Pressure-Cooker Culture Leads to Enron’s Demise
Would employees knowingly do wrong for their employer? “At Enron, losers fell by
the wayside but victors stayed in the game,” wrote two Washington Postreporters.^34 The
“winner-take-all” culture demanded that employees do whatever they could to make
Enron’s stock price continually rise. Executives thus took risks with investments and
accounting procedures, inflating revenues and hiding debts. Those who could not (or
would not) play this game were forced out. As the company’s annual report stated,
“We insist on results.”
“The driver was this unbelievable desire to keep portraying Enron as something very,
very different and keep the track record going and going,” said Forrest Hoglund, a for-
mer senior manager.
Enron’s culture set up an in-crowd and an out-crowd, and employees knew whether
they were “in” or “out.” Everyone wanted to be liked in the organization, according
to Sally Ison, another employee. “You do everything you can do to keep that.”
Employees were even willing to blatantly acknowledge they were doing wrong
among themselves, according to Margaret Ceconi, a former Enron Energy Services
(EES) manager, who was only briefly employed by Enron. After she was laid off, she
wrote a memo to Kenneth Lay, former chair of Enron, and phoned federal regulators
twice. In her memo to Lay she said, “EES has knowingly misrepresented EES’ earnings,”
and, she added, “This is common knowledge among all the EES employees, and is
actually joked about... [Enron] must investigate all these goings-on.”Enron’s culture led its employees to engage in various unethical accounting practices.
Consistent with what happened at Enron, recent research suggests that cultures that
strongly emphasize competition can lead to negative organizational consequences.^35
We now consider culture’s impact on change, diversity, and mergers and
acquisitions.Culture as a Barrier to Change
Culture is a liability when the shared values do not agree with those that will further the orga-
nization’s effectiveness. Employees are less likely to have shared values when the organi-
zation’s environment is dynamic. When the environment is undergoing rapid change, the
organization’s entrenched culture may no longer be appropriate. Consistency of behaviour
is an asset to an organization when it faces a stable environment. However, it may burden
the organization and make it difficult to respond to changes in the environment. For many
organizations with strong cultures, practices that led to previous successes can lead to failure
when those practices no longer match up well with environmental needs.^36 When employ-
ees at the Royal Canadian Mint failed to act rapidly to create a commemorative coin for
Canadian golfer Mike Weir, then president and CEO David Dingwall felt this underscored
the Mint’s reluctance to respond to a competitive environment. Consistent with this, research
shows that overly friendly cultures may prevent managers from making important strategic
decisions for fear of harming relationships.^37 This chapter’s Point/Counterpointon page 360
further explores the question of whether a culture can change.Culture as a Barrier to Diversity
Hiring new employees who, because of race, gender, disability, or other differences, are
not like the majority of the organization’s members creates a paradox.^38 Management344 Part 4Sharing the Organizational Vision
FOCUS ON ETHICS