General Electric and Enron

Organizational culture reflects the shared social knowledge that employees have about their organization's rules, norms, and values. This shared knowledge shapes the attitudes and behaviors of the employees, for good or for bad. We can all think of examples of companies for which the culture is strong and beneficial—resulting in high employee commitment and performance, as well as positive outsider perceptions. At the same time, we can call to mind examples of companies that have strong but detrimental cultures, which ultimately suffer in terms of performance and commitment among employees. Two such examples are General Electric and Enron, respectively.

In this exercise, please read the mini-case and answer the questions that follow.

General Electric. Enron. Not two companies that you would expect to be mentioned in the same breath. After all, General Electric is repeatedly in the top of Fortune magazine's "Most Admired” companies, and Enron will go down in history as one of the greatest failures and financial scandals in U.S. corporate history.

So why would we mention both of these firms together? Because the fact is that throughout the 1990s and into the early 2000s, these companies actually approached their businesses and treated their employees in very similar ways. Both were extremely successful enterprises whose stock performance rewarded investors handsomely and caused them to be recognized as companies of excellence by numerous publications of all types. On the surface, both companies used terms like "creativity," "competitiveness," "people," "integrity," and "excellence" to describe their core values. On an annual basis, GE and Enron both fired managers who were at the bottom of their performance scales, with Enron removing the bottom 20 percent of performers and GE removing the bottom 10 percent.

Employees were paid well above average market levels, and managers received large bonuses that were tied directly to performance goals. Both had strong-minded and well-respected leaders—GE was led by Jack Welch, who has been described as a legend, a hero, and one of the world's greatest business leader, and Enron was led by Jeff Skilling, known as a brilliant visionary and perhaps one of the smartest CEOs on the planet.

Underneath the surface though, these two organizations could not have been more different. What was it that made these two companies move in such opposite directions? One potential answer lies with organizational culture. Whereas GE's culture led to continued success, high levels of employee commitment and performance, low employee turnover, and generally a perception as one of the top companies in the world, Enron's culture failed miserably over the long term on almost every level. Many blame Enron's failure on a culture of greed that favored maximizing real or perceived profits to boost stock prices. In the late 1990s, an Enron task force put together to help communicate Enron's "Visions and Values" considered replacing words such as "integrity," "excellence," "trust," and "respect" with words like "smart," "bold," and "aggressive." The changes were never made, but the fact that they were considered says quite a bit about the underlying culture within Enron. There was also no doubt that the culture at Enron had a powerful effect on employees. Jeff Skilling told others, "People didn't just go to work for Enron; it became a part of your life, just as important as your family. More important than your family."

1- At Enron, the words "integrity," "trust," "excellence," and "respect," would be called the company's ______________, but the words "aggressive," "bold," and "smart" might actually reflect the company's ______________.

A- symbols; espoused values

B- espoused values; underlying assumptions

C- symbols; underlying assumptions

D- underlying assumptions; espoused values

E- espoused values; symbols

2- GE employees appear to think alike and act alike, and also to be friendly to each other, suggesting what type of culture?

A- Communal

B- Networked

C- Fragmented

D- Mercenary

E- Solidarity

3- If the culture at GE was low on both solidarity and sociability, we would describe its culture as

A- weak

B- networked.

C- fragmented.

D- communal.

E- strong.

4- Which of the following was a disadvantage of Enron's strong-minded culture?

A- Created extreme behaviors among employees

B- Made merging with other companies too easy

C- Created too much organizational stability

D- Differentiated the culture from others

E- Encouraged thought diversity