After going through the case study of the organization – Enron, it has been understood that one of the chief reasons for the organization’s bankruptcy is the inappropriate management style and unethical persuasion of the authority. Apparently, it may looks as if the organization has faced the unfortunate consequence of bankruptcy due to false earnings and the collateral collapse of the stock market. However, a closer look at the case study has pointed out that the financial failure is a mere reflection of the organization’s malfunctioning management. More precisely, the organization’s management and higher authority should be blamed for the devastating consequence. It is required to note down here that the management of the organization as well as the higher authority has repeatedly pursued unethical behavior and terminated all those who have shown objection against such persuasion.
Understandably, for a long time, the organization has been suffering from a mal-functioning organization culture, which has been highly manipulated by the unethical management practices. The case study is indicative of the fact that the organization has treated employees as a weapon for accomplishing the unethical financial greed. In that way, the organization does not only lose talented and honest employees but also have ended up with a devastating result.
It has been understood that the organization has compromised on its customer service also for a long time the organization used to transfer energy out of the territory of California for creating black outs and subsequently raising the fare of electricity. Therefore, it can be said that the organization does not only deprived its talented and honest employees but also have deprived its customers. The financial failure of the organization is due to the reluctant attitude of the board of directors who ignored the dubious transactions and has failed to design moral and appropriate organizational aims and priorities. The following paper will focus on the aforementioned situation of Enron and will discuss the situation from the point of view of varied leadership theories, and thereafter will recommend fruitful suggestions.
Analysis and problem diagnosis (Q.1)
From the above-discussed comprehension, it has been understood that the considered organization has suffered from unethical and reluctant leadership. It has been also identified that the leadership has been autocratic several times. In the contemporary era of business where business market has become an aspect of fluctuation, business organizations are supposed to follow the contingency theory as theory says that there is no better way to organize an organization but to operate it according to the internal and external situation (Avolio & Yammarino, 2013). The situation of Enron is indicative of the fact that neither the managers have considered the internal situation nor they have taken concern about the external situation. However, the consequences of Enron is mainly indicative of the fact that the organization never consider pursuing transformational and transactional leadership styles. According to the transformational leadership, motivation from the peers or from the leaders is essential for making employees dedicated and productive to an impressive level (Dansereau et al., 2013).
On the other hand, according to the transactional leadership style, managers should use reward or punishment for controlling the behavior of the employees (Foti et al., 2014). The case of Enron is indicative of the fact that the organization may have used the transactional leadership theory though in a negative way. It is because; the case study has indicated that the organization has given priority to those employees, who had not shown objections against the unethical approach and had encouraged them to behave unethically by promotion and other benefits. On the opposite side, in terms of punishment, the organization has terminated those who had shown objection against the activities. Most significantly, the case study is indicative of the fact that an autocratic view had been pursued by most of the leaders, as they had not considered listening to the words of those employees who had tried to point out that the organization was going in a wrong way. According to the trait theory of leadership, those should be chosen as leaders who possess appropriate qualities of a leader (Jansen, 2015). The consequence of Enron is indicative of the fact that the organization has not chosen appropriate leaders who possessed ethical and dedicated attributes for the organization. Moreover, the case of Enron can be justified by the Behavioral theory of leadership. The behavioral leadership does not consider the in-born traits of a leader but believes that leaders can be made as the capabilities of leadership can be made (Latham, 2014). The consequence of the organization is indicative of the fact that instead of facing continuous financial issues, the organization did not consider modifying the behaviors of the leaders.
Therefore, it can be said that the organization’s consequence is a result of the organization’s incapability of employing a proper leadership style.
Theory and practice (Q.2)
In this context, it is essential to evaluate the relationship between leadership and organizational culture as well as will to identify in what ways leadership influences organizational culture. The case study is indicative of two significant facts, one is, the organization had pursued an unethical corporate culture and the second one is the organization’s management or leadership style had highly influenced the organizational culture and helped to continue its immoral approach. Prior to understand the relationship between the leadership and corporate culture and the influence of leadership on organizational culture, it is essential to mention that organizational culture refers to a set of prevalent values, attitudes as well as organizational beliefs. Organization culture or the set of prevalent values characterize an organization’s aim and approach to the external and internal stakeholders (Levine, 2005). In other words, organization culture can be considered as a set of norms or rules that shapes organizational behavior and guide its practices (Lussier & Achua, 2015).
On the other hand, the aspect of leadership is considered to have the responsibility to fruitfully accomplish individual organizational culture. According to Nahavandi (2016), organizational culture and corporate leadership are interrelated aspects and the difference in leadership pattern is determined by the observation of organizational culture by the subordinates. It should be considered that success of an organization’s culture is determined by organizational performance. Organizational performance on the other hand is dependent upon organizational management and leadership. As per Odumeru and Ogbonna (2013), organizational performance strongly depends upon the values and norms set by organizational culture that is required to be shared among the internal stakeholders. However, it should be kept in mind that leadership and management are parts of an organizational culture, which support the corporate culture to meet organizational objectives by enhancing the organizational performance (Prakash et al., 2015).
Nevertheless, as per Schyns and Riggio (2016), leadership approaches influence organizational culture in five major ways, which are model behaviors, communicating organizational mission, setting expectation, reinforcing a culture of accountability and constructing appropriate teams. In order to employ appropriate employee behavior, which is essential for organizational production, it is necessary to set a role model in front of the employees (Shanafel et al., 2015). The ideal behavior of the team leaders works as a fair example for the employees, which inspires them to work in a proper way and accomplish organizational goal. Therefore, it should be contemplated that leadership behavior determines organizational goal, which is the ultimate goal of an organization’s culture (Tourish & Vatcha, 2005). On the other hand, for obtaining expected performance outcome from the employees, it is essential at the very first to communicate all the organizational objectives and long term vision to the employees. The management of an organization or the leaders is responsible for communicating the mission, vision and objective of an organization (Van Wart, 2013).
At the same time, without an appropriate leadership, it is not possible to improvise the performance of the employees according to organizational expectation. According to Zandstra (2002), a leader can increase productivity of the subordinates by the setting examples and through a persuasive behavior. If the leaders would not show a proper sense of accountability, a culture of accountability is not possible to reinforce. Reinforcement of a culture of accountability is an essential part of an organizational culture and it is required to be implemented at the time of employing candidates for the first time. Employees should stay transparent about detail of their job description along with key responsibilities according to their organization’s objectives. Without a responsible leadership, it is not possible to establish attainable and appropriate measures for the employees (Van Wart, 2013). An organization’s culture, which is designed so that the organization can systematically and ethically meets its goal, is therefore dependent upon employee behaviors and their productivity, which on the other hand is determined by leadership. Hence, it can be said that leadership shapes culture and so does organizational culture does on leadership.
From the considered situation of Enron, it can be assumed that from the very first, Enron lacked an ethical and appropriate corporate culture and due to that, the leaders got the opportunity to continue with their unethical and autocratic leadership. Further, with the continuation of the unethical and reluctant leadership, the corporate culture of Enron, which has been already weak and flawed degraded and finally result in disaster. Here it should be kept in mind that it is not easy to shift a culture easily if an organization’s leadership would not accept the change. If the leadership would have acted in an ethical and systematic way, the organization’s objective could have met in a proper way and so the authority could possibly avoid the bankruptcy (Nahavandi 2016). Therefore, it is proved that the leadership does have a strong influence on organizational culture.
The above discourse about the relationship between leadership and organizational culture and the situation of Enron from the point of view of varied leadership theories have indicated the fact that Enron’s financial mishap and their subsequent fall is due to ill-maintained corporate culture and unethical leadership. The organization repeatedly deprived the employees as well as their customers and it has been understood that the organization has pursued an autocratic management also that lacked proper judgment and observation.
If an organization is having a same situation like the Enron, it can be therefore suggested that to reduce unethical leadership approach, it would be essential first to modify the organizational culture. Reinforcement of the consequences would be a convenient measure for reducing the unethical approaches of an organization. According to Levine (2005), the best medicine to end unethical behaviors is prompt actions from the higher authority. It means if employees as well as the management would try to pursue unethical and unjustified activities, they should be penalized with strong punishments.
However, it should be considered here that prior to penalize unethical activities, it would essential to form a separate team whose responsibility would be monitor and make report about the actions of the workers in an organization. In order to build a team as such, an organization needs honest and dedicated employees (Latham, 2014). The case of Enron is evident of the fact that the management, which is responsible for managing behaviors of the subordinates, was dishonest, manipulative and immoral. Therefore, at the very first an organization requires recruiting experienced and honest candidates with the help of a thorough background check. In order to do that every organization should contact with the organizations, where the candidate has previously worked and should compulsorily conduct a personality test on the candidate.
Most importantly, if an organization is facing unethical behavior in the workplace and realizing that the management is to be blamed for that, the organization should immediately change the managerial individuals and should start showing appreciation to the loyal employees. Moreover, the board of directors should not show reluctance to any organizational matter and must take actions against any unjustifiable act. In case of Enron, if the board of directors would have acted in a more responsible way, the honest employees of Enron would not have been terminated. Moreover, for maintaining an ethical organizational culture, it is necessary to employ transformational and transactional leadership, which are significant for motivating employees and increasing their productivity. Performance appraisals, ideal model of leadership and a responsible board of directors should be integrated in the culture of a business organization for preventing unethical approaches. Moreover, a fraud report policy should be formed through which the board of directors could prepare themselves in taking actions against the blamed individuals prior any major accident takes place.
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