Organizational Behavior and the Enron Research Paper

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They were rewarded excessively for high performance and punished excessively for poor performance. The management style fostered a tremendously competitive environment among employees through a "rank or yank" policy in which all employees were evaluated every six months and categorized into three performance ranges of whom everybody in the lowest ranking was subject to termination unless performance improved satisfactorily in the subsequent evaluation period

As in the case of cults, the Enron initiation phase was followed immediately by the indoctrination and conversion phase during which employees were simultaneously rewarded with excessive luxuries and also subjected to the intense pressure to surrender their psychological independence, conform to corporate values, and also to a highly competitive work environment. More specifically, the organizational culture at Enron continually promoted the notion that all of its employees were the best and most talented in the world. Yet, they were also subjected to a punitive culture in which a "rank or yank" performance evaluation system ranked all employees twice each year into three categories, the lowest of which coincided with imminent dismissal without a dramatic performance turnaround by the next evaluation (Tourish. 2005). In addition to creating an excessively stressful environment, this management approach directly resulted in the minimization of any concern over ethical business practices. It severely discouraged any critical expression and gave employees every incentive to do whatever they could to maximize their apparent worth to the organization through the profits they generated (Olson, 2007).

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Conclusion

The 2001 Enron collapse amidst rampant ethical violations of rules and regulations governing the financial services industry illustrates the damaging effect of inappropriate leadership styles, dysfunctional organizational culture, and performance management through excessive competition, fear, and the demand for blind loyalty. By relying on the charismatic leadership of two narcissists, Enron was predisposed to problems in the area of employee morale and psychological health. By instituting a cult-like organizational culture, Enron cultivated a staff of unquestioning followers. Finally, by creating excessive reward policies simultaneous with a punitive environment that demanded performance at any cost in a vocational field in which the opportunities for unethical conduct and business practices are always a concern. Enron virtually assured its own eventual demise. To establish and sustain long-term organizational health, organizational leadership must be appropriate to the nature of the field; critical thought must be encouraged rather than discouraged or punished; and competition should be a function of natural performance elements and not artificially created and perpetuated.

Source Consulted

Bass, B. "Does the Transactional/Transformational Leadership Transcend

Organizational and Motivational Boundaries" American Psychologist (52),

(1997).

Olson, T. "Slippery slope' led to Enron, CMU, Harvard researchers find." Pittsburgh

Tribune-Review (8/29/07).

Tourish, D. "Charismatic leadership and corporate cultism at Enron: The elimination of dissent, the promotion of conformity and organizational collapse." Leadership

1(4), (2005).

Phillips, K. (2008). "Bad Money: Reckless Finance, Failed Politics, and the Global Crisis

of American Capitalism".....

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