Enron's Corporate Culture: Doomed for Failure

Organizational culture can be defined as the system of attitudes, beliefs and values that are collectively expressed in support of organizational structure. Organizational culture is a pattern of shared basic assumptions that dictate the behavior of individuals within an organization. Culture determines which practices are appropriate and which are not, effectively developing standards, guidelines, and expectations for individuals within an organization. Although they work hand in hand, there is a definite distinction in the beliefs and the values that make up organizational culture. The beliefs of an organization are assumptions of the way things are, while values are an assumption about the way things should be. By that definition, beliefs constitute the day-to-day actions of a company (how things are run and why they are run that way), while values project those beliefs on future considerations (what is important to the organization and how those things should be maintained).

Status distinctions, ideologies, language, symbols, rituals and myths are all byproducts of the development of organizational culture. All of these things can then be effectively used as agents to reinforce culture within the framework of that organization. Pettigrew describes culture as “the source of a family of concepts” in which the offspring of the concept of culture are symbol, language, ideology, ritual, and myth. In examining these agents of cultural reinforcement, it becomes possible that all of the “offspring” are symbols in their own right, representing the beliefs and values of the company in their own form of expression. For example, the language or vocabulary that is created exclusively within the context of inter-organizational relationships is symbolic because it represents the values of the organization. Rituals, or prescribed activities that reinforce the culture of an organization are a form of symbolism as well, representing the individual commitment to culture within an organization. Symbols are “objects, acts, relationships that stand ambiguously for a multiplicity of meanings, evoke emotion, and impel men to action.” Symbols by this definition are integral to the effectiveness of culture within an organization. The process of developing symbols is intrinsically cohesive and creates solidarity within an organization. Once developed, it is important to note that symbols (including language, rituals, myths, etc.) are able to motivate individuals into action. Once individuals internalize culture, or synergize the organization’s values and beliefs with their own personal values and beliefs, the power of culture to impel action is born. This can be a powerful tool of an organization to increase an individual’s motivation and to increase efficiency in the workplace.

Organizational culture is typically constructed with a variety of influences, both external and internal to the organization. External factors that affect organizational culture include historical events, national culture, and the type of work that an organization specializes in. As organizations are functional parts of society as a whole, organizational cultures are generally reluctant to break social norms dictated by the course of history or national culture. National culture and norms developed by history reflect societal values and typically give a foundation of norms in which organizations are to abide by. The type of work an organization specializes in is also important in developing culture. The type of work dictates the most basic distinctions in organizational culture (i.e. the culture of a resort hotel is very different from the culture of a maximum security prison) and also can have more complicated implications (i.e. the oil industry may be more competitive than the office supply industry, therefore cultures of organizations in these industries may differ). Culture in specific organizations, while affected by external factors, is often uniquely developed internally вЂ" through leadership and management. Senior management of organizations often tries to dictate organizational culture reflecting the objectives and goals of the organization. The vision of leadership within a company is integral in developing culture. Pettigrew describes visions as “not merely the stated purposes of an organization…but they also are and represent the system of beliefs and language which give the organization texture and coherence.” The leadership role dictates the vision of an organization. Through the consciousness of a coherent vision, an organization defines its role in its surroundings, its beliefs and values, and subsequently develops its culture.

Organizational culture can be defined by a system of dimensions based on measurable tendencies of organizations. The most prominent dimensions include the level of individualism versus a teamwork or hierarchal system, time orientation (long-term goals versus short-term goals), and approach to the environment (dominance vs. cooperation in an industry). An organization’s alignment with these dimensions specifically defines culture and dictates the direction in which an organization is moving.

Organizational culture is key in the success or failure of organizations, as is evident in contemporary society. Although organizations differ in strength of culture and those with strong, positive cultures tend to be the most efficient and productive, strong cultures can also become negative and powerfully influence an organization in a negative way. Such is the case with the Enron Corporation, a once massive energy company that suffered arguably the most horrific financial collapse in American history. The Enron failure began with the development of a flawed corporate (organizational) culture, and was fulfilled by the constant reinforcement of that culture. From the top down, Enron’s corporate culture damned the company’s successes and ensured it for eventual collapse.

It must by noted that while the collapse of the Enron Corporation was dynamic and was the result of many specific venture failures and market pressures, this paper has a specific focus on determining how the corporate culture of Enron contributed to it’s failure. Although the specific financial shortcomings are not fully addressed in this paper, the corporate culture dictated the intentions of these shortcomings and therefore can be held responsible. Additionally, with a focus on concision, this paper will deal with the corporate culture of Enron after its growth into a major power in the international financial market.

Enron’s corporate culture was built upon values of “risk taking, individual creativity, and aggressive growth”.

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