The Toxic Impact of Ethically Lacking Leadership: The Fall of Enron Corporation

The case study of Enron Corporation's downfall can be attributed to the convergence of two models: Mintzberg's concept of managerial postures and the Competing Values Framework (CVF). The Mintzberg model highlights the organization's imbalance in its management styles, with a focus on science and art, but lacking craft. This led to a unitary managerial posture that fostered a myopic vision and toxic culture. The CVF framework shows Enron's initial balance across all four quadrants, but later instability, reflecting an imbalance in external focus, cultural orientation, and managerial styles. Additionally, the leadership theories of trait and transformational leadership reveal a lack of integrity among leaders, contributing to the organization's downfall. Ultimately, Enron's collapse can be attributed to its failure to maintain a balance between its various components, including management style, organizational culture, and leadership.

Company Overview
The rise and fall of Enron deal with the collapse of Enron Corporation resulting from the
criminal trials for various top executives of the company during their Enron Scandal depicting
the involvement of Enron traders in the crisis of California electricity.
Enron Corporation was an American commodity, energy, and Services which was based in
Houston, Texas. The company employed around 20,000 employees before bankruptcy and was
considered as the major natural gas, electricity, pulp and paper companies and communication in
the world and has revenues of $111 billion. It was termed as America's Most Innovative
Company by Fortune for around six consecutive years.
The financial conditions were seen to be sustained substantially in 20012 by the systemic,
institutionalised and creatively planned accounting fraud was terming the organization as Enron
Scandal. Since then the company is a well-known name in the cased with corruption and willful
corporate fraud. The accounting practices and related activities were brought into questions in
the whole United States. The scandal by Enron was seen to affect the greater business which
caused a dissolution in the Arthur Andersen accounting company.
During late 2001, a bankruptcy protection was filed by Enron in the Southern District of New
York and selected Manges, Gotshal and Weil as their bankruptcy counsel. During 2004, the
organization ended in bankruptcy and is considered as the most complex bankruptcy cases in
U.S. history (Gibney, A., 2005).
The paper discusses the success and failure of organizations using the three theories/ models
which are:

 Competing Values Framework
 Mintzberg management model and
 Trait and Transformational Theories of Leadership
Discussion
Various management theories related to the organization help in offering a lens by which the
organizations and managers of the organization can be viewed. These theories help in reflecting
a perspective on the management and the organization and help in mobilizing the arguments,
ideas and explanations for making sense of practice along with influencing the practices. A
framework is provided using the theories for analyzing the strengths and weakness of the
managerial system. Therefore the case of rising and fall of Enron Corporations has been
discussed by using the three management theories.
The Competing Values Framework (Goodman, E.A., Zammuto, R.F. and Gifford, B.D., 2001)
along with the management model by Mintzberg’s (1976) are highly valuable at examining the
failures and success of the organizational culture. The CVF model depicts four quadrants
namely, control, compete, create and collaborate. This model has integrated various management
models and assists the organization and their managers in order to balance the managerial
concepts like efficient activities versus innovation and change in an organization, stability, and
control versus flexibility and adaptability; respecting the employee versus setting the objectives
and goals. Both the models will emphasize on the skills required by the management. However,
the Mintzberg's model will focus entirely on the roles of managers and their need for action in
the internal and external planes and CVF focuses on integrating the competing skills and values
for developing a balanced individual approach.

Each model was applied to the Enron corporations to seek unique vintage ideas that highlight
various strengths and weaknesses. A wide range of skills for the managers was selected from the
given models like encouraging compliance, leading teams, managing oneself and others,
scheduling and leading the unit or the organization and compared with the skills of management
of Enron Corporation. The model of management by Mintzberg focuses primarily on managing
the places and position in the organization and the roles and sub-roles played by a manager. The
model is highly prescriptive, detailed and action-orientated in nature. On applying the model to
the managers and staff of Enron Corporation, it can be suggested that the managers were highly
excelled at competencies like project managing, negotiating, managing change, firefighting, and
politicking. This lead to the achievement of commendable success of the corporation in a short
span of time.
Through the Competing Values Framework, it was suggested that the managers of Enron were
not rated highly on the basis of their ability to communicate honestly and clearly as they were
seen to withheld information and data from their workers and staff thereby neglecting the
essence of communication as the true states of the organization. These skills were not even
adapted in the hour of crisis and on the eve of bankruptcy. Although the managers were good and
effective communicators when it came explaining the goals and objectives of business. In spite
of wielding their power in an effective manner while making profits, the managers and staff were
seen to lack the ability to use power ethically and ended up using their authority and power for
retaliation in the crisis time. This explains the abrupt fall of the organization even after attaining
the highest position in the market.
Both the models are seen to present convergence between the competencies explained by each
one of the models. Both the models help in offering the different perspective and explain the

success and fall of Enron Corporation and both the models explain the key weaknesses present
the management team of Enron contributing to the downfall of the company. The Mintzberg
Model helps in conceptualizing the practice of managing as a combination of science, art, and
craft. On this basis, the management of Enron is compared suggesting that the managers of the
organization adopted their managerial styles which focused primarily on the science and arts of
management along with overlapping it with craft. The managers of the company were seen to
adopt a managerial posture which connected externally, and some of the managers were reluctant
in nature. This can further be explained by saying that the leadership of Enron did not have an
equilibrium of individual approached towards their management and their top management was
further seen to have no balance in their management styles as they failed to provide perspectives,
strengths, and viewpoint to their teams.
The Same conclusion can be provided by CVF framework but with a different perspective. The
management was seen to excel in the external focuses competencies on the “create” and
“compete” quadrants of the model. By seeking the strong competitive and strong focus with the
cultural orientation towards innovation and change, it can be seen that the Enron Corporation had
adopted an adhocracy culture with a strong market presence. However, the imbalance in their
managerial styles, organizational culture and focus lead to leaning and toppling of the
organization. The managerial team of the organization was not seen to integrate the competing
values and practices and did not demonstrate behavioral complexity which would have made the
organization more effective in its operations. They had adopted a unitary managerial posture
which ended up contributing towards a myopic vision and therefore fostered a culture which was
initially successful and ended up becoming highly toxic.

The organization initiated with a balance of all four quadrants of the organization but later
became unstable. Whereas the Mintzberg highlighted the managerial posture for the managers
and their team. The organization, therefore, lacked a correct balance of managerial postures with
crafts, arts, and science.
On evaluating the case study with the Trait and Transformational Theories of Leadership, it can
be seen that the organization lacked the vital key trait of integrity which impacted the
organization in the worst way possible. Enron managers and especially the executive leaders
were seen not to exhibit the trait of integrity within their organizational culture. For example,
Jeffery Skilling was highly intelligent, confident and determined. He had an ability to provide a
clear vision to the organization. His leadership style can be portrayed and exemplified especially
in the scenario of maximization of the share value and profits of Enron. The maximization of
profits was taken aggressively in the case of the leadership style of Skillings to such an extent it
did not take into account the trait of integrity seriously. This lack of integrity in the
organizational structure of Enron projected a serious issue for the company and the group
members and leaders like Andrew Fastow started to encounter the circumstances which required
them to have an honest disclosure of the financial reports and information. Only a very few
number of the staff members were given the external motivation from their leader Skilling and
told the truth regarding the real financial situation of Enron. Those selected people who lacked
enough integrity to speak about the matter and reveal the truth concerning the financial losses of
Enron were fired, dismissed and demoted. This lack of integrity from the leaders of the
organization resulted in fostering a “me-first” attitudes along the ranks of management of Enron.
Regarding the transformational leadership model, it can be seen that the leaders like Rebecca
Mark, Jeffery Skilling, and Kenneth Lay were exceptional transformational leaders at the

organization. Their leadership helped the organization to achieve unprecedented heights and
inculcated the cultural values like creativity, innovation, and risk-taking in their workforce at
Enron Corporation. This helped the organization to hail titles like “American’s Most Innovative
Company,” “The #1 CEO in the USA” and “No.1 in Quality of Management,” and Skilling was
presented as “The #1 CEO in the USA”. Their short-term personal behavior provided immense
success to the organization but had toxic long-term health effects on the company.
From the leadership theories, it can be seen that the hierarchy of leadership did not abide to the
moral standard and focused only on making money. Therefore Enron eventually emerged out as
the moral-less transformational leadership which can be viewed as an asset initially and
weakness in the future driving the organization to attain its highest financial heights and
emerging in the deepest valley. The absence of the moral form of transformational leadership
became a double edged sword which leads to cutting off the leaders of the organization from the
financial reality surrounding them. Therefore, the coupling of lack of integrity with this
leadership led to the feeding of narcissism culture which eventually permeated throughout their
organization.

References
 Gibney, A., Alberti, M., Coyote, P., Cuban, M., Davis, G., Ellwood, A., Fastow, A.S.,
Hauser, M., Kliot, J., Lay, K.L. and Lerach, W.S., 2005. Enron: The smartest guys in the
room. Magnolia Home Entertainment (Firm).
 Goodman, E.A., Zammuto, R.F. and Gifford, B.D., 2001. The competing values
framework: Understanding the impact of organizational culture on the quality of work
life. Organization Development Journal, 19(3), p.58.
 Mintzberg, H., Raisinghani, D. and Theoret, A., 1976. The structure of" unstructured"
decision processes. Administrative science quarterly, pp.246-275.