Once upon a time, not long ago, there was a company called Enron.
In 2001, Fortune magazine ranked Enron at No. 7
with revenues of over $100 billion, profits of nearly a billion, and a market
value of nearly $50 billion.
The “icing
on the cake” for Enron was Fortune naming it (Enron) “America’s most innovative
company” 6 years in a row.
Enron went on to innovate and grow. In 2017, it became the
No.1 company in the world with revenues of over half a trillion and a market
cap to match. Employing over 100,000 people, Enron represented the best in
American entrepreneurship and innovation.
Well, you know that the last paragraph didn’t happen.
Fortune had
to “red circle” Enron in its 500 lists.
The company collapsed spectacularly after it was discovered that key top
executives and Arthur Anderson
(company’s auditors) had “managed” to keep huge debts off the balance sheets
resulting in “fake earnings” of $1.7
billion.
Shareholders lost some $74 billion, thousands of employees
lost their retirement accounts, and many lost their jobs. CEO Jeff Skilling and
former CEO Ken Lay went to prison. Lay died before serving time. Skilling got
24 years in prison. Arthur Anderson was found guilty of fudging Enron’s
accounts and was fined $7 million.
How did the
malfeasance become known?
Sherron Watkins thought something was fishy about the stock
prices and turned whistleblower.
Fast forward to 2017.
Who could have predicted a few months back that the “poster
boy” for Silicon Valley’s entrepreneurial spirit, Travis Kalanick, Co-founder
and CEO of Uber would be stepping down?
The company
has had a meteoric rise and earlier this month had a presumptive value of over
$70 billion.
Please read
the transcripts or watch the videos of Kalanick’s speeches at conferences, his
inspirational addresses to students across the world, his numerous and
unabashedly arrogant interviews. You would probably think that the next great
leader has arrived.
Then hear Adam Lashinsky’s fascinating audio book
on Kalanick (Wild Ride: Inside Uber’s
Quest for World Domination; Penguin Audio; 2017).
I won’t
spoil the fascinating (and often disturbing) account by revealing anything.
However, it
is worth noting a few important lessons from the rise and (at least temporary)
fall of Travis Kalanick:
Leadership matters – leading by
example matters even more. Using expletives every other sentence may be “cool”
but I would respectfully submit that behind the façade is a probable
realization that something could be terribly wrong.
Organizational culture matters – a toxic culture that is impervious to real problems and
real issues is an almost guaranteed path to failure.
Rapid and constructive responses to crises matter – the more you try to push issues under the carpet, the more
cancerous they become.
In the era
of social media and instant “breaking news” negative publicity is probably a hundred times as potent as positive publicity. The ability of the
latter to generate goodwill is incremental. The ability of the former to
destroy a brand is a near certainty – quick and brutal.
A parallel
to Enron is Susan Fowler whose blog
on discrimination and sexual harassment triggered the present crisis, the
appointment of a former Attorney General to investigate matters, and the forced
resignation of Kalanick.
Which begs
the question – have we lost the capacity
to learn from history? More on this in a subsequent post.
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