5. Enron (Background Information): One of the problems with traditional organizations is the lack of upward feedback. Enron was a traditional company that due to numerous unethical practices grew to become a powerful international organization before its collapse in 2001 causing stockholders around the world to lose over $60 billion in market value. Many employees knew of or suspected problems but “were afraid to express their opinions or to question unethical and potentially illegal business practices” (Fusaro & Miller, 2002, pp. 51–52). Enron had a cutthroat employee reward system that employees referred to as “rank and yank.” Twice a year each employee was rated by peers and managers on sets of criteria. Then executive panels would “debate and rank each employee on a scale of 1 to 5” (McLean & Elkind, 2003, p. 63).
Although criteria might include team and communication skills, what really counted was how much money each individual made for the company. To keep from being “yanked,” most individuals had to show a “short-term paper profit” (Conrad & Poole, 2012, p. 476). People ranked “1” received huge bonuses, whereas those at the bottom were fired if they failed to improve. For example, in 1999 the top 200 employees (not including the top CEOs) made a total of $402 million, counting stocks, bonuses, and salaries (McLean & Elkind, p. 241). What has to happen for a workplace culture to make employees afraid to questions unethical practices?
Enron Activity: In small groups discuss: 1) Why Enron employees were afraid to question unethical practices; 2) What role did the type organization contribute to this problem; and 3) Do you think you would have done things differently? If time allows, watch the 2005 documentary Enron: The Smartest Guys in the Room, directed by Alex Gibney, or the 2003 CBS movie CrookedE: The Unshredded Truth about Enron.