Recommended Business Resources: The Smartest Guys in the Room

19 Jun

Yesterday I was back in the office after taking a few days off last week to catch my breath at this point during the summer production cycle and do some reading. I was able to finally start (and finish) Daniel Woodrell’s Winter’s Bone: A Novel, a fairly good example of “country noir” (although not quite as strong as his Tomato Red or, my all-time favorite, The Death of Sweet Mister which has an ending that has the horrifying impact of being run over—repeatedly—by a dump truck). Currently I’m working my way through Margaret Atwood’s dystopian Oryx and Crake because I needed a break before tackling the noir-ish No Country for Old Men by Cormac McCarthy, which I’m determined to read before the Coen brothers movie version comes out this fall. (I’ll have to wait a couple of years before Ridley Scott’s version of Blood Meridian: Or the Evening Redness in the West is released; it’s hands down my favorite McCarthy novel by far.)

Anyway, all that aside, I did get a chance to read a business-related book I picked up several weeks ago at Books-A-Million. At the front of the book was this statement from the company under discussion:

Our Values

RESPECT: We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness, and arrogance don’t belong here.

INTEGRITY: We work with customers and prospects openly, honestly, and sincerely. When we say we will do something, we will do it; when we cannot or will not do something, then we won’t do it.

COMMUNICATION: We have an obligation to communicate. Here, we take the time to talk with one another . . . and to listen. We believe that information is meant to move and that information moves people.

EXCELLENCE: We are satisfied with nothing less than the very best in everything that we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we really can be.

Sounds good, right? (The more cynical reader might be more inclined to say “typical” and/or “generic.”) These are the sentiments that people like to hear and the kinds of things we are often told by businesses and other organizations. The key thing here is that all too often there is a big difference between what we’re told versus what we’re shown. And, when you’re a company like Enron—and the statement above came from their 1998 annual report—that point is illustrated all the more clearly.

At one point in the late ‘90s and early 2000s Enron was the darling of Wall Street and one of the largest and most influential energy companies in the country. After a series of accounting, trading, and other business-related scandals Enron fell apart very quickly and very publicly at the end of 2001. This is very well documented by Bethany McLean and Peter Elkind, both senior writers at Fortune, in The Smartest Guys in the Room. After this book came out, a documentary of the same name Enron: The Smartest Guys in the Room was released; I’ve seen it a couple of times before reading the book last week and it is a good introduction to the wealth of more detailed information presented by McLean and Elkind.

By the time Ken Lay took Enron over as CEO in 2001 after Jeff Skilling’s departure, an internal study of morale at the company made “brutally” clear, as reported by McLean and Elkind, that:

“. . . the CEO’s exalted notions of Enron’s culture were a delusion. ‘Instability and chaos’ were the defining features at Enron. . . . employees complained bitterly about senior management’s ‘lack of corporate vision’; ‘there appears to be no long-term thinking, strategy, or game plan.’ Enron’s constant reorganizations—six in just the previous 18 months—were a running joke. The PRC [the employee evaluation committee structure] was viewed not as a meritocracy but as ‘punishment.’ Only deal makers got ahead; ‘no one in the corporate leadership truly cares about those charged with executing the deals and making them actually produce profit.’ Enron’s lack of discipline wasn’t something noble that nurtured creativity; it was destructive and demoralizing. Commented one Enron employee: ‘We’re a major corporation still acting like a dot-com start-up.’”

There are a lot of specific lessons to be learned from this case study known as the Enron debacle—far too many to go into here (Hey! Read the book! Watch the movie!)—but there are certainly some general principles that leap to the forefront: making a deal is one thing but satisfactorily fulfilling the obligations of the deal is another set of equally important concerns, transparent accounting is a necessity, hubris is a losing bet over the long haul, and you can’t have multiple/contradictory codes of standards and conduct, either internally or externally.

In the end, for having come across this book by virtue of having seen the documentary and wanting, subsequently, to learn more of the in-depth details of Enron’s rise and collapse, I would have to say this is one of the best business management books you could read. That is, management books with perky maxims and/or too-brief and under-explained happy case studies are one thing; books that show how the best of intentions can lead to the worst of failures can be both compelling and insightful.


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