The Company Culture Of Enron Management Essay

The Company Culture Of Enron Management EssayJust as the destiny of individuals is determined by personal character, the destiny of an boldness is determined by the character of its attractorshiphiphip. And when individuals are derai direct beca procedure of a lack of character, the organization will also be harmed (Josephson, 1999).The merger of two Houston-based pipeline companies in 1985 lead to the creation of Enron. It started as an sinew delivery company, but the deregulation a few years later helped it change its focus and become an energy matchmaker or energy broker. The company started matching the buyers and sellers of energy and utilised creative trading methods to generate profits. So in a short span of time, Enron corporations fortunes changed from honourable a surviving company and it become a thriving company- a symbol of sure-fire American corporation.1.2 The Company CultureThe deregulation in 1988 lead to a dramatic change in the corporation. Enron had bec ome the symbol of dynamism and hostility. The culture at Enron was to encourage creativity amongst the employees. It embraced a culture that rewarded cleverness. The employees were motivated to research innovative approach to their work. The limits were pushed for performance on the individual employee level to sustain the astonishing growth levels that the corporation was experiencing. It was slowly moving towards a culture that look up to unchecked ambition. In the pursuit, Enron led a culture which believed in stretching the performance until the limits of ethical conduct were overlooked. We will also see ahead how the leadership at Enron affected a change in the culture of the corporation. If corporate leaders encourage rule-breaking and foster an intimidating, aggressive environment, it is not surprising that the ethical boundaries at Enron eroded a bureau to nothing. Schein (1985) has focused on leadership as the critical comp matchlessnt of the organizations culture because leaders can create, reinforce, or change the organizations culture. This applies not the to the lowest spot to an organizations ethical climate (Sims, 2000 Trevinoet al., 2000 Sims and Brinkmann, 2002).According to Schein (1985) there are five primary mechanisms that a leader can use to influence an organizations culture attention, reaction to crises, role modelling, parcelling of rewards, and criteria for selection and dismissal. Scheins assumption is that these five criteria reinforce and encourage behavioural and cultural norms within an organization. So to summarise the culture at the company as depicted in the movie which was influenced by the following factors. leadership Behaviour (reference?)Espoused values and visionsCommunicating the vision for the formation through stated strategic long-term objectives in the vision statement/yearly general meeting statement.Role modelling and attention on that point were multiple instances of Management-Employee seminars. There wer e also Enron Gas services effect days, where the anxiety would use motivational speech to inspire employees.Reaction to crisisIniti onlyy in the nascent stages of the accounting misdemeanours the caution devised way to avert crisis with efficient use of Public relation to make the event look insignificant.Programs , structuresCriteria for rewards and personnel decisionEnrons remuneration system rewarded individuals who adopted Enrons aggressive, individualistic culture and were based on short profits and financial measures.Symbols , rituals and storiesThe enron management way of celebrating success- organising weekend adventure trips.Jeff Skilling mantra- Do it right, do it now , and do it better1.3 The External EnvironmentEnron had become an energy trading giant in the US market and it was expanding in more sectors and international markets. The surprise with the companys growth was not its ingenuity of doing business but the press forward at which it was expanding. But with a careful counterweight of public relation and good CSR skill, Enron had succeeded in developing a niche amongst the American corporate houses, the American media and the masses. It was a symbol of corporate excellence teamed with an ambitious zeal to succeed at all cost. Enrons spectacular success was receiving positive reviews from the press and the financial analyst community which was incremental in adding fuel to the companys competitive culture.So the movie very succinctly describes the leadership at Enron which encouraged a culture that was virtuously flexible leading to ethical degeneration in the name of ambition.Leadership at EnronThe pillars of Enron were the top management team which always believed in exuberant performance. They were control in their pursuit of delivering on the bottom-line numbers at all cost. This attitude was percolated to the complete organisational structure at Enron by dividing the company in every the risque performing employees or the so- ca lled low-performers. The employees who were a part of the upper-crust were handsomely remunerated. This led to a negatively infected passion amongst the employees to break the performance bench-mark in the organisation to gayly afloat.The reflection of the leadership style in the movie is Indirect leadershipIt is evident from the movie that there was a heavy influence of the top management on the culture of the organisation which cascaded down to all the employees of the company, but indirectly. A form of indirect leadership involves leader influence over the organization culture, which is delineate as the shared beliefs and values of members (Scheinn, 1992- trice Beyer, 1991). Leaders may attempt either to strengthen existing cultural beliefs and values or to change them. There are many ways to influence culture, and they may involve direct influences (communication, a compelling vision or leading by example) or other forms of indirect influence, such as changing the organizati on structure or reward system.Transactional leadershipIt refers to the leadership style wherein the leader exchanges rewards of economic or financial value with the follower. These rewards are based on the premise that the leader recognises the parameters and the levels of performance which justify reasonably the task and also clarifies the conditions under which the rewards are available for justification. The last is to enter a mutually beneficial exchange, but not necessarily to develop a enduring relationship. Although a leadership act transpires, it is not one that binds the leader and follower together in a mutual and continuing pursuit of a higher purpose.But in the movie it is also seen that leaders were in a constant pursuit to convince their followers about their genuine interest of promoting the wel farthere of the stakeholders, which was not the campaign in reality. Yet they were successful in blinding the stakeholders (employees) with their leadership position and ski lls. So here we see an overlap of transactional as comfortably as transformational leadership traits as the leaders at Enron were successful in their motive.Effective transformational leaders may exhibit transactional behaviors, but their leadership style also includes one or more of the following characteristics idealized vision, inspirational motivation, intellectual stimulation, and individualized consideration (Bass, 1985 Bass Avolio, 1994). These characteristics are assumed to transform followers and motivate them to do more than initially expected. This transformation presumably occurs through raising the followers awareness of the signicance of designated outcomes, getting followers to transcend their egotism-interests for the good of the organization, or augmenting followers needs on Maslows (1954) hierarchy of needs (Bass, 1985). Although leaders and followers purposes may begin as separate but related, they eventually become fused into a linkage of power bases that pro vide support for two members of the relationship.Leadership is about making choices (Kouzes and Posner, 2003). Choice is a binary action that divides options into two sets, the desired and the undesired ones, according to a higher principle or value (Rawls, 1999). Mostovicz (2008) posits that the way people choose is a reflection of their worldview. This discovery can be approached in 2 ways(1) By the need for consummation (the Lambda worldview) or(2) By the need for affiliation (the Theta worldview).Both the world views have a unique set of characteristics. The Lambda are self- motivated and highly driven to benefit individaulistic goals whereas the Theta are more society welfare oriented. The Lamba have a narrow prespective towards the society as such whereas the Theta have a much broader view. The unique characteristics of twain the worldviews along with leadership approach is as mentioned below.ThetaLambdaMotivation/reasonSocially orientedPersonally orientedGoal want unity a nd certaintySeeking challenge and creationBehaviourCommunionAgencyBenefitBuilding respectLooking for personal freedomLeadership principleAuthenticity = truthAuthenticity =genuinenessInclinationToward choiceToward contrastPerception of truthAs an objectiveAs a set of rulesTransformation of aleaderA leader is born. Qualities are subconsciousA leader is developedconsciouslySo the reflection in the movie about the leadership at Enron is more on the Lambda worldview. The attitude induced by the top management through the company made the organisation develop a Lambda view which led to the massive breakdown of the ethical machinery.The LeaderJeff Skilling- the man with the ideas. He was the kind of a person who had big vision of things. One of his favourite books was the Selfish Gene, which was a description about the human nature being steered exactly by greed and competition in the service of passing on the genes. He precious to alter the way in which Energy was being traded. He succe eded in initiating a market for natural gas wherein it started being traded as stocks. He born-again energy into a financial instrument and this led to Enron becoming the largest energy trader in North America.Kenneth Lay was a visionary and he like people who shared this attribute. Jeff Skilling fit in the picture perfectly. He was aggressive, intelligent and possessed exemplary leadership qualities which was incremental in creating a culture of aggression and incentivised competition in the organisation.Under his leadership the organisation transformed from a small energy market player to the biggest energy trading company in North America with a rapidly expanding global operations network. The company was being driven by the aggressive and individualistic attitude which was strongly innate in the system by Jeff Skilling and the policies of the management team for attaining short term profit. These were successful in achieving the results in hindsight but were seriously damagin g the ethical balance in the system.According to the Big Five model (Hogan, Curphy Hogan, 1994, Page 61), Jeff Skilling exhibited the Surgency nature type which had specific traits of Extroversion, High Energy/activity level and a deficiency for power.Charisma was the most important aspect of his personality. He believed in gaining power and self glorification, caring very little for his followers, the ideals or values. This is usually seen in the case of negative charismatics. He used his charisma, to influence people in a way which made them awe-stricken, wanted his acceptance and hence they could not criticise him or his actions. This not just has an influence on the followers, but has an effect on the leader as well. The leader in such cases become not only over-confident but also delusional of their infallibility. To describe further we utilise the following table to understand the charismatic leadership and its effect on the organisation.The leader has impart and absolute authority.Leaders build their eminence and maintain their grip on their followers throught a well-articulated ,emotive communication of their vision.The leader cultivates a compelling and captivating self imageImmense faith invested in the leaderHeavy emphasis on the charismatic attributes of leadership.The CEO had immense and unchallenged authority.Events such as the annual management conference, where leaders promoted themselves in a thearitical manner.Intense faith exhibited by emploess in Lay and Skilling and a declining confidence in the quality of their perceptionsCharismatic LeadershipA totalistic vision, leading to a higher sense of purpose and achievement.Employees assured they were transforming how business was conducted in the world.An intense transcendent ideology.A high degree of personal commitment by followers, to the goals of their leaders.The replacement of the followers existing belief system with a sense of being involved in a important or revolutionary change.A compelling vision and intellectual stimulationIntense recruitement rituals, designed to engage employees in a process of affliation.The transformation of attitudes, behaviour. invariable messages that those hired were part of a special elite and were the brightest and the best in the worldIndoctrination rituals that alternate between stressful and exhilarating.A process of conversion enacted unbroken indoctrination ,to reinforce initials sense of affiliationIndividual considerationPerceived dissenters marginalisedFinancial data falsifiedCultivation of obscure jargon, familiar only to people within the organisationPunitive internal regime.Promotion of a Common CulturePunitive internal environment dissent demonisedUnidirectional communicationNegative information suppress and positive information maximised.Total conformity from followersPower and Influence-Amongst the different types of powers Skilling had both at his disposal. He made use of his position power receivable to his posi tion in Enron and also the personal power.In terms of position power it appears that applied the reward power which meant that his followers complied in order to bring forth rewards and also legitimate powers where in the followers complied as they believed that he had the right to make the request due to his position.Also, we could see the use of his personal powers to a capacious extent where in his vast knowledge about the subject enabled his followers to comply. The followers also admired him and aspired to be like him due to his charismatic personality which also gave him the referent power which helped him gain loyalty and commitment.In order to influence his followers in supporting him he did use rational view to show them the logical side of his argument based on factual evidence. The followers at some time did realise that Skilling was being unethical in his practices and in spite of this realisation still continued to support him. To explain the influence Skilling had o n his followers we can make use of the 3 well known experiments-Milgrams experiment, Solomon Aschs conformity and Zimbardo prison experiment. Milgrams experiment tells us how people conform to an authority figure. The agentic state theory explains this further by stating that the person comes to view himself as an instrument in carrying out another persons wishes and therefore no longer sees himself responsible for his actions.Similarly the other 2 experiments highlight the human behaviour in terms of role conformity and social conformity where in people have a tendency to come under the pressure of social acceptableness and conforming to everything they feel they need to in order to be a part of the group.Leader-Member ExchangeEnron was a company of believers. In a survey in 1997, employees who were surveyed for a feedback faced tremendous faith in the leadership of Kenneth Lay and Jeff Skilling. It has been discussed in this analysis that the company had an indirect leadership st yle, whereby influence of the top management percolated to all the employees in the company through the use of multiple communication strategies (Enron Gas services day) when the top management discussed the future strategy of the company, the importance of employee contribution, commending handsome employee performance etc. So the employees became blind believers in the methodology adopted by the leadership at the organisation and started working with the win at all cost attitude which led to the slow erosion of the ethical fabric. Also the reward system that was created in the organisation, reflected the expectation of the management. The companies reward system only appraised employees who performed consistently with little regard to ethical conduct. Overall,Enrons reward system rewarded individuals who embraced Enrons aggressive, individualisticculture and were based on short-term profits and financial measures.Leadership development at EnronLeadership calls for total commitmen t to the perpetual process of purpose seeking.While leaders are usually concerned with their legacies, their commitment to purposehas to go far deeper. This total commitment implies that, in reality, leaders seekeither my way or nothing. However, this commitment is intrinsic it calls for theleader to mobilise himself, body and soul, but in no way does it imply extrinsically that what is not my way is wrong.Ideal leaders do not exist in practice. Thus, we can relate to leadership as a progressive development only. Since humans cannot be fully conscious of our emotions, a posteriori, we cannot fully mobilise them in order to understand and attain our flavour goals and purpose. Because our purpose remains opaque at best, it follows that leaders will act unethically even when they do so unwillingly or unconsciously. The only way for leaders to improve their ethical position is to interact with others in society to help them reveal their hidden agenda over time. The particular worldview , in turn, shapes these agendas, either Theta or Lambda, that a person embodies in his search for greater self-awareness and contextualisation with his external environment.Appendix