Organizational Communication & Enron: the Smartest Guys in the Room

Sarah Kelzer 10/14/2013 Organizational Communication Professor Hall

Introduction Corporations in general tend to have a negative connotation. It is true that positive things such as employment, salaries and a 401(k)s for employees stem from corporations, but the terms greed, fraud and lies tend to follow close behind. The Enron Corporation is a prime of example of what a corporation can become when the organizational structure as a whole has become deeply flawed. In the following paper, I will show examples of organizational communication concepts, what the concepts mean and how they are applied to the movie Enron: the Smartest Guys in the Room. I will explain and apply two concepts: groupthink and organizational culture, specifically Scheins Model of Culture. This is turn will correlate to the movies examination of why the Enron Corporation ultimately failed.

Summary To review, Enron: the Smartest Guys in the Room is a movie made in 2005 about how the incredibly corrupt Enron Corporation hid their behavior and actions the resulted in bankruptcy 2001. The documentary video interviews key witnesses and reporters that were involved with the Enron Corporation, which was an American energy, commodities, and services company. The movie looks at the top executives of the corporation and various employees who took outrageous risks and made outlandish claims to increase the price of their stock and thus increased the size of their personal bank accounts. In the end, they screwed over thousands of loyal employees who were rewarded by losing their jobs, income and retirement funds so that the higher ups could turn a profit.

Concept 1: Groupthink Defined Organizational Communication covers a wide spectrum of situations and theories. When watching the movie Enron: the Smartest Guys in the Room, it was clear that the psychological phenomenon concept of groupthink was present. According to Katherine Miller, author of the textbook Organizational Communication: Approaches and Processes, groupthink is when there is more concern with appearing cohesive and maintaining group relations than there is with making a high-quality decision, (148). There are seven symptoms contributed to groupthink: illusion of invulnerability, illusion of morality, stereotyping, self-censorship, illusion of unanimity, direct pressure on dissidents, and reliance on self-appointed mind guards (Miller, 148).

Concept 1: Groupthink Applied The Enron Corporation is a good example where individuals feel extreme pressure not to express any real strong arguments against any of their co-workers talk or actions. Every single one of the characteristics of groupthink can be shown in the tragedy of the Enron Corporation. Despite the numerous people, employees, traders, accountants, lawyers, investors, analysts, and even premier banks that were suspicious (if not aware) of the fraudulence being committed, not one person stepped back from the pack because they knew they could be replaced. For example, there was such a high symptom of selfcensorship which is the overt restraint of group members against offering opinions counter to the prevailing thought in the group, that unethical practices were allowed to take place (Miller, 148). It wasnt until Sherron Watkins, the Vice President of Corporate

Development at the Enron Corporation, finally broke out of the groupthink mode and became the whistleblower. Executives and employees alike conformed to the pressure to make more money by any means necessary. The term groupthink is ironic in this sense because in the end everyone was looking out for themselves, the individual. Being the star pupil was such a firm expectation, that morals went out the window, the sense of invulnerability was at its height, Enron was the greatest, self-censorship was non-existent, pressure was coming from every direction and outside influences conformed along with the company. In laymens terms, the Kool-Aid was not only drank, but enjoyed.

Concept 2: Scheins Model of Culture Defined The Enron Corporation became an extreme example of unethical practice in the corporate world because the Enron Corporation had an extremely unethical model of culture. To review, Edgar Schein defined culture as a being a group phenomenon, pattern of basic assumptions, an emergent and developmental process and having a socializing aspect (89-90). Schein continues to delve further into culture theory by proposing a 3 part Model of Culture that organizes the elements of culture into three levels. The first and broadest level is Level 1: Artifacts. This level consists of the physical aspects, such as furnishings, and the social aspects, such as rites, rituals and stories told. Level 2: Espoused Values, is harder to study since it is made up of individual and group values. Values are what people think should happen during an event, but expressing certain values does not mean that they align with actual behavior (91). Finally there is Level 3: Basic Assumptions. This deepest third level is the core assumptions that individuals in a group hold about the world and how it works (92). The Basic Assumptions are

continuously being reinforced by repeating behavior. Therefore, they are more like unspoken rules.

Concept 2: Scheins Model of Culture Applied The Enron Corporation displayed a fascinating cultural environment. Scheins Model of Culture can be applied to the corporation by looking at the three levels of the model. Level 1: Artifacts, consisted of physical, incriminating written documents such as the ones destroyed as the Enron ship was sinking. Social artifacts at Enron consisted of communication styles, specifically the way decisions were made. Enron exhibited a downward form of communicating. The poor decisions and mismanagement that the top executives displayed was repeated and exemplified down the company ladder. Enrons Level 2: Espoused Values, were a well thought out faade. According to James Kuen, New York Times reporter and author of Enron's vision (and values) thing, Enron intended to conduct itself in accord with four capital-V Values: Respect, Integrity, Communication and Excellence and to be global corporate citizen (2002). Enron's mission statement said that We treat others as we would like to be treated ourselves....We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness and arrogance don't belong here (Kuen, 2002). The values expressed were espoused values they may have intended to follow through, but when the time came, the values did not match behavior. Level 3 of the unspoken rules (basic assumptions) was actually more extreme, a parallel to the actions that took place. As explained more thoroughly in the movie, the basic assumption were that it did not matter how you did it, just increase the numbers and

turn a profit. Lie, cheat, steal, sell your soul to the devil, do what you must. The bottom line is more important than the actual people you hurt along the way because we are too big to fail and therefore cant get caught. This thought process was repeated, emphasized and even rewarded to the point that this level of greed resulted in an entire corporations real core values. The espoused values just became a pleasant after thought.

Conclusion Watching Enron: the Smartest Guys in the Room raises a lot of questions: How could a corporation sink to that level? How could everyone at once act like nothing was wrong? Are all corporations like this or is Enron the only one who got caught? Some of these questions may never be answered, much less understood. In the meantime, analyzing the corporate culture may someday prevent the Enron scandal from repeating itself. Because, in essence, it was the culture that wasnt sufficient enough to handle crisis and what ultimately caused the corporations failure.

References Kunen, J. (2002, January 19). Enron's vision (and values) thing. The New York Times, DOI: www.thenytimes.com Miller, K. (2012). Organizational communication: Approaches and processes. (6th ed.). Boston: Wadsworth.