In any organization there exists an organism that requires nurturing to survive. That organism is known as “culture”. Culture is a living, breathing thing that grows and develops from the inputs that are provided to it. It is the shared values, attitudes, standards, and beliefs that characterize members of an organization and define its nature. Culture is a funny thing, it always tells the truth. Culture is the unabashed, unveiled, purest representation of the atmosphere that drives your organization. For a company to thrive and be productive, it requires a healthy corporate culture among its workers and employers. But not all organizational cultures lead you to success. An example of how a culture that was cultivate with the ethical misgivings and a skewed moral compass is the energy giant, Enron.
Brief history of the Enron Corporation
The Enron Corporation was a U.S. energy, services and commodities company with headquarters in Houston, Texas. With a workforce of approximately 20,000 workers, Enron became the seventh largest corporation in the U.S by the year 2000. With revenues close to $101 billion in 2000, the company was named by Fortune as “America’s Most Innovative Company” for six successive years.
In December 21, 2001, it collapsed in the most unusual way in circumstances that led the scandal to become the largest bankruptcy and stock collapse in history as at that time.
Olympus has fallen
By the end of the year 2001, several reports revealed that Enron’s continued financial success was maintained by an internally systematic accounting fraud which has come to be called the “Enron scandal”. The fall of this corporate behemoth just barely after a year it was named the seventh largest corporation in the U.S, led to the questioning of accounting activities and practices in many corporations in the U.S. One notable effect of this scandal on the corporate world was the dissolution of the Arthur Andersen accounting firm – one of the five largest audit and accountancy partnerships in the world as at that time.
This scandal led the company to file for bankruptcy in late 2001.
How a Toxic Culture Fed the Death Spiral of Enron
The top executives at the helm of affairs at Enron created a toxic corporate culture by using corruption, greed and deception. By failing to sustain an open relationship and trust with its employees, the executives were inevitably driving the company to its gloomy end. Whenever employees rose up to question some of the practices and decisions of the leaders, they were either ignored or fired. The leadership at Enron cared more about enriching themselves than the demands of its followers. This lack of regard for ethics showed that the leadership had no shared vision with its employees that go beyond making profits. At Enron, greed was good.
“…greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through…” –Gordon Gekko, Wall Street
These top executives used deceptive accounting practices to cover Enron’s financial losses – and sometimes its gains too. By enriching themselves through the use of structured financing techniques, they brought the collapse of Enron to its doorstep.
This toxic corporate culture in Enron is undoubtedly the major cause for its fall. An environment where there is no trust and openness between employer and employees results in a workplace filled with secrecy and suspicion that spurned internal competiveness and negativity. They ignored or fired anyone who challenged their decisions which in turn made the environment toxic for everyone.
By promoting an environment filled with competition and a sort of dictatorship, the leaders of Enron continued to feed the erosion of the company. They silenced the creativity and voice of their employees that any company needs to have if they are to thrive. Let’s look closer at the major players in this twisted tale of the rise of Enron and its subsequent collapse.
Jeffery Skilling
Jeffery Skilling was hired several years after the company was formed and served as both President and Chief Operating Officer; and later CEO. He was given the task of building a staff of executives. His bad leadership led him to rely on his past achievements in manage a corporation that is in a dynamic business world. His big ego would not allow him to see his faults and take corrections: inevitably leading the company to one of the largest business fails in history.
Chief financial officer Andrew Fastow and other executives that worked for Enron put pressure on the Arthur Andersen firm to ignore some of their high-risk accounting practices; thus, misleading both the board of directors and audit committee.
Kenneth Lay
He was the founder of Enron and served as the Chairman and CEO until its collapse.
Both Ken and Jeffery Skilling were the spearheads of Enron’s toxic employer culture. They started on a good note but ended up creating a toxic working environment especially for their “benign followers” who were afraid to challenge their leader; and in extension, continued the bad leadership of those at the top.
He switched and fired his employees on a whim: instilling fear in the minds of the employees: by doing this, the workers became afraid to challenge their leaders even when they – the workers – should have done so. They encouraged the toxic ones by letting them stay.
By doing this and many other “toxic” acts, the leaders at Enron lost track; where instead of them focusing on their primary business of natural gas, they extended into water, oil and even broadband. By losing focus on the mission of the company and focusing more on the illusion that they are being run by the best of experts, the Enron leadership lost the basic understanding of what the company was about.
Andrew Fastow
Chief Financial Officer. He was a major contributor to Enron’s downfall because he manipulated the financial statements while also pressuring the auditing team to ignore ethical business practices thereby enriching himself and his top executives.
The employees
Majority of the employees then at Enron were well-to-do and separated themselves from the corruption of their leaders as challenging their employers would cost them their employment. With Kenneth Lay lying to them and giving them false hope, he made them to keep their stocks while selling his own.
The Final Word
Whether it be C-Suite executives or floor level employees, it's the job of everyone in the organization to exemplify and live the company's vision and ensure everyone is positively contributing to it. If you are committed to your company's values, your team will be, too. Enron executives displayed just how powerful an organizational culture is and just how vital it is to company's ability to thrive.