Enron is an American corporation that deals in various commodities such as electricity, natural gas and communication. The company that was established many years ago changed its name in 2004 to Enron Creditors Recovery Corporation after an accounting scandal that happened in 2001. The corporate culture found in Enron is a toxic one. This is a dangerous type of culture because it leads to downfall of the company. In addition to the corporate culture, globalization and corporate social responsibility have affected corporate policies made by the firm hence the activities of the organization have been affected. This study examines the impact of corporate culture, globalization and corporate social responsibility on corporate decisions made by Enron Corporation.
Organizational culture and their impact on Corporate Policies
A good organizational culture is important for the success of an organization. Further, the culture of the organization, as viewed by the people in it affects the attraction and retention of competent employees. Some organizational cultures discourage employees leading them to leave the organization. For instance, an organization with a culture that devalues the employee and hinders them from utilizing their expertise would only lead to the departure of such employee. Such an organization can improve its culture by valuing its employees hence attracting, retaining and retaining its valuable staff. The culture of an organization also affects the way external forces are viewed (Miller 71).
On the other hand, toxic organizational cultures can be very dangerous. Toxic organizational cultures are seen as the main contributors towards the collapse of Enron Corporation. These include practices such as authoritarian hierarchical and rigid-traditional cultures. Dishonest-corrupt and also competing-conflictive practices in an organization are also part of toxic organizational cultures. Positively, the culture offers education and training.
In an organization where this culture is practiced, the manager takes upon himself the role of making important organizational decisions alone with no consultation. Such a culture is dangerous to any organization because it lacks accountability and in case things do not run well in the organization, no one is there to bear the blame. This practice also provides a good environment for corruption to thrive unchallenged. Misuse of the organization’s funds is also present because the person or people in authority are only concerned about how to amass wealth for themselves without caring about the fate of the organization. In most cases, this type of organization culture is found in organizations where there are no people to challenge the governing authority.
This form of malpractice leads to deterioration of the values and belief systems governing that particular organization as people feel that they are free to do whatever they please. According to McLean and Elkind (4), the Chief Executive Officer of Enron, Lay, was involved in use of the company’s property to carry out private tasks. They give an example of a particular time that the secretary wanted to organize for transport of some members on a business related trip only to find out that three of the company’s jets would not be available because they were booked by Lay’s relatives. The employees should have a sense of ownership to the organization for them to be able to contribute to the advancement of the organization.
The authoritarian-hierarchical culture makes the junior employees not to have a sense of ownership of the company thus leading to low productivity. There is need for employees to have a sense of ownership because this motivates them to work without feeling as if the company is owned by a few individuals, hence high yields. In addition, proper communication in a company helps employees discuss their plight and corporate policy with the top management. In spite of few complaints from employees at the expense of working, the firm increases communication to solve disputes. In such a case, the management improves its culture through increased communication (Marsden 43).
Another dangerous practice that was carried out by Enron and which led to its downfall is the Competing-conflictive culture. This is whereby the top authorities have unresolved conflicts among themselves and end up having grudges against one another which may lead to unhealthy competition and also looking for means to bring down one another which could be political or otherwise. There is mistrust among the leaders and they refrain from sharing vital information with one another because of fear that their rivals might use the information to destroy them and their reputation.
Because of their selfish ambitions, they end up concentrating much on how to protect themselves and their selfish interest at the expense of engaging in acts that can lead to the growth of the organization. This is not only one by the leaders but it also gets down to the junior employees and hence, a lot of resources and time is wasted as people try to fight one another to fulfill their selfish desires. McLean and Elkind (3), record that the relationship between Lay and Jeff Skilling, one of the top officials, was not a good one. Jeff is said to have held feelings of contempt towards Jay. This was one of the things that led to the fall of Enron Corporation.
Laissez faire culture
Laissez faire culture entails leaving the employees to do whatever they want without any supervision. This leads to stagnation or slow growth of the organization. The employees are usually confused on what is expected of them because the management fails to offer the necessary guidance. This form of culture results to both inter-personal and intra-personal conflicts. Intra-personal conflict occurs within a person whereby they are faced with the challenge of deciding between what they think is right and what is wrong. Making such decisions is at times a difficult task. Inter-personal conflicts arise mostly when there is duplication of roles or when roles are not clearly defined. This was the case in Enron Corporation as noted by McLean and Elkind (414).
Skilling is quoted to have said that he was not aware of any malpractice within the organization that would have led to its collapse. Whether it was just an excuse of the truth, it is possible that the people in the organization did not have a clear definition of their individual roles and that no supervision was done to ensure that work was done well. Supervision and training of the employees is important in order for them to continue being focused on the mission of the organization. It is worth noting that the culture of an organization is mostly derived from its mission statement. This is further broken into smaller details so that it becomes easier for the organization not to deviate from its mission. She therefore suggests that training of people in organizations about these smaller details is necessary in order to achieve the set goals.
This form of culture was also present in Enron and it contributed greatly to its decline. This culture is characterized by greed for wealth and the means of getting this wealth does not matter. Those involved in this form of culture are not concerned about the consequences of their actions on the future of the organization. Due to the overwhelming desire to have more, the management makes poor decisions and justifies any of their wrong actions. The vision and mission of the organization are no longer important because everyone, from the least to the people holding top positions, work towards satisfying their greed.
Boundaries that were initially not to be crossed are crossed unconsciously and people continue acting in this manner until their malpractices are exposed. This is what happened in Enron for a while before those involved, who include the CEO Jay and his co worker, Skilling were charged in the court of law for various counts of crime. It is apparent that people in the west or in developed countries to get away with corruption because they tend to sugar coat this vice by giving it other names that do not sound bad. For example, people involved in this act may refer to their action as a scheme they are using to achieve the organization’s set goals.
Here, the leadership resists the introduction of changes in the company. They hold on to the old method of doing things which may not necessarily work out in the current market. Their resistance may be due to their past experience whereby they might have used a certain method of doing things which brought them glory and hence they think that it is the only way that things should and must be done. They ignore the requirements of the current market and continue to bask in their past glory. Employees who try to suggest change are scorned and at times even rebuked for trying to change their way of doing things. Some authors advocates for the need for one to know the strategies that an enemy is using in order to gain victory over their rivals. Application of this strategy in Enron Corporation was not there because of the rigid-traditional culture
That was held, hence the decline and eventual downfall of the company.
Globalization and Corporate Responsibility
Globalization is the rapid spread of interdependence among countries in the world. The interdependence among nations has been growing over time with cross border exchange of services and commodities increasing immensely. Globalization indicates the continuous expansion and integration of markets. According to Fischer, the trend that globalization has undertaken is irreversible (26). The main driver of globalization is the swift progress in science and technology. The progress in these two helps increase the speed of movement in information and goods across the world. Through globalization, international trade has grown leading to further growth of economies. The outcome is reduced poverty levels and development. Despite the benefits of globalization, there are challenges that affect its continued growth (Holtzhausen 106).
Through advanced technology, the cost of communication and movement of goods and services around the world has reduced. For instance, the costs that are incurred by Enron Corporation in shipping products have reduced. According to Herring and Litan, the reduction in the costs of international trade has encouraged the firm to increase its participation in international trade by establishing international ventures (42). Enron has established a competitive advantage in information technology by establishing blogs for the firm and its employees (Herring and Litan 45).
In addition, the firm has been able to outsource and off-shore IT expertise from other countries. Globalization involves utilization of advanced technology to reach out to the world market. Globalization has influenced the marketing strategies of Enron Corporation to include online marketing strategies. In addition, the company has engaged the internet in its e-commerce and e-business ventures that have proved productive (Miller 76).
Corporate social responsibility is the ability of an organization to be responsible for the impacts of its activities and products on both the environment and the society. The operations of firms in different environments leave a lot to be desired. Many manufacturing firms produce emissions that are harmful to the environment and the society. Corporate responsibility for Enron Corporation involves the responsibility the firm has to the society for its products’ impacts.
The firm has established programs in which it gives back to the society through. For instance, the organization has special days in which it attends to the needy and minority groups in the society. During such periods, the organization mingles with the society while providing their needs that lie in the company’s line of production. Products are given free. Therefore, corporate social responsibility has shaped the corporate decisions to include specific activities of the firm that care for the community. In addition, the company sells products that are friendly to the environment in a bid to cater for future generations.
Enron Corporation operates in the electricity and pulp industry. The firm has come a long way since its establishment to overcome accounting issues to the present competitive corporation. The organizational culture at Enron has had a great impact on the organization, mostly a negative one. This has led to some of its senior leaders, like Jay and Skilling, losing their jobs and facing criminal charges in court. Contrary to Skilling’s claim that the collapse of Enron was not caused by corporate mismanagement, it is clear that this was the main contributor of the company’s collapse especially because of the toxic culture that was practiced.
Globalization too has positively influenced corporate decisions of the organization hence enabling the firm to engage in outsourcing and selling its products to international markets. In addition, corporate social responsibility has contributed to the decisions Enron has made regarding giving back to the society and environmental conservation. The organization operates using environmental products and vehicles while supplying similar products to the market. It is therefore evident that the decisions made by the organization have been strongly influenced by the culture developed by the firm, the globalization and social responsibility.
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