 PROJECT: WHY ORGANIZATION FAILED?

 TITLE: ENRON ENERGY CORPORATION

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  PRESENTATION BY ACCORDING TO FUNCTIONS OF
MANAGEMENT:

 GROUP LEADER: MASHOOQ ALI

 SANAM FATIMA: PLANNING
 SADIA PARVEEN: ORGANIZING
 MUZAFFAR AL: LEADING
 SHAHVEER ALI: CONTROLLING
 OVERVIEW:

 Former Type: Public Company

 Industry: Energy
 Founded: Omaha, Nebraska (1985)
 Founder: Kenneth Lay
 Defunct: December 2, 2001
 Headquarters: Houston, United States
 Key People CFO: Kenneth Lay, Founder, Chairman and Jeffrey Skilling, Former
President, CEO and COO And Andrew Fastow, Former CFO.
 Revenue: $101 Billion (2000)
 Employes: 22,000 (2000) {Approximately}
  INTRODUCTION:

Enron Energy Corporation was a multinational energy trading and utilities company based in
Houston, Texas. Founded in 1985 by Kenneth Lay, Enron quickly grew to become one of the
largest energy companies in the United States, specializing in the buying and selling of natural
gas, electricity, and other commodities.

Enron initially operated as a traditional energy company, owning and operating pipelines, power
plants, and other infrastructure. However, it gained significant attention and became renowned
for its innovative approach to energy trading and its aggressive expansion into new markets.

Enron embraced a new business model that focused on creating a market for energy-related
commodities. It pioneered the idea of trading energy contracts as financial instruments, allowing
companies to hedge against price fluctuations and manage their risk exposure. This approach led
to the development of a highly profitable energy trading division within Enron.

Throughout the 1990s, Enron's stock price soared, and it gained a reputation as one of the most
innovative and successful companies in the world. It expanded globally, establishing offices and
operations in Europe, Asia, and South America. Enron also diversified into other industries, such
as broadband and water services, aiming to become a dominant player in various markets.

However, Enron's success was short-lived. In 2001, the company's fraudulent accounting
practices and unethical business dealings were exposed. Enron had been artificially inflating its
profits, hiding debt, and using complex financial structures to deceive investors and regulators.
The revelations led to a rapid collapse of the company, resulting in one of the largest corporate
scandals in history.

Enron filed for bankruptcy in December 2001, and its downfall had far-reaching consequences.
Thousands of employees lost their jobs, and investors lost billions of dollars. The scandal also
led to increased scrutiny and regulatory reforms within the energy and accounting industries, as
well as changes in corporate governance practice.
  PLANNING:

Planning involves setting goals, determining actions to achieve those goals, and
developing strategies to guide an organization. In Enron's case, planning played a crucial role in
its deceptive practices. The management, particularly the executives, formulated plans to
manipulate financial statements and hide debt through complex accounting techniques. They also
planned to create special purpose entities (SPEs) to transfer debt off Enron's balance sheet,
presenting a misleading picture of the company's financial health.

Planning played a significant role in the failure of Enron's energy corporation. Enron's
downfall was the result of a combination of unethical practices, accounting fraud, and a
flawed business model. Here's how planning (or the lack thereof) contributed to the
company's failure:

Strategic Misdirection: Enron's planning process failed to establish a clear strategic

direction for the company. The company diversified into various unrelated businesses,
including broadband services and water utilities, without a coherent strategy. This lack of
focus and strategic misdirection ultimately led to a lack of synergy and contributed to the
company's financial instability.

Complexity and Obscurity: Enron's business model involved complex and opaque
financial structures, such as special-purpose entities (SPEs), which were used to hide debt
and inflate profits. The planning process should have identified the risks associated with
such complex structures and assessed their implications. However, the planning at Enron
failed to adequately address these risks, allowing deceptive accounting practices to persist.

Lack of Risk Management: Enron's planning process did not effectively identify and
manage the risks associated with its aggressive trading and investment activities. The
company engaged in high-risk speculative trading in energy markets, including
derivatives trading, without implementing robust risk management strategies. This lack of
risk management contributed to significant losses when market conditions turned
unfavorable.

Inadequate Internal Controls: Enron's planning process failed to establish and enforce
proper internal controls. The company lacked effective checks and balances, which
allowed fraudulent practices to go undetected. Key stakeholders, including auditors and
board members, were unaware of the extent of the financial manipulation and relied on
inaccurate and misleading financial statements.

Ethical Oversight: Planning processes should incorporate ethical considerations and

establish guidelines for ethical behavior. However, at Enron, the planning culture fostered
a focus on short-term financial gains and disregarded ethical principles. Executives and
employees were incentivized to pursue aggressive accounting practices and engage in
unethical behavior, leading to a culture of corruption and deceit.

In summary, the failure of Enron's energy corporation was a result of multiple factors,
including strategic misdirection, complexity, inadequate risk management, weak internal
controls, and ethical oversight. The planning processes at Enron failed to address these
issues effectively, allowing fraudulent practices to thrive and ultimately leading to the
company's collapse.