Introduction

Strategies which were developed by the Enron business for growth had made a huge impact on the organization. The failure faced by Enron business highlights how implementing unethical and unacceptable methods used by senior management to boost profit can harm a company. The management paid attention to the business strategy but they forget to concentrate on an important factor which is human resource management. The below report will analyse the factors responsible for the business failure and what process could have been followed to control the failure.

In the report, you will read about the major challenges faced by the company. Along with the reasons behind the lack of leadership strategies, failure to examine the internal cultural practices. The company forget to add ethical values which encourage employees to work harder and give their best in the business strategy. They replaced the whole policy and making management to analyse and make changes in the long-term business goals which made the direct impact on the business activities. (Kaplan, R.S. and Norton, 2001).

During the 90s Enron was of the fastest growing business but unfortunately, it turned out to be a failure due to the lack of leadership practices and unethical strategies adopted by the management. These factors made a negative impact on the employee relationship which was necessary for the growth of a business organization. In this report, various types of challenges related to the leadership and employee relationship will be highlighted.

Enron History

Enron was the American company located in the Huston, Texas. The company was founded by the Kenneth Lay who later incorporated the organization with the Intern-North Inc. Both companies were small in size and thought about growing their business together through the partnership which turned out to be a mistake. The organizations had to suffer through huge losses before going bankrupt on December 3, 2001. The increased debt ratios and business environmental challenges faced by the management said to be the main reasons behind this business failure. To increase the business profit the company invested in different organizations without using an ethical approach.

Benefits promised to employees of the organization was not fulfilled and there was no formal method for the salary payment were followed by the organization. This further damaged the goodwill of the Enron in a long run.

Analysis of Enron Performances through Leadership Theories

There is no doubt that the success of an organization highly depends on the sales strategy, leadership skills and human resource management. Leadership skills and internal work cultures are related to each other. The policy change is drafted to handle the issues related to the norms and conditions implemented by the management (Saa-Pere et al., 2002 pp. 123-140).

In the beginning, the organization focused to improve the internal work culture to offer a reliable work environment to the staff and goals were made to fulfil this. However, the senior management changed the policy and pre-determined goals to meet the losses which incurred during the financial year. The management of the company become objective and developed a prejudice attitude toward the employees which affected the internal work culture and work performance of the staff.

Company policy changed to cope with the prevailing crisis which remodelled the whole structure of the organization. The management had started avoiding the expectations of the employees which was the main reasons behind the failure. The company didn’t take human resource management seriously which was essential during the crisis (Heffernan & Flood, 2000 pp. 128-136).

In the beginning years, the management drafted the payment structure to encourage staff to give their best but instead of following the original form, the leaders of the company solely focused on the high-performance staffs. They paid incentives to staff who performed better and nothing was done to encourage the rest employees.

This huge decision was taken by the management negatively affected the performance of the employees. The management didn’t pay attention to this issue as they were only focusing to improve the profit margin. To meet the profit margin. The organization start adopting unethical modes of investment.

Jeffrey Skilling who was a consultant that time came with the practical and transparent payment structure for the people. With better payment, management planned to encourage employees to perform well which will automatically increase the profit margin and bring more investors to the company.

Things had started taking the wrong turn after the management changed the policy to prevail the crisis. The company was accused to manipulate the stock value to represent the positive performance and influenced the earned income to overcast the original performance. Only staff who brought more sales were awarded the high-checks and nothing were done for the remaining one.

Manager and leaders didn’t follow any ethical standard which affected the overall performance of the employees. As a result, the organization failed to achieve basic goals. Jeffrey Skilling had further encouraged people to adopt the unethical process to invest and influence the sales. This path led them toward the business failure as the managed failed to fulfil the promises made to the people.

Rather than making timely payment and giving increments to the staffs the management focused on giving high stake rewards like cars, assets and other factors to those who performed better than the rest. The management thought through this, they can come up with the higher profit and prevail the incurring crisis. The strict selection pattern was followed by the company. During the entire process the management lack one important thing which is a well-introduced training program for the newcomers.

To save the cost the company hired fresh talent from the reputed universities around the world. It was necessary to provide training for newcomers to adapt and understand the roles and responsibilities of the new job. The management shifted the newcomers to another department they can fully prepare for their responsibilities. This affected their performance ability as well. Non-performing members were instantly fired by the organization without pointing out their mistakes and providing training to avoid them. This reduced the goodwill and further affected the performance of employees and their capabilities to handle new challenges (Heintzman and Marson, 2005 pp 549-575).

Leadership Influence on the Culture

In 200 Enron was a well-established and successful company. In the 20 years, the company went through ups and downs and successfully completed various projects with the strong internal work culture as a backup support. Everything was well defined from the investment plans to payment structure which helped to resolve upcoming challenges and enhance work performance (Dernovsek, 2008).

Information system played an important role in improving business performance whereas managers effectively shared the right information with the shareholders, clients and employees. The ability of the organization to handle and resolve marketing challenges has made it one of the most innovative organizations of 1999.

Just like any other organization, Enron also capitalised by adopting innovative strategies to increase the profit margin. Things start taking the wrong turn when the management start overstating the internal work culture to increase profits to cover the losses. The company should have followed a strict control system to handle the situation. But no effective control system had adopted by the managers, hence, situations got worse.

These mentioned factors made the negative impact on the profit of the organization and created a bad impression about the company in the eye of the marketers. The internal control system such as following ethical standards for the task performances, introducing the right process for increasing the team performances, and others were not concentrated by the management (Ricardo & Wade¸2001).

The above-highlighted factors increased fraud and activities which is no doubt affected the business image and performances. Investors and shareholders stopped believing whatever purposed by the representatives of the organization. The company didn’t learn from the mistakes and further pursuing unethical practices to meet the profit margin. The upper management starts neglecting the internal work culture which was previously followed by the organization.

Skilling who was consultant encouraged the management to go with the ‘rule of games’ which was based on the evaluation of the behavioural factors of the employees working within the company. Different business activities were outsourced to manipulate the internal work culture and the performances (Dasanayake and Mahakalanda, 2008 pp. 539-550).

To achieve the business success it is necessary to maintain the positive relationship among the managerial control, leadership skills and structural factors affects the ethical values. The management failed to share the right information with investors and employees which led toward the lack of trust and more complicated issues

The main objective of the risk assessment and control group to identify the major challenges faced by the management and staff of the organization and strategies to control them. However, things didn’t work well as the information was manipulated by the management to hide the losses.

The management made different investments by following the unethical practices which affected the business performance. The company has to avoid to discuss payment issues and business deals with the shareholders and clients. The managers and leaders failed to bring the essential changes in the attention of the upper management which was no doubt crucial for the business growth.

No ethical evaluation process was adopted to analyse employee performance. The best practices were introduced to increase the profit margin but none was suggested for the benefits of employees.

Changes to Done to Reduce Unethical Bbbehaviour

Unlawful and unacceptable methods for controlling the behaviour of the managers and management had to be controlled. The Organization can develop effective HRM strategies to bring the changes to the staff. The regular meeting should be held to discuss the ethical changes that need to be implemented within the organization. The company must keep an eye on the external challenges and further analyse them to come up with the appropriate measure to evaluate and improve the team performance (Ellis and Sorensen, 2007).

Timely payments, incentives and perks are the factors that influence employee performance thus, management should take it seriously. The objective should be to increase the overall production by implementing the right strategy. Unfortunately, business development strategy adopted by the Enron was unjustified and partial. The company solely focused on increasing profit rather than paying attention to the overall business growth.

Losses were hidden, profits were manipulated to bring more investors which were unethical from a business point of view and considered as fraud. The failure of the business came into the light when facts related to the services were audited. The changes made to shape the internal culture have been reanalysed to come up with corrective actions. Business standards are adopted by evaluating the ethical practices and implementing changes that were quite important for increasing the performances (Chenhall, 2005 pp. 395-422).

Recommendation

The suggested changes to conduct productive business activities are:

1. Develop and implement a business plan that will eventually enhance the internal cultural values. The right information regarding the organization should be shared with the staff, shareholders and clients on the regular basis.
2. Crucial changes for the cultural practices should be introduced and implemented as it is important to bring some changes to meet the goals.
3. Motivate the employees by making the necessary changes in the payment designs. This will help the organization to retain the staff.

Conclusion: The development of a business organization basically depends on internal work and leadership skills. The strategy is designed to analyse the marketing challenges and implement ethical changes to resolve them. Managers and the leaders play an important role in bringing changes in the organization that would be beneficial for all. They help to control unethical means that will improve the team performance.