Problem Solutions and Evaluation

Enron’s Collapse

David, Cedric, Jubentino, Terrence

University of Phoenix

PHL 320

November 7, 2016

Enron’s Collapse

Enron Corporation is a former American company that had its headquarters in the city of Houston. The organization came to life in 1985 in the wake of the acquisition of Natural Gas Company by InterNorth Inc. (Yardley, 2002). Due to the resource and capacity endowment of the two companies, the emergent company, Enron Inc. became the market leader in the natural gas industry across North America. In addition, it also assumed the position of America’s largest electricity supplier. These accolades gave Enron a front seat globally insofar as its areas of interest were concerned. It remained was unmatched until the onset of its demise at the end of the year 2001 when it filed for bankruptcy. Enron’s narrative is one that is not an isolated case on America’s corporate scene. Unscrupulous managers and board members have repeatedly faced charges of corporate greed and corruption, causing the collapse of otherwise robust companies and untold suffering to stakeholders.

In his article that featured in The New York Times on January 14, 2002, Jim Yardley recounts the consequences of how the bankruptcy and the fall of the company affected its investors and the employees (Yardley, 2002). According to Yardley (2002), the bankruptcy of Enron led to the loss of close to 4000 jobs to the Houston locals and was a painful encounter for the Houston Ballet. The charities that benefitted from the company faced a huge blow after its closure in 2001. The corporation’s demise triggered a full-scale corporate scandal in the city of Huston and later the whole of the United States. Before its collapse, the company was the epitome of corporate grandeur in Houston and beyond. It was a civil dynamo whose money and influence were tangible across the city and its environs (Yardley, 2002). Houston’s citizens could not help but wonder about the scope and depth of the effects of Enron’s demise. It was devastating. Many laid off employees were furious at the company’s executives and their financial, and emotional distress could not be overstated. One of the former employees had to cancel a scheduled cancer surgery due to the shortage of funds.

Another article that covers the Enron case is a piece by Joseph Nicolson, which explains the factors that led to the collapse of the company. Nicolson gives the major causes of Enron’s downfall as both personal and systemic failures (Nicholson, 2015). The article cites accounting problems where the company claimed there were profits even when there were none. Secondly, endless borrowing from Wall Street to invest in e-commerce and other questionable investments led to the downfall from fraud. The article further cites management culture and preferential treatment as additional causes of Enron’s downfall.

From the first article, focuses on bankruptcy and the downfall of Enron as well as the ensuing consequences after its collapse, especially in the lives of individuals and families in Houston. Greed coupled with circumstances in the prevailing business environment and market euphoria to motivate ignorant engagement in high-risk activities, some being beyond the purview of Enron’s traditional interest areas. Eventually, the company filed for bankruptcy, an event that saw over 4000 employees get laid off. The loss of jobs led to untold emotional and financial strain among the former employees. In the second article, the main problem discussed is the cause of Enron’s collapse. These are the underlying problems because they identify how the bankruptcy and laying off of workers affected the normalcy of life they had gotten used to, It further gives a detailed description of factors that occasioned the fall of the company, which was once deemed as the corporate star in Houston. The problems discussed in the articles directly relate to the research problem, which are office closure and its impacts. These problems explain why Enron gas and electricity was closed and the effects of the closure to its investors and employees.

Well-defined problems lead to breakthrough solutions. When developing a product or solving a business issue, it is vital to identify and define the problem clearly. Failure to identify a problem properly leads to wastage of resources, opportunities, and the pursuit of insignificant solutions. Problem identification is the focal point in problem-solving efforts. The quality of a solution is directly proportional to the quality of the solution given to a specific problem that one is trying to solve. The proper definition of a problem follows the problem definition stages, which help to identify the right problem whose solution is desired. The most important strategy of defining a problem is exposing and challenging assumptions in order to eliminate unsuitable assumptions and find the right problem. A clearly identified problem tests the validity of the problem and the likelihood of its consequences as well the views from multiple perspectives, therefore, leading to the proper channels of finding the right solution to the right problem and not the general assumption of what could be or not be the problem. Correctly and clearly defining a problem places it in the right problem space through which it will be studied through interlinking different underlying issues that need to be solved in order to find the most suitable solution to the identified problem (Savery, 2015). The significance of the problem space is the proper identification and gives the right solution.

References

Nicholson, J. (2015, September 22). What caused Enron to collapse? Retrieved from http://www.ehow.com/how-does_4911332_what-caused-enron-collapse.html

Savery, J. R. (2015). Overview of problem-based learning: Definitions and distinctions. Essential readings in problem-based learning: Exploring and extending the legacy of Howard S. Barrows, 5-15.

Yardley, J. (2002, January 14). Enron’s collapse: The hometown; fall of Enron ends its dance with Houston. The New York Times. Retrieved from http://www.nytimes.com/2002/01/14/us/enron-s-collapse-the-hometown-fall-of-enron-ends-its-dance-with-houston.html