Enron: Leading while avoiding conflict
Luke Gordon
Organizational Communications
Hall
November 6, 2011
Enron
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Upon viewing the movie “Enron” I picked up on two main concepts that were stressed throughout the movie. I noticed how leadership, both good and bad, was extremely vital to this company. I also noticed that conflict was another major determining factor for Enron. According to the Blake And Mouton Managerial Grid, a good leader must have theoretical ideals, high relationship, and high task accomplishments. While Kenneth Lay lacked a few qualities, he did show signs of leadership which proves that one doesn’t always have to contain these qualities to run a multibillion dollar company. My next theme, conflict, shows conflicts in the movie, and various definitions regarding conflict.
As soon as numbers weren’t adding up, and the company was falling through,
Lou Pai and J. Clifford Baxtor were hired. Pai was notorious for using shareholder money to feed his obsessive habit of visiting strip clubs, and for allegedly inviting strippers into his office and the Enron trading floor. Pai abruptly resigned from Enron with $250 million, soon after selling his stock. Despite the amount of money Pai had made, the divisions he formerly ran lost $1 billion, a fact covered up by Enron. Pai used his money to buy a large ranch in Colorado, becoming the second-largest landowner in the state. This paper is going to consist of what it takes to be a good leader, how one can avoid being a bad leader, and what Enron did that connected both of these traits. I will also be discussing conflict and how to properly handle issues, and what Enron did to try to resolve conflict.
The film starts out in a mysterious way, providing some background information and viewings of the Enron building while leaving viewers somewhat puzzled. The film then shifts to a reenactment of the suicide of Enron executive known as John “Cliff”

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Baxter, driving his Mercedes late at night. He then parks his car, and as viewers see nothing but the car, a single gunshot is fired. This is, and then the movie travels back in time, describing Enron chairman Kenneth Lay's humble beginnings as the son of a preacher, his ascent in the corporate world as an, "apostle of deregulation," his fortuitous friendship with the Bush family, and the development of his business strategies in natural gas futures. The film then points out that the culture of financial malpractices at Enron was evident as far back as 1987, when Lay apparently encouraged the outrageous risk taking and profit skimming of two oil traders in Enron's
Valhalla office because they were bringing a lot of money into the company.
The Smartest Guys in the Room explores the extent in which the company went to in order to appear profitable. Their win-at-all-costs strategy included suborning financial analysts with huge contracts for their firms, hiding debts by having the company loan money to itself, and using California's deregulation of the electricity market to manipulate the state's energy supply. Gibney's film reveals how Lay, Skilling, and other execs managed to keep their riches, while thousands of lower-level employees saw their loyalty repaid with the loss of their jobs and their retirement funds.
The filmmaker posits the Enron scandal not as an anomaly, but as a natural outgrowth of free-market capitalist.
Leading a multibillion dollar company takes a unique leadership style, which is described as, “a continuum from autocratic (boss-centered power and authority to democratic (managers and subordinates share power and authority) to laissez faire
(subordinate-centered power and authority with little to no guidance from managers).
Through Kenneth Lay’s leadership, I picked up on a few strategies he used. One of

Gordon 4 those was motivation, which is described as, “the degree to which an individual is personally committed to expending effort in the accomplishment of a specified activity or goal.” Lay was very open, and open communication is described as, “perceive the other interactant as a willing and receptive listener and refrain from responses that might be perceived as providing negative relational or disconfirming feedback.” Another strategy
Lay used was empowerment. This is defined in a few different ways such as: sharing power and decision making with employees through delegation to enabling and motivation employees by building feelings of self-efficacy.
Some of the worst events in history have come from the best of intentions.
Enron saw dollar signs in their eyes, and did what they had to do to be the best. They proved that with a quality leader, a company can appear as if it is running smoothly.
The company was well organized, contained the smartest men in the room, and was destined for grea tness. If it wasn’t for a simple issue of dealing with conflict, this company may have remained on the, “Fortune 500,” top cooperation’s. In order for a leader to be great, they must either be open, supportive, motivating, and or empowering.
Kenneth Lay possessed many of these qualities, but still let his company go under.
He was open and motivating, as he took his employees on rock climbing trip, and to races in the Baja.
As long as Lay’s employees were able to make the company look successful, they were given raises and were praised. This was seen through the incident of the forest fires, and the power plant company shutting down power to raise prices. When the community was forced to pay a higher price or go without power, they buckled. Two Enron employees were recorded having a conversation about cheering on the forest fire and being happy about retiring at age 30. This was immoral but was

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Another form of leadership lay used was his ability to empower his employees.
Conflict is all around us, and there is no way to avoid it. In order for conflict to be resolved, it must be properly dealt with which wasn’t the case with Enron. Conflict is defined by organizational communication scholars Linda Putnam and Marshall Scott
Poole as, the interaction of interdependent people who perceive opposition of goals, aims, and values, and who see the other parties as potentially interfering with the realization of these goals.” Kenneth Lay reached a consensus, which is defined as,
“reflecting an overarching belief that in the long haul, all of us are smarter than any one of us.”
The first example I saw relating to conflict started with the trips Kenneth Lay took his employees on. They would all go rock climbing and race off road vehicles in the
Baja, which sends mixed messages.
It’s one thing for a few co-workers to go out for a few drinks after work, but this is on a large scale and is at the expense of the company.
Next, Lay hired Lou Pai and J. Clifford Baxtor to enforce his directives inside Enron, and they were known as the "guys with spikes." Hiring these men could have been avoided if the company had morals, and was very clear as to how operations were going to be run.
Next, Lay quoted that he didn’t care how revenue came in, just as long as it came in. This opened all sorts of doors for corrupt business actions. This included having some of their clients buy large cargo ships that had nothing to do with their business.
This cleared the debt temporarily from Enron’s books, and they temporarily got away with it. Lastly, as the company was crumbling and it was every man for himself, Lay

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With a successful leader who can resolve conflict, an organization can go far.
We learned through the failure or Enron that it is not worth lying, working around the system, and being dishonest, to try to be successful. Leaders can show a number of characteristics such as being open, supportive, motivating, and or empowering. Even though Kenneth Lay showed most if not all of these qualities, he still had one of many flaws. He was unable to handle conflict, or rather he handled it in a way he thought was correct.
By allowing his company to be run by the employees and turning his head to what was going on, he lost all reputation as a great leader. He did not care how income was generated, just as long as the money was rolling in. This created dishonesty with his employees, and eventually the downfall of Enron. What we all can take away from this movie is simply that with a true leader, good morals, and an excellence at resolving conflicts, business everywhere will flourish.

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Eisenberg, Eric M.. Organizational communication: balancing creativity and constraint.
5th ed. Boston: Bedford/St. Martin's, 2007. Print.
"Enron: The Smartest Guys in the Room :: rogerebert.com :: Reviews." rogerebert.com ::
Movie reviews, essays and the Movie Answer Man from film critic Roger Ebert.
N.p., n.d. Web. 8 Nov. 2011.
<http://rogerebert.suntimes.com/apps/pbcs.dll/article?AID=/20050428/REVIEWS/
50413004>.