Enron & Its Kpi
I do agree that it was the "Greed Factor" which drives Enron employees to increase the profits through unethical methods, and ultimately causing its downfall. But could it be the opposite? I mean, could it be that it was Enron 's culture and Key Performance Indicators (KPIs), which is to increase the profits and share price that "forced" Enron employees behave in an unethical manner? What circumstances caused them to be unethical, really?
At first, the leader of Enron Finance Corp, Jeffrey Skilling recruited the best and brightest traders from the top schools in the country. To reward and motivate these traders, Enron gave them corporate benefits like concierge services, company gym and award merit-based bonuses which had no cap. Was this wrong? I personally think at this stage, there is nothing wrong with the rewarding system. I think that it is still okay to motivate the employees by giving those perks and reward them based on their contributions to the company.
Later on, Skilling introduced the Performance Reviewing Committee (PRC) and a "360-degree review" based on the company 's values (respect, integrity, communication and excellence). This performance review system was known to be the harshest employee-ranking system in the country. The traders were also regularly rated on a scale from 1 (being the best) to 5 (being the worst). Traders with a rating of 5 were usually fired within 6 months. As a result, the employees in Enron became more competitive and were motivated to "do deals" as they felt that the only real performance measure was the amount of profits they generate. I believe that this performance ranking system is one of the factors that caused the employees to behave unethically. To keep their jobs, they have to meet their KPIs. And if they cannot meet their stipulated KPIs, they will be fired or they may resort to "creative" tricks just to meet their KPI without considering the long-term impact.
In the year 2000, Enron traders encouraged
At first, the leader of Enron Finance Corp, Jeffrey Skilling recruited the best and brightest traders from the top schools in the country. To reward and motivate these traders, Enron gave them corporate benefits like concierge services, company gym and award merit-based bonuses which had no cap. Was this wrong? I personally think at this stage, there is nothing wrong with the rewarding system. I think that it is still okay to motivate the employees by giving those perks and reward them based on their contributions to the company.
Later on, Skilling introduced the Performance Reviewing Committee (PRC) and a "360-degree review" based on the company 's values (respect, integrity, communication and excellence). This performance review system was known to be the harshest employee-ranking system in the country. The traders were also regularly rated on a scale from 1 (being the best) to 5 (being the worst). Traders with a rating of 5 were usually fired within 6 months. As a result, the employees in Enron became more competitive and were motivated to "do deals" as they felt that the only real performance measure was the amount of profits they generate. I believe that this performance ranking system is one of the factors that caused the employees to behave unethically. To keep their jobs, they have to meet their KPIs. And if they cannot meet their stipulated KPIs, they will be fired or they may resort to "creative" tricks just to meet their KPI without considering the long-term impact.
In the year 2000, Enron traders encouraged
References: THOMAS, C. W. (April 2002). The rise and fall of Enron. Retrieved from http://www.journalofaccountancy.com/Issues/2002/Apr/TheRiseAndFallOfEnron.htm Sweeney, J. L. (2002). The California Electricity Crisis: Lessons for the future. Retrieved from http://www.nae.edu/Publications/Bridge/OurEnergyFuture/TheCaliforniaElectricityCrisisLessonsfortheFuture.aspx