terday. The scene: the dolder grand hotel, high in the hills above Zürich, Switzerland. It was I was the co-organizer of an impor- tant international monetary. The Smartest Guys in the Room PDF Summary by Bethany McLean & Peter Elkind give an account of the lightning growth and an even quicker. service and publisher of book Abstracts. getAbstract maintains complete editorial responsibility for all parts of this Abstract. The respective copyrights of authors.
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Read the definitive Enron book about the financial scandal and Enron's downfall. Book summary of the Smartest Guys in the Room, by Bethany. [PDF] The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron All e-book all rights stay with the writers, and packages come ASIS. Get Free Read & Download Files Enron The Smartest Guys In The Room Book PDF. ENRON THE SMARTEST GUYS IN THE ROOM BOOK. Download: Enron.
As Charlie Munger would put it , when multiple conditions mutually reinforce each other and create positive feedback loops, a massively outsized result — a lollapalooza — can happen. These are also the warning signs you can use to detect unstable situations and desist from bad behavior. Accounting practices that disguised the fundamentals The root of Enron has to be the accounting tactics that enabled deception. They let Enron book more revenue than they actually earned; keep losses and debt off balance sheets. If these were disallowed, the money-losing state of Enron would have been apparent far sooner.
The management team excelled in the external-focused competencies on the compete and create quadrants, with demonstrated weakness on the opposing and competing values aligned with the control and collaborate quadrants.
The strength of this model is that it also allows us to analyze the organizational culture along these same dimensions. Its managerial team did not integrate competing values and demonstrate behavioral complexity that would have made them more effective. Their unitary managerial posture contributed to a myopic vision and fostered a culture that was enormously successful but later became toxic. Both the CVF and the Mintzberg model offer valuable frameworks for assessing organizations, but each model has strengths and weaknesses.
The competing values framework offers a stronger perspective on the overall balance of the organization among four quadrants. The Mintzberg model offers insight into managerial posture for individual managers and teams.
Effective organizational leadership teams are those that have balance among individuals who assume various managerial postures aligned with art, craft, and science, as each managerial posture brings different strengths to the organization.
The CVF emphasizes the integration of competing values for a balanced individual approach to management. Managers set the bar high for goal attainment—and then raised it higher. They achieved incredible productivity from their employees.
However, the combination of an externally focused managerial posture Mintzberg, , p. From a managerial standpoint, Enron holds many lessons for organizational development and success. Enron was led by a team of charismatic leaders who could communicate the need for change and effect change in the organization. Unlike many organizations whose processes and dynamics stifle change and innovation, Enron leadership valued creative, visionary thinkers and entrepreneurial individuals, and the leadership welcomed good ideas and acted on them.
These managers are leading organizations that have been indelibly changed by their own successes in that the original strengths that made the organization successful have become weaknesses which bring the organization down Mintzberg, , p. Enron illustrates the tremendous leadership role that managers have in establishing the culture of the organization and in understanding the mechanisms for how organizational culture evolves. Currently, many managers deny the existence of a corporate culture in their organizations or view it as something they cannot control, instead of leveraging the opportunity to shape the formal culture of the organization Grey, , p.
The experience of Enron emphasizes the need for managers to be reflective practitioners in identifying and analyzing their own managerial style and to seek a balanced approach to management.
Managers, for example, will want to judiciously set challenging goals for employees— but also to develop controls that prevent unethical behavior in pursuit of those goals. It is imperative that managers are cognizant that the practice of management requires an understanding oneself as well as others and to examine their implicit biases to ensure that they are promoting diversity of thought and perspective and not hiring someone who is exactly like themselves.
Managers with a high level of confidence and competence are skilled at being able to work with diverse individuals and to value different ideas and different work styles. Managers need to exercise care in the goals that they set for employees and the behaviors that are rewarded. While they may be required to follow established performance review mechanisms and models established by the organization, to the extent possible managers can shape behaviors of their employees by judiciously selecting the goals that they will pursue.
Managers also can be cognizant of the tremendous power they have in creating confidence in their employees that they can achieve the goals set for them and fulfill their roles with the organization.
Managers can use their power judiciously and ethically to influence and motivate individuals in their unit. Lastly, while Enron holds many valuable lessons as an organizational success, it ultimately created a toxic culture that encouraged its employees to be dishonest and rewarded greed at the expense of long-term corporate results.
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Great man or great myth? A quantitative review of the relationship between individual differences and leader effectiveness.
Journal of Occupational and Organizational Psychology, 84, Curse of the superstar CEO. Harvard Business Review, 80 9 , Kerr, S. On the folly of rewarding A, while hoping for B. Academy of Management Journal, 18 4 , Kotter, J. Leading change: Why transformation efforts fail. Harvard Business Review Original work published , 85 1 , Mintzberg, H. In this culture, the most ruthless or those with the most flexible morals such as Jeff Skilling, Andy Fastow, and Ben Glisan naturally rose to the top.
It's hard to say exactly when Enron first stepped over the line; it's more of a gradual slope than a steep cliff. However, the company officially had to restate earnings from through before it declared bankruptcy in late The two major accounting problems that the book repeatedly mentions are mark-to-market accounting and Special Purpose Entities SPE's.
The value of an asset can be accounted for on a historical cost basis what you paid for it when you bought it or the market value what it would be worth if you tried to sell it today.
Fund managers who control money invested in the stock market use mark-to-market accounting because the price of a highly liquid asset such as a share of stock is easily attainable.
Less liquid assets like power plants or pipelines or international projects are harder to determine the market value for. Enron used this uncertainty to repeatedly deceive investors about the state of its finances. It also used Special Purpose Entities to keep debt off its balance sheet and manage its earnings.
This ensured that creditors wouldn't lower its rating, it would meet Wall Street's expectations, and the stock would continue to rise. Neither of these appealed to Enron, so, instead, it turned to LJM, which was technically an independent entity. LJM would fund the acquisition by taking out loans of its own, but the lenders would require Enron stock as collateral, which worked as long as the stock remained high. So, in reality, Enron was on the hook for the loan, but it wasn't required to report this inconvenience on the balance sheet.
LJM would receive hefty fees from Enron in exchange for removing the debt or adding additional earnings as needed.
The Board did so because it helped the stock and presumably their wallets if they were compensated in stock while Andersen received tens of millions of dollars from Enron for their consulting services on various accounting transactions or issues. The investment banks, the law firms, and Arthur Andersen all got their bread buttered by Enron. They had conflicts of interest and were unwilling to question the suspect, sketchy, and then illegal machinations of Enron's executives.
In the end, Enron's games with SPE's and accounting manipulations faltered when the tech bubble burst and dragged down the entire market. In desperation, Enron tried to contradict their own very narrow interpretation of the accounting rules governing the reporting of earnings and debt, but Andersen finally decided floating interpretations were untenable. This forced Enron to restate prior periods and miss their earnings target, subsequently triggering a massive sell-off, the unwinding of all the SPE's that were backed by Enron stock, a downgrading of their credit rating, a requirement to post cash collateral that they didn't have for all trades, the loss of liquidity, and ultimately the failure of the company.
It went bankrupt, but not before Lay, Fastow, Lou Pai, Glisan, Kopper, and other high-ranking execs walked away with tens of millions of dollars from cashing out their Enron shares. This book - fully updated for the paperback - tells the extraordinary story of Enron s fall. Customer Reviews Most helpful customer reviews 2 of 2 people found the following review helpful.
Great book. By Jeremy I downloadd this book as the textbook for a senior-level mathematics coursein my undergrad. However, this book does not "read like a textbook. Thepictures are clear, the words are concise, the ideas are organized logically and in proper order suchthat ideas are clearly described and explained in a manner that you don't have to be a mathematicsmajor to understand what is being talked about.