Enron HBS Case Study
After hearing bits and pieces about the “Enron scandal” over the years, it was interesting to learn about what specifically happened to the global giant company and how it reached its demise in the early 2000s. It seems as though Enron’s downfall had largely to do with the corporate culture instilled within the company from its inception in 1984. The idea of “get big fast” encouraged employees to do whatever they deemed necessary to drive earnings, even if it meant leaving ethics at the door. The arrogant culture signaled to employees that great amounts of risk could be taken with seemingly little or no repercussion. This decentralized the company even further, as each department was competing against each other to perform, which discouraged a team-oriented environment that many companies attribute to their successes. Decentralization also created strong personal incentive for employees, especially with the extravagant bonuses or harsh penalties given based on personal performance.
Under Skilling, a ruthless and rigorous performance evaluation system relied on peer evaluations to rank department members. In such a competitive environment, this type of system can lead employees to rank peers lower than themselves to protect their own job. This seemingly self-centered, individualistic corporate culture is causing employees to act in ways that defend and preserve themselves, rather than create value for shareholders, which is what a public company should strive to do. The energy at Enron is focused in the wrong areas as employees seem to do whatever is necessary to stay “alive”.
Although Skilling was the one at the forefront when the Enron ship began to sink, the presence of many strong players all competing for individual power within the organization attributed to Enron’s downfall. Although Skilling came in fresh out of HBS ready to aggressively hit the ground running, it seems as higher management at the time, namely Lay, did not have the foresight to control
Under Skilling, a ruthless and rigorous performance evaluation system relied on peer evaluations to rank department members. In such a competitive environment, this type of system can lead employees to rank peers lower than themselves to protect their own job. This seemingly self-centered, individualistic corporate culture is causing employees to act in ways that defend and preserve themselves, rather than create value for shareholders, which is what a public company should strive to do. The energy at Enron is focused in the wrong areas as employees seem to do whatever is necessary to stay “alive”.
Although Skilling was the one at the forefront when the Enron ship began to sink, the presence of many strong players all competing for individual power within the organization attributed to Enron’s downfall. Although Skilling came in fresh out of HBS ready to aggressively hit the ground running, it seems as higher management at the time, namely Lay, did not have the foresight to control