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Enron

1. Profile

In 1985, Houston Natural Gas and Omaha, Nebraska's InterNorth merged to become the interstate pipeline business Enron. The Houston, Texas-based Enron was an energy trading and utilities conglomerate. Houston Natural Gas' former CEO Kenneth Lay engineered a merger with Enron and rose through the ranks to become the company's CEO and eventually its chairman. In 1999, Enron grew from being a pipeline company into having the most significant business site in the world thanks to its expansion into the broadband services unit and Enron online. By early 2000, it had grown to become the sixth-largest energy company in the world, with a hundred billion dollars in annual revenue, with each of its nineteen thousand workers generating $5.3 million. After only six months as CEO and as the driving force behind Enron's reorganization, Jeffrey Skilling resigned in August 2001. After he left, Enron's finances started to show signs of strain, and the company posted its first quarterly loss in four years, amounting to $618 million. In December 2001, Enron filed for bankruptcy.

2. Management Planning

The company's downfall was exacerbated by poor management planning. Management planning is comprised of aspects of “planning,” “organizing,” “leading,” and “controlling” (Ghafoor, 2023). While the P-O-L-C model may have been followed initially, it became unbalanced as Enron's success and expansion caused a shift in emphasis.

As Enron crumbled, it became apparent that top executives like Kenneth Lay, Jeffrey Skilling, and Rebecca had subverted the company's management principles for their benefit. They should have focused more on expansion and growth to develop and maintain ethical standards to ensure the company's long-term success. There needed to be more controls (PLOC) in vital areas like accounting policies and procedures. They should have adequately overseen the work of their subordinates and instead demonstrated better leadership.

Based on POLC's management principles, Enron's planning main objective was to avoid detection. Each target and metric was geared toward disguising the actual state of the company's finances. There was no morality or honesty. Vanity and greed were the driving forces behind everything. The company could not continue.

3. Employees' perception and organizational culture.

The organizational culture at Enron was toxic. Enron's senior management executives' unethical, greedy, and deceptive practices contributed to the company's toxic culture. The company's executives were driving it to ruin by neglecting to communicate with and trust its workers. Employees were hesitant to speak up for fear of retaliation from management, and those who did were either ignored or terminated when they questioned the company's policies and procedures.

Enron's demise can be directly attributed to the company's toxic culture. Lack of trust and communication between management and staff breeds an atmosphere of mistrust and secrecy, which encourages unhealthy levels of competition among employees (Du, 2020). Enron's executives made the atmosphere toxic by ignoring or firing anyone who questioned their actions.

The management at Enron accelerated the company's decline by encouraging an atmosphere of cutthroat competition and a mild form of tyranny. They muzzled employee innovation and input essential to a company's success.

4. Communication

One of the reasons why Enron failed was poor internal communication. Enron's management needed to communicate more adequately to inform employees of organizational operations. Management executives could hide the actual state of Enron's finances, mislead shareholders and analysts with a complex business plan, and employ dishonest accounting processes to falsify earnings since nobody else in the organization knew what they were doing. For a very long time, the senior management at Enron ignored the employees' concerns. Enron's administration failed to keep employees informed adequately and made an effort to keep the facts about the nefarious and fraudulent operations from them.

The vertical organization structure at Enron was a barrier to communication. Communication was one way- from top management to lower-level employees (Worren, 2019). Employees could not communicate upward, especially if it were criticism. Corrective feedback should have been sought. Communication with employees involved instilling constant pressure on them to perform to increase their revenue, forcing employees to use unethical practices.

References

Du, J. (2020). Communication and culture in multinational organizations. Communication. https://doi.org/10.1093/obo/9780199756841-0253

Ghafoor, L. (2023). Quality Management models for implementation in organizations. https://doi.org/10.31219/osf.io/6cvgu

Worren, N. (2019). Defining the vertical structure. Organization Design, pp. 170–191. https://doi.org/10.4324/9781315145112-6

https://app.sophia.org/tutorials/enron-case-study

https://www.youtube.com/watch?v=-PEnWd4MetY