Running head: ENRON'S MANAGERIAL ORGANIZATION

Enron's Managerial Organization Patricia Baskerville LDR/531 April 9, 2012 Professor Thomas Matula Ph.D.

ENRON'S MANAGERIAL ORGANIZATION

Abstract

Within the past few decades, organizations have gained better control of its operation mainly because of increased technology and its competitions failures. Every company has made faulty mistakes, but developing a solution will recover the companys value and retain its consumers. Some conflicts can help the company progress, and there are some organizations who may not recover from the conflicts. Enron is a company who could not recover from the decisions its leaders developed. As a result, the company went out of business. This article will discuss briefly the behaviors the organization displayed. In addition, this article will evaluate and weigh how leadership, management, and organizational structures contributed to Enrons business failure. Furthermore, shared beliefs are beneficial to an organization success, but if the shared beliefs are unethical, it can cause detrimental damages to the organization.

ENRON'S MANAGERIAL ORGANIZATION

Enron's Managerial Organization Enron, an American Energy company was the seventh largest organization in the United States. The establishment of Enron began in 1932, reorganized subsidy in 1979, and the ending result is Enron went bankrupt in 2001. The reason for Enrons bankruptcy is unethical behavior and poor business decisions. Enrons bankruptcy is the result of risk-taking errors its accounting practice incurred. Failure to develop the integrity ethic, Enron decided to confuse its followers and regulators of their faulty business decisions. People lost their jobs and investments because of the top executives business decisions. The stakeholders of Enron hold the executives responsible for the occurrence of the damages that include the California energy crisis, and deceiving its followers and regulators out of billions of dollars. Furthermore, this article will elaborate more on Enrons failures based on its organizational behavior theories. Organizational Behavior Theories Organizations worldwide use behavior theories to develop an explanation or comprehension of the business outcome whether it means success or failure. The purpose of explaining organizational behaviors the information gained the cause, and effect of decisions, and the development of strategy improvement. Organizational behavior theories relate to both individual and team settings and the impact it has on the organization. Organizational behavior theories identify the shared beliefs that members have in common, such as the attainable performance level, knowledgeable of position importance, and the mutual allowance of decisions made. Identifying Enrons behaviors that caused the organization to fail was the lack of three theories that include development and growth, integrative, and leadership.

ENRON'S MANAGERIAL ORGANIZATION

The development and growth theory includes the stages of group development, team cohesion, and conflict resolution characteristics. The group development theory focuses on job satisfaction, increasing employee morale, and continual motivation. Organizations use motivational methods to improve decision-making skills, increase employee involvement, increase innovation, and to satisfy the needs of the consumers, employers, and shareholders. Based on the development and growth theory, Enron failed because of the lack of recruitment policies, and provided insufficient training on ethics. This theory explains that Enron failed because of the strong organization culture it formed among each other, stormed if the risk was worth taking, normed its followers to adapt to culture, and performed organizational reasoning. Another identified behavior theory includes the leadership theory. The leadership theory practices at Enron relates to the contingency and trait theory. Effective leadership requires individuals behavior to align well with the situation he or she may face. In addition leaders should behave according to the strategies and regulations the organization developed. Enron leadership abilities failed because they lacked leaders who resolves issues, instead the leaders created more problems for the company. The following identifiable behavior theory includes the integrative theory. Organizations must embrace both climate and diversity because of the development of innovation. Diverse cultures expand an organization creatively and enable the company to develop an advantage over its competition. As a result of unfair and unethical practices, the organizational lost its value in the market segment; its creditability ruined, and reduced its opportunity to resource allocation and deployment. Moreover, Enron behavior theory concludes that the organization practiced unethical habits, and implemented weak business decisions into its operations.

ENRON'S MANAGERIAL ORGANIZATION

Enrons Contribution to Failure Developing a full diagnosis of conflicts such as, why the problem occurred, who are the people responsible for the problem and is the problem preventable is important in resolving problem. In the Enrons case, three people are responsible for the organizations failure. The three men include Kenneth Lay (CEO), Jeffrey Skilling (CEO), AND Andrew Fastow (CFO). The three top executives all failed to develop an effective organizational structure. An organization structure is essential to the success of a business. As a result, the organization lacked productive objectives, which caused the company to fail at achieving its goals. In addition, these three men displayed characteristics that enabled them to seem egotistical, deceitful, envious, and lustful. Additionally, to cover up their faults, the top executives offered weak performance appraisals systems that benefited their followers and eliminated those who disagreed with their tactics. All three executives failed to follow rules and regulations, and assumed their position allowed them to act in an unethical way. In comparison, each executive member had its own contribution to Enrons failure. Both Chief executive officers contributed corporate abuse and accounting fraud to Enrons organization. Jeffrey Skilling displayed a cocky attitude when discussing his lack of success. In addition, Skilling displayed angry emotions when questioned about Enrons operational performance. Kenneth Lay knowledgeable about fraudulent activities approved the poor decisions. In addition, he displayed a cocky attitude toward ethics compliance when attending an important meeting with its partners. Additionally, the chief financial officer, Andrew Fastow sold 36 million of his shares when he discovered that Enron investment market was about to

ENRON'S MANAGERIAL ORGANIZATION

crash. Furthermore, the decisions, and actions the top executives made is the cause of Enrons failure. Conclusion Furthermore, Enrons executive team would have succeeded if the company developed better financial mechanisms such as, following and respecting ethical laws and regulations. In addition, the organization should develop a mechanism that enables them to comply with the standards of the Financial Accounting standards Board (FASB). Additionally, the management team should incorporate an audit system because it would reduce problems such as, fraudulent activities, monitor ethical compliance systems, and reduce unethical practices. Developing effective leadership capabilities will increase the organizational structures. Moreover, Enron experienced avoidable issues because of an executive team who failed to commit to the organization.

ENRON'S MANAGERIAL ORGANIZATION

References http://www.associatedcontent.com/article/167610/what_brought_about_enrons_collapse.html http://www.cwru.edu/med/epidbio/mphp439/Organizational_Theory.htm http://www.scu.edu/ethics/publications/ethicalperspectives/enronpanel.html http://www.associatedcontent.com/article/167610/what_brought_about_enrons_collapse.html