Magazine

Leadership


As the 1990s unfolded, Enron came to represent the triumph of New Economy thinking over Old Economy principles. It was fast, adaptive, innovative, and profitable--a corporate culture perfectly suited to what it did: creating and exploiting new markets. Everyone envied and emulated Enron.

While Enron's culture emphasized risk-taking and entrepreneurial thinking, it also valued personal ambition over teamwork, youth over wisdom, and earnings growth at any cost. What's more, the very ideas Enron embraced were corrupted in their execution. Risk-taking without oversight resulted in failures. Youth without supervision resulted in chaos. And an almost unrelenting emphasis on earnings, without a system of checks and balances, resulted in ethical lapses that ultimately led to the company's downfall. While Enron is the extreme case, many other companies show the same symptoms.

If the challenge for executives in the 1990s was to transform corporate behemoths into nimble competitors, the challenge in coming years will be to create corporate cultures that encourage and reward integrity as much as creativity and entrepreneurship. To do that, executives need to start at the top, becoming not only exemplary managers but also the moral compass for the company. CEOs must set the tone by publicly embracing the organization's values. How? They need to be forthright in taking responsibility for shortcomings, whether an earnings shortfall, product failure, or a flawed strategy and show zero tolerance for those who fail to do the same.

The best insurance against crossing the ethical divide is a roomful of skeptics. CEOs must actively encourage dissent among senior managers by creating decision-making processes, reporting relationships, and incentives that encourage opposing viewpoints. At too many companies, the performance review system encourages a "yes-man culture" that subverts the organization's checks and balances. By advocating dissent, top executives can create a climate where wrongdoing will not go unchallenged.

None of these proposals can guarantee that another Enron, Cendant (CD), or Sunbeam will never surface. No one can legislate or mandate ethical behavior. But leadership must create an environment where honesty and fairness is paramount. If integrity is to be the foundation for competitiveness, it has to begin at the top.


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