Case Study: Impacts of Power, Politics and Conflicts A Case Study: HRM, Impact of Power, Politics and Conflictat Enron Power is defined as capacity or ability to direct or influence the behavior of others or the course of events. In many corporations including Enron, it may reflect itself in terms of authority that an individual commands by virtue of his/her office that may make him able to make another office implement his direction (Dahl, 1956). At Enron, the office of the CEO, held by Kenneth Lay commanded much power after the merger of Internorth and Houston Natural Gas that enabled it with the help of chief financial officer, Andrew Fastow to transfer liabilities so as not to appear in its accounts.
This allowed management to hide losses from the public investors and auditors. Despite the obvious losses realized, the executive didn’t consider reporting the truth in their books of accounts but instead chose to falsify the statement. This was being done to win investor’s confidence in the company which they succeeded in until 2001. The company used its power to manipulate investment banks who had invested into it to attempt recovering it especially by not disclosing the truth to the third parties the true state of affairs and even the financing they gave against the legal requirements by the government (Jickling, 2003).
The same power was used to intimidate senior employees into not reporting what was happening. Whoever tried that would be greeted by termination of employment (Jickling, 2003). Politics on the other hand was played by the way chief financial officer could fire you for not being loyal to him. Loyalty here was by not disclosing any secrete to anybody.
Also as reported by Sherron Wartkins, Enron’s’ executive that she informed the CEO about the anomalies in the accounting system but the he never acted (Cohan, 2002). This shows how willing she was to correct this but could not due inadequate authority. She had to wait for the above office to act but this never happened. Politics manifested itself in how the chain of command was designed such that top executives were so isolated from the group that they never had direct contact with people below (Peter, et al. , 2002).
This locked a lot of information from them and hiring was done on loyalty to the hirer. Majorly, politics was so evident in the way government moved swiftly to enact Sarbanes-Oxley Act of 2002 to transform how securities markets, corporations and independent auditors operated in a bid to stop any future occurrence. This not only saved public investors but also the face of the whole country’s corporations before the world. The human resource approaches that could have been used to assist employees through the conflict would be; use of various communication means to amplify the organization culture, redesigning the organization structure to accommodate better internal communication and flow of information.
The HRM should also win the confidence of employees by reassuring them of future compensation for their pension and their future involvement in decision making as well as transparency in the company’s undertakings. This will help to win back their confidence. The HRM approaches that could have been used include; employee involvement and relations in company’s undertakings, developing ethics management, work restructuring as well as strategic HR work restructuring and developing other communication channels within different hierarchy to ensure no level gets distorted information.
This would have made it possible to for employees to communicate such unscrupulous financial reporting and escaped being duped into buying such securities. For the sake of ethics, corporations should make it a must to respect the GAAP procedures regarding financial reporting. It should be a culture not to reprimand bearer of bad information but to encourage all kind of information regardless of whose mistake resulted into such occurrence. Bibliography Cohan, J.
A., 2002. I dint know and i was only doing my job: Has corporate Governance careened out of control? A case study of Enrons information Myopia. Journal of Business Ethics, 21(3), pp. 272-299. Dahl, R. A., 1956. The concept of power. Journal of Management, 12(7), pp. 134-56. Jickling, M., 2003. The Enron collapse: the overview of financial issues. [Online] [Accessed 20th March 2015]. Peter, C., Fusaro, R. & Miller, M., 2002. What went wrong at Enron: Everyones guide to the largest bankruptcy in U. S History. New York: John Willey & Sons.