People and organization: Enrons Corporation case - Essay Example

? People and organization Introduction This paper is going to focus on some items related to people and organization. In particular,the paper will highlight the problem of bureaucracy that is facing the company to be selected, in this paper. Bureaucracy is about management. Therefore, when the management of any organization is undertaking a particular action or is making decisions on a number of organizational aspects, they may do it in a way that would affect the organizational behavior. For instance, the management can undertake some actions violating the company’s ethics, and hence this may not go well with the people. One of the companies, which have experienced many problems due to the actions undertaken by the management, is the Enron’s Corporation. This paper is therefore, is going to focus on the Enron’s corporation in terms of several aspects related to people and organization. Among the things to be highlighted in the Enron’s Corporation are the history of the organization, the workforce, and its human resource strategies. After highlighting these areas, the paper will go ahead to focus on the at least two important aspects related to bureaucracy. These are the violation of the codes of ethics, and the ineffective human resource management. As far as the code of ethics is concerned, the management is expected to conduct itself in a manner that is conducive for the operations in the company. On the other hand, the human resource implies that all the employees must strive for the success of the company. Body Enron’s case study Enron was one of the world’s biggest manufacturers of natural gas, oil, and electricity. Before 2002, it was considered one of the most profitable limited companies whose shares value rose from $19.10 in 1999 to $90.80 at the end of 2000 financial year. These successes are attributed to the board of directors and the top management team who always looked for new ventures, partnerships, and make crucial decisions of the company. On several occasions, the company’s Chief Financial Officer, Andrew Fastow had many investments for the company and the board of directors never questioned his decisions, little did they know that despite the created partnership he in fact the major investor participating in the buying of shares and to conceal his deals he introduced a complex scheme of off-balance-sheet partnerships. Analysts in trying to go through the balance sheets did not figure out anything for the scheme was so complex and did not make sense. This was the revelation for the shareholders and it marks the downfall of Enron Company. Enron’s company was highly respected for its managerial skills and efficiency attributed to its’ hiring of top graduates and experienced personal to undertake in the run of daily business operations. The CEO on the other hand cultivated a culture of competition among the employees, those who were rank low would be dismissed hence everyone was self conscious, but never went into it to find out how it operated, thus the employees cooperated amongst themselves and when a problem occurred it was hidden rather than being disclosed. This shows that the CEO was ignorant on some key issues of running the business. In our society today, we are made to believe and trust too much on the professional bodies like the lawyers, accountants, and the external auditors, but in reality they are the ones who can ruined the company or an organization. The law on the other hand finds only the key players in a case. Enron’s failure was not only because of bad decisions of the CEO and the CFO, rather the entire management had a problem. There was lack of proper communication between the senior directors and the subordinates of which they should have all been investigated. From the case, the company was more interested on enriching her employees’ welfare and put aside the interests of other stakeholders. For this reason therefore, the employees did anything to benefit themselves and they should have been investigated. Business undertaking is a dirty game and only those who follow the right procedures survive, while those who like short cut will be caught by the law and the consequences are more severe than anyone can imagine. When a company is declared bankrupt, the investors, employees, and board of directors looses many finances because of the scandal that precedes it (Gouldner 1954, p. 254). Sarbanes Oxley act (2002) has been very effective in managing the various risks exposed by the Enron, Arthur Anderson, and WorldCom through the implementation of various provisions; Disclosure control. Under this provision, the firm is mandated to set up internal procedures to oversee accurate financial disclosure. The financial officers are answerable and responsible of effective internal control system. This therefore, ensures that the CFO discloses their undertakings in a report and presents a conclusion of company’s financial status to the board of directors for further scrutiny. By so doing he or she will have brought transparency and accountability, Disclosures in periodic reports provision requires the disclosure of all off-balance sheet items, a SEC study and a detail report to bring out a clear image of the scope of usage such inventions and discuss on whether accounting concepts completely tackled these inventions. The other provision is the assessment of internal control. Under this provision, it needs the management and external auditors to prepare a report on the competence of the company’s internal control over financial reporting (ICFR). Annually the management is expected to produce a report on key issues of the company and capabilities of management in maintaining sufficient internal control structures. These are some of the provisions, which enable Sarbanes Oxley to control the management risks facing various companies effectively (Knights & Willmott 2007, p. 65). With the current global financial crisis, a new legislation is possible to be introduced. People now are civilized and we need a civilized method of handling current issues worldwide. With improved technology, I believe that the legislation will be in a position to solve the ethical misconduct effectively although it will be a very big challenge for those who are concern. This is because the world is comprised of people of diverse culture and practices; others will feel that their rights are being violated while others will be rigid to accept the new changes in the financial system (Crozier 1964, p. 84). Human Resource Management People and organization cannot be mentioned without mentioning the human resource management. Consequently, it can be said that the problem in Enron’s company lied on the human resource department. Therefore, if human resource department could have been as effective as it should, most of the actions that lead to the downfall of the company may not have been taken by the management. Human resource department involves everyone, right from the CEO to the subordinate staff, who invest their skills and understandings in the company. Consequently, we are going to discuss the expectations of the human resource management, to see if the problem in the organization could have been avoided (Merton 1949, p. 98). Consequently, debates in relation to human resource management and its environment continue to gain momentum although the focus has changed with time. The debates first began by trying to find the differences between human resource and employee management. The discussions moved on to scrutinize the associations between human resource approaches and the incorporation of Human Resource Management into business policies and practices. In addition, the degree to which human resource management can be utilized to accomplish competitive advantage in business was also analyzed. Much of the progress has occurred over the past decades and has hastened changes in the way human resource operates. Currently, the contribution of HRM to enhance an organizations performance is being emphasized (Knights & Willmott 2007, p. 178). Human resource strategies Enron Company failed to make good use of the Fit as strategic integration as one of the human resource strategies. Fit as strategic integration recommends that strategies should be in tandem with business approaches. These strategies ought to match with the level of the business especially when the organization is experiencing changes. The expectations of the employees should also be in alignment with where the company is heading to through communication of organizations values and vision, transforming approaches into routine management and creating a consistent business culture, one that recognizes the needs of both the employees and the entire business (Gouldner 1954, p. 28). Organizations can therefore come up with strategies that fit the size of the organizations. Smaller business for instance cannot adopt comprehensive and demanding approaches such as having an excessive number of employees. Strategic integration guarantees that human resource administration is completely unified into strategic development, rules are comprehensible, and line managers utilize human resource practices as a portion of their daily operations (Merton 1949, p. 5). According to Enron, if an integrated set of human resource practices is utilized in a comprehensible manner with an aim of achieving dedication, quality and suppleness, personal achievement will surely be realized. Under commitment, the employees might feel connected with the organization hence behave in a way that fosters high achievement. Organizational employees that are flexible may adapt quickly to the business structure and exhibit several skills at the same time. The employees may also provide high quality products and services. Considering the problem that was experienced by Enron Company, it is true that there was no good connection between the organization and the management. This is because the management was using the organization to pursue their individual needs. That is why the organization went into bankruptcy (Mommsen 1974, p. 87). As the management was pursuing their selfish gains, they also failed to implement the fit as contingency strategy. This strategy ensures that internal practices of an organization change the setting of the business and its policies. The “best fit” method is founded on the notion that there is no one particular way for strategy. Appropriate tactics must therefore be carefully chosen to fit particular requirements through the analysis of the organization’s setting internally for instance opportunities, limitations and threats, and externally for instance process, culture and technology (du Gay 1994, p. 8). This model concentrates on the fit between organizational processes and the features of the circumstance. This approach does not allow the use of worldwide management strategies in all circumstances. This model does not concur with the one best model as stated in past theories hence provides supple theories for business project and structure. This approach also shows the association between the external environment of the business, size, objectives, and structure of the organization. According to this model, managers must therefore understand the environment and setting to the business before coming up with the right structure (Mommsen, 1974). Enron Company also failed to follow the fit as an ideal strategy. This strategy is a set of practice proposes that internal organizational practices should mirror “best practice.” This approach is founded on the belief that adopting particular widely human resource management practices will enhance business performance. Various best practices such as employment security, self-governing teams, and reward associated with performance and continuous development have been created. A company may for instance may consider training options and analyze the kind of believes that can improve or bring down the organization. Organizations can therefore motivate their employees by compensating those who exhibit better performance for instance through promotions. The Enron’s CEO for instance, did not demonstrate the best practices, especially those of transparency and accountability (Merton ,1949). Lastly, Enron Company failed to stick to fit as bundles human resource strategy. This strategy proposes that unique bundles of human resources practices can be created and executed. These practices may include appropriate management and competences, which can be utilized in various settings to develop coherence across several functions guaranteeing that they balance and reinforce each other. For instance, if the general human resource approach is to enhance performance the sourcing tactics for competence founded staffing can be combined with progress strategies for capability- training alongside incentive policies to offer proficiency based pay. Employees may also have their own believes for instance and these are chief motivators in the way individuals behave. Recruiting competent individuals through personality tools and group interviews can be a good strategy but understanding and appreciating their beliefs can be another way of identifying other strategies. Although Enron company was being lead by well educated CEO and managers, the actions that they took , which lead to the downfall of the company imply that they did not have the appropriate management and competencies needed for the success of the company (Selznick, 1949). Recommendations Considering the case of Enron Company, it is true that the management had failed in several aspects regarding the human resource management. There was weak connection between people and the organization. While the people, forming the human resource department were being expected to work for the organization, they were instead working for their own gains. The CEO was doing dubious business secretly by taking advantage of the authority he had in the organization. Transparency and accountability had been thrown out of the window in Enron Company. The following are therefore, some of the recommendations that could have solved the problem (du Gay 2005, p. 32). For the interest of the organization to be upheld in any organization, action taking and decision making processes are very vital. Decision-making process and action-taking processes are critical and must be handled with care because it may cause unending conflicts and misunderstanding in the organization. Including the subordinate in these processes will make them feel part of the organization and feel part of the organization and they are recognized. In this case, the interest of the organization will have been taken care of (Blau 1955, p. 53). This will enhance communication and free interaction because they can openly and freely discuss issues they can all understand and agree on one thing. It will reduce cases of fear and favoritism (Selznick 1949, p. 32). Leadership also had a problem. From the Enron’s case study, it is clear that the kind of leadership that was being used was autocratic one. Consequently, autocratic leadership style is the one where a leader is able to control his workers without question. He has powers over the entire staff and nobody in the company can makes decisions easily without the leader’s consultation. It does not matter whether the team in the organization thinks their wish to make decision is beneficial to the organization. This kind of leadership may affect the workforce due to the fact that the rest of the staff feel unappreciated, but is effective when making urgent decisions (Blau , 1955). Therefore, the recommended leadership styles that should have been used by the organization are the bureaucratic leadership and democratic leadership. Bureau tic leadership is the leadership style where the leaders work according to policies and regulations for effective outcome, is very suitable in a business where there are serious risks of safety and also in a place where large sums of money is involved (du Gay 2000, p. 21). On the other hand, democratic leadership is the leadership style in which decisions are finalized but the staff also is involved in decision-making. The involvement of staff in the participation of business decisions greatly boost job satisfaction and helps in widening the individual’s skills. It makes the workers feel they are part of the business fully and increases motivations for staff to work extra hard hence increasing productivity (Blau 1955, p 321). Conclusion This being a very big company, I could not have taken chances. The company requires an overall reshuffling of the management team, introduction of departments, and ensure that each department is run by a senior director who shall be accountable and responsible for any misconduct in that department. Being the CEO, I will also ensure that I go round the countries with a team of specialized auditors to determine their financial status at a given interval. This will make sure that those who delegate duties are held responsible. At the same time, in case there is any misconduct those implicated would face immediate consequences. Setting targets for every country will also be my responsibility, and whoever achieves them should be rewarded to be loyal to the company and avoid ethical misconduct that may result from abandoning (Selznick 1949, p. 34). Bibliography Blau P., 1955, The Dynamics of Bureaucracy. University of Chicago Press. Chicago. Crozier M., 1964, The Bureaucratic Phenomenon. Tavistock. New York. du Gay P., 1994, 'Making up managers: bureaucracy, enterprise and the liberal art of separation,' British Journal of Sociology 45, 4 du Gay, P. ,2005, The Values of Bureaucracy. Oxford: Oxford University Press. du Gay, P.,2000, In Praise of Bureaucracy: Weber, Organization, Ethics: Organization, Theory and Society. London: Sage Gouldner A., 1954, Patterns of Industrial Bureaucracy. Free Press. New York. Knights, D & Willmott, H., 2007, Introducing Organization Behaviour and Management, London: Thomson Learning. (chapter 13) Merton R. ,1949, Social Theory and Social Structure. Free Press. New York. Mommsen W., 1974, The Age of Bureaucracy. Harper & Row. New York. Selznick P., 1949, TVA and the Grass Roots. University of California Press. California. Read More