Examining a Busness Failure Ldr/531

Running head: EXAMINING A BUSINESS FAILURE

Examining a Business Failure

University of Phoenix

Organizational Leadership, LDR 531

Examining a Business Failure

Enron – Business Overview

Enron, a natural gas company, located in Omaha, Nebraska, and founded in 1985. Enron produced from a merger of Houston Natural Gas and InterNorth, a Nebraska pipeline company. The company was aggressive as a trader of electric and natural gas with primary operations in buying energy at a negotiated price and then selling it as market prices increases. In addition to energy trading, Enron engaged in e-commerce and exotic investments areas, such as weather futures, all under the direction of CEO Kenneth Lay. It became the largest energy company in the world employing over 20,000 people, and reporting $111 billion in revenue for 2000 (Cook, 2008). The operating years 1985 to 2000 was good times, healthy earnings and lavish lifestyles for the Enron executives however, that was the beginning of the end. In July 2001, Enron posted a huge company quarterly loss and the Security and Exchange Commission conducted series of account fraud investigation and sent Enron stock quickly tumbling downward and bankruptcy quickly followed (Greider, 2001). The loss of jobs, investments, and employee retirements destroyed people lives inside and outside the company. One must ask-how and why did this happen? This paper will examine the organizational structure and how it contributed in the failure of Enron.

Organizational Structure

Enron operated as the Professional Structure model. The professional structure relies on highly specialized professional to conduct operating tasks of the company. The structure is highly decentralized horizontally; power over many decisions, both operating and strategic, flows all the way down the hierarchy, to the professionals of the operating core (Mintzberg, Lampel, Quinn, & Ghoshal, 2003). The larger Enron grew the more...