Question

“The resignation of the CEO and Senior Executives at Rio Tinto is merely symbolic - nothing will change in the organisation”.

Do you agree with this assessment?

Use systems thinking to explain your answer. (250 words)

Answer 1

Those who asset that new CEOs may be best suited to lead the firms value creation efforts have failed to recognise that there is a cost associated with replacing a CEO .there are at least two costs associated with replacing a CEO .

1. Loss of knowledge about the organisation,its resources and its competiton :

CEO posses three types of skill - genric , industry related, and firm specific . Generic skills are those that can be easily transferred across firms while these skills may be used to create value this value is not likely to be long Lasting because other firms can easily acquire CEOs who also have these skills . Industry related skills are those that can be transferred among firms within an industry. Industry related skills may also be used to create value but this value is also not likely to be long lasting because other firms in industry may also acquires CEOs with these skills .

Firm specific CEOs skills are those that are specific to a particular firm and are therefore only useful or potentially valuable within that firm thus firm specific CEOs skill are a potentially valuable resource that may be useful in the process of corporate entrepreneur ship

The second cost associated with CEOs change is the

2. Loss of valuable relationships or social complexities :

The current CEO may have developed a Goodwill in the market which affect the market price of the stock of the organisation the CEO represent a company in the world and if there is any misconduct found against the CEO or there is change in CEO of the company or say senior management it impacts the objective of the company because a negative rumours regarding the company will spread in market which will impact the investors and shareholders of the company as the EPS and other relating terms will be effected

So after concluding above i think change in CEO or senior executive at Rio Tinto will affect the organisation because a change in management can cause the lost of trust in the market and also the objectives of the company will be effected because a new management will take time to get control on the environment and activities of the organisation and to get stabilized it may take much time and till this period a organisation can suffer loss of consumers and value of company in market