Owen Coleman
ENRON
A Lesson For Technical Communicators
ABOUT ENRON
Enron Corporation was an energy, commodities, and intensive services company based out of Houston, Texas. Established in 1985 by Kenneth Lay following the merger of Houston Natural Gas and InterNorth, it was primarily involved in the energy and commodities markets, offering products and services like natural gas, electricity, and broadband communications in new 'Innovative' ways. Enrons approach to energy was banking on, and lobbying for deregulation. It pioneered the commodification of natural gas, energy, and other utilities into a Wall Street style trading market. Enron was hailed as the company of the future, a model for successful corporate management at its height, and an innovator in what was seen as a ossified and stagnant industry.
However, today Enron is most infamous for one of the most notorious corporate scandals in history. In 2001, it was revealed that Enron's financial condition was an elaborate fraud. The company had used accounting loopholes through its 'Mark-to-Market' accounting strategy, special purpose entities, and poor financial reporting to hide debt from both internal and external observers. The As a result, Enron filed for bankruptcy in December 2001, which at the time was the largest bankruptcy in U.S. history.
One of the major contributors to Enron's financial collapse was a failure in basic competence in communication, driven by a toxic organizational culture, poor inter-departmental lines of communication, and a hyper-competitive, adversarial, corporate structure. This breakdown in communication, marked by a lack of honest and cooperative information exchange, obstructed transparency and facilitated a growing web of financial deceit. Critical data was often obscured, misinterpreted, or entirely ignored, leading to faulty decision-making processes. The lack of robust communication protocols and the culture of secrecy allowed misleading and dishonest accounting practices to go undetected for an nearly a decade. In this high-pressure environment, the necessity for clear, accurate, and honest technical communication was sacrificed in favor of rapid financial and personal gain to the detriment of the organization as a whole.
Methods
Given the defunct status of Enron, materials are limited to those made public by Enron or through depositional and discovery processes. Materials include email archives, financial statements, shareholder reports, onboarding materials, internal phone calls, and executive interviews. Using these materials, I will explore the primary communication channels used within Enron, what about the organization, such as culture and structure, fostered the egregious lack of communication, and how these contribute to the company's mismanagement and fraud.
Using the archive of 500,000 + internal emails made public through discovery, I will attempt to draw some macro-level insights by running data analysis using R. This includes the frequency of certain keywords, Communication clusters within the organization, frequency of communication based on position within the organization, and sentiment analysis. Through these Insights, I will attempt to draw some conclusions on information bottlenecks, practical organizational structure, corporate culture, as well as norms and expectations in written communication.
Through financial statements and shareholder reports I will look at the ways in which Enron translated internal data and information into public-facing communications. Given the organizational goals inherent to these documents, such as downplaying headwinds and failures while emphasizing success and financial strength, I will look at the methods technical writers used to achieve these organizational goals. Given the context of Enron's collapse, I will look at accounting methods as a form of translation. Specifically how the accounting practices were intentionally obfuscated in public-facing texts to achieve organizational aims.
For onboarding materials, I will examine the ways in which Enron communicated its corporate culture, expectations, and norms to new employees. This may provide insights into the broader communicative environment within the organization, as well as offer clues about the ways in which new employees were encouraged or dissuaded from participating in certain communication practices.
Examining internal phone calls and executive interviews will provide further context to the communication norms within Enron. These conversations often capture the tone, language, and informal norms that govern an organization's communication culture. By analyzing these calls and interviews, I will explore the spoken communication channels within Enron and understand how they contributed to or diverged from the written communication practices.
Through this detailed analysis of Enron's communication practices, this project seeks to underline the critical importance of transparent, ethical, and effective communication to the longevity of organizations.
Findings
For Explanations of data insights, refer to the visualizations page
I. Macro Insights from Enron Email Archives
The Enron email archives, originally released by the Federal Energy Regulatory Commission, is one of the largest publicly available collections of professional communication, containing roughly half a million emails between relevant Enron employees. The emails provide a unique insight into the internal operations and communication dynamics of a Enron during a critical period prior to the company's bankruptcy. Through analysis of these documents, we can see the broad patterns of communication within the organization, the hierarchical structures, the frequency and nature of communication between different positions and departments, and the tone of this discourse. We can also gain insights into the corporate culture and power dynamics present.
Analysis of networks of communication present in the Enron archive, shown in Figure 1 indicate a conventional top-down organizational structure where executives are highly interconnected, acting as nodes for interdepartmental communication. In contrast, lower level managers, associates, and employees remain segmented into their respective departmental communication networks. As seen in the figure 1, nodes (individuals) with greater size have integrated into large network of highly interconnected contacts. The majority of nodes are not part of of these robust communication networks, likely communicating directly with direct superiors and colleagues which is supported by Figure 2, showing that while higher positions have greater connectedness, they tend to have much fewer direct connections. In a more egalitarian organizational structure, you would expect these nodes to be of similar size, as norms surrounding communication would encourage access and discourage hierarchical structures. The organizational structure evident in this dataset presents significant risks regarding the flow of information and the introduction of potential bottlenecks. If executives fail to collaborate, lines of communication between departments would likely break down.
Sentiment Analysis of a random subset of the data presents some counter-intuitive insights into narrative and tone within the context of Enron at the time. Figure 3, indicates that while Enron was under financial pressure due to failures in their broadband ventures and increasing regulatory scrutiny regarding alleged market manipulation, attitudes within the company reflected 'positivity' and 'trust'. A potential explanation for this anomaly could be a lack of information resources. While most employees and low level managers were unaware of the misconduct occurring at Enron, this dataset is weighted with upper level managers and executives who would have been at least been partly aware. It is likely that due to information breakdowns within the organization, no single actor understood the full scale and complexity of Enron's financial position. Testimony from former Enron Employees seems to support this view, "It certainly wasn't clear to anyone at Enron, much less anyone outside of Enron. It wasn't really clear what was going on" (Wickman, Smartest guys in the Room)
II. Mistranslation in Public Communications
The primary organizational aim apparent at Enron was increasing market capitalization, or share price. By increasing share price Enron increased its ability to borrow, enriched executives, and kept the company from financial collapse. Public oriented communications such as annual shareholder reports, financial statements, announcements, and investor calls were central to achieving this outcome. These forms of communication acted as information tools to shape public perception and investor sentiment. They were crafted to present an image of Enron as an innovative and financially robust company, even when that narrative clearly deviated from the internal reality. The careful translation of internal financial data into optimistically skewed public communications played a key role in maintaining investor confidence and share price. It is this misuse of technical communication that led to the gross distortion of Enron's true financial status and its eventual collapse.
The Intentional mistranslation of technical language is most apparent in the Annual Shareholder Report of 2000. In Financial Highlights, we see Enron's financial statements for years 1996 - 2000. The document presents staggering revenue growth of of almost 1,000% over 5 years, and a 290% growth in profits over the same period. What was omitted from the document were the unorthodox accounting practices implemented at Enron to achieve those numbers. Enron used mark-to-market accounting, which is which is an accounting practice, introduced to Enron by Jeff Skilling, that involves recording the value of an asset based on its current market price, rather than its book value. This method, while common in financial industries, was applied by Enron in an unconventional way, allowing them to arbitrarily speculate on and record potential future profits on the day that a deal was signed, regardless of the actual profits received. Enron applied this accounting method to long-term energy contracts, allowing Enron to record profits as far as 20 years in the future. As you can imagine, predicting the price of anything 20 years into the future is nearly impossible, virtually giving accountants the power record any number within the realm of possibility.
Another misuse of technical communication is apparent in the document Outdistance The Competition, showing how Enron used informal language and casual tone in conjunction with technical terms to misinform readers. The term "total contract value" is a reference to this unorthodox accounting system, what is omitted is the arbitrary nature of the "value" of these contracts, as well as the fact that these revenues haven't and will not be received for years. Additionally, the term "significantly accelerated transaction activity" presents the organizations new broadband service as a success, when in reality Enron was losing money on every one of these additional transactions.
Enron's public-facing communications served as a vehicle to propagate a narrative of growth and profitability that was at odds with the organizations internal reality. The intentional mistranslation of technical language was a key strategy employed by Enron to inflate its financial status. The strategic selection and cooption of language and tone was employed to further obscure the true nature of the company's operations.
III. Culture, Norms, and Expectations
From the breadth of analysis done on Enron since it's collapse in 2001, one of the constant themes was the particularly problematic culture within the organization. Enron, despite its stated commitment to Equal opportunity employment and diversity (Exhibit X), promoted a patriarchal culture characterized by intense competition, pressure to perform, and pursuit of profit. The firm's culture prized Professionalism, individualism, and innovation to the point of recklessness, with a high tolerance for risk taking and a disdain for regulatory constraints. This hyper-competitive and exclusionary culture likely contributed to the poor lines of communication apparent within the organization.
The professional norms within Enron were highly conventional, but only slightly more conservative than what was common in late 1990's and early 2000s. in Exhbit 1 we see the guidelines for dress code, and what seems to be a begrudging acceptance of 'casual fridays,' with supervisor approval of course.
At Enron, organizational norms surrounding dress code were trivial in comparison with the other problematic aspects of company culture. The most impactful driver of the internal issues at Enron was the Annual Performance Review, which was a bi-annual, company wide, employee ranking system implemented by Jeff Skilling. The performance review was high stakes, with those scoring high obtaining massive bonuses, and those at the bottom being marked for termination. The system was designed to pit individual employees, departments, and executives against each other, leading managers and executives to do whatever it took to show positive performance, at least on paper, before the performance review, while actively obstructing other departments. Cases reported by Bethany McLean and Peter Elkind in Smartest Guys in the Room, such as head of trading division, Lou Pai, providing false information to the trading division to cause losses exemplifies the breakdown in communication lines driven by an environment of distrust.
The manifestation of this organizational culture is most evident in the implicit in verbal communications within the Enron trading division, shown in Exhibit 5. These communications show not only a willingness to engage in highly unethical practices, such as creating artificial energy shortages to profit off of energy trades, but the mutual encouragement of it. In a culture that promotes dishonesty and rule breaking under the guise of innovation and a go-getter mindset, it is no wonder that communication breakdowns occurred within the organization. When various departments and teams view those they are supposed to cooperate with through an adversarial lens, an organization will lose its ability to make and execute on informed strategy and decision-making.
Conclusion
The study of Enron's internal and external communication practices reveals the key role that technical communication played in the company's downfall. From the macro insights derived from the email archive analysis, we observed a top-down communication structure, significant information bottlenecks, and a disconnect between the organization's internal and external realities relating to communication. Despite presenting an image of positivity and trust within the company, the underlying reality was characterized by intense pressure, competition, and unethical conduct, all driven in part by deficiencies in competent organizational communication. This internal dynamic is what ultimately enabled and perpetuated fraudulent activities within the firm.
However, there are limitations to this analysis. The availability and selection of materials, particularly the email archives, could introduce bias. The email dataset over-represents higher-level managers and executives, potentially skewing the results. This, combined with my lack of competency in utilizing quantitative tools should cast doubt when drawing any firm conclusions. Sentiment analysis performed might not accurately capture the nuance of human emotion and organizational culture, especially regarding written communications that often lack context. Finally, while quantitative insights can highlight patterns and trends, they might not fully capture the complexity of individual behaviors, organizational culture, and communication norms.
Despite these limitations, the analysis and findings provide valuable insights into Enron's technical communication environment. The organizational culture, characterized by intense competition and a lack of cooperation, impeded the firms's internal communication. This culture, along with the absence of effective communication protocols, facilitated the manipulation of technical language in internal and public-facing documents, contributing to the distortion of Enron's financial status. The data-driven insights from the email archive analysis offer a rare perspective into the macro communication dynamics within Enron, shedding light on the organizational structures and practices that enabled the company's fraudulent activities. Enron serves as a lesson to technical communicators, as while their impact may seem abstract and disconnected there is significant consequence in ignoring potential breakdowns and breaches in communication structures and responsibilities.
