Lessons Learned From Enron

We all get complacent sometimes. We have comfort zones. We do the things we enjoy, that feel good, that come easily. That’s why many people surround themselves with people who agree with them, think like them, and support them. The CEO of a large company does not have that luxury.

In return for the outlandish compensation being heaped on them by the shareholders, the CEO must immerse himself or herself in the uncomfortable, the unfamiliar, the different opinion. Only in that way can they keep the company strong and growing. Only then can they earn what they are being paid. Only then can they, and their shareholders, avoid a debacle like Enron.

There are many lessons that can be learned from the collapse of Enron. Any organization has an obligation to all of its stakeholders, not just its shareholders, and those obligations were not met in this case. Executives at Enron made decisions that were wrong. Some of their decisions may have involved illegal activities. Many people also are beginning to question the professional conduct of auditors Arthur Andersen. Did their interest in preserving their income cloud their judgment? We will leave those discussions for others and focus instead on the key management failure – curbing dissent.

It starts at the top
It is the leader’s job to provide the vision for the group. A good executive must have a dream and the ability to get the company to support that dream. But it is not enough to merely have the dream. The leader must also provide the framework by which the people in the organization can help achieve the dream. This is called company culture.

When your company culture allows people to challenge ideas, suggestions, and plans, you create an organization of thinking, committed people capable of producing the kind of innovation and productivity required to succeed today. However, if your company culture does not allowed dissent, if people who suggest alternatives are castigated for not being “team players”, you produce an environment of fear, stagnation, and antipathy. Not allowing appropriate dissent will kill your company.

Discuss and debate – up to a point
You’re smart manager. You encourage your people to challenge you and suggest alternatives. But are you a good subordinate? Do you challenge your boss? Or do you sit back and protect your job by agreeing with everything the boss suggests? Such agreeing won’t protect your job, as Enron’s employees have learned.

Every manager has a boss. It is our responsibility to our bosses to be honest with them, to tell them what we really think, even if we disagree. Especially if we disagree. You, and everyone of your peers, need to discuss issues openly, frankly, and with the best interests of your area clearly visible. You need to give the boss as much information and as many options as possible. Don’t be afraid to fight hard for what you believe to be right. Be professional about it, but be candid too.

However, once the boss has made a decision, the discussion and arguing and dissent must stop. Once the decision has been made you have an obligation to support your boss in that decision. You expect it of your people; you should do no less.

Disagree without being disagreeable
You think your position is right. You want what is best for your people. You want things done in the way that works best for your department. So you argue your points strongly. That’s good, but don’t overdo it. You won’t win every battle. After all, your boss is looking after the best interest of his or her entire organization, not just your part of it. Recognize the aspects of negotiation involved. Remember you will be working with these people again in the future. For those reasons it’s important that you “disagree without being disagreeable”.

Dr. Suzette Elgin, an expert in psycholinguistics, wrote the definitive book, “How to Disagree Without Being Disagreeable: Getting Your Point Across With the Gentle Art of Verbal Self-Defense”. The next time you have to give someone a bad performance evaluation or a co-worker verbally attacks you in a meeting you will wish you had read this book of practical, real-life techniques.

There are many other resources on the Internet. Here are two more:

  • Fast Company calls this their Starter Kit on Managing Disagreements.
    Using Mark Twain humor and common sense, they suggest ways to deal with the most common types of disagreeable people.
  • Disagreeing Without Being Disagreeable
    Professional trainers Anne Baber and Lynne Waymon, writing for “The Industrial Physicist”, recommend these conflict-solving steps to help you “become as proficient at resolving people problems as you are at finding technical solutions.”

Challenging the status quo has to be a top priority in any organization. Accepting the status quo leads to stagnation. Stagnation will kill any organization.

Being a yes-man is damaging to the individual, not just the company. The classic movie “The Man in the Gray Flannel Suit” chronicles the stress Gregory Peck’s character endures by agreeing with everything his boss says just to keep a job he really doesn’t even want. If you find yourself in an organization that does not encourage dissent, move on to one that does.

The Internet Search Engine Google has “never settle for the best” as one of their goals and puts that at the top of their corporate information page. Their performance recently, in a very tough market, is testimony to the value of that plan.

Manage This Issue
Foster a culture in your company where differing opinions are encouraged. Avoid the temptation to surround yourself with individuals who are so similar to you that they can’t offer a different perspective. Don’t surround yourself with people who are so afraid that they won’t dissent. Reward creativity and original thought in your decision-making process. Hang on to those people who have mastered the art of disagreeing without being disagreeable. Maybe then you can avoid being blindsided by events such as Enron has encountered.

If you have any questions or comments about this article, or if there is an issue you would like us to address, please post them on our Management Forum to share with the entire group.

 About the Author

John Reh is a senior business executive whose broad management experience encompasses managing projects up to $125 million and business units including up to 200-plus people.

A published author, most recently as a contributing author to Business: The Ultimate Resource, John has set aside time throughout his career to mentor newer managers, often women and minorities, in the art and science of management: a skill that can be taught and learned.

What you Need to Know

Ethics is a standard of acceptable behavior or a set of rules by which to judge decisions and conduct. In the workplace, ethics may be referred to as business ethics or corporate responsibility, but the overall idea is that of instilling a sense of values and knowledge of what is right and wrong throughout the organization.

Why is Ethical Conduct Important?

First, of course, there are the negative consequences of unethical conduct to consider. Many corporate leaders have been prosecuted and incarcerated for their unethical behavior. Furthermore, federal laws have set strict guidelines for required conduct in areas where unethical behavior is particularly risky—for example, in financial reporting. The Sarbanes-Oxley Act of 2002 (SOX) and the Federal Sentencing Guidelines have placed strict legal requirements on covered employers. But there are also positive rewards for engaging in ethical conduct. Ethical conduct is good for business and is the basis for long-term success in any organization. It promotes a strong public image for the organization because people respect an organization that makes ethical choices. Customers like doing business with an organization they can trust.

Ethical conduct also makes the best use of resources. Money, time, and effort are put into productive activities rather than diverted for questionable purposes or personal gain. Ethical conduct on the part of all employees also helps maintain quality and productivity. When employees follow ethical standards, they do not cut corners or shortchange the company or its customers.

Ethics in the Workplace

Ethics are about making choices that may not always feel good or seem like they benefit you but are the right choices to make. They are the choices that are examples of model citizens and examples of the golden rules. We’ve all heard the golden rules: Don’t hurt, don’t steal, don’t lie, or one of the most famous: Do unto others as you would have done to you. These are not just catchy phrases; these are words of wisdom that any productive member of society should strive to live by.

In our personal lives, most people try to do exactly that. Ethics are thought of by many people as something that is related to the private side of life and not to the business side. In many businesses, having ethics is frowned upon or thought of as a negative subject. This is because business is usually about doing what’s best for number one, not about what’s really the right thing to do. You probably are already feeling uneasy just reading this.

A Good Example

Take ENRON, for example. Were the actions of ENRON CEO a good example of ethics? No. But, what they WERE was a CLASSIC example of two things: One, those actions displayed how ethics were not used in any way. Two, their actions painted a grim and realistic picture of what can happen when ethics are neglected. Had ethics been considered in the first place by the leaders of the company, there would have been no scandal. If ethics were used on a daily basis in every company, there would never be scandals.

Martha Stewart comes to mind when speaking of ethics. Again, there is a feeling of uneasiness when dealing with this topic. But, why is it like that? Ethics are supposed to improve our lives and invoke good feelings. Perhaps the reason ethics is such a sore subject is because they are so often poorly used, if used at all.

A New Way

Ethics are making a comeback. To begin with, more and more corporations and businessmen and women are now realizing that ethics are not checked at the door when entering the workplace. Ethics have every bit as much a place in the public as they do the private. How is it there should be separate sets of ethics, depending upon whether it is your personal life or your work life? The answer is that there should not be a separate set and in light of recent events that we see on our television sets as of late, more and more companies are realizing this fact.

Some companies are incorporating ethics into their training. It is a subject that can go hand-in-hand with business and when employees and CEO’s alike understand what ethics are about, business can improve. Not only will the community take note of the ethical nature of a business but also so will customers.

Periodic re-evaluations are suggested in ethics training as well, since times change many things that some would never consider ethical or non-ethical. For instance, when the first computer hacker sent a worm into a university computer system and crippled the entire network, it was considered a prank more than an unethical act. Computers were new, at the time and no one had ever been able to do such a thing before. With new times comes new technology and new ways of doing things. Ethics will still play a part of it all and refreshing ethics training only strengthens what has already been learned, when new ages come about.

In the end, it’s all about what a person understands about ethics. Many university curriculums are now heavily applying the teaching of Ethics and for good reason. Young minds will take this information into the workforce and understand that ethics need to be applied there as well as in the private sector. Corporations will be able to avoid embarrassing scandals that are presented all over the national news. Small business will be able to keep and attract more clients and customers. Negotiations between businesses could be accomplished with more consideration for the other company in mind, which would only help both.

Above all, a high level of ethics in your business should be in place at least for the customers. If anything, it is the customer that should be considered the most when it comes to ethical business practices. In the long run, a company will reap great profits from a customer base that feels it is being treated fairly and truthfully.

Training Improves Workplace Ethics

Protect your organization from unethical behavior, devastating lawsuits, negative publicity, wasted time, loss of money, and low employee morale by offering your employees ethics training on a regular basis.

Morals At Work

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You have probably heard the word “ethics” thrown around quite a bit, but do you know what ethics are? Ethics are a person or corporations moral philosophy, which involves how a person or business defines and handles right and wrong behavior. A solid ethical foundation is generally based upon human rights, what is fair and what is in the best interest of the workplace (both employer and employee).

Due to the fact that ethics can vary greatly depending on many factors, it can be difficult for a business to determine where the lines are drawn in the sand when it comes to quandaries involving ethical decisions. It is important not to confuse ethics with the law, as some laws may not be in line with what we consider to be ethical. What is ethical can change based on where we work and who we interact with.

Almost all employees will find themselves from time to time in a position where they are being asked to do something that is unethical. If a superior requests a financial report but asks that the numbers be manipulated, it is unethical, especially if you know that finagling the figures will benefit the recipient.

Managers are supervisors are not the only people who can dish out unethical requests and behaviors; colleagues are guilty of the same. Some new employees have reported being asked by more senior staff members to do their assignments or even take tests on their behalf. Of course, because the staff member is new, they feel pressure to be accepted and comply with the requests.

If you are in a position where your ethics or that of your employer comes into question, sit down and have a very frank discussion with the offender or even your Human Resources Department. Chances are, they may not even recognize their own behaviors. Be proactive and take steps towards prevention by educating yourself on workplace ethics.

If you are a jobseeker, it is important for you to know whom you are working for when you are seeking employment. Do research on the companies where you have applied and make sure you are asking questions.

Ask about the work environment, where the company sees itself in 5 years, and what the turnover rate is like. It is just as important for a recruiter to learn about its potential employees, as it is for to determine if the company will be a good fit for you.