Integrative Case – the Downfall of Enron
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Integrative Case – The Downfall of Enron
Part I
Ken Lay served as CEO and chairman and Jeffrey Skilling also served as CEO. They both were responsible for planning, organizing, controlling and leading the company. They set goals for the company and organized how they would be achieved. Kays role was as the figurehead and the leader. He also served as the spokesperson for the company and made many of the decision on the future of the company. As CEOs they both possessed effective communication skills, where decisive, which was evidenced by their vision for the company and refusal to admit wrong even at the end, and visionary. Throughout Lays tenor the company continued to grow and prosper at a fast pace.
The challenges faced were those of a changing workforce, competitiveness, and globalization, as well as ethics and social responsibility. While many companies were downsizing in the mid-1980s, Enron continued to grow and expand despite their lofty goals. They ventured out into foreign markets to be more competitive. The workforce also became more diverse and the characteristics changed. Employees during Enrons tenor were less devoted to long-term career prospects; instead they were more interested in financial gain at any cost. Ethics seemed to be a secondary thought for most people during Enrons time. To meet these challenges Enron executives had to make working for their company more attractive and lucrative.
The contributing factors to their ineffectiveness were poor planning and leadership. The company grew to quickly. In their desire to grow and expand, the companys senior management did not establish and follow ethical practices that would sustain the company. Controls were not established in key places, such as, accounting practices and principles. Senior management failed to appropriately manage the activities of lower level managers and set a bad example.
Part II – The People
Enron sought out young, ambitious, recent college graduates and placed them in entry-level positions and then gave them the autonomy to make big trade decisions. The few star performers were promoted very quickly. Taking this hiring approach benefited the company because it kept labor costs low due to the employees inexperience. It also provided increased innovation and creativity because these recent graduates were exposed to cutting-edge techniques and were prone to take more risks, and it helped to socialize workers into Enrons culture and behavioral norms. The downside to this approach was that these individuals were inexperienced and prone to taking large risks.
Enron employees were motivated by vanity and greed. Management used promotions, hefty raises and bonuses to motivate their employees. The focus was placed on meeting financial needs. It was effective in motivating those who were extremely ambitious and did not have concerns for ethical practices but put their focus on earnings and acquiring wealth.
Enron used a 360-degree feedback performance management system (PMS). Performance was directly linked to rewards. The system can be beneficial to managers because it typically gives them a much wider range of performance-related feedback than traditional evaluation provides. The disadvantage to this type of PMS is that if used inappropriately the focus can be placed on individual biases and politics. That is, if an employees peer dislike them, the PMS can be used as a means to hurt that individual. Enron should have more closely managed their PMS so that its focus remained on constructive rather than destructive criticism. Also, they could have removed the link between the PMS and rewards.
Part III – The Leadership
Lay and Skilling can be characterized as highly educated, extraverted, over achievers. Kays personality traits are high energy, openness and an attraction to complexity. Kay was a charismatic leader. On the other hand, Lay was autonomous, extremely self-confident and arrogant. These traits caused them to be too oblivious to the inappropriate dealings of the company because their focus was on achieving and acquire more wealth and higher status.
Lay and Skilling clearly created an agenda for the company. They provided the direction and aligned the appropriate people to meet their needs. They also provided the motivation and inspiration for their employees. However, they failed to provide the appropriate management, direction and oversight of the companys dealings.
Lay used personal power and Skilling used position power. Lays was categorized as smooth and charming. He was optimistic about Enrons future and fiercely