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ORGANISATIONAL BEHAVIOUR

TUTORIAL TASK 2

TOPIC:
MOTIVATION

Read the attached case and answer the questions at the end of the case
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LOOKING BACK AT ENRON

In December 2001 global energy giant Enron Corporation collapsed, declaring itself
bankrupt. The collapse shocked the business world, since Enron had been hailed as a
highly successful beneficiary of the deregulation of energy markets and the expansion
of the free market economy. The results of Enron’s demise were catastrophic. Over
6,000 Enron employees lost their jobs. More than $60 billion in shareholder value
was destroyed, much of it held by US pension funds, affecting the retirement security
of practically every American worker.
Enron Corporation was formed in 1985, when Houston Natural Gas merged
with InterNorth, as a US interstate natural gas pipeline company. It began to trade
natural gas commodities in 1989. By 2000, 95% of its revenues and more than 80%
of its operating profits came from “wholesale energy operations and services”. Enron
often described this new business, which it pioneered, in grandiose terms such as the
“financialisation of energy”. More simply, the company switched from the business
of energy hardware – pipelines – to buying and selling gas and electricity. From this
base, it moved into trading products such as broadband capacity and metals.
After establishing its base in North America, Enron rapidly expanded into
Europe, Africa and Asia. Enron’s international strategy was largely developed by
Rebecca Mark, a protegée of the company’s Chief Executive Officer Jeffrey Skilling.
She was listed by Fortune magazine as one of the 50 Most Powerful Women in 1998
and 1999. In 1998 Rebecca Mark took over as head of Azurix, a new subsidiary set
up to replicate Enron’s success in the energy market in the water business. Azurix did
not enjoy unalloyed success. Corruption was suspected when, in 2000, the World
bank cancelled a $100 million loan to finance part of a $285 million water project in
Ghana. After the loan was cancelled, Enron pulled out of the deal. Enron also made
an expensive investment to gain a water distribution contract in Argentina, where it
was ultimately accused of supplying dirty water to some customers. This investment
was written off just a year later. The construction of Enron’s Dabhol power plant in
India resulted in long-running disputes between the company, and local and national
Indian governments. An Amnesty International report outlined brutal treatment by
Enron employees of protesting villagers near the Dabhol site.
Enron appeared to have fallen foul of the political sensitivities of its
businesses around the world. Nevertheless, Enron’s business strategy was publicly
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acclaimed, in that for six years running the company was voted Most Innovative
among Fortune magazine’s Most Admired Companies. Business expert Gary Hamel
applauded the organisation’s capacity for inventiveness, which he said had
“institutionalised a capacity for perpetual innovation…where thousands of people see
themselves as potential revolutionaries…where new voices have the chance to be
heard”. Fortune magazine even likened Enron’s emergence to the arrival of Elvis
Presley on the 1950s music scene.
Chairman Kenneth Lay and CEO Jeffrey Skilling portrayed themselves as
revolutionaries who not only applied a new strategic model to the global energy
business but also encouraged a radically entrepreneurial culture to prevail within
Enron. The company was dominated by young graduates of top US business schools
who were given the freedom and opportunities to start new business units. (Many of
these in fact failed.) In this sense, Enron’s culture mimicked that of the marketplace,
in that speed of operation, innovation and cut-throat competition predominated.
Recruits talked about a socialisation process called “Enronising”; those who did not
fit in were described as “damaged goods” or “shipwrecks” and likely to be fired at
annual job reviews known as “rank-and-yank sessions”. Jeffrey Skilling took his
favourite employees, known as “The Mighty Man Force” away on macho adventure
trips, including a 1,000-mile bike tour across Mexico. The ultimate Enron status
symbol was one of the company’s half a dozen car parking spaces monitored by
security cameras.
Not surprisingly, the Enron culture had its downsides. The extreme
competition which was encouraged made employees unscrupulous towards and
suspicious of their colleagues. Enron traders were allegedly too scared to go to the
lavatory in case a co-worker used information off their computer screen to trade
against them. The company’s ruthlessness endorsed a system of forced rankings for
employees. Yet annual reviews aimed at weeding out the least “productive” five to
ten per cent of the workforce damaged employee morale, especially that of longer-
term employees. The ruthlessness of the company culture also created a fear of
failure, which, together with the focus on innovation at all costs, suppressed criticism
of ill-advised new ventures. The myth was created that Enron thrived on risk-taking
and could never make any mistakes.
Most importantly, the Enron culture bred an arrogance that gave licence to
improper and illegal management behaviours. Enron described itself as “the world’s
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leading company”. It encouraged the belief that older, more conventional competitors
had no chance against its modern, iconoclastic organisation. CEO Jeffrey Skilling
notably told a conference of executives from rival energy firms that he was going to
“eat their lunch”. This led to a conviction that Enron could handle increasingly
dangerous risks with impunity. This arrogance was accompanied by personal and
corporate greed, which led to the inflation of the value of contracts being handled,
since this was what determined executive compensation.
A report drawn up by a special committee of the Enron Corporation after the
company’s collapse concluded that executives had intentionally manipulated the
company’s profits within a culture of self-dealing and self-enrichment at the expense
of the company’s shareholders. The report was also harshly critical of Enron’s
accountants Arthur Andersen, who had condoned many of the dubious accounting
practices in which the company had indulged. It stated that the transactions which
resulted in the collapse of the company were caused by “a flawed idea, self-
enrichment by employees, inadequately designed controls, poor implementation,
inattentive oversight, simple (and not so simple) accounting mistakes, and over-
reaching in a culture that appears to have encouraged pushing the limits”.

Task:
Please write down your answers to the following questions in a separate
document and submit it on KEATS before your Week 4 tutorial. Also, bring
your answers to the session so you can discuss your responses with your course
mates.

Questions:
1. Using two content and two process theories of motivation, how would each
describe the motivation of a typical Enron employee?

2. What are some of ways in which the ethical behaviour of employees can be
encouraged within organisations?