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Examine Biz Failure

The document examines the business failure of Enron Corporation. Enron was initially successful but its top management decided to use accounting loopholes and hide failed deals to continually attract investors. This ultimately led to Enron declaring bankruptcy in 2001 and shareholders losing $11 billion. An analysis of Enron's organizational behavior found deficiencies in leadership, goal setting practices, transparency, and employee motivation which contributed to the company's demise.

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43 views

Examine Biz Failure

The document examines the business failure of Enron Corporation. Enron was initially successful but its top management decided to use accounting loopholes and hide failed deals to continually attract investors. This ultimately led to Enron declaring bankruptcy in 2001 and shareholders losing $11 billion. An analysis of Enron's organizational behavior found deficiencies in leadership, goal setting practices, transparency, and employee motivation which contributed to the company's demise.

Uploaded by

sabbysmail01
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Examining Running head: EXAMINING

Examining a Business Failure Name University

Examining Examining a Business Failure Enron Corporation, an American energy company, was founded in 1985. The company which was based in Houston, Texas was basically an offspring of the merging between

Houston Natural Gas and InterNorth. Enron became successful in selling electricity at affordable market prices. It soared to greater heights in 1992 when the U.S. Congress passed the bill that deregulated the sales of natural gas. Enron went on to become the largest seller of natural gas in North America. However, the company met its end in less than a decade. Apparently, the top management team thought that the company's income averaging $122 million per year was not enough. They wanted more so they resolved to the use of accounting loopholes and special purpose entities to cover some of the revenues, making these non-declared and non-taxable. There was also evidence of poor financial reporting to hide the failed deals and projects as well as the tremendous debts from investors. To cut a long story short, Enron's executives tricked its Board of Directors, Audit Committee and other investors. All shareholders lost almost $11 billion, pulling the company towards bankruptcy on October 2001. A close look at the events leading to Enron's failure reveals glitches on the company's organizational behavior. The term organizational behavior refers to the study used to investigate individuals, structure and groups and the behavior that they imply within the organization. The purpose of the study is to apply different knowledge for the improvement of the organization and to know the effectiveness of such applications. Organizational behavior is simply the attitude of people toward their work and in the organization. Technically, the top management team behind Enron has played against the goal setting theory of organizational behavior. Although the company did set certain goals, the means and

Examining media that they used in order to achieve these goals are not acceptable. It is highly important for any organization to meet goals particularly in terms of revenues and profits. Perhaps one of the reasons why Enron decided to make erratic financial reports is because they do not want to disclose that they have failed projects and deals to continue attracting investors to invest in the company. This, in turn, can help them meet their goals. In terms of leadership and management, Enron also had its share of inefficient leaders and managers. For one, these the very people responsible for the fall of the company. A good leader or manager will never tolerate any anomaly or wrongdoing especially if it involves the

overall status of the company. However, Enron's leaders were the ones who hired and developed a staff that can help them utilize the accounting loopholes so they can cover the company debts and liabilities. Rather than find ways on how to counteract the impending negative effects of these liabilities, Enron's leaders cultivated the wrong attitude and processes to rake in more investments. Although the company appeared to have a commendable organizational structure, its members or employees do not exhibit the right organizational behavior. For one, most of the employees and managers seem to work for their own interest and advantage rather than work as a single unit to achieve the mission and goals of the company. If they have worked hard and efficient enough then they could have saved the company from bankruptcy and make it fully functional. The transparency among the members of the organization was not good. Although it was not discussed in any of the articles that featured the company, it seems that Enron also lacked the mechanism to motivate its employees to work more efficiently.

Examining Bibliographies Healy, P. (2003). The fall of Enron. Journal of Economic Perspectives 17(2); 3. Mack, T. (2002). The other Enron story. Forbes Magazine. Retrieved March 31, 2011, from the Forbes Magazine database. Rosen, R. (2003). Risk management and corporate governance: the case of Enron. Connecticut Law Review 35(1157); 1170.

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