Leadership and Culture in Business Ethics
Organizational Culture
Organizational culture identifies with the human behaviors in an organization and the meaning that the in individuals attach to their behaviors while working in the organization. It has been noted that culture includes the norms, values, systems, working language, vision, symbols, habits and beliefs of people while in the organization (Brown, 2008). Organizational culture also identifies with the collective assumptions and behaviors that are passed over to new members of an organization in ways of thinking, perceiving and in general feelings. Organizational culture is responsible on the way groups, stakeholders and individuals interact within an organization (Brown, 2008). Each and every organization has its own organizational culture; although there are a number of conflicting subcultures. Organizational culture shapes the performance of an organization.
Enron’s scandal
Enron’s scandal is an example of corporate crime in the United States; organizational culture, motives, beliefs and incentives facilitated the scandal (Free et al, 2007). There are many forms of corporate crime in organizations; with different organizations displaying different patterns. Enron’s scandal was extensive since it involved the bad boys at the top management teams and market traders and all through the organization. Organizational deviance at Enron was initialized in an infantile pattern. The Chief Executive Officer (CEO) by then Mr. Ken Lay was submerged in realizing huge profits in an innovative and new organization; He and other leaders overlooked a number of employees who displayed trading habits that were dangerous (Madsen & Vance, 2009). Some of the employees were punished although a number of issues within the organizational culture were ignored altogether. It is strongly believed that the organization culture is the mother of the deviant behaviors that led to the failure of the organization.
Enron’s Sense of Business Operations and Ethics and the Roles Of
Executives to the Failure of the Organization.
Jeff Skilling was influential in setting high expectations at Enron, an idea that they shared with Ken Lay. The two individuals were part of the top management teams, and they were thrill seekers and risk takers at the same time. The two members of the top management teams enforced the values to the existing employee base (Free et al, 2007). Skilling led an active role in developing and implementing a model that led to a firing system, where the employees would be retained depending on evaluations. The test led to the survival of only the best and brightest; Skilling also encouraged dangerous risk taking encounters with minimal monitoring models in place. The risks emanated from outside and inside the walls of Enron, majority of employees were forced to leave their comfort zones.
Jay and Skilling strongly believed that failing was not a desired option, and the success of the employees were ranked in accordance to the worker’s ability to bring in more and more profits; while ignoring the organizational deviance that was developing with time (Madsen & Vance, 2009). Skilling and Jay were mainly concerned in placing Enron as the most productive organization in the United States; which involved any possible means. The push of the unrealistic goals led to fostering of beliefs and attitudes that encouraged deviance at Enron.
Employees at Enron developed a belief that frauds were necessary in realizing the desired organizational goals set by the top management teams at Enron (Free et al, 2007). The tasks performed in realizing the profits were ignored, in ways that ethics was not given a chance (Meisinger, 2012). Dishonesty within Enron became the order of the day, and was valued as a way of realizing the goals and the objectives of Enron. Acts of dishonesty were not considered as deviant, and that dishonesty was seen as a normal behavior within and outside the organization; and part of jobs done by the employees of Enron. It was noted that at the time the operations of Enron were ruled out as a crime; people working in Enron even the top management teams could not recognize the deviant behaviors. Dishonesty had been deeply entrenched in the organizational culture of Enron to levels that business ethics were totally ignored (Meisinger, 2012).
Dishonesty was a deviant behavior that became a norm in Enron; employees not practicing dishonesty were considered abnormal. The fact that Jeff Skilling and Ken Lay among other members of the top management teams played a wrong example to the employees. Their emphasis was on profits only and not ethics (Madsen & Vance, 2009). In the eyes of the top management teams at Enron, wrong behaviors were considered normal as long as the end results were characterized with huge profits.
The defective organizational culture resulted to defective values and beliefs; to an extent that employees took a brave step in practicing flaws in the name of profits. Defective organizational culture resulted in intolerance, pride, greed and arrogance among the employees working in Enron, and that was considered as a norm. The deviant organizational culture to some extent shaped people originating from different personalities and histories into committing crimes. Employees working in Enron were no longer concerned on one another, but were after fame and productivity at whatever the cost (Free et al, 2007).
Enron was characterized with side identification, a trait that was observed among the members of top management teams; this led to poor self confidence and depression among the top management teams. Employees at all levels of the organization were involved in scandals that cost their jobs. The incentive of Enron scandal was fear, the corporate crime was fostered by perceived and real fear of employees losing their jobs. Employees kept on involved in dishonest deals as a way of maintaining work status. Employees at the higher positions like Jeff Skilling and Ken Lay among others were motivated by profits in continuing with the deviant behaviors (Madsen & Vance, 2009). At that time, people thought that Jeff Skilling and Ken Lay were great leaders who propelled a successful organization. Jeff Skilling and Ken Lay were scared of judicial punishment and public humiliation, an incentive that contributed to the leaders being engaged in the scam to higher levels.
The motive of the employees at Enron were huge profits, with ethics being ignored altogether (Meisinger, 2012). Enron at that time had dominance in the target market, and the same power was transferred to the employees in a number of ways. Employees working in Enron believed that people outside the organization perceived the workers of Enron as geniuses (Free et al, 2007). Recognition and authority forced the employees of Enron to dig deeper into the illegal practices. The organizational deviance at Enron was a result of ineffective beliefs, organizational culture, ill motives and misguided incentives that finally ended the organization; these factors were all over Enron from top to below and from inside to outside of the organization.
Responsibility and roles of company leadership
Executives at Enron ignored a number of responsibilities and roles bestowed on them in regards to the day to day operations of Enron. The board of directors and other executives like Jeff Skilling, Ken Lay and Fallow among others were expected to play active leadership roles that considered all the levels of the organization. Leadership is a special function in an organization that influences the operations of an organization at all management levels (Madsen & Vance, 2009). Top management teams were expected to corporate in the formulation of policies and plans which were expected to be communicated to other levels of the organization. Lower level and middle managers were expected to execute and interpret the programs and plans made by the executives. Leaders at Enron were expected to be a representation of the company, reconcile and integrate organizational and personal goals, solicit support and be involved in building work relationships among the employees. Leaders must play as role models in the organizations.
Influence of HRM (Human Resources Management)
HRM in organizations is a crucial department since it acts as the bridge between the organization and the employees (Mathis & Jackson, 2007). If HRM was active in Enron, it could have been influential in setting a moral compass on ways that employees were expected to behave within and outside the organization. HRM could have been useful in shaping and forming an effective organizational culture to the desired embodiment. HRM is useful in recruiting, training and in implementing and developing procedures and policies to be followed by the employees (Mathis & Jackson, 2007). HRM in Enron could have been useful in maintaining compliance, saving time and money and in relinquishing control. Maintaining compliance is sensitive in making sure that the organization and the employees are in compliance with the regulations and rules on personnel management and relations (Mathis & Jackson, 2007). In so doing, HRM department could have noted the deviance on the organizational culture and taken up corrective measures before things could get out of control. Dishonesty could have been dealt with before it could get attached to the organizational culture as a norm.
References
Brown, A. (2008). Organizational Culture. Upper Saddle River, New Jersey: Financial Times Management.
Free, C., Macintosh, N., & Stein, M. (2007). Management Controls: The Organizational Fraud Triangle of Leadership, Culture and Control in Enron. Ivey Business Journal Online. Retrieved from ProQuest.
Madsen, S. & Vance, C. (2009). Unlearned lessons from the past: an insider’s view of Enron’s downfall. Corporate Governance, 9(2), 216-227. Retrieved from ProQuest.
Mathis, R. & Jackson, J. (2007). Human Resource Management . Stamford, Connecticut: Cengage Learning.
Meisinger, S. R. (2012). Examining Organizational Ethics. Human Resource Executive Online (June, 2011). Retrieved on November 19, 2012 from: http://www.hreonline.com/HRE/story.jsp?storyId=533348507
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