In December 2001, the 90 billion dollar US behemoth Enron collapsed. The dramatic fall of America’s 7th largest conglomerate came in 24 days. Later, an insider confessed that Enron had been a “house of cards built on a pool of gasoline.”
Who was responsible for the sudden death of a company which caused collateral damage far beyond its Houston headquarters? An even better question would be – what caused it?
It has been argued by many that the deeply flawed culture of Enron was its undoing. Someone pointed to ‘pride, arrogance, greed and intolerance’ as key elements of that culture, words that are hardly likely to be found lurking an a company’s P&L statement or its balance sheet.
The train-wreck rendered 20,000 employees jobless and brought the top leadership including the former President and CEO Jeffery Skilling and the enigmatic Chairman Kenneth Lay into the dock of Congressional hearing. It literally killed a former top executive. John Clifford Baxter, a US Air Force veteran shot himself in the head while sitting in his Mercedes Benz, ostensibly to avoid facing the same committee.
It emerged that in its headlong plunge for profits, Enron had breathtakingly ignored ethics and commonsense. Corruption, creative accounting, inflating figures and every possible financial wrongdoing was encouraged in pursuit of heftier profits. It was clear to the employees that in otder to survive and thrive, that was the playbook to follow. The only way to describe this complete disregard for rules is arrogance – born out of success and patronage of political big-wigs. That became the culture of Enron.
Enron’s strategy collapsed under theweight of its own culture. It allowed extreme greed to rule the hearts and minds of its decision makers. There was such a disregard for the ethics that the description ‘arrogance’ begins to make sense. Money was the only god. Cheating, creative accounting, corruption were practiced with abandon till these values percolated to everyone in the rank and file. Every employee understood that to succeed and survive, this was the only route to take.
Profit is the objective of every business entity. But when a culture is created where even the reputation and existence are made subservient to profit, chances are that the cookie will crumble.
But how did the Enron leadership describe the company’s value system? Kenneth Lay, the Chairman who, in four short years, raked in USD 300 million in compensation and stocks, had described Enron as ‘a company that deals with everyone with absolute integrity. We want people to leave (after) transaction with Enron thinking they have been dealt with in the highest possible way, as far as integrity and truthfulness (goes).”
This brings us to a vital clue about the culture of organizations. Culture is not what is espoused, announced with ringing pride from pulpits, splashed on to colourful posters to adorn the walls of meeting rooms. It is what is actually in play. It is the easiest trick in the trade to proclaim lofty ideals while using these as a smokescreen of moral rectitude and practising whatever-goes in reality. And it is eventually only a step away from self-seduction into believing that what is claimed is what is in possession. After all, is there a company in the world that does not ‘believe’ and broadcast its love for the customer, its employee-centricity and, not to forget integrity and probity? But in reality, does such a self-hypnotizing routine have the least amount of utility when the balloon goes up?