For many years, strategy and environment of Arthur Andersen changed especially with regards to the materials. The management of Andersen’s businesses reacted to the changing environment by making the related changes to the organizational architectures such as performance evaluation, decision right and reward systems. In the book, it is revealed that poorly designed organizations architecture in response to the changing environment in term of material can result into company’s underperformance and even failure. The initial Andersen’s business plan was to provide high-quality bookkeeping services to its clients. Later, with the invention of computers, Andersen’s engineer named Joseph Glickauf illustrated that computers could be utilized to automate bookkeeping. Through bookkeeping automation, Andersen’s firm became the most outstanding accounting firm in America. Their business exploded due to the increased demand for information technology in the 1970s. During that period, business consultation became the chief revenue earner in the Andersen’s firm. The growing consultation business created high tension within Andersen’s firm employees. The firm’s consultants began noticing that their wages were less in relation to the market opportunities. They felt their contributions towards profit realization were more than the auditors’ contributions who even had better salaries than them. The auditing partners who were in the managing board of the organization resented that their consulting partners wanted higher profits and shares which they were not ready to address. As a result the consulting partners pulled out of the organization and formed their own consulting firms. This led to the creation of more consulting firms in America and it is the reason as why Andersen’s firm began declining due to increased competitions. 2.
The problem started with Andersen hiring a staff of 40 internal auditors from Enron leading to the management of a staff of more than 150...
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