Management Strategy and Operations Management - Enron - Case Study Example

MANAGEMENT STRATEGY AND OPERATIONS MANAGEMENT Question1 Enron was one of the biggest energy companies in the United s of America. Enron had an enormous workforce of over twenty thousand employees and registered profits of about one hundred and eleven billion dollars in the year 2000. The company was also ranked at the very top by Fortune magazine as America’s most innovative company for six years in a row between the years 1996 to 2001. It therefore came as a huge surprise to the entire corporate sector when fraudulent activities were unearthed in Enron’s financial records, a phenomenon dubbed by the American media as the Enron scandal, which later led to the declaration of bankruptcy by the once global juggernaut in the energy and infrastructure sector (Bryce, 2002, p.79). The question thus arises as to what exactly led to the fall of this nice respectable company and what other large and small corporations can learn from Enron. The fall of Enron can be primarily traced back to the highest echelons of power in the organization. In the year 1990 the chief operations officer at Enron Jeffrey skilling hired Andrew Fastow, an expert when it came to burgeoning deregulated energy markets. Fastow, with the knowledge of Enron’s top management, immediately initiated a venture in which he established vast limited liability purpose entities (McLean & Peter, 2003, p.80). This single act gave Enron the ability, on a large scale, to transfer liabilities. Thus, any liabilities noted would not appear in the records of the Enron Company, ensuring that the company maintained an increasing stock price. The above information is very useful from the perspective of other companies when it comes to clearly outlining the roles of the CEO and the board of directors. Primarily the CEO, or any other person in a managerial position, should exercise the highest levels of ethical diligence. This ethical diligence includes instilling an aura of honesty in the subordinate staff and pointing out any discrepancies when they appear. This is what lacked in the case of Enron where the chief operations officer conspired with an employee to produce fraudulent company records that inflated the stock of the company above its real status. As a result, the company was viewed as this successful entity in the energy sector while in actuality it was struggling to stay above water (Lay, 2008, p.75). Had the management exercised honesty and ethical competence, other entities such as the government would have stepped in and bailed the company out in what has famously come to be known as the corporate bailouts. The board of directors also displayed an immense amount of ignorance when it came to the operations of the company. In any given corporate setting, the board of directors acts as a measure of quality, ensuring that the conduct of the people in top managerial position is in line with the objectives of the company. The board of directors should never employ a laissez-faire approach, as seemingly was the case with Enron. The general culture or rather collective employee tendencies are also of interest to other corporations in terms of the lessons that can be learnt from it. Accountants who inflated records of Enron’s assets (Fox, 2003, p.139) enabled a large chunk of the Enron scandal. Some of these assets were even noon existent and were pure fabrications aimed at making Enron look better and even richer than it was. Thus, the organizational culture that existed at Enron is a phenomenon that requires analysis. This is a multi-billion dollar corporation where apparently the entire finance and accounting department decided to conspire with the top brass management to tailor fake financial records aimed at making the company look good and attractive. The organizational culture that presents itself in this instance is one of pure dishonesty and complete disregard for ethical conduct and practices. Even the auditors who are supposed to act independently seemed to be in on the plan. It can clearly be extrapolated from Enron investigations that the fall of the company can be attributed to the organizational culture that was well inclined towards dishonesty and fraud, thus, encouraging employees to also take part in the faking of records (Lay, 2008, p.59). This exact organizational culture needs to be avoided in other corporations. For starters, there should be independence between the auditing departments, the management and the accounting department. These departments should work independently but also scrutinize each other’s operations so as to ensure greater accountability (Smith and Beresford, 1999). Companies should also incline its organizational culture towards honesty and accountability. Even the lowest ranked employees should be held accountable for their various actions in order to build an effective organizational culture (Cruver, 2002). Once an employee is found in violation of the company’s ethical code of conduct, the employee should be released from the company immediately rather than be encouraged to continue with their fraudulent dealing as was the ace with Enron. This organizational culture of ethics and accountability should stem right from the top brass management that is supposed to lead by example and pave the way for the rest of the organization to follow. Performance management is also another aspect that comes into question from the Enron case study. Normally corporations are supposed to closely monitor the performance of the staff and in essence aim to improve performance of departments that seem to be lagging behind. Corporations should shy away from a culture of covering up failure and promoting employees with a poor record of accomplishment to head the corporation. The performance of various departments of the corporation should be of utmost importance to the management. Poorly performing ventures that seemingly bring losses to the corporation should be ceased with immediate effect in favour of more auspicious opportunities for the corporation in question. Corporate citizenship and social responsibility are also aspects that can be studied in the Enron case. The absolute lack of social responsibility shown by the Enron management is just shocking. The management acted with absolutely no sense of social responsibility or corporate citizenship. These are very important aspects, which any good managerial team must have. The social responsibility is a paradigm if ethics of conduct and dictates the role of the management to the staff and the rest of society corporate citizenship mainly involves corporations working in good faith. Both of these aspects lacked in the Enron management, perhaps one of the main reasons for the fall of the company. Question 2 The Chernobyl disaster, which was one of the worst nuclear disasters in human history acts to date as a window into the role of human decision-making and behaviours when it comes to safety issues. In light of the impending nuclear disaster, Ukrainian authorities acted swiftly to contain the fire at the nuclear power station while at the same time evacuating civilians in the vicinity of the projected nuclear fallout (Smith & Clarke, 2000, p.85). In modern times, organizations can employ human resource management practices and processes to develop a more intact safety culture and maintain this culture. Using human resource management paradigms in building a safety culture in any organization is a top-down operation. This means that it has to start with the management and work its way down to the other employees. In any given corporate setting, the employees would most feel more safe and at ease if they knew that the management was concerned with their safety from a human resource management perspective. It is therefore the responsibility of the entities in leadership positions to exercise initiative aimed at ensuring a safe working environment as well as building the trust of the employees as far as their safety concerns are affected (Dessler, 2000, p.137). This simply means that the leadership has instill a sense of confidence in the staff about their safety, a fete that can only be accomplished by putting in place infrastructure and showing initiative that is aims at ensuring safety of the staff. If leadership is safety oriented, it could also lessen the response time in case of a safety related emergency (Bratton and Jeffrey 2000, p16). This is because the leadership will already have in place drill and infrastructure to deal with such emergencies, and the staff. Trusting the management to have their best interest in mind when it comes to safety, will easily rally behind the leadership and respond to the safety emergency cohesively instead of every employee choosing to act in their best interest. Safety culture cannot develop without employee involvement and engagement. This is because the response to safety related emergency strongly depends on the actions of the employees during the emergency in question. From a human resource management point of view, the employees should be well versed in the safety procedures and drills at their particular working space. This can be achieved by educating the employees on the appropriate safety related actions to take in case of an emergency. The employees should also be trained in basic first aid as this could greatly come in handy in the case where another employee is injured (Mondy, 2005, p.71). Employee response could help save the life of a fellow injured employee as opposed to relying fully on the response from the closest medical facility. Thus, an appropriate safety culture mechanism cannot be employed in any formal setting without banking on the response of the employees with reference to a safety emergency of a particular nature. Performance management is also very useful when it comes to human resource management related safety culture. This performance management is embodied by carrying out various safety related drills and evaluating the performances of the various departments during the drill vis a vis their response time and projected casualties and losses had the drill been an actual emergency. This will give the employees a clear evaluator perspective of their various weaknesses and strengths when it comes to emergency response. As a result, the employees will be well versed with the dos as well as the don’ts of an emergency scenario, and this will go a very long way in ensuring their safety at the workplace. Question 3 Intellectual property refers to creations of the mind. These creations of the mind range from ideas, musical compositions, artwork and logos. Apple is a good example of a company that is very strict as far as the acquisition of intellectual property is concerned (McLure, 2012 p.179). The following table presents information that must be presented before acquiring any intellectual property from Apple. Specific material or images for which permission is being sought Copy or text of the material owned by Apple that you wish to acquire or use Publisher of the material in question Publishing date and publishing country of the material in question Title of the material in question A description of how the property owned by Apple will be used if permission to use it is granted. This must also include information on how Apple will feature into the use of the desired material. The deadline for acquisition of the material in question The above table just goes to show how far companies like Apple are willing to go in order to protect their intellectual property. One must get writer permission from the company to use this property and it is clearly visible just how rigorous the permission acquisition process is. Intellectual property also includes all patents registered under the company thus making it illegal to use them without company permission. Reference List Bratton, J., and Jeffrey G. Human Resource Management Theory and Practice. 2nd ed. Mahwah, N.J.: Lawrence Erlbaum, 2000. Bryce, R. Pipe Dreams: Greed, Ego, and the Death of Enron. New York: Public Affairs, 2002. Cruver, B. Anatomy of Greed: The Unshredded Truth from an Enron Insider. New York: Carroll & Graf Publishers, 2002. Dessler, G. Human Resource Management. 8th ed. Upper Saddle River, NJ: Prentice Hall, 2000. Fox, L. Enron: The Rise and Fall. Hoboken, N.J.: Wiley, 2003. Lay, K. L. The Enron Story. New York: Newcomen Society of the United States, 2008. McClure, N. Apple. New York: Abrams Appleseed, 2012. McLean, B., and Peter, E. The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. New York: Portfolio, 2003. Mondy, R. W, and Robert M. N. Human Resource Management. 9th ed. Upper Saddle River, N.J.: Pearson Prentice Hall, 2005. Prebble, L. Enron. London: Methuen Drama, 2009. Smith, J. T., and Clarke, R.T. Time-dependent Behaviour of Radiocaesium: A New Method to Compare the Mobility of Weapons Test and Chenobyl Derived Fallout. 2000. Smith, J., and Beresford, N. A. Managing Chenobyls Radioactive Legacy. 1999. Read More