Enron Corporation’s Organizational Culture

Introduction

The following essay is concerned with the critical analysis of the organizational culture that led to the debacle of Enron corporation. The collapse of Enron corporation provides a case of organizations that have felled as a result of scandals by their leaders in the recent past. Generally, the manner in which a leader behaves during the conduct of the business has an impact as far as the organizational performance is concerned. A leader has the effect of developing either a good organizational culture that will led to success or an unethical one that will contribute to organizational failure. Enron Corporation was established in 1985 and was very successful Energy Company in the United States in the recent past which was being ranked position seven in the market capitalizations. It was a highly rated organization and acted as the United States’ government adviser.

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Many employees wished that they could work in this reputable company. It was guided by the principles of excellence, corporate responsibility as well as ethics. However, the crisis started when the organization was using questionable accounting practices sin an effort to ensure that its credit rating maintained. The organizational culture was to blame for the debacle of Enron Corporation. It is thus important to define what an organizational culture entails before examining its effect on Enron debacle. Organization culture refers to the shared ideologies, beliefs, assumptions, attitudes, expectations and norms. Organizational culture enables managers to; support organizations’ business strategy, make staffing decisions, set performance criteria, guide the nature of acceptable interpersonal relationships in organizations and select appropriate management styles. Organizational culture generally provides consistency to an organization by integrating diverse elements into a coherent set of beliefs, values, assumptions and consequent behaviors.

The type of culture in any organization is determined by the following factors; history of organization, types of leadership, size of organization, technology in use, goals and objectives, environment as well as people in the organization(Hatch & Cunliffe,2006,18-34).

Organizational culture that led to Enron corporation debacle

Such organizational cultures that contributed to the failure of Enron Corporation are generally referred to as toxic organizational cultures. They include authoritarian-hierarchical, Competing-conflictive, Dishonest-corrupt as well as Rigid-traditional cultures.

Authoritarian-hierarchical culture

This entails a situation where the managing director has the role of making critical decisions by himself without consulting anyone. This is dangerous because no one knows what is happening as far as the organization operations are concerned and in a situation where things turn out to be worse, the organizational chiefs cannot be challenged. There is no accountability in this form of organizational culture and thus providing an environment for corruption as well as embezzlement of funds. Authoritarian culture simply concentrates on the desires of self and contains no consideration of the other party’s interests. The main cause of power abuse is as a result of flawed governance structures. This form of toxic organizational culture has no checks as well as balances i.e. there is lack of effective opposition and thus it creates an environment for corruption as well as power abuse.

The individuals thus becomes irresponsible and takes advantage of the leadership vacuum to pursue their own objectives. This culture is also characterized by lack of respect as well as integrity for people i.e. the leaders fails to adhere to the mission statement of the organization. The top management team at Enron Corporation enjoyed huge salaries and bonuses. Despite being paid handsomely, the management was involved in corrupt activities and thus stole from the organization. They enjoyed a lavish lifestyle and used the company’s assets for their personal interests. For instance, the reports have indicated that the Chief Executive Officer at Enron, M. Lay used the company’s jets for his own transport. The management also went ahead to recruit family members as well as friends and this was dangerous since they could not be held accountable in case of any malpractices (Collins, 1989, 16).

Competing-conflictive culture

This refers to a situation whereby there are conflicts between senor managers which can lead to an attempt by one to undermine the position and authority of the other through political activity. In this form of culture, the senior managers plot against one another. Mutual cooperation does not exist in this form of organizational culture and more than often refrains from sharing information with one another as they fear that the information may be used against them. People struggle to gain power and they usually sabotage one another so as to emerge top of the others.

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The mission statement of the organization is no longer regarded as the survival as well as safeguarding of personal interest’s forms the order of the day for both the leaders as well as the employees. Organizational resources are therefore misappropriated following the duplication of roles. The information deficiency in this form of organizational culture entails that the necessary information to carry out tasks effectively is possessed only one person or few individuals and this is dangerous as far as the organizations survival is concerned. With regards to Enron Corporation, the top leaders did not maintain an open and trusted relationship with the workers and therefore those employees who raised concern about the malpractices were however not taken seriously. The top management at the Enron Corporation used the organization’s money so as to ensure that others were blamed and to occupy their positions and this in turn led to the collapse of the company (Mullins, 2005, 16-27).

Laissez faire culture

Leadership in an organization entails the relationship that exists between the top management and the employees whereby, the top leaders influences the employees to leave behind their personal interests so as to realize the organizational objectives. However, there arises a situation whereby the leaders are not competent enough to steer the organization to greater heights. In leissez-faire form of organizational culture, the leaders fail to provide the required directions, the expected performance as well as the values to the employees. This in turn makes each employee to do whatever they wish to do as there is no much attention that is given unto them by the management. As a result, the employees become confused wit regards to their expected roles. The failure of Enron Corporation was attributed to the laissez- faire.Leissez –faire form of leadership is often characterized with the following types of conflicts; intrapersonal conflict which arises within an individual and it is concerned with deciding what is right and what is wrong. Deciding the right things to do in certain situations can be quite stressful.

The other form of conflict with regards to the leissez- faire culture is interpersonal conflicts. With this regard, there is role incompatibility in that there is a mismatch between persons and the tasks allocated to them. The senior management at the Enron corporation did not bother much on what the employees were doing and so the employees were allowed to act in the manners that they deemed fit. The lack of controls contributed to the failure of the Enron corporation.Without proper controls vacuum was created and thus an effective leadership was lacking leading to chaos (Dawson, 1996, 65).

Dishonest-corrupt culture

The senior management at Enron Corporation was being driven by its own greed. They thus enriched themselves at the expense of the shareholders. The stewardship accounting was thus lacking and so the management decided to pursue its own interests. They misappropriated the companies’ resources by rewarding themselves high salaries. Instead of carrying out the business in a profit manner, the senior management at Enron Corporation spent huge sums of money on entertainment, financing trips to far regions and warded themselves fringe benefits which increased the company’s costs and this eventually caused the company to collapse. They involved themselves in such dishonest practices as manipulating the financial statements through the change of accounting policies so as to misappropriate funds (Grey, 2009, 5-7).

Rigid-traditional culture

Rigid traditional culture refers to a situation whereby there is resistance to change as a result of the following factors; parochial self interests i.e. people resists organizational change due to fear of losing something they value. Thus the senior management Enron Corporation did not welcome the organizational change as they feared losing power, freedom, prestige, relationship as well as friendship. The fearful individuals at Enron Corporation had their own parochial interests at heart and did not consider the interests of the organizations and its members.

The senior management at Enron Corporation had low tolerance for change implying that they resisted change in order to save their faces i.e. reputation. They assumed that making the necessary changes would be an open admission that they have failed. Misunderstanding as well as lack of trust among the management team at Enron Corporation was a factor that contributed to change resistance. The management refused to communicate the employees the need for change. The individuals thus did not fully understand the reason for change as a result of lack of trust between them and the change initiators.

The resistance to change implied that the products that the Enron Corporation produced failed top respond in accordance with the changing demands in the market as the accounting as well as the marketing procedures did not adjust with the innovations. In short, the Enron Corporation lagged behind the technology as a result of resistance to change by the senior management and this led to its collapse as its products were no longer competitive (González, 2009, 21).

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Conclusion

Every organization entails a collection of individuals who have unique needs as well as unique cultural backgrounds and therefore conflict is inevitable as far as the organizational life is concerned. An organization can be rigorously damaged as a result of toxic senior management team. A grandiose Chief Executive Officer can indeed drive away the organization’s best people, make terrible decisions as well as divert the energy of the people The Enron corporation represents a case whereby the senior managers made disastrous decisions and in turn embezzled funds. The greed led the top managers to misappropriate the organization’s funds and this eventually caused the corporation to collapse.Organizations requires to aggressively deal with toxic managers problems as quickly as possible so as to ensure that they don’t fail. Some of the key steps that can be taken to change the toxic culture in organizations includes; ensuring that the senior managers don’t engage in unethical, rigid as well as aggressive behavior, ensuring that the senior managers gives feedback with regards to their performance, coaching the corrupt leaders, refraining from employing and promoting the toxic leaders and finally firing those managers who are deemed to be toxic (Hatch & Cunliffe, 2006, 18-34).

Reference List

Collins, J., 1989. Uncommon cultures: popular culture and post-modernism. London: Routledge.

Dawson, S., 1996. Analyzing Organizations. London: Macmillan.

González, J. M., 2009. Conflicts, Disputes, and Tensions between Identity Groups: What Modern School Leaders Should Know? North Carolina: IAP.

Grey, C., 2009. A Very Short, Fairly Interesting and Reasonably Cheap Book About Studying Organizations. London: Sage.

Hatch, M. J & Cunliffe, A.L., 2006. Organization Theory: Modern, Symbolic and Postmodern Perspectives. Oxford: Oxford University Press.

Mullins, L.J.2005.Management and organizational behavior. New Jersey: Prentice Hall/ Financial Times.

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