Examining a Business Failure: Enron

Examining a Business Failure: Enron
Organizations are charged with the responsibility to function in an ethical fashion. And for the most part, organizations do just that. When an organization does not live up to this responsibility, it can become worldwide news. In the early 2000’s what might be the largest or most well know business failure occurred. Enron was exposed for their immoral practices and not only was the organization held responsible, but the individuals involved were also. There are specific organizational behavior theories that could have predicted Enron’s failure. And likewise, the leadership, management, and organizational structures contributed to the public failure of one of the largest companies in the world.
Enron was an energy company that grew to be the middleman for energy companies that allowed them to exchange energy contracts. Their growth was very impressive and the business expanded into other facets including Internet services. As Enron grew, they needed to borrow more and more money. To keep the debt off of Enron’s books, they began to create spin out organizations that were used to hide over $600 million in losses that were truly created by Enron. Spin out companies constitutes an excellent vehicle for not only developing but also commercializing expensive and risky emerging technologies (Mintzberg, Lampel, & Quinn, 2003, p. 238). The primary partnership used was Chewco Investments. In 2000, Enron reported that they had tripled their profits over the prior year. By hiding their debt, Enron looked like a very successful company. Until October 22nd, 2001 when the Securities and Exchange Commission (SEC) announced they Enron was under investigation.
There were different behaviors within the organization that could have predicted Enron’s failure. Thakur provided three stages to the demise of Enron. First, the company was leveraged through debt. Some of which was reported and some of which was not. The second was the fall of the...