Skilling Given Low Marks for Leadership
Former Enron Chief Executive Jeffrey K. Skilling’s testimony that he was unaware of the company’s financial distress defies belief and flies in the face of bedrock tenets of corporate leadership, many executives and management experts said.
Skilling swore to a congressional committee Thursday that he “was not aware of any financing arrangements designed to conceal liabilities or inflate profitability” when he resigned from Enron on Aug.14, shortly before the company started to unravel.
It will be up to others to decide whether Skilling broke any laws, but taking that story to Capitol Hill convicted him in the court of common sense, management experts said Friday.
“He was a completely incompetent CEO if he didn’t know,” said Larraine Segil, a Century City-based management consultant and author. “What you’re talking about here is either a blatant untruth, or it is evidence of something very smelly at the top of that organization.”
In an era when the highest form of flattery a CEO can hear is a favorable comparison to Jack Welch, who recently retired as the very hands-on head of General Electric Co., the ignorance Skilling expressed about Enron’s impending financial disaster struck experts as all the more remarkable.
“We look at Jack Welch and say, ‘This is what we expect from a corporate executive, not a micro-manager but hands-on,’” said Lois P. Frankel, president of Pasadena-based Corporate Coaching International. “Jack Welch had a broad vision for what he wanted GE to become. He empowered people to go out and make it happen--and he held them accountable.”
If all Skilling failed to do was to hold his lieutenants accountable, he still violated a cardinal corporate rule, Frankel said.
“There is a saying in management: ‘What you were responsible for before you delegated it, you are responsible for after you delegated it,’” she said. “You can’t say you don’t know anything about it. That’s a fundamental breach of your management responsibility.”
Corporate coach Stephen Xavier said he was flabbergasted by Skilling’s testimony.
“If he truly didn’t know, shame on him as a CEO because it’s his job to know,” said Xavier, managing partner of Thousand Oaks-based Cornerstone Executive Development Group.
Skilling, 48, has been portrayed as a pivotal figure in Enron’s transformation from a natural gas pipeline operator to a pioneering energy trader. In doing so, he espoused what has been described as a fast-paced, freewheeling entrepreneurism.
But having a corporate vision is not enough, executives said. Former President Reagan, Apple Computer Inc.’s Steve Jobs and Microsoft Corp.’s Bill Gates are noted for their visions, but each surrounded himself with top-notch deputies, kept a close eye on the bottom line or did both.
“I’m a visionary-type person myself, but I make darn sure there is a CFO sitting right next to me who, if there is any problem, I trust to march into my office and say, ‘There is a problem,’” said David Friend, CEO of Boston-based Sonexis Inc. “I know I’m ultimately responsible to my stockholders. ‘I’m off giving speeches somewhere and didn’t know what was going on’ is not going to cut it.”
Skilling told Fortune magazine in April that he couldn’t wait for Enron to move into an as-yet- unfinished tower across the street from its downtown Houston headquarters so that he could have an office near the trading floor.
The former CEO lamented being in the executive suites on the top floor of a 50-story high-rise, where he said he felt out of touch with the rank and file.
But it doesn’t take an MBA to figure out how to talk to employees. One method known as “walk-around management” is just that: Executives stroll and chat with employees throughout the company, from the shop floor to the boardroom.
Some CEOs invite employees to communicate directly with them by unscreened e-mail or voicemail--simple mechanisms to discover problems that their immediate subordinates might be reluctant to pass on.
“Sometimes it’s very hard for someone at mid-management level to get the word up that it’s not going to work,” Frankel said.
One of the most infamous examples of bad news not getting through the invisible barrier between people in the know and decision makers was the explosion of the space shuttle Challenger in 1986.
“Why did the people at the top [of NASA] not know the O-rings had a problem?” said USC management professor Ian Mitroff. “There were memos. But they were blocked from reaching the top. The point is, a colluding culture will block the messages from getting through.
“That may have been what happened [at Enron], although instead of blowing up a rocket, they blew up people’s retirement funds,” he said.
Although Mitroff said it is possible Skilling was kept in the dark, he said that assertion “strains the imagination.”
