Change and Organizational Development Strategies Attempted by Enron
When failing to adapt to changes, the first strategy employed by Enron was to fix financial reporting practices. Contracts with customers were not audited properly, leaving enough room for incorrect transaction interpretation and recurring revenues that went unnoticed (Eckhaus & Sheaffer, 2018). The company’s executives also focused on how they could avoid write-offs to maintain expired contracts.
The second strategy was to construct compensation agreements that do not reflect the actual state of affairs across the organization. Enron’s executives tried to focus on short-term profits to generate an equivocated cash flow and have employees support the idea (Khan et al., 2022). Accordingly, there were equity positions available for workers who displayed the most loyalty to the executives’ plans.
Reasons for the Failure of Change Strategies
There are three particular reasons why Enron’s change strategy failed and led to the company’s bankruptcy. First, relevant human processes were absent from the company’s agenda both on short- and long-term scales. Therefore, Enron’s fraudulent exercises were exceptionally evident, especially to partner organizations engaged with Enron financially (Lee & Keathley, 2022).
Various compensations put a strain on the company’s budget while being expected to cover executives’ needs and aspirations. When looking at its human processes, Enron’s management tried to remain as virtually transparent as possible. With everyone virtually ignoring Enron’s unlawful actions, the management became too confident in its relationships with the market and fraudulent opportunities.
The second reason for Enron’s failure could be the presence of unrealistic technostructural expectations. The emergence of new digital tools was a rather promising venue, but the company failed to curb its ambition and respond to the growing demand by increasing the respective supply (Abdel-Khalik, 2019). Technostructural strategy requires a high amount of self-confidence, and Enron’s unrealistic expectations forced numerous missed deadlines and the non-delivery of promised services. These failed promises laid the foundation for Enron’s collapse.
The third reason why the change strategies employed at Enron failed miserably was poor strategic management. Weak leadership efforts were paired with greed, resulting in unfair financial treatment that could not be reverted (Roy & Ghosh, 2019). Even though the management was aware of multiple concerns regarding unfair practices, it decided to disregard those intentionally. Enron’s strategic management was based on omnipresent control, making it impossible to make organizational operations more flexible.
Change Implementation Guidelines
It can be claimed that the ultimate guideline for change implementation at Enron was to do whatever brought even more financial profit, regardless of how it affected the company’s ethical stance. Therefore, the top executives disseminated the foundation for a toxic corporate culture that was grasped by the team. Over time, it led to constant deception and corruption across Enron (Khan et al., 2022). From the point of change management, it could have been safer to maintain a transparent relationship with workers to ensure that deceitful practices were avoided.
Yet another change that has to be mentioned here is that every dissatisfied employee was either ignored or fired. Hence, organizational practices and decisions were based on the outlooks displayed by top-tier managers who had the most authority. All changes were implemented in an attempt to have every worker adhere to the needs of Enron’s executives (Lee & Keathley, 2022).
This failure to establish healthy leadership practices affected lower-tier employees because they could not do anything about the growing demands of Enron’s officials. It can be claimed that the company’s organizational development efforts lacked a shared vision and a detailed ethical agenda. Hence, Enron could have become successful if it chose to follow the principle of corporate social responsibility and other ethical practices.
References
Abdel-Khalik, A. R. (2019). How Enron used accounting for prepaid commodity swaps to delay bankruptcy for one decade: The shadowy relationships with big banks. Journal of Accounting, Auditing & Finance, 34(2), 309-328.
Eckhaus, E., & Sheaffer, Z. (2018). Managerial hubris detection: The case of Enron. Risk Management, 20, 304-325.
Khan, M. A., Khan, U. N., Jamali, A. K., & Jamshed, J. (2022). The factors contributing to a corporation’s demise: An analysis of Enron. Journal of Management Practices, Humanities, and Social Sciences, 6(2), 15-21.
Lee, L. W., & Keathley, A. (2022). Scammers: Enron Scheme. In 45 Conversations About Behavioral Economics: An Interdisciplinary Discussion Crossing Business, Public Policy, Sociology, and Psychology (pp. 143-145). Cham: Springer International Publishing.
Roy, A., & Ghosh, S. K. (2019). Determinants of corporate environmental disclosure from an Asian perspective. IIM Kozhikode Society & Management Review, 8(2), 171-189.