POWER FAILURE : Leadership Analysis of the movie "ENRON: The Smartest Guys in the Room"
Jeffrey Skilling’s leadership style / Behavior of people /
Describe the “corporation culture” at Enron. How was it created and maintained?
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Léa SIMONIN
POWER FAILURE
ENRON: The Smartest Guys in the Room
1) In class we discussed the five sources of power. Describe Jeffrey Skilling’s
leadership style. Based on what you saw in the film, which sources of power did
Jeffrey Skilling employ as the leader of Enron? Provides examples.
Jeff Skilling did not become the CEO of Enron for no reason: if we consider that after
graduating from a Texas university, he earned an M.B.A. from Harvard Business School
graduating in the top 5% of his class, we can assume that he had got the skills required to
use the expert power. The thing is that he was too well aware of it …and for example during
the interview for the admission to Harvard he was asked if he was smart and he supposedly
replied "I'm fucking smart".
Jeffrey Skilling definitely used a referent power : This charisma personage imposes a
culture of aggression and incentivised competition in the company. He achieves to be
considered as a clever and outstanding CEO and made Enron becoming the largest energy
trader in North America seen as a model firm. Indeed, in the film, they say that people think
Enron can do no wrong; they say: “where came profit? We don’t know” so Skilling achieved
to fool everyone. Employees, Medias, market analysts believed him without checking or put
into question his statement. He’s displaying a powerful attribute which is used in a negative
way for self-serving and being destructive to others. So we can say that these people blindly
followed him because of his charismatic leadership style. He could lie with success even
when Californian’s anger rose. He pretended to be compassionate to his employees whereas
he buried them by encouraging them to buy shares when he knew that their value would
tumble down.As said in the film, he could be compared the captain of the Titanic who knows
that the boat races into the iceberg but continues by saying “full speed ahead .He was such a
reference that it is not clear if he played a role or if he convinced himself that he was among
the best ones… What shows that he became a model is that in the late 80’s, he was not so
handsome and used to wear glasses but thanks to his success he could afford himself an eye
surgery so he doesn’t need glasses anymore and thereafter no one in the company wanted
to wear glasses anymore.
Jeff Skilling followed the transactional types of leadership because he wanted employees to
believe on his words. He made sure that each and every employee work according to his
instructions and timelines and achieved a maximum output in the minimum time. He also
used a new approach to keep on motivating employees by rewarding them for the work
done. He would offer rewards to people who did a good job, hence demonstrating reward
power. People would also comply with his orders as they thought he was at a level of
authority that request they had to obey. This shows the use of legitimate power: The
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success of the company shall ensure the employees to believe that they belong to the best
group and understand that they are associated with the best organization in the world, even
if he led his followers into situations that turned out horribly. In this case, the leader's job
was done in an unethical manner. Jeff Skilling had a dream and wanted the company to
support that dream but he used his charismatic power to influence people in wrong
directions. He provided a self-manipulated framework by which the employees in the
organization believe they can become rich and achieve their dreams by giving them rewards.
Skilling was an authoritarian leader low in relationship, ethic and moral. So he also used a
coercive power .He established a review committee that graded employees and annually
fired the bottom fifteen per cent. This created a highly competitive and brutal working
environment. Skilling hired lieutenants who enforced his directives inside Enron.He liked
“guy with spikes” as the film said. He influenced people by rational persuasion, by appealing
people’s values and getting their commitment to prevent the whistle blowing of all the
negatives activities. Moreover, when an Enron investor and a Fortune reporter questioned
irregularities about the company's financial statements and stock value, Skilling responded
by calling McLean "unethical". He even accused Fortune of publishing a reporting to
counteract a positive Business Week article on Enron. He even insulted an investor telling he
was an “asshole” because he was asking accurate questions on the profits sources of
Enron.His bossy behavior also included the use of violence: as shown in the Milgram
experiment, he and his colleagues would have been among those sending high voltage of
electricity!
To conclude we can see that Skilling used a combination of the different types of power with
referent power as a main point!
2) Using table 14-1 (Criteria for Evaluating Ethical Leadership) Examine, analyze, and
explain the behaviour of the following people.
a) Ken Lay (Chairman)
Lay embodies the capitalist dream in the US by building a fortune as his father was from the
lower middle class. His poor origins might explain partly his greed but therefore we can state
that he satisfied personal needs to earn $217 million from the sale of Enron stock options;
even when the company was on the brink of bankruptcy he kept telling the employees that
“our liquidity is fine”. He perfectly knew that they diverted company money to offshore
accounts and in fact he gambled away Enron's reserves, nearly destroying the company. But
after these facts were brought to light, Lay denied having any knowledge of wrongdoing.
Maybe as a friend of the Bush family and a contributor to his political campaign, he believed
that he could act beyond the law. It’s hard to understand why he was so far away for moral
and ethic as his father was a Baptist preacher but what is for sure is that he “discouraged
criticism and dissent “ in order to sell his personal vision as the only way for Enron to
succeed”... Through his life, we can really see the flipside of the business world as he
embodies an unethical leadership.
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