Issues in Management at Enron Corporation - Essay Example

Issues in Management Issues in Management at Enron Corporation Enron Corporation is an American energy company located in Houston. After its establishment, in 1985 by Kenneth Lay, the management board developed a staff of executive directors who possessed poor qualities of management. The staff used accounting loopholes and other bad financial reporting to hide lager amounts of money in debt from their failed deals and projects. The company’s board of directors and the audit committee was misled by the financial officer and other executives within the company. A forty billion dollars lawsuit was filed by the company’s shareholders after the falling of the company’s stock price from a high level of $90 to a low level of $1 within one year. Investigation was carried out before Houston offered to purchase the company. Although the deal failed, Enron assets were made the largest corporate bankrupt in the history of United States’ corporations. The collapse of Enron serves as a lesson for managers and all sub-versions of company management controls. The meteoric rise and down fall of the company astonished groups of people thereby becoming a dream for researchers to unveil what led to such misfortunes; however, the entire ordeal has ever since remained a nightmare for all former and current stakeholders of the company. The company’s downfall is associated with individuals born with greed and in atmospheres on corporate arrogance. However, many people kept on buying stock; thus, making it buy risk deals. After some time, Enron was then bought from the union of Houston Natural gas. In the union process, the company incurred huge debt and lost its rights to pipeline. To revive its operations, the company decided to initiate new ideas and formulate new strategies that would help to generate cash flow and good profits. On the other hand, to regain its stability, the company hired Jeffrey Skilling, a young consultant with good skills in banking and liability management who created gas bank whereby, Enron could buy gas from suppliers and sell it to consumers. This activity brought about huge profits and created new product as well as new paradigm for the company. Under the leadership of the young consultant, the company’s finance corporation soon dominated the market with many contracts and good access to suppliers. The number of customers was also seen to multiply. Its gained market power was utilized on predicting future prices with accuracy. Skilling begun to change the culture of the company to much its transformed image as a trading business entity. For instance, he hired the best traders and recruited associates from the best MBA schools (Sterling, 2002). Enron SWOT Analysis The basic aim of Enron is promoting and motivating the company and becoming the largest energy company in the world. The company has regained its standard and is seen to maintain its name. Nonetheless, this aim can only be evaluated by analyzing its strengths, weaknesses, opportunities, and threats (SWOT Analysis). Strengths Enron is among the largest natural gas pipeline system company in the U.S. The company is ranked seventh among other five hundred companies in the country. It conducts an awareness campaign to its customers which causes to build its name. Additionally, Enron is among the biggest companies that supply energy thereby giving it an edge above its competitors. Through this, the company has got many advantages over its competitors. Moreover, the company has managed to strengthen its management system by employing the highly skilled individuals. Despite the company’s management system being faced with some management problems, its control measures usually make it come up with the best solutions that boost the company’s performance and image. Weaknesses The company has never consistently been under productive workmanship. For instance, workers in the company sometimes portray unethical behaviors by conducting wrongful acts that usually impact negatively on the productivity and image of the company. The company is also faced with employees’ lack of fairness and integrity. This may be attributed for by less or ineffective control of the management of the company over their employees. The portrayed lack of effective leadership has often led to conflicts between employees and the management thereby affected the productivity of the company. For instance, the company finance department has set a very high target of result, but due to squabbles in the organizational management and leadership, the financial officers only harms the company with poor financial record keeping . Every time incorrect information is brought in the company, employees decrease their loyalty and hard work. Opportunities The company name and brand is its greatest opportunity. This is because the name Enron is well known in the market for their quality service of energy provision. Therefore, the company enjoys this as an advantage of the ease in expanding their products since they are the number one suppliers of gas pipeline and other fuel related materials. Moreover, the Energy deregulation of 1970 that still occur in the market, allows it start business and rise in the market. Enron Threats The company faces a lot of threats including employees not trusting one another. This increases threats from the competitors since they can easily influence a partner to join them and snatch best performing employees from the company. If a partner is taken away from the company, part of the company profits is considered to have been taken. Growth in technology and surveys is a threat to the company since consumers are in the environment where they can find alternative materials to use in place of oil and gas. People’ search on alternatives resources as those supplied by Enron greatly threatens the stability of the company. On discovery of these alternatives, the company may experience great losses or decreased profits. Management by Objectives (MOB) This is the process of defining objects in an organization so that both the employees and the management agree to all objectives and realize the need to work towards the achievement of the objectives (Hersey et al. 1996). Management by objectives is essential in goal setting, the choice of action, and decision making. It’s an important part is the comparison of performance with the set objectives. Employees are more likely to fulfill their responsibilities after they have taken part in the formulation of the objectives and in goal setting. In this case, the employee and the employer should jointly identify the company objectives. Notably, objectives are usually translated into guidelines that control the performance of the employee. However, the use of these arithmetical objectives can cause misdirected focus or short term thinking. Enron optimized the Management by Objectives type of management where its focus was given to the achievement of one single goal. This made Enron to focus on managing and improving its daily activities. Aligning the employee’s objectives with the goals of the organization ensures that all employees are clear about their work and its benefits to the organization. Management of this manner incorporates the minds of all team members within the organization and the same is applied at Enron where employees are given an opportunity to focus on what they are trying to achieve. This helps them to fast distinguish between tasks that are must complete and others that are not worthy their time. This type of management also works at an individual’s level. This is achieved through the employees desire to see their work as meaningful and purposeful. This creates a clear link between the organization’s mission and the employee’s effort. Enron uses Management by objectives uses mainly to motivate its sales-personnel. Total Quality Management To maintain top position in the market, Enron management is keen to know all the pieces that need to be brought together to deliver a quality product to their customers. Therefore, the management must take much consideration of the processes that are taken from the time of the customer request on their product to the time of delivery. In order to attract more customers and win their trust, the management has been very strict on ensuring that quality products are delivered in a quality manner. In other words, the customers must remain the company’s first priority. Gas fuel is delivered upon the customer request and within the shortest time possible. To achieve this, the company has established various transport means which ensure deliver of customer request on an efficient means. Gas fuels ready to be transported are thoroughly inspected before the delivery method is set. After setting the delivery method, a customer conduct is made. This alerts the customer on the exact time of delivery of product. Poor quality is associated with poor planning and execution of processes. Enron has ensured the availability of correct systems for checking quality. This gives them a higher chance of getting their orders right and satisfying their customers (Prebble et al. 2009). The incorporation of all quality measures in management in termed as total quality management and the same is applied by Enron Company. All departments are involved in the process of quality maintenance. The human resource, marketing teams, production department, and the accounting department play their significant roles in the achievement of quality. Skilling became the chief operating officer at Enron and delivered quality services to the company and to the stakeholders. He created the most exciting development to the eyes of many people. The creation of Enron Online was a sign of quality management carried out in the company. This was an electronic commodity website for trading. Traders received more valuable information regarding all operations of the company. Traders could view the prices of products in their real time. Credit risk had been crucial and this was addressed by the online transactions. Enron online became a continued success and handled the largest profit for the company on online commodity trades. Enron management announced their plan to build a high-speed broadband telecommunications network for trading electricity and gas. The aspect of total quality management utilized at Enron was considered more significant for the benefit of both the company and its relevant stakeholders. The type of management was conveyed by positive feedbacks from customers on their satisfaction as well on the noticeable rise on profit generations of the company products. Enron scandal involves unethical activities. Corporate managers should commit themselves to maximizing investors’ returns and at the same time comply with the regulatory standards. They should try as much as they can to avoid principal-conflicts of interests. Hence, it is vital that the Managerial integrity is maintained at all time and costs (Prebble et al. 2009). This may be pegged on the moral root of Enron’s financial and legal problems. Managers and organizations that uphold high integrity capacity are in a better position in exhibiting a coherent unity of action and purpose and can avoid all forms of irresponsible managerial decision making. Hence, Managers with low integrity wears away their reputational capital and provoke management distrust and the wrath of a stakeholder (Doyran, 2011) thereby risking the future of the business. The value and nature of integrity capacity by managers and the neglect witnessed in the Enron management serves to open up the eyes of managers and portray the necessary actions to be taken on running an activity in a company. Balancing the competing values of ethics and management theories address the issue of moral and behavioral complexity which can protect a future crisis. Managers should implement the necessary policies and management skills that will prevent any Enron-like managerial negligence. Quality of management is an important tool that should be integrated with other tactics including the management by objectives to ensure a smooth running of an organization. Managers should lay a role as the main directors and coordinators of all activities carried out in an organization for prosperity in the business. References Doyran, M. A. (2011). Financial crisis management and the pursuit of power: American pre-eminence and the credit crunch. Burlington, VT: Ashgate. Hersey, P., Blanchard, K. H., & Johnson, D. E. (1996). Management of organizational behavior: Utilizing human resources. Upper Saddle River, N.J: Prentice Hall. Prebble, L., Chichester Festival Theatre. Headlong Theatre, & Royal Court Theatre. (2009). Enron. London: Methuen Drama. Sterling, T. F. (2002). The Enron scandal. New York: Nova Science Publishers. Read More