During its collapse in the year 2001, Enron remained proud of their thorough state-of-the-art management control and governance frameworks. The corporation proclaimed themselves “The World’s Leading Company” as well as relied on their aggression to implement systems. However, such controls were considered not working in the corporation's final few years. There was a radical change that was witnessed in Enron's corporate culture that existed from the Lay-Kinder era (1986 - 1996) to the Lay Skilling era (1997-2001) (Dibra, 2016). This paper will examine the corporate culture of Enron Corporation as well as determine the main cause of neutralizing these controls that left Enron's deteriorate into being bankrupt.
Enron’s corporate culture was one that could be summarized as the World’s Leading Company having aggressive employees. They had an improper feeling of pride in that they thought that their employees could deal with risks without exposing the company to danger. Enron’s corporate culture stirred the act of suppressing policies just to earn profits. Enron’s executive compensation frameworks were headed toward channeling more wealth to the executives rather than being mindful of the profits directed to the shareholders. It is through this manner that executives served to reinforce a culture of privilege for themselves (Dibra, 2016). They amassed wealth to themselves, and were not mindful of the profitability of the corporation itself. The executives did not have a proper framework to deal with bad news, leading to more problems being unresolved and not reaching the management desk.
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Ranking and yanking was common at Enron that always created tension among the Houston-based company's 18000 employees. In a normally vigorous exercise, more than 20 managers could have a meeting with a computer screen that is full of employee rankings that are projected on the wall for scrutiny. Every participant came with notebooks, and the managers could change positions along the hierarchy, by simply a click of the mouse. This act of replacing a majority of employees in the Enron Corporation defines the bureaucratic system of the company. It is bureaucracy in the sense that 20 percent of employees were forcefully removed from their positions or company as annual exercise exemplified by the company (Ritzer, 1992). The rank and yank strategy simply takes the model of retrenchment, such that the executives of Enron could thrive in such a system exploiting the resources of the company without being discovered quickly. In this sense, rank and yank became a brutal technique that led to the fall of Enron Corporation. Compared to race care driving, the managers wrongly graded their employees' performances using a vitality curve and doing away with those that were in the lowest category (Dibra, 2016). This grading exercise was costly, as some talented and sincere employees will be eliminated using a performance review that the managers determined to favor people that they could control. They ended up finishing the race in a fall, even though they achieved fewer laps.
McDonaldization is the context of Enron, is when it incorporates the elements of a fast-food restaurant in its system. Ritzer explains that the main contributors of Mcdonaldization are bureaucracies, Fordism as well as scientific management. Scientific management is the approach that a company adopts to heighten their productivity and efficiency. The outcome of Enron’s crisis is that auditors, bankers, and attorneys majorly contributed to the fall of the company. Vinson and Elkins ignored Sherron Watkin’s claims of fraud in the financial records (Ritzer, 1992). They were in the upper hand of structuring Enron’s special-purpose partnerships that frustrated the progress of the company. The auditor Arthur Anderson obstructed justice because he destroyed important auditing documents during SEC investigation, even as a partner. The idea of McDonaldization in Enron was to create partnerships that would profit the company. Unfortunately, the partnerships were intended to cover some 1 billion dollars in Enron debt.
In conclusion, the fall of Enron was orchestrated from the executives and top management. The executives came up with strategies that created problems, which gave way for Enron’s financial problems. The approach that was adopted from the beginning gathered more wealth for the executives rather than the stakeholders. The former employees structured partnerships that on the surface was thought to profit the company, but in real sense deterred the progress of the company. McDonalization of the company through partnerships only gave way for losing of billion dollars in Enron debt.
References
Dibra, R. (2016). Corporate Governance failure: the case of Enron and Parmalat. European Scientific Journal , 12 (16).
Ritzer, G. (1992). The McDonaldization of society . Pine Forge Press. http://fasnafan.tripod.com/mcdonaldization.pdf
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