Leadership, Management, and Organizational Structures of Enron

Failure of Enron

The story of Enron is considered as one that will reverberate in the global financial as well as the energy markets. It will also reverberate in the criminal and civil courts for years to come (, 2004).

Organizational Behavior Theories

            One of the primary fault or mistake of Enron can be explained by focusing on the organizational behavior and theories regarding the practice of the company. In the condition of the company it will be important to focus on the individual perception, judgment and attribution where in it focuses on the fundamental of perception, judgment biases and errors that can affect the overall attitude and behavior of the employee towards work that will eventually affect the entire performance of the company.

            In addition to that, different motivational theories can also explain the failure of the entire human resource management and employee relations of the company. It began during the massive change that had happened in the company that was done in order to save the position of Enron in its market.

Leadership, Management, and Organizational Structures

            Leadership, management and organizational structure play a very important role in maintaining the competitive advantage of any organization in any field and in the case of Enron; it had a vital role in its failure.

            Enron is well known for its high compensation and benefit package that enables the company to get the attention of those talented and aspiring individuals. The compensation package of the company is the reason why there are many individuals who are dying to be included in the great team.

            On the other hand, due to the high compensation of the company, it is implementing a very high standard during selection and hiring, and upon entering the company, they have to face a punitive internal culture. Due to the great needs of the company for innovation, it implemented an appraisal system that is called the rank and yank. It shows that despite all the effort of the company during the selection process, it is easy for them to fire them quickly.

            The said system created a cutthroat culture where in the management regarded kindness as a show of weakness. The said situation had destroyed the morale and internal cohesion, and lead to a working environment where in the employees are afraid to express their opinion and even question unethical and potentially illegal business practice due to the fact that the rank and yank system can be considered as both arbitrary and subjective where in it was easily used by the managers to reward blind loyalty and even quash brewing dissent.

            The said situation had created an uncomfortable working environment which is very important motivator for the employees

            The flow of information is very important aspect of the organization, and it is considered as one of the most important factors in terms of good governance. The board needs to be provided and showed with different important information and data in timely manner, in order for them to perform their roles and responsibilities. In the situation of Enron, the directors are pleading ignorance of the murky deals as a way of excusing themselves of the liability. The board had been denied the important information that will serve as a key to the reason of the action, but the Board did not fully understand and appreciate the vitality of some of the information that have came before it ( 2002).

Recommendations

            One of the major mistakes of the company is that it did not focus on managing the human resource, which is considered as the most important aspect of the organization. Although, the company has great benefits and other financial packages that will motivate the employee, it did not focus on the importance of non-financial motivational forces that could affect the entire working environment.

            In terms of leadership and management, Enron should’ve not focus on the innovation process alone. It will be important to focus on the needs, opinions and suggestions of the employees. This is due to the fact that more comfortable and decentralize system of communication flow can help more in the process of innovation. Furthermore, it could also help to create and maintain a healthy relationship and teamwork in the organization that would help to motivate the people in terms of social aspect. It will also help to create an open and honest connection and communication between the employees and management that will help to promote trust and loyalty.

            Above all, the company should’ve followed the rule regarding good governance that tackles about transparency and honesty of data towards all the stakeholders of the company.