Lessons from Enron

By Bob Knowles

Managing Director

By now we all know who Enron is and the name is synonymous with scandal. I often hear it used as a metaphor of what a company doesn’t want to be. Unfortunately, that pains me because I spent many of my formative years as a young executive working there.

Long before the scandal Enron was a well-run cash cow of a pipeline company that everyone envied. In the days prior to a series of mergers Enron was known as Northern Natural Gas Inc.

This was the largest of the companies and it was a company with solid Midwest values that focused on hard work and integrity. It was merged with a series of other pipeline companies i.e. Houston Natural Pipeline, Florida Gas and Transwestern Pipeline just to name a few.

It became a formidable company with formidable problems, disparate cultures with different ways of doing things, different accounting systems, and different ways of managing people.

The early days of the merger mania were difficult but we also knew that we were on to something that was going to be big in the industry. There was an excitement and an energy that was transformational.

The challenge of finding a way to meld all these divergent cultures into a top-notch company was both a daunting task as well as an OD manager’s dream. During the years of merger activity I learned a tremendous amount about organization design, organization culture, strategic planning and operating excellence.

I learned even more after I left the organization. (The scandal unfolded several years later)

What were those lessons you might ask?

First and foremost, “leadership matters!” The leaders of the organization stopped leading the organization and focused on CYA. That seems obvious now but as things unraveled and I contacted my friends and colleagues that were still there, it became obvious that the leadership was busy taking care of themselves and had abandoned the people that had invested their time, effort and money in the organization.

We now know that the leadership had been corrupted by power and money but could this, would this have happened if they had been more focused on the people and their investors rather than on themselves?

The second lesson is, “establish and stand by your values”. The leaders abandoned the long-standing values that had been established through many years of hard work. The values that many admired and had been utilized to forge a solid long-standing company went by the wayside.

These values had been established around respect for customers, investors and employees. Again it’s obvious after the fact but critical, that decisions and actions be linked to values that are established well before a crisis takes place.

The third lesson, “clearly define and execute your strategy”. This one sticks with me more and more everyday because if you cannot explain your strategy to the people within your organization and have it make sense, you have no strategy at all.

Warren Buffet is famous for stating that if he can’t understand a company’s strategy then he can’t invest in that company.

Well, I’m here to tell you that this still rings true today. If you can’t explain the key working parts of your value proposition then it will be equally hard for your employees to execute that strategy.

Although these may seem overly simplistic, think how many lives would have been changed and how many billions of dollars would not have been lost if these lessons had been applied. Organizations today that fail to heed these lessons are destined to repeat history.

  • Leadership matters
  • Establish and stand by your values
  • Clearly define and execute your strategy

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