Organizational Culture : The Demise Of Enron

During the year 2000, Enron was exceeding all expectations, its stock was through the roof, and the company seemed to be on top of the world. The next year Enron declared bankruptcy. So how did a company rise and fall so quickly? The key in analysing this question lies in Enron’s organizational culture, which is defined as “a shared meaning held by members distinguishing an organization” (Robbins and Judge, Essentials of Organizational Behavior, 269). During its prime, Enron appeared to be a successful and innovative company, but in reality was a company rooted in an organizational culture of corruption and greed. The five culture dimensions of stability, risk taking and innovation, attention to detail, outcome orientation, and aggressiveness are key to understanding how unethical behavior became such a problem at Enron.

Enron began as a pipeline company in Houston in 1985. It profited by promising to deliver so many cubic feet to a particular utility or business on a particular day at a market price.

Enron was considered to be one of the most innovative companies at its time because of its fast growth, and unique commodities. Little did most people know, Enron was abusing this power. Enron’s executives created a corporate culture that promoted cutthroat competition between employees. These extreme cutthroat environments can easily brainwash employees

Enron’s use of informal or social control as a means of guiding employee actions contributed to its illegal actions forwarded by a pervasively negative culture and led to the ultimate downfall of the firm. In order to examine how Enron made a greater use of social control than formal control, this paper will first propose frameworks that describe what social control are formal control are. Then, it will use key details from the documentary to show how Enron’s culture fit the a framework of social control that generated its actions. Finally, the paper will discuss how formal controls were in place but, display how these formal controls were minimized and not the primary catalysts through a discussion of espoused values. These arguments will then show how Enron’s greater use of social control to direct the actions of its employees led to the bankruptcy of the company and loss of the employees’ pension and life savings.

The organization culture as a leadership concept has been identified as one of the many components that leaders can use to grow a dynamic organization. Leadership in organizations starts the culture formation process by imposing their assumptions and expectations on their followers. Once culture is established and accepted, they become a strong leadership tool to communicate the leader 's beliefs and values to organizational members, and especially new comers. When leaders promote ethical culture, they become successful in maintaining organizational growth, the good services demanded by the society, the ability to address problems before they become disasters and consequently are competitive against rivals. The leader 's success will depend to a large extent, on his knowledge and understanding of the organizational culture. The leader who understands his organizational culture and takes it seriously is capable of predicting the outcome of his decisions in preventing any anticipated consequences. What then is organizational culture? The concept of organizational culture has been defined from many perspectives in the literature. There is no one single definition for organizational culture. The topic of organizational culture has been studied from many perspectives and disciplines, such as anthropology, sociology, organizational behavior, and organizational leadership to name a few. Deal defines organizational culture as values,

As with much of Enron, their outward appearance did not match what was really going on inside the company. Enron ended up cultivating their own demise for bankruptcy by how they ran their company. This corrupt corporate culture was a place whose employees threw ethical responsibility to the wind if it meant financial gain. At Enron, the employees were motivated by a very “cut-throat” culture. If an employee didn’t perform well enough, they would simply be replaced by someone who could. “The company’s culture had profound effects on the ethics of its employees” (Sims, pg.243). Like a parent to their children, when the executives of a company pursue unethical financial means, it sets a certain tone for their employees and even the market of the company. As mentioned before, Enron had a very “cut-throat” attitude in regards to their employees. This also became one Enron’s main ethical falling points. According to the class text, “employees were rated every six months, with those ranked in the bottom 20 percent forced to leave” (Ferrell, 2017, pg. 287). This system which pits employees against each other rather than having them work together will create a workplace of dishonesty and a recipe of disaster for the company. This coupled with the objective of financial growth, creates a very dim opportunity for any ethical culture. “The entire cultural framework of Enron not only allowed unethical behavior to flourish,

A strong culture is important to today’s organizations in a fast pace environment affected by a diverse internal workforce (Baker, 2002 p. 4). Schein (as cited in Baker, 2002) defined organizational culture as an arrangement of shared beliefs that the group learned through problem solving, and adapting to internal and external environments (p.4). Culture is not only a means of bettering internal coordination, but is important in facilitating environmental adaptation (Baker, 2002 p. 4).

According to Johnson (2012) leaders are powerful role models, and policies will have a little effect if leaders do not follow the rules they set. In Enron case, corruption and ethical misconduct were deeply embedded in their business culture where profitability was more important than ethics. In this paper, I will address the factors that had led to the development of the culture of profit before principle at Enron. Also, I will create my personal code of ethics that will guide me in my professional and personal decision making and doing the right thing when faced with ethical challenges.

Organizational culture is defined as a cognitive system of beliefs, attitudes, values, and behavioral norms that are shared by members of the organization. The documentary “The Smartest Guys in the Room” researched, chronicled, and explained the culture and collapse of Enron Corporation, an American energy, commodities, and services company. The organizational culture of Enron was extremely multifaceted and comprised of many aspects. According to Schein’s three levels of organizational culture, such aspects were expressed by means of manifest articles such as heroes and language, which were linked to espoused organizational values, and then connected to basic assumptions about the company and what was deemed important there. Manifest artifacts are things that are characteristic of the organizational structure and processes. Espoused values are the standards that define and are defined by culture, and by which organization members judge what is good and desirable. Basic assumptions are the deepest level, which include the beliefs, perception, and emotions of organization members that are often not expressed and unconscious. This paper will analyze the links and connections between artifacts at Enron, the values and standards they expressed, and what can be assumed about the cultural beliefs, perceptions, thoughts, and feelings at Enron.

Brickman and Sims evaluate the result of how unethical behavior can affect the organizational culture. The article is credible because if demonstrates the effects of negative and unethical behavior on an organization and how to counter act them. Robert Sims is an author, Floyd Dewey Gottwald Senior Professor of Business Administration at Mason School of Business and has a PhD in Organizational Behavior from Case Western Reserve University. Johannes Brickman Professor in the Department of Strategy and Entrepreneurship at Norwegian School of Management BI, Sofienberg, Oslo, Norwayship. Their backgrounds in leadership, business, ethics and business assist them to be specialist in their field and credible sources for research. This paper shows

According to Robbins and Judge, organizational culture is, “a system of shared meaning held by members that distinguishes the organization from other organizations” (Robbins 249). A strong organizational culture is one whose organization’s core values are both intensely held and widely shared. After viewing Enron: The Smartest Guys in the Room, it is obvious that Enron had not only an organizational culture that was strong, but one that was extreme and aggressive. This aggressive and strong organizational culture discouraged both teamwork and ethical behavior and in the end it only plagued Enron until it eventually collapsed under its downfall.

In this case of Enron the corporate culture played a vital role of its collapse. It was culture of full of moneymaking strategies and greed, in the firm Greed was good and money was God. There was no or very little regards for ethics or the law, they operated as there was no law and ethics in the world (Enron Ethics, 2010). Such culture affected all the employees of the firm from top to down. Organizational culture supported unethical behaviour and practises, corruption, cheating and those were all widespread. Many executives and managers knew that the firm is following illegal and unethical practises, but the executives and the board of directors did not knew how to change this unethical culture, the firm used creative accounting and were making showing misleading profits every day. Reputation management enabled them carry on their illegal and unethical operations. Moreover if the company made huge Revenue in the unethical way then the new individual who joined the firm would also have to practise all those unethical practises to survive in the company. All of the management was filled by greed and ambition, their decisions became seriously imperfect, thus the firm fell back and managers had to pay in the price in the form imprisonment and fines. Greed is the main key factors that brought the Enron “the most innovative company” to downfall. Enron was looking into the ways of

Enron was founded in 1985 through the merger of Houston Natural Gas and Internorth (a natural gas company based in Nebraska). Enron quickly became the major energy and petrochemical commodities trader under the leadership of its chairman Kenneth Lay. Enron moved its operations online, boasting the largest online trading exchange in 1999, as one of the key market makers in natural gas, electricity, crude oil, petrochemicals and plastics. Enron also diversified into various businesses such as coal, shipping, steel & metals, pulp & paper, and even into such commodities as weather and credit derivatives. Enron was reporting revenues of $80 billion and profits of $1 billion at its peak. It was selected by Fortune as America’s most innovative company for six consecutive years.

The story of Enron begins in 1985, with the merger of two pipeline companies, orchestrated by a man named Kenneth L. Lay (1). In its 15 years of existence, Enron expanded its operations to provide products and services in the areas of electricity, natural gas as well as communications (9). Through its diversification, Enron would become known as a corporate America darling (9) and Fortune Magazine’s most innovative company for 5 years in a row (10). They reported extraordinary profits in a short amount of time. For example, in 1998 Enron shares were valued at a little over $20, while in mid-2000, those same shares were valued at just over $90 (10), the all-time high during the company’s existence (9).

Enron Corporation was formed as the result of the July 1985 merger of Houston National Gas and InterNorth of Omaha, Nebraska. Their headquarters were located in Houston, TX. In its earlier years, Enron was a