Challenges the popular explanation for Enron's failure as being simply about financial reporting or criminal behavior and offers a more subtle and complex explanation.
With a framework developed from the literature on cults and cult behavior as well as secondary research, the authors develop the perspective that Enron's senior leaders created an organization that encouraged executives to act in ways that were criminal. Five characteristics of cults: persuasion, isolation, elitism, charismatic (and dogmatic) leadership and wealth not benefiting group members were found to apply.
The major differences between a high performance organization and a cult were transparency, accountability and dialogue.
It highlights the small difference between a high performance culture and a cult and raises “red flags” or warning signs for executives to be aware of. Executives looking for long‐term outstanding performance through high levels of social cohesion and strong behavioral norms need to be aware of the cult trap.
There are important management lessons from the Enron story that transcend accounting and financial reporting techniques and lessons beyond the illegal behaviors. It provides an understanding of how an organization's culture and systems can lead to cult‐like behavior and encourage employees to act in illegal ways.
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