Enron Business Leadership Case Analysis Management Essay

This study includes a instance analysis of Enron Corporation ‘s concern patterns so that it can be identified that does its leaders are responsible for its failure or non. The strategic context of Enron Corporation is analyzed to measure and choose appropriate procedures or actions for developing the potency of directors and employees for prosecuting in critical and strategic thought ( e.g. engagement in determination devising, authorization, information, concern, etc ) . Additionally, the study besides includes a treatment of emerging tendencies and patterns in concern leading along with significant recommendations and alterations in Enron “ leading doctrine ” that may hold prevented its prostration. It provides wholly inclusive information related to Enron prostration and advanced concern leading patterns that have been used to forestall houses from these sorts of prostrations.

Contentss

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Introduction

All houses ‘ directors are expected to increase investor returns whilst conforming to established regulative steps, rid ofing principal-agent struggles of involvement, and rising the reputational capital. The present coverage of apprehensions and resignations of top directors in U.S. evidences an increasing degree of corporate irresponsibleness and managerial carelessness ( Bryce 2004 ) . This in bend is going a ground of most of houses ‘ ruin like Enron. The increasing figure of ruins has increased companies attending towards the development of advanced concern leading patterns ( Boscheck 2008 ) .

Here, in this study the concern patterns of Enron Corporation will be analyzed so that it can be identified that how company leaders are accountable for its ruin due to their ethically and morally irresponsible behavior. Here, the analysis will be strengthened by measuring the function played by the magnetic leaders, Kenneth Lay and Jeffrey Skilling in the autumn of Enron Corporation. In the terminal, emerging tendencies and best patterns in concern leading will be discussed that could hold been recommended for Enron ( prior to its autumn ) that may hold precluded its prostration.

Critical Analysis of Enron Corporation Downfall

Enron Corporation ‘s 2001-2002 corporate fiscal dirt stunned the state and industries because of its graduated table and the grim denials of senior directors about any information of the deceits or related misconduct. The company top governments like Kenneth Lay and Jeffery Skilling were besides incognizant about the fiscal error of their subsidiary. As good, they committed that they did nil immoral ( Boscheck 2008 ) .

This dirt became a important topic of argument and scrutinies about houses ‘ concern leading patterns and process to follow prescribed moralss and concern duties ( Bryce 2004 ) . Throughout treatments and rating of top most concern research workers, it was identified ‘Leaders from Enron are accountable for its ruin as they were non ethically and morally responsible ” . The statement is rather right and can be supported strongly.

The company dirt was non due to faulty accounting or hapless ordinance but it was the consequence of irresponsible behavior of its directors in respect to concern moralss and ethical motives ( Baker & A ; Hayes 2005 ) . Directors of a house are extremely responsible for its success if they operate ethically and morally but this was non the instance with Enron directors and it resulted in company ruin ( Seeger & A ; Ulmer 2003 ) . The degree of this event forced concerns to concentrate on the development of ethical and moral behavior among their directors every bit good as dressed ore on the communication-based duties of senior directors and development of criterions for responsible leading ( Daft & A ; Lane 2007 ) .

The ruin of Enron can be analyzed based on the rule of duty as this is important to act morally and ethically. This event independently affected the state, other houses, investors, authorities, and ordinance governments ( Bryce 2004 ) . The company irresponsible behavior and the misgiving in corporate administration generated by it besides independently affect cardinal stock markets. The company ruin is due to the inappropriate leading behavior of its three senior executives that are:

Kenneth Lay ( company CEO and laminitis )

Jeffery Skilling ( company president )

Andrew Fastow ( Chief fiscal officer-CFO ) ( Seeger & A ; Ulmer 2003 ) .

Initially, the company was transformed due to Lay. He was able to transform little, Houston-based grapevine company into an energy-trading giant due to province and federal statute law that prompted deregulating of the energy industry. Throughout his attempts and enterprises, he became able to achieve immense success and several awards ( Boscheck 2008 ) . In 1996, from the Council of Economic Priorities the company received the Corporate Conscience Award. It besides used to run by incorporating values like regard, unity, communicating, and excellence.

The company value statement was known as RICE but easy and bit by bit its senior directors started losing their focal point from these values and eventually resulted in a ruin due to their misconducts. Their concentration and values were ignored in respect to the issue of net income ( Sosik & A ; Jung n.d. ) . The company attack and basiss were right in the beginning but slowly directors started believing about net income by beliing the company RICE codification ( Daft & A ; Lane 2007 ) .

For case, though Enron emphasised unfastened communicating, but its Acts of the Apostless were non relentless with company value statement as its directors used to avoid messages of opposition and resistance ( Seeger & A ; Ulmer 2003 ) . The codification of behaviors made for the company was besides non adopted suitably. Its codification included that employees of the company are trained to describe everything that is non harmonizing to criterions but this was non the instance in world as its directors hide the fiscal place from employees, stakeholders and general populace ( Bryce 2004 ) .

The company values mentioned in its statements were neither patterned by its leaders nor incorporated into its operations and due to this it confronted ruin. With appropriate leading patterns the company could hold become able to decide its problems and issues but deficiency of responsible leading behaviour encouraged its operations and procedures towards bankruptcy ( Boscheck 2008 ) . In malice of following RICE values, the company leaders were runing with values associated to concern success and profitableness.

The company parking garage for its employees used to grounds different concern virtuousnesss like bold, advanced, smart, ambitious, complete, adventuresome, and undismayed ” . Its RICE values were working as a public limelight and above discussed values were working for insiders ( Seeger & A ; Ulmer 2003 ) . The company ‘s skilled and competent operators worked in a decentralised construction with small or no supervising and due to this all directors get downing diverting from basic ethical and moral values associated to concern ( Daft & A ; Lane 2007 ) .

The company operators were encouraged to happen new chances for net incomes and it expanded its operations at international degree with several hazardous and unethical endeavors. The concern patterns of these endeavors were rather complex and resisted established concern and accounting wisdom ( Daft & A ; Lane 2007 ) . This was due to the deficiency of top direction support or uneffective communicating at the portion of its senior leaders like Skilling and Fastow.

Skilling and Fastow were non involved in company day-to-day operations and this was the ground that Enron confronted ruin and failure. Most of the trades done by its directors were unsound that if analyzed on a regular basis could hold been avoided by its leaders ( Bryce 2004 ) . Leaderships play a important function in the success of a concern enterprise as it plays several functions like facilitator, struggle handling, pioneer, communicator, organiser, contriver etc ( Sosik & A ; Jung n.d. ) .

If a leader is involved at its most it can successfully direct a house towards strategic alteration but in instance of Enron its leaders were non involved significantly and due to this lone its directors were runing with a exclusive motivation of increasing net incomes ( Nolan 2008 ) . It was besides said that Enron Corporation was holding persons that are highly wicked, big-chested and mercenary persons and they created an environment of greed and benefit of their ain instead than administration ( Koppes 2002 ) .

The company civilization was besides a factor that resulted in ruin as it was infused with corruptness. The development of a healthy civilization and dedicated employees depends on its leaders and their effectual patterns ( Petrick & A ; Scherer 2003 ) . The leaders of Enron were non every bit effectual as required and this directed its directors towards the acceptance of incorrect patterns that were non as per the ethical concern criterions. Its directors were adapted to working ambiguities and uncertainnesss ‘ so that market can be manipulated and company net incomes can be increased wrongly ( Daft & A ; Lane 2007 ) .

This was done in California energy markets that were independently manipulated in the twelvemonth 2001. With several programs and strategies, the company directors tried to worsen and capitalise on the electricity deficits ( Barsky, Catanach, Rhoades & A ; Thobodeau 2003 ) . The company ruin was wholly due to its leaders as they were non able to pass on appropriate values. This is one of the most important duties of a company ‘s leaders that it communicates its values in an appropriate mode so that employees can go motivated for working in that way ( Boscheck 2008 ) .

Enron Founder, Ken Lay established company with significant traits of an entrepreneurial organisation headed by long-established entrepreneurial values. Throughout his addresss, he concentrated on the demand of doing extremist invention via interrupting existing regulations and revising them ( Sosik & A ; Jung n.d. ) . This concentration of company leader besides made it easy for directors to interrupt other regulations.

In malice of directing others with active simulating or by pass oning an extended societal values related to ethical and moral behavior, Enron leaders like Lay and Skilling patterned go againsting conventional corporate theoretical accounts and systems with an purpose to achieve more and more wealth ( Petrick & A ; Scherer 2003 ) . This civilization of making wealth was quickened when Jeffery Skilling took in charge of company day-to-day operations. Through his in charge, the preliminary entrepreneurial vision was more and more driven to new points of otiose and corruptness ( Western 2007 ) .

He prompted company directors and employees towards ritualistic and indiscreet exhibits of wealth and power instead than working morally and ethically. Its executives were involved in incorrect workss and actions that are purely restricted in work topographic point ( Seeger & A ; Ulmer 2003 ) . Tonss of money were expanded on show off instead than heading its employees towards greater committedness and working in the way of organizational ends ( Nolan 2008 ) .

All these behaviors and procedures adopted by leaders developed norms and values related to maltreatment of power, falsity, privilege, wealth, hoggishness, and regulation misdemeanor ( Daft & A ; Lane 2007 ) . These values in bend resulted in company bankruptcy due to its several incorrect trades made in order to increase company wealth and net incomes. The inappropriate attack of Enron leaders towards company direction and success encouraged others to compromise long-run stableness of the company ( Daft & A ; Lane 2007 ) .

As good, the company studies were besides evidenced falsely as its bad debts were hidden with the aid of SPE partnerships. This in bend directed towards evident struggles of involvements while maintaining debt off the books.

Emerging Trends in Business Leadership & A ; Change in Enron ‘s Leadership Philosophy

Nowadays concern leading is emerging as a powerful tool to manage concern and develop employees that can work ethically and morally ( Storey 2004 ) . If, Enron leaders would hold besides followed an effectual leading attack they could hold besides saved the company from traveling to ruin. Nowadays figure of leading constructs have emerged that is extremely relevant in today ‘s economic system in which all houses are viing with each other. Any person who can act upon others, organizational systems and processs are leaders.

Leaderships do impact the attitudes, behaviors and values of others and similar was the instance with Enron. At Enron Corporation, leaders were holding incorrect attack and this besides made an consequence on its employees and due to this they started runing unethically ( Luthans 1998 ) . The company leaders ‘ ardor to gain more and more wealth made it ill-defined to its leaders that what is an appropriate manner to gain net income so that company can last in long-term instead than short-run period.

The company failure was due to its leaders and their failure to influence others in a positive manner. Enron leaders were non concerned with the control and monitoring of company daily operations that were besides incorrect as this attack allowed employees to run in their ain manner instead than turning them dedicated towards administration ‘s codification of behavior. Enron leaders if have played their function as a strategian who is able to foretell, envision, maintain flexibleness and authorise other they could hold become able to make strategic alteration and decide company failure.

Rather than following magnetic leading attack, if its leaders had followed transformational leading, they could hold been able to develop employees with strong moralss and moral concern values ( Storey 2004 ) . The company employees were non working responsibly and it was besides due to the deficiency of cheque and monitoring by its leaders. Rather than demoing incorrect purposes, the house leaders should hold communicated with its employees to place some ethical ways to gain more net income and turn significantly.

The company leaders were non able to direct its employees and develop them with a sense of high duty. The jobs confronted by Enron, was due to the deficiency of value-based leading. Value-based leading pertains to an association between leader and employees on the footing of strongly internalized ideological values. Ideological values are values associating what is ethically right and incorrect. Due to the deficiency of value-based leading, Enron employees were non able to place which trade is right or incorrect or it can be said that they were non concerned with this as they were prompted to gain more and more wealth.

Ideological values refers to personal moral duty, societal parts, selflessness, concern moral duty, consideration for honest and trust, unity with organizational facets, equity and following with set criterions ( Harrell 2003 ) . By following values based leading, Enron leaders could hold become able to asseverate a corporate vision, internalized committedness and encouragement of motivations among employees that were pertinent to the company goals attainment ( Daft & A ; Lane 2007 ) .

With this sort of leading, Enron leaders could hold besides become able to do a significant consequence on employees ‘ public presentation. This could besides be understood with an illustration of administration that needs norms and values similar to our social establishments ‘ like household, mosques, schools etc that besides require specific values and norms ( Storey 2004 ) . Most of the present administrations like Enron are losing their rudimentss as it has become less competitory, less motivative and directing, more unjust, less effectual.

Employees are working with an increased sense of separation, alienation, and misgiving that in bend is conveying a corresponding lessening in their assurance, satisfaction and security ( Luthans 1998 ) . All this in bend is motivating them with deficiency of intent, map without following with codifications of behavior, gaining net incomes instead than believing approximately right or incorrect. All these jobs besides emerged in Enron due to miss of sense of duty and intent that could hold been resolved if its leaders would hold adopted a value-based leading.

The Enron failure evidences the significance of good strategic control and other corporate administration mechanisms that public presentation depends on its leaders ( Daft & A ; Lane 2007 ) . Enron Corporation ‘s board, its hearers, and every bit good as its bankers all have been partly responsible for the bankruptcy. All company leaders are responsible but still what was missing is moralss. It is the duty of leaders to develop employees in a manner that they can be motivated to work ethically and it can be done merely when a houses leaders follows strategic leading ( Luthans 1998 ) .

If Enron leaders besides have followed strategic leading they could besides hold become able to decide issues related to morality and moralss. Strategic leading would hold furnished company leaders with an ability to expect, envision, maintain flexibleness and empower others that was critically missing at Enron ( Sridharan, Dickes & A ; Caines 2002 ) . All these properties would hold allowed Enron leaders to convey a strategic alteration as required. Strategic leading is multifunctional in its nature and includes pull offing through others, managing an all inclusive administration instead than its functional fractional monetary units, and managing alteration in a manner that will let house to run in twenty-first century competitory environment ( Storey 2004 ) .

If Enron leaders like Kenneth Lay and Jeffrey Skilling have besides adopted strategic leading, they could hold besides become able to convey a strategic alteration as required throughout its worse period. By following strategic leading, Enron leaders would hold become able to expect its hereafter jobs due to ongoing schemes and manner of employees function. Rather than thought and focusing on specific sub-units to turn the company leaders could hold become capable to manage all maps of Enron ( Tourish & A ; Vatch 2005 ) .

This in bend would hold helped company to develop a sense of duty among its directors and other employees instead than insecurity. With the development of strategic leading, Enron leaders could hold become able to pull off cognition and set up and commercialize invention ( Luthans 1998 ) . This leading attack besides assist in building a model through which company stakeholders like employees, clients and providers can put to death at their highest degree.

Without strategic leading a steadfast confronts several negative results both internally every bit good as externally. A house may face issues like deficiency of moralss and moral, deficiency of assurance and productiveness among employees, terror among stakeholders about houses ‘ safety and hereafter ( Storey 2004 ) . Similar was the state of affairs of Enron and due to this it eventually confronted failure. All these issues could hold been resolved, if its leaders have worked as strategian.

Strategic leading would hold facilitated Enron leaders with an ability to efficaciously pull off company operations and maintain high public presentation in long-run. It would hold besides appropriate Enron top direction with a willingness to follow alterations in conformity to alter in concern environment. Throughout their finding to success, development of strategic leaders would hold allowed Enron directors with an ability to do ethical determinations whether whatever is the state of affairs and whatever is the degree of uncertainness.

This concern leading attack would hold besides facilitated Enron leaders with an ability to expect the affect of company determinations on internal systems that in bend is indispensable to foretell opportunities of success. It allows company directors to work as organizational resources. The findings and activities of strategic leaders appropriate them as a beginning of competitory advantage for house. By naming strategic leaders, Enron could besides hold become able to decide its issues related to developing moralss among employees, finding the strategic direct ion, managing the company ‘s resource portfolio, prolonging an effectual organizational civilization etc.

With the development of strategic leaders Enron could hold been able to find the strategic way that includes development of a long-run vision and every bit good as development of dedicated employees ( Zandstra 2002 ) . This was the most critical issue that directed the company towards its failure. If, its leaders would hold developed a vision for long tally, they could hold been able to direct their employees to achieve net income with ethical agencies.

The ideal long-run vision would hold served Enron with a nucleus political orientation and an pictured hereafter. The nucleus political orientation motivates employees to work by following company heritage that in instance of Enron was losing. The pictured hereafter inspires company employees to believe beyond their outlooks of attainment and necessitates significant alteration to recognize hereafter ( Storey 2004 ) . All these facets need to be managed for directing employees towards ethical patterns. All these facets related to strategic leading could hold helped Enron in its critical state of affairs when all employees were acting on their ain to do excess net incomes instead than believing about what is right or incorrect for company ( Lussier & A ; Achua 2009 ) .

Strategic leaders are besides able to develop a high public presentation civilization and empower others that were significantly needed for Enron as its employees were runing in a low public presentation civilization ( Harris & A ; Hartman 2001 ) . The environment or civilization of a house is the most of import facet that resists required alteration and similar was the instance with Enron as its civilization was less welcoming with the rise of Skilling. Skilling ‘s utmost concentration was on the bottom line and doing Enron successful at any cost. This attack changed company civilization from high-performance to low public presentation ( Lussier & A ; Achua 2009 ) .

In malice of this, the company leaders should hold worked as strategian that focal point on the development of more and more high public presentation civilization. The strong corporate civilization could hold improved Enron public presentation by allowing internal behavioral coherence ( Storey 2004 ) . With this, the Enron leaders would hold besides become able to develop clear and definite set of rules and values that in bend would hold assisted in the development of strong and cohesive civilization ( Senior 2010 ) . Throughout appropriate strategic way and cohesive civilization strategic leaders besides become able to develop trust, honest, regard, unity, duty, answerability and high quality relationships among all organizational members.

With the aid of above treatment of tendencies and patterns emerging in leading, it can be said that the development of appropriate leading could raise a house ‘s vision to higher previsions, arouses its employees working to higher criterions and physiques their personality beyond normal limitations. The significance of leading for Enron could besides be understood with the fact that it is a cardinal qualifier of an organisation ‘s behavior.

Decision

Subsequent to the elaborate analyse of Enron concern patterns, it can be concluded that its failure was due to the inappropriate attack of its leaders. Enron could hold able to decide its place but deficiency of concentration of its leaders direct it towards short term attack instead than following a long-run attack. The company leaders were non able to direct and act upon others in a positive manner and this in bend directed company employees towards unethical concern patterns. If company leaders have motivated its employees in a right manner, it would hold been possible to decide company issues that conducted it towards failure ( Tourish & A ; Vatch 2005 ) .

The illustration of emerging tendencies and patterns of concern leading groundss that how Enron could hold resolved its internal system related issues. It was non so hard for Enron leaders to develop high-performance civilization but their incorrect attack towards achieving high net incomes directed it with the development of low-performance civilization.

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