Enron

Question 1

Enron

Answer 1

• Housten-based energy trading firms
• founded by Ken Lay in the mid-80s
• one of the most spectacular collapses in corporate history
• cimplex syste, of “creative accounting”, off-shoring and insider-trading
• pilling up massive debts behind the scenes

Question 2

Inside Enron: Management Approach

Answer 2

“Rank and Yank” sysetem:

• controversial appraisal system where the employees are reviewed by their superiors every year
• employees are ranked by their superior (e.g. in a 20:70:10 ratio)
• the bottom 10-15% are replaced every year

Question 3

Management Approach: Advantages

Answer 3

• Competition leads to superior performance enhancement
• poor performers are identfied quickly, high potential candidates are rewarded
• Decision-making is speeded up: approaches, tasks, deadlines and objectives are rarely challenged, leading to higher productivity

Question 4

Management Approach: Disadvantages

Answer 4

• “Survival of the Fittest” creates a toxic work environment where distrust, backstabbing, even sabotaging each other might occur.
• People focus on their own personal gain and on protecting themselves. This leads to secrecy, thereby undermining cooperation and innovation
• Not being part of the top ranks might breed resentment and envy, ultimately resulting in demotivation and poor performance.
• Employees might be afraid of addressing problems or to question a superior‘s decision out of fear of being ranked unfavorably