BUSINESS ETHICS AND ORGANIZATIONAL CULTURE

Organizational culture

Organizational culture is the customs and traditions of an organization. This can best be demonstrated by an example. According to Madsen & Vance, (2009, pg 217),”Willis Straus had been the man in charge of InterNorth Corporation for years and was much-loved by everyone. InterNorth had constructed a dining room on the highest point of the InerNorth structure. Any worker had the liberty to take meals there regardless of his/her status or rank in the organization.’ This is an example of organizational culture.

Enron’s Business ethics and operations

Enron Company was started in 1985 with when InterNorth conglomerate and Houston Natural Gas formed a union. Before Skilling was made the Chief Executive of Enron, Richard Kinder was the man in charge. It is imperative to posit that Richard Kinder could hold a convention every Monday at first light. He used this opportunity to question and cross examines managers from every division in regard to their tactical preparations and arrangements. He insisted on performance and obedience from the workers. Al this changed as soon as Jeff Skilling took over. Jeff Skilling introduced a type of positioning workers according to their performance. Consequently, poor performers were laid off. This kind of behavior brought with it an aggressive and spirited contests and rivalry among workers. As a result workers lacked a sense of responsibility and accountability (Free, Macintosh, & Stein, 2007).

Management control systems were withdrawn and hence faded away immediately key managers and directors such as Jeff Skilling took over as the Chief Executive Officers. These players implemented plans of action that enabled them to have power over relatively the entire façade of the group, for instance the accounting modus operandi of the organization. These were structured in a way that manipulated accounts with an aim of impressing the market analyst. According to Free, Macintosh & Stein, (2007, pg 7), “Supervision of pay, salaries, and wages was achieved mainly by means of unique rationale entities, accounting ‘funds for contingencies’ and mark-to-market accounting, which recorded profits from long-term deals immediately and, gave weight to quick-fix domino effect.’ This structure of leadership put huge strain on brokers and agents for immediate but temporary gains.

According to Free, Macintosh, & Stein (2007), these executives also gave exaggerated incentives and ranks to his executives. During their tenure, reparation arrangements were aimed at enriching senior managers and directors. They made it possible for managers and directors of the organization to easily access shares in the organization if they enabled the organizational revenue and the price of shares to rise adequately in return. Brokers and agents in Enron were also given huge pays, as well as other additional benefits when they brought in high profits for the organization. These executives ensured premeditated paradigms and training that put out inflated claims to the workers. They also employed smart employees who they believed could become callous and merciless brokers and agents. This provided a lee way for the plummeting of Enron from a top energy company in the universe to the most horrible.

Roles and responsibility of company leadership

The tasks and duties of company executives are to ensure better investors’ empowerment and form a panel of trustees. They job would also entail dispensing financial credit reporting regulations and setting up policies, decrease or lessen external parameters and bylaws of office performances and calling for assessors to arbitrate on the matters revealed. The threat evaluation and management faction of Enron was an important division or branch that was mandated with the authority of endorsing all business transactions and treaties. They were also in charge of controlling organizational threats in general. However, all business transactions needed consent and endorsement from the panel of managers. The Board of Directors could also have been drawn into ensuring those workers’ achievements and accomplishments are parallel with the tactical goals of the organization. It is important for organizations to have good leadership especially from the Board of Directors. Management and control in organizations is significant to ensure the formation and preservation of customs and traditions in an organization (Free, Macintosh, & Stein, 2007).

During Skilling’s term as CEO, various techniques were employed to redesign organizational culture. The adopted culture failed to take action on endeavors undertaken by the executives to disobey organizational regulations and statutes. This was done through rebellion and sedition of administrative bodies in the organization. For instance, during Skilling’s tenure, there surfaced mores inside Enron that adopted and tolerated nonstandard performance and activities. This provided an avenue in which employees could dodge punishment when they went against authorized and moral standards of the organization. Opposition to appalling reports and intelligence formed significant strain on distribution of these reports inside and outside the group. Ferocious rivalry and antagonism within the organization resulted to concealment of information, treachery, and widespread attempts to encourage and boost instant but temporary performance (Free, Macintosh, & Stein, 2007).

Role of HRM

The HR in Enron played a part in setting the ethical range and scope in Enron from as early as the 1980s. Initially, the Human Resource executives in this organization employed individuals from mid-level institutions. This changed in the 1990s where the company started employing graduates from advanced institutions of higher learning. In 1980s, the company laid a lot of significance on trustworthiness, devotion, as well as practical and methodological capabilities of new employees joining the organization. This changed dramatically in the 1990s where workers who brought in huge profits to the company were valued more than others. Executives in Enron started gauging workers’ performance by evaluating them against each other, rather than through ethics and ideology. The amount of extent of incentives and compensation also became limitless. This enabled traders to make huge sums of money and then leave the organization (Madsen & Vance, 2009).

According to Meisinger (2013), it is not appropriate for Human Resource boss to assume that many workers in institutions observe officially permitted and moral regulations within and outside the workplace. Many workers at Enron failed to observe the set standards of the organization. It is therefore the responsibility of the Human Resource managers to support and persuade workers to report any incidences that goes against organizational legal and ethical standards. A study done in the past by the Ethics Resource Center elucidated the fact that practically half of US workers have seen immoral or unlawful behavior inside the workplace and approximately sixty five percent of them reported these incidents to their seniors. Enron employees lacked a sense of protection and commitment to their organization hence failed to report unruly behaviors for fear of victimization. This is posited by Free, Macintosh, & Stein, (2007, pg 8), “Promotions and reassignment of workers was done hurriedly, devoid of giving workers a chance to study trade information and facts. Workers performing poorly were hastily sent off to other places within the organization and soon after laid off.”

Enron’s is an example of how company’s management and traditions can influence its moral principles in trade. The demise of Enron clearly shows that when workers adopt and support a specific business customs and traditions, and devote grave dedication and loyalty in managerial practices as well as the astuteness and intelligence of their managers; then they are likely to drop or do away with their novel sense of individuality and character. They are also prone to putting up with and decrease moral drifts they would otherwise condemn or criticize. It is obvious that a sarcastic arrangement makes workers susceptible to exploitation by institutional administrators they have commended their safety, welfare, and safety. Enron downfall also makes it possible for individuals to identify various threats linked or connected to deteriorated customs and traditions. These include customs that results from encouraging and compensating ingenious and consumerist transactions that offer motivations hence additional threats (Free, Macintosh, & Stein, 2007). These in return lead to illegitimate and disreputable behaviors.

Conclusion

Organizational culture is the customs and traditions of an organization. Management control systems were introverted and hence faded away immediately key executive players such as Jeff Skilling took over Enron. These players employed plans of action that permitted them to have influence and command over more or less the whole institution, particularly the accounting modus operandi of the organization. Compensation arrangements were structured in a way that aimed at enriching senior managers and directors at Enron. Traders in the organization were also given huge pays, as well as other supplementary reimbursement when they brought in high proceeds for the organization. The fall of Enron evidently illustrates that when employees agree to and maintain precise business customs and traditions, and dedicate the necessary enthusiasm and allegiance in supervisory performances as well as the shrewdness and intellect of their executives; then they are likely to drop or do away with their novel sense of individuality and character (Free, Macintosh, & Stein, 2007).

References

Free, C., Macintosh, N., & Stein, M. (2007). Management Controls: The Organizational Fraud Triangle of Leadership, Culture and Control in Enron. Ivey Business Journal Online. Retrieved from ProQuest.

Madsen, S. & Vance, C. (2009). Unlearned lessons from the past: an insider’s view of Enron’s downfall. Corporate Governance, 9(2), 216-227.

Retrieved from ProQuest.

Meisinger, S. R. (2012). Examining Organizationa ethics, Human Resource Executive Online (June, 2012). Retrieved on Novemeber 19, 2012 from:

http://www.hreonline.com/HRE/story.jsp?storyId=533348507