridging theoretical and methodological chasms. Academy of Management Annals, 13(1), pp.272-307.
Paais, M. and Pattiruhu, J.R., 2020. Effect of motivation, leadership, and organizational culture on satisfaction and employee performance. The Journal of Asian Finance, Economics and Business, 7(8), pp.577-588.
Podsakoff, P.M. and Podsakoff, N.P., 2019. Experimental designs in management and leadership research: Strengths, limitations, and recommendations for improving publishability. The Leadership Quarterly, 30(1), pp.11-33.

Purkayastha, D., Dutta, S. and Chakravarty, S., 2020. Dark Side Case: Elizabeth Holmes and the Rise and Fall of Theranos Inc. In Academy of Management Proceedings (Vol. 2020, No. 1, p. 12239). Briarcliff Manor, NY 10510: Academy of Management.
Randhawa, K., Wilden, R. and West, J., 2019. Crowdsourcing without profit: the role of the seeker in open social innovation. R&d Management, 49(3), pp.298-317.
Roehrich, J.K., Davies, A., Frederiksen, L. and Sergeeeva, N., 2019. Management innovation in complex products and systems: The case of integrated project teams. Industrial Marketing Management, 79, pp.84-93.
Rouyre, A. and Fernandez, A.S., 2019. Managing knowledge sharing-protecting tensions in coupled innovation projects among several competitors. California Management Review, 62(1), pp.95-120.
Scott-Young, C.M., Georgy, M. and Grisinger, A., 2019. Shared leadership in project teams: An integrative multi-level conceptual model and research agenda. International Journal of Project Management, 37(4), pp.565-581.
TALA KHALIFEH, C.M.A., 2022. THERANOS: CAUTIONARY TALE OF ETHICAL FAILINGS. Strategic Finance. Trautman, L.J., Koretz, L., McNeil, C. and Yordy, E.D., 2022. Ethical Challenge at Theranos. Available at SSRN.
Williams, M., 2022. Elizabeth Holmes and Theranos: A play on more than just ethical failures. Business Information Review, 39(1), pp.23-31.