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Enron Culture - Critical Analysis

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Assignment

1. Critically evaluate this case in the context of the organization's culture. How were Enron's business ethics and business operations influenced by the organization's culture? Specifically, what went wrong?

2. What should have been the role and responsibility of company leadership (the Board of Directors, the CEO Ken Lay and others) in such an issue? In what ways did key executive players (e.g., Lay, Skilling, and Fastow) work to negatively reshape the culture, and with what adverse consequences?

3. How might Human Resource Management (HRM) have played a central role in setting the "moral compass" at Enron, helping to form and shape the organizational culture - perhaps avoiding the Enron debacle?

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When InterNorth Corporation and Houston Natural Gas merged together in 1985 to form Enron, the culture took a dramatic turn as Sam Segnar, the president of InterNorth, became the president of the newly formed Enron. Unlike his InterNorth predecessor, Willis Straus, who was loved by everyone and appreciated an open culture where everyone was treated fairly and treated as the same, Segnar was an elitist who nobody liked. He saw the need to separate the work class as essential (Madsen & Vance, 2009). So, as the newly formed Enron got its feet off the ground, it was already heading down the path of a culture restructuring that divided the working class and elitist spending that was encouraged and endorsed by CEO Segnar (Madsen & Vance, 2009).

Through this massive culture change, Segnar had developed hatred from his employees and peers and this was a weakness that was taken advantage of by Ken Lay, the former CEO of the merged partner, Houston Natural Gas. Lay offered Segnar a proposal to allow 6 of his former board members to join Segnar's 8 board members and work together as opposed to Lay being bought out in the merger and let go completely, as is typical. To Lay's surprise, Segnar took the deal believing he would still have a majority on the board, however, Lay took only one month convincing 2 members of Segnar's team to turn on him. This gave Lay the majority vote and he took over as Chairman of the Board of Enron within a month of his arrival (Management Controls, 2007).

From that point, over the next 8-10 years, Enron struggled with losses and High debt. There was a lack of confidence from investors based on their traditional "old school" model of doing business as a traditional natural gas company and they faced repeated attempts at hostile takeovers (Management Controls, 2007). During this period, Enron was sticking to a strict and rigid culture of discipline, targeted goals, and ethical principles as driven by their then CEO Richard Kinder, also called "Dr. Discipline". Kinder met every Monday with his leadership team and challenged them on their numbers, ...

Solution Summary

From that point, over the next 8-10 years, Enron struggled with losses and High debt. There was a lack of confidence from investors based on their traditional "old school" model of doing business as a traditional natural gas company and they faced repeated attempts at hostile takeovers (Management Controls, 2007). During this period, Enron was sticking to a strict and rigid culture of discipline, targeted goals, and ethical principles as driven by their then CEO Richard Kinder, also called "Dr. Discipline".

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