Enron: Applying Business Principles

Paper Summary:

This paper reviews the business principles related to the corporate climate at Enron including principles of ethics, leadership and corporate culture. This paper also analyzes the reasons why Enron failed, with the company engaging in flagrant corruption that flies in the face of international business morals and values.

Contents:
Introduction
Overview: The Fall of Enron
Chain of Command and Management Style at Enron
Managerial Ethics and Enron
Corporate Culture
Conclusions

From the Paper:

"The organizational culture of Enron changed under Kenneth Lay's guidance and that of his cohort Jeffery Sklling, who together created a culture that supported the idea "do it right, do it now and do it better" (Sims, 2003: 148). The culture at Enron might best be described as a monoculture, supportive of a particular breed of top-notch executive rather than a heterogeneous or diverse culture supporting open democracy and freethinking. The centralized leadership style at Enron further acted to support a lack of diversity and burden on employees. Many have described the corporate culture that existed under Lay as innovative and competitiveness, where "employee enjoyed autonomy IF they produced quarterly results" (Fox, 2003). Top leaders began recruiting associates from top schools and looking for prestigious talents (Thomas, 2002). Workers were rewarded with amazing perks including concierge privileges and merit bonuses (Thomas, 2002). Among the "bright hirings" during the 1990s included Andrew Faston, who became CFO of the company in 1998 (Thomas, 2002). Enron's internal culture however soon took on a "dark tone" when a performance review committee was established enforcing a 360 performance review process based on Enron's morals and mission. These included "respect, integrity, communication and excellence" otherwise known as RICE (Thomas, 2002). Cultural diversity was not encouraged; rather all employees were encouraged to be the same bright and clever, innovative and daring.
Most associates however began feeling too much pressure and felt that they were judged on the profits they brought into the company rather than the values outlined in the RICE (Thomas, 2002). The practice of posting earnings was common in the company. The worse people's profits margins were the more likely they were to be downsized, thus internal competition in the organization was fierce. "Immediate gratification was prized above long-term potential" (Thomas, 2002) suggesting that top officials did not care much for long term relationships as they did for immediate profits."

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