Writing Assignment

Jeffrey Skilling is an infamous name in the business world. He was the notorious former CEO of one of the most prestigious energy trading company of the world, Enron, which built pipelines, power stations, and gas plants in the United States and around the world. He received his MBA from Harvard in 1979 and moved to Houston when he joined Enron in 1990 working with Kenneth Lay, the current CEO at the time. In 1997, he was promoted to president and Chief Operating Officer of Enron (Biography.com). Within a few years, he became the chief operating officer and then named CEO of Enron Finance Corporation.

Enron was considered as an icon the US industry. It was a well-respected business that possessed so much trust and respect all around the world. It also received the Fortune honor of “America’s Most Innovative Company” six years in a row. When you hear the name Enron, you think disaster. That is because things changed few years after Skilling took over. The collapse of Enron has been described as offering the same sort of opportunity for reflection for the business community as September 11 did for political scientists (Free, et. al., 2007). Enron provides a prototype of how scarcity in attention to changes in leadership can sabotage a well-structured management system. Structure and leadership in an organization is dependent on its sophistication and success.

The transition to naming Jeffrey Skilling as the CEO led to a radical transformation. Skilling transformed a small energy market player to the biggest energy trading company and converted energy into a financial instrument which led to become the largest energy trader in North America (biography.com). In 2000, it became “the star of the New Economy”, and in 1999, Enron was named “no. 1 in Quality Management,” and “No. 2 in Employee Talent”. Skilling was also referred to as “The #1 CEO in the USA” given that Enron was not only embracing innovative theories of business but also making a lot of money doing so (Free, et. al., 2007). So how is it that Enron became the largest corporate bankruptcy in the U.S. industry?

Skilling was a bright businessman who became greedy at the expenses of others. His leadership style included both transactional and transitional features. Skilling rewarded his employees and partners with bonuses. He rewarded production with merit-based bonuses that had no cap, permitting traders to “eat what they killed” (Thomas, 2002). With monetary rewards, Skilling motivated his them to perform their duties exceptionally well; employees were also granted plenty of overtime. Employees also had access to a company gym and professional concierge services at no cost. To demonstrate transitional methods, Skilling made his employees feel as if they were equally involved in the development of the organization. He hired talented people, providing a challenging environment resulting in motivation to strive and created a desire to be rich and influential, driving them to greed and illegality.

Things were not as easy and great as it seems. As Enron’s reputation grew, Skilling created a strict employee ranking system. To Skilling, performance meant promotions and non-performers were fired. He established the performance review committee (PRC), which became known as the harshest employee-ranking system in the country. It was based on the values of Enron – respect, integrity, communication and excellence (RICE); employees were rated on a scale of 1-5, with usually being fired within six months if rated a 5 (Thomas, 2002). The lower the PRC score was, the closer the employee could get to Skilling. Many associates felt, however, that they were being rated based on the profits they could generate, which caused many to push for deals and earnings. As strict as this was, Skilling’s division was known for replacing up to 15% of its workforce every year (Thomas, 2002). With this system, Skilling pushed his associates to be risk-takers, just as he was. He motivates his followers to take risks, think outside of the box and created a yes-man culture (Kharuna, 220).

Ulmer identified “toxic leaders are individuals whose behavior appears driven by self-centered careerism at the expense of their subordinates and unit, and whose style is characterized by abusive and dictatorial behavior that promotes an unhealthy organizational climate” (as cited in Stoltz, 2020). This describes Jeffrey Skilling as he was self-centered, using charisma to motivate his followers for personal gain, winning more power and control. He is concerned with enriching his life and taking risks at the expenses of others, has a lack of concern for subordinates, and manipulates them to build trust as he engages in unethical behaviors (Stoltz, 2020). With his charismatic, transactional, and transformational leadership styles, Skilling was able to influence his followers to turn the blind eye to everything happening, to believing they were part of the decision-making process, and to be unaware at the fact that they were getting played. Skilling held a team of committed and loyal followers who looked up to him and believed in him. They were not allowed to challenge his questions or ideas, nor did he allow dissent.

So, what really happened? Skilling became aggressive with his power which led to unethical and illegal decision for his personal benefit. As CEO of Enron, stocks were valued at around $126 per share in February of 2201. By March, the stocks had fallen to the mid-$60; by August, they dropped to below $30 per share (Stoltz, 2002). Skilling resigned in August, six months after being name CEO, stating it was for personal reasons. He was sentenced to prison in results to charges on conspiracy, securities, fraud, and other charges related to the collapse of Enron (US Dept. of Justice, 2018). Long story short, the real earnings of Enron were much less than what was claimed by Skilling, resulting in the stock price drops. This derived into a big loss in the trading business, leading the company to bankruptcy.