The wolf of Wall Street (2013), a movie based on true events, revolves around Jordan Belfort’s life. He started out as a low-level stock-broker and GOT retrenched when the company he was working for became bankrupt. He found employment with a small company that dealt with Penny Stocks. Thereafter, he broke out and started his company, Stratton Oakmont Inc., with a group of friends, which was an Over-The-Counter (OTC) brokerage house. I selected this movie so as to analyze the organizational structure in Over-The-Counter firms. These types of firms have been criticized and branded the “dark market” because their charges in most cases are hardly regulated.
The various studies of organizational theory provide an analysis of the external and internal facets of the organization including the impact that individual traits and behaviors affect the organization. They also focus on the performance, achievements as well as the influence of the social interactions within the organization and how they impact individual attitudes. Activities in organizations originate from similar aspects, and these include the existence of a decision-making structure, rules and procedures, as well as division of tasks. These features are vital and are present in almost all organizations, but variations regarding how they get approached depends on the degree of formality within the different organizations.
Decision-making structures can either be centralized or decentralized. In the former, decisions originated from the top of the hierarchy and passed down through all levels of management. Decision makers are the executive directors and managers of such an organization. In decentralized arrangements, there are rarely any levels of hierarchy, and making of decisions is less formal, and individuals are somewhat independent. Such a structure aims at empowering employees in an organization, by giving them a chance to contribute in making of decisions.
In the Wolf of Wall Street, important decision making was a task by the executives of the company. For example, closing deals with different companies and partnering with them in the announcement of Initial Public offers (IPO). The staff was responsible for ensuring that clients received such information soon after the announcement, and convince them to purchase. Stratton Oakmont Inc. exhibited a decentralized structure of decision making. The structure appears when one of the staff members gets fired for cleaning his fish bowl. He did it just before the executives; Jordan Belfort, Dannie Azzof and Steve Madden of Steve Madden Limited, were about to announce the IPO of Steve Madden Limited, which was worth $22 million dollars.
The division of labor in Stratton Oakmont Inc. assumed the horizontal orientation, where workers had tasks in accordance with their skills. Jordan selected a few of his friends, who were salespeople in different professions (none of them had ever worked as stock brokers), as he was starting out his company. He believed that with their sales skills they would make the perfect start out employees for Stratton Oakmont. The company only had the executives who performed the basic functions of the business and the staff, which provided their proficiency in dealing with the internal operations.
Rules and regulations in organizations are important as they provide guidelines and eliminate disorderliness. Without guidelines, it is impossible to set targets, and this disturbs the productivity of an organization. In Stratton Oakmont Inc., the guiding principle of the employees was the commissions that they would get after selling stocks to potential clients. Selling of many stocks meant that a broker would get more commissions. Jordan also held meetings with them from time to time to tell them of how they would make more money by being dedicated and focused. Organizations with formal rules can handle various activities at a go and managers can focus on opportunities for the organization and find out how the existing and impending challenges can get tackled.
Various scholars attempted to study the operations of organizations in an effort to determine the ideal theory that would contribute to the enhanced performance of organizations. Max Weber, Henry Fayol and Frederick Taylor, came up with different theories, which described how organizations would perform under different conditions. Max Weber believed that a successful organization is one that used the bureaucratic approach, where regulations of attitudes and behaviors of individuals in the workplace by rigid rules and policies was present. Unlike in Stratton Oakmont Inc., a bureaucratic organization does not allow the employment of friends, and neither does it support favoritism. Jordan started the company with a group of individuals who were not only his friends, but also did not possess the required skills. In such an organization, employment occurs on the basis of an individual’s competence.
Some experts take bureaucracy as the perfect model for the organization. That is probably because law and order get maintained, and there are clear policies for employee responsibilities outlined. However, it also has several shortcomings. First of all, due to its rigid nature, it was difficult to adapt to changes, and, therefore, thriving in a dynamic environment would be a challenge. Another shortcoming is that it does not appreciate and recognize culture as a tool for employee motivation. It is an ideal structure, but not for all organizations, because the authoritarian nature would make employees fearful and, therefore, perform poorly.
Henry Fayol, a French engineer, is apparently the first scholar to study organizations in Europe, and he concluded that the basic and most important function of any organization was the administration function. He pointed out that for an organization to be successful, it was necessary to have careful planning and maintenance of orderliness through proper coordination as well as adequate supervision. He continued to say that successful management needed to have discipline, with duties given priority. Achievement of such would be a consequence of an agreement between the manager and his subordinates, on how they should behave and the rules to follow. He also mentioned that people in an organization should all have a clear sense of direction, and this would mean that managers set goals and targets and guide employees towards their achievement.
Stratton Oakmont Inc. assumed the structure of an organization that Frederick Taylor wrote about. The Scientific Management Theory, according to Taylor, analyzed different aspects of the organization and their impacts on the overall performance. He also mentioned the importance of training employees, and setting work standards. When Jordan set out to start his company, he selected a few of his friends whom he believed were capable of selling stocks, with the right training. In the advertisement, they mentioned that they trained professionals in order to guide clients through financial decisions. Jordan trained his people through the methods that he assumed were best.
According to Taylor, it is the duty of managers to identify every worker’s ability and align it with the duty ahead. Jordan identified salespeople, and he believed that their drive for being wealthy would facilitate their dedication to doing their work well. The theory provided that managers had the responsibility of ensuring that workers knew what strategy was perfect for performing their job, and putting up a fair reward system. At Stratton Oakmont, workers got assurance of a 50% commission on every stock or sale that they made. Enactment of a punishment system was also necessary, so that people would be aware of unbecoming conduct and the consequences that would befall them if they went against the rules.
Taylor emphasized the need to leave all planning and strategy formulation to the managers and the execution part to the workers. At Stratton Oakmont Inc., it was the duty of Jordan, as the executive head, to plan what it is they were to sell. He also found ways to make it a large organization by making more money. He started out by selling penny stocks and pink sheets, but he was always finding ways of advancing and looking for greater opportunities by consulting with his team; those with whom he started the company. He had focus and vision for his company. He simulated this when he someone inquired about the future of the company and his response was “diversification”. He wanted to find companies that would increase their publicity, and this is where he liaised with Steve Madden, who specialized in designing women’s shoes to launch their first Initial Public Offer (IPO).
Jordan Belfort knew that his employees needed motivation, and he did this by awarding them with monetary tokens and held celebration parties whenever there was a good sales breakthrough. He knew they would not understand the importance of the Steve Madden Ltd IPO. For this reason, he brought Steve Madden to the launch, as a motivation to the employees to put their best foot forward. He also praised them whenever they did a good job and always believed in them. Henry Fayol emphasized on the need for orderliness and its importance in reducing waste of hard work. Jordan understood this aspect very well and for this reason; he put his father in charge of maintaining order in the organization.
The movie made me understand how organization structures affect overall organization performance, and that it is not necessary for managers to be tough on employees for them to do their work. They should understand that teamwork begins from the top all the way to the bottom level of management.
