September 11th was a tragedy that brought harsh consequences for many businesses for which one can blame terrorism. The other bankruptcies, though, are more frightening in that we brought them on ourselves. True, one can point fingers at the CEO’s in charge. There is no doubt that some were in a position to know when to jump ship before the rest of us.
But how do large organizations get to that point virtually overnight? What creates the organizational culture that allows a house of cards to be built in the first place? What drives good leaders to make unethical choices? To assume that all of the leaders in Enron were evil, greedy and selfish is too simplistic. There is more to the story, and we must understand how such ethical violations and consequent collapses occur.

How can it happen?
In 1986 the space shuttle Challenger exploded causing the death of seven astronauts. A subsequent investigation of the culture at NASA revealed important lessons. There was not one single error that occurred, and neither did the managers intentionally commit wrongdoing. Yet it could have been prevented. The errors were years in the making. NASA engineers noticed damage to crucial O-rings yet they repeatedly convinced themselves that this level of damage was acceptable. One analyst described it as “an incremental descent into poor judgment.”
The culture at NASA was extremely success-oriented. They had hired the best of the best, and had set highly complex and sophisticated performance goals. The pressure to succeed gradually mounted until minor violations of standards became the standard. Nothing looked wrong until it was all over.
The culture at Enron was very similar. They hired the brightest from graduate schools. Success was rewarded and non-performers shunned. The emphasis was on the numbers and immediate success rather than on long term values. There was a gradual descent into poor judgment, denial, failure to challenge the system, greed, deceit, ego, wishful thinking, poor communications and lax oversight. But it was apparent only in retrospect. No one noticed at the time as everyone was immersed in the culture.
The question to ask is not how did this happen at Enron, but how is it happening in one’s own organization right now? What are the standards and how and to what degree are they communicated and reinforced? Where are standards being violated? As a leader, in what ways is one contributing to a loosening of ethical and moral values?