Business Ethics and Organizational Culture Essay

Business Ethics and Organizational Culture - Essay Example Organizational culture has an impact on the way in which an organization executes is vision and mission and affects the manner in which it deals with customers, employees and other third parties. It also determines some other critical aspects such as the level of involvement of employees in decision making process, innovation, contribution to new ideas as well as expression of opinion. The organizational culture also determines the hierarchy and the commitment that employees have towards to the organization. Organizational culture is often said to be one element that is most challenging to change or alter and hence, the way in which it gets shaped is very important (Cummings et al, 2004). Therefore, the way in which leadership of the organization paves and molds the development of culture is of critical importance. Enron and Organizational culture The Enron scandal which happened in early 2000s is one of the major scandals of corporate history where it came to light that the organiza tional leadership took advantage of certain loopholes in accounting and hence, did not show their losses and debts in their financial statements. As it was an accounting scam carried out purposely, the leadership Enron received major criticism on account of improper ethics as well as flawed organizational culture. Jeff Skilling (President) and Ken Lay, the CEO had intense focus on making huge profit and this compromised the ethics. To make this huge amount of profit, the employee reward system was changed to such a manner that compensation was totally based on the level of profit that an employee can produce and there were no caps on salaries. This resulted in an extremely competitive environment where dishonesty would be overlooked and profits were the only thing that mattered. The belief that making more money permeated through the organization in such a manner that it became a norm. According to Cruver (2003), it was clear to the employees that the leadership expected 'profit at all costs' from them. In addition, the focus was on short term bottom line which made the employees and traders even more aggressive towards making more money. Therefore, a culture was established where employees were hired and fired based on the profits that they bought to the organization. Enron Leadership and its responsibility in the Scandal As per Schein (1985), leadership is one aspect that causes the creation, reinforcement as well as change in the culture of the organization especially from an ethical perspective. The responsibility of the entire scam and the subsequent crisis lies with the leadership because the way in which the key executive players of the organizations such as Ken Lay and Jeff Skilling reshaped the culture determined this particular outcome. They adopted several strategies to make changes to the culture so that it centers around profit and money. One of the first strategies adopted by them was to shuffle their staff around and hence, giving pink slips to the employees based on performance became an accepted practice. However, as the employees were rewarded with a huge compensation for their performance, they cultivated a set of employees who were high performers, but who chose to ignore tenets of basic ethics. Hence, the entire culture of the organization underwent a transformation within a short period of time. As