CX770022 BUSINESS TRANSFORMATION AND CHANGE

Auckland International Campus
Graduate Diploma in Applied Management
CX770022 BUSINESS TRANSFORMATION AND CHANGE
ASSESSMENT 1
INDIVIDUAL ASSIGNMENT: RESEARCH BASE CASE STUDY
Learning Outcomes Covered
1. Identify drivers necessitating change, and apply concepts, tools and techniques to
implement organisational change
2. Evaluate the activities and responsibilities of participants within a change programme
and apply appropriate personal adaptation strategies to allow change to occur
3. Propose appropriate styles of leadership for change scenarios within an organisational
setting
4. Incorporate views of others to evaluate issues facing change agents, the methods of
measuring progress and success of change programmes.
*All Learning Outcomes will be assessed in this Assessment
Individual Assignment 1: Business Transformation and Change
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Assessment Overview
This is the first of two assessments for this course. This is an individual assessment that you
will complete in your learner-managed time, however your teacher will provide opportunities
during class time for clarification, guidance, collaborative working opportunities and
discussion in groups.
This assessment requires you to produce a professionally formatted business report to
critically analyse the case for business transformation required to lead and implement change
within the organisation.
Assessment Table
Assessment Activity Weighting Learning Outcomes Marks out of
Assessment 1 50% 1, 2, 3, 4 70
Assessment 2 50% 1, 2, 3, 4 30
In order to pass this assignment, you must achieve a cumulative grade of at least 50%,
across assessment one and two. (This assessment is marked out of 70, and contributes to
50% of the entire assessment).
Moodle Marks out of 100: 50% of final weighting
Due Date: Thursday 21
st November 2019
– Hard copy: in class
– Turnitin: before 11.55 p.m
Individual Assignment 1: Business Transformation and Change
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Assessment One: Case Study
MANAGEMENT CONTROLS: THE ORGANIZATIONAL FRAUD
TRIANGLE OF LEADERSHIP, CULTURE AND CONTROL IN ENRON
by: Clinton Free, Norman Macintosh, Mitchell Stein, Norman Macintosh, Mitchell
SteinIssues: July / August 2007. Tags: The Organization. Categories: The Organization.
Almost faster than you can say mark-to-market accounting, management controls
disappeared once Jeff Skilling became CEO of Enron. The rest is sad history and a
shareholder’s worst nightmare come true. These authors document the subversion of Enron’s
management controls and suggest the lessons managers can learn from the worst financial
collapse in U.S. corporate history.
The collapse of Enron has been described as offering the same sort of opportunity for
reflection for the business community as the Challenger disaster did for the engineering
profession or September 11 did for political scientists. This article draws on a vast database
of public records, testimonies at the various Enron-related trials and insider accounts
concerning Enron’s rise and fall to answer the question: how did a sophisticated and
comprehensive set of management controls fail to prevent and detect widespread and
continued corporate-wide fraud, information manipulation and dishonesty.
Introduction
Throughout the Enron post-mortem, financial accounting irregularities and the audacious use
of special purpose entities for off-balance sheet financing purposes have been the focus of
attention. Seldom acknowledged is the fact that Enron had in place a comprehensive, stateof-the-art and award-winning management control and governance system, and that during
Richard Kinder’s term as president from 1986 to 1996, Enron operated with a highly effective
management control system.
This article focuses on the cultural environment surrounding Enron’s management control
systems, and the influence of a powerful-risk taking culture on Enron’s controls. Robert
Simons’ work on management control underscores the need to incorporate culture in
understanding management control systems. Research conducted by leading organizational
psychologist Edgar Schein also suggests that a strong link exists between executive
leadership actions and the nature of an organization’s culture. Accordingly, in this article we
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highlight the critical role that leadership and culture play in the success and effectiveness of
management control systems within organizations.
Enron provides a blueprint of how insufficient attention to changes in leadership and culture
can undermine what, at least on the surface, appears to be a state-of-the-art management
control system. While many companies may claim to have sophisticated management
controls, the ultimate effectiveness of such controls is highly dependent on an organization’s
culture and leadership. The perversion of this control infrastructure under the leadership of
Jeffrey Skilling offers vital lessons about the operation of management control systems in
large, complex organizations. Understanding these lessons is crucial in ensuring that Enron’s
plight is not replicated.
The collapse of Enron
Enron Corporation was born in the middle of a recession in 1985, when Kenneth Lay, CEO of
Houston Gas Company, engineered a merger with Internorth Inc. The new company, which
reported a first year loss of $14 million, consisted of $12.1 billion in assets, 15,000 employees,
the nation’s second-largest pipeline network, and a towering mountain of debt. Enron was a
typical natural gas firm with all the traditional trappings of a highly leveraged, “old economy”
firm competing in the regulated energy economy. Teetering on the verge of bankruptcy in its
early years, Enron had to fight off a hostile takeover attempt. It also incurred embarrassing
losses on oil futures, which its traders in New York covered up in their reports to the Houston
headquarters. Its old economy strategy did not excite the stock market. This would change
dramatically, however, during the 1990s, when Jeffrey Skilling replaced Richard Kinder as the
CEO.
Richard Kinder, known throughout Enron as “Doctor Discipline”, was both people and numbers
oriented. He held a meeting in the boardroom every Monday morning where he interrogated
every business unit leader, frequently challenging their strategic plans and numbers. He
focused hawk-like on expenses, cash flows, and employee levels. Cash management was so
important for Kinder that he gave all business group managers a budget target for cash flow
and profits, with bonuses tied to meeting both targets. While Kinder demanded performance,
he was also realistic, often telling business unit leaders who submitted overly optimistic
proposals not to start “smoking our own dope.” As well as demanding discipline with respect
to numbers, he was also people oriented, creating a collegial, family-like environment, with a
respect for all.
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With the appointment of Skilling as CEO, Enron’s culture would begin a radical transformation.
By 2000 it had become “the star of the New Economy,” emerging as a paragon of the
intellectual capital company with an enviable array of intangible resources, including political
connections, a sophisticated organizational structure, a highly skilled workforce of
sophisticated financial instrument traders, a state-of-the-art information system and expert
accounting knowledge. In 1999, Enron was named by Fortune as “America’s Most Innovative
Company,” “No.1 in Quality of Management,” and “No. 2 in Employee Talent.” An army of
scientists, business people and academics sat rapt as Skilling – “The #1 CEO in the USA” –
proselytized at technology and leadership conferences across the United States about how
Enron was not only embracing innovative theories of business but also making a lot of money
doing so.
However, in late 2001 Enron announced that because of accounting errors it was reducing its
after-tax net income by a total of over $1 billion and its shareholders’ equity by $1.7 billion. On
December 2, 2001, Enron, with assets of $63.4 billion, became the largest corporate
bankruptcy in U.S. history, triggering a collapse in investor confidence and opening a
Pandora’s Box of issues relating to corporate governance, accounting and regulation.
Commentary on the Enron scandal has tended to focus on a number of financial reporting
issues including auditor independence, special purpose entities (SPEs) and the
appropriateness of its accounting. A host of solutions have been proposed with respect to
these issues, including greater shareholder empowerment, shareholders’ boards of trustees,
privileging accounting principles over accounting rules, a reduction of outside regulation of
accounting practices and requiring auditors to judge the substance of disclosure (and, of
course, most notably the Sarbanes-Oxley legislation). However, the role of management
control systems – and more importantly, the affect of leadership and culture on such systems
– in the Enron collapse has largely been overlooked.
The organizational fraud triangle
How fraud occurs within organizations can be understood by examining the elements that
comprise such actions. At an individual level, SAS No. 99 (Consideration of Fraud in a
Financial Statement Audit) issued by the Auditing Standards Board indicates that the
occupational fraud triangle comprises three conditions that are generally present when a fraud
occurs. These conditions include an incentive or pressure that provides a reason to commit
fraud (personal financial problems or unrealistic performance goals), an opportunity for fraud
to be perpetrated (weaknesses in the internal controls), and an attitude that enables the
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individual to rationalize the fraud. While the fraud triangle focuses on individual-level
constructs of fraud, such as localized instances of cash or other asset appropriation by
employees, the Enron example highlights fraud at the organizational level – systemic
organization-wide fraud and corruption. At the organizational level, leadership, organizational
culture and management control systems form the three points of the organizational fraud
triangle shown below.
Organizational Fraud Triangle
The fraud triangle illustrates that the most important lessons from Enron lie in the way that a
corporate culture championed by CEO Skilling overcame a sophisticated and widely lauded
set of management controls and in the importance of carefully balancing the core concepts of
leadership, organizational culture and control within organizations. Organization-wide fraud is
only possible when these three variables are configured in a way that enables – and even
fosters – manipulation and fails to prevent compliance failure. The linkages presented in the
diagram above provide managers in other organizations important, yet largely untold, insights
into Enron’s demise.
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Linkage 1: Enron’s sophisticated management controls at
the time of its collapse
Controls form the cauldron in which Enron’s innovative energies circulate (G.
Hamel, Leading the Revolution, Harvard Business School Press)
Management controls refer to the tools that seek to elicit behavior that achieves the strategic
objectives of an organization, such as budgets, performance measures, standard operating
procedures and performance-based remuneration and incentives. While Enron’s demise has
been portrayed as resulting from a few unscrupulous rogues or ‘bad apples” (the phrase used
by President Bush) acting in the absence of formal management controls, Enron featured all
of the trappings of proper management control, including a formal code of ethics, an elaborate
performance review and bonus regime, a Risk Assessment and Control group (RAC), a Big-5
auditor, and conventional powers of boards and related committees. This control infrastructure
was widely lauded right up until the demise of the company.
The three core pillars of Enron’s management control system were the risk assessment and
control group, Enron’s performance review system and its code of ethics.
Risk Assessment and Control Group: An integral part of Enron’s management control
system was the Risk Assessment and Control group (RAC). RAC was responsible for
approving all trading deals and managing Enron’s overall risk. Every deal put together by a
business unit had to be described in a Deal Approval Sheet (DASH), which was independently
assessed by RAC analysts. Deals required various levels of approval from numerous
departments, including approval from the most senior levels, even from the board of directors.
Enron’s Performance Review System: Another vital link in Enron’s management controls
was the Peer Review Committee (PRC) system. The intention of the PRC system was to align
employee action with the company’s strategic objectives, retaining and rewarding superior
performers on a fair and consistent basis. Under the PRC system, every six months each
employee received a formal performance review, based on formal feedback categories
including revenue generation, and was assigned a final mark from one to five (the employee’s
photo was displayed on a screen). Feedback came from various sources including the
employee’s boss, as well as from five co-workers, superiors or subordinates that the employee
selected. The bottom 15 percent, no matter how good they were, received a “5” which
automatically meant redeployment to “Siberia,” a special area where they had two weeks to
try to find another job at Enron. If they did not – and most did not – it was “out the door.”
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Code of Ethics: Enron’s code served as a behavioral control intended to prohibit a range of
unethical behaviors. The code stressed the following four key principles: communication,
respect, integrity and excellence, and included phrases such as “we treat others as we would
like to be treated ourselves”, “we do not tolerate abusive or disrespectful treatment” and “we
work with customers and prospects openly, honestly and sincerely”. The code, which each
employee signed on joining Enron and annually re-affirmed, proved to be of wide interest – so
much so that the political history division of the Smithsonian National Museum of American
History acquired it for its permanent exhibit of exemplary business practices.
Enron also had in place the usual corporate governance mechanisms including a wellcredentialed board of directors, an audit and compliance committee, a Big-5 external auditor
(the ill-fated Arthur Andersen), an office of the director of financial disclosure, a chief risk
officer’s office, a finance committee, and the SEC’s normal oversight. In sum, the control
infrastructure within Enron was carefully designed, comprehensive and cutting edge. How this
infrastructure was systemically subverted, marginalized and ignored under the leadership of
Jeffrey Skilling offers key insights for practitioners and regulators alike.
Linkage 2: Jeff Skilling’s role in crafting corporate culture
at Enron
By mid-2000, Jeff Skilling had achieved his goal: Almost all the vestiges of the old
Enron … were gone. In its place, Enron had become a trading company. And with that
change came a rock-em, sock-em, fast-paced trading culture in which deals and ‘deal
flow’ became the driving force behind everything Enron did. (R. Bryce, Pipe dreams:
Greed, ego, and the death of Enron, Public Affairs)
As Edgar Schein argues, leadership is critical to the creation and maintenance of culture; there
is a constant interplay between culture and leadership. Within companies, cultural norms arise
and change due to what leaders tend to focus their attention on, their reactions to crises, their
role modeling, and their recruitment strategies. Leader’s visions provide the substance of new
organizational culture. To understand how the management controls at Enron were subverted,
we must not only recognize the nature of Jeff Skilling’s tenure as company CEO, but also
Enron’s shift to a Wall Street-type options and futures trading firm (i.e., a financial engineering
shop). Schein’s leadership framework outlined in the diagram below charts how Skilling’s
agency was instrumental in creating an environment that came to pervade and degrade
Enron’s management controls.
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Skilling’s leadership style had emerged over a
number of years. As early as high school Jeff
Skilling held a reputation as not only a scholar,
but one with a penchant for somewhat
dangerous activities, a characteristic that
resurfaced later at Enron. After thriving at the
highly competitive Harvard Business School,
where he excelled as a top scholar, Skilling
joined the Houston office of McKinsey &
Company, where his intellect and tenacity
impressed many clients, among them Ken
Lay.
Skilling impressed Lay when he proposed
forming a “Gas Bank”, which took advantage
of the fact that the short-term demand and
supply for gas was chronically out of balance.
The idea proved an instant success and moved Lay to hire Skilling as head of its trading
operations, Enron Finance Corporation (EFC). Eventually, in 1996, Jeffrey Skilling would
replace Richard Kinder as the CEO of Enron. Under Skilling’s reign as President and CEO, a
very different management control style ensued and elements of Enron’s culture and
operations underwent a radical transformation.
Within a few short years, Enron’s business model shifted towards a Wall Street-type financial
engineering trading platform operating in energy futures but also expanding into financial
commodities of all kinds. By 2000, trading operations accounted for 99 percent of income, 88
percent of income before tax and 80 percent of identifiable assets; reported revenue increased
from $11,904 million in 1996 to nearly $100,000 million in 2000 – a tenfold increase. Enron
morphed into a full-scale Wall Street trading corporation specializing in the financial
engineering of derivatives, options and hedges involving commodities such as broadband,
fibre optics and paper goods.
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Skilling’s leadership style
Many Enron insiders have commented on Skilling’s footprint on Enron’s emerging
organizational culture. Moreover, as outlined in the diagram below, Edgar Schein’s leadership
matrix highlights how Skilling’s leadership was critical in fashioning an organizational culture
valorizing risk taking, a mercenary approach to profit making and a win-at-all costs trading
approach.
Skilling’s leadership style and vision were
evident in a number of characteristics and
traits that exemplified Enron’s culture. Skilling
exercised control over almost all facets of the
organization, particularly regarding its
accounting procedures, which where designed
to “massage” reported earnings in order to
meet analysts’ expectations. Earnings
management was accomplished largely using
special purpose entities (SPEs), accounting
“reserves for contingencies” and mark-tomarket accounting, which recorded profits
from long-term deals immediately and,
therefore, emphasized short-term results.
These accounting maneouvres, used widely in
the banking and finance industries, meant that
to continue to increase reported earnings at its
current rate, an ever-greater volume of deals
were necessary. This form of “cowboy
capitalism” put enormous pressure on the
traders for short-term output.
The importance of earnings in Skilling’s
leadership style is unmistakable, especially in the reactions to critical incidents and
organizational crises. For instance, evidence emerged at Skilling’s 2006 trial that Skilling and
Richard Causey, Enron’s chief accounting officer, had decided to change the numbers to meet
the new analysts’ consensus, which had risen from 30 cents to 31 cents. Accordingly, Wesley
and Colwell, chief accountant of Enron’s wholesale energy trading unit, transferred $7 million
Individual Assignment 1: Business Transformation and Change
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to a profit account from a reserve contingency account set up in a prior period as a reserve for
possible future contract settlements.
Another critical trait of Skilling’s leadership style was the importance of rewards and status.
Compensation plans, a powerful shaper and emblem of Enron culture, had one purpose in
mind — to enrich the executives, not to enhance profits or increase shareholder value. For
stock option incentives, Enron added the condition that if profits and stock prices increased
sufficiently, vesting schedules could be rapidly advanced, meaning executives could get their
hands on the stock more quickly. Skilling handed out extremely large pay cheques, bonuses
and stock options to traders who met their earnings targets; in 1999, Enron granted 93.5
million stock options compared with 25.4 in 1996. John Arnold, a gas trader, booked $700
million in 2001, took his $15 million bonus and left Enron. Lou Pai cashed $250 million in Enron
stock over three years.
Skilling’s leadership style also included deliberate role modelling, teaching and coaching,
which involved exposing employees to exaggerated claims. In 2000, for instance, Enron
draped a huge banner at its entrance, enjoining employees to engage in the process of
transforming Enron “FROM THE WORLD’S LEADING ENERGY COMPANY – TO THE
WORLD’S LEADING COMPANY.” The pervasiveness of hype extended to the use of
metaphors drawn from war, sport and extremism. On bonus day, upscale car dealers set up
shop around the Enron headquarters building showing the latest most expensive Mercedes,
BMWs, Aston Martins, Alpha Romeos and the like.
The final characteristic of Skilling’s leadership style was borne out in how Enron recruited,
selected and promoted employees. Skilling’s shopping list for job candidate characteristics
described a very smart, aggressive, glib extravert who could become a ruthless trader. Skilling
hired only the “best and the brightest” traders, investment bankers, information and computer
experts, programmers, and financial engineers, most of whom were graduates of prestigious
universities. As part of his Analyst and Associates’ Program, Skilling would annually hire from
250 to 500 newly minted MBAs from the top business schools in the country. Promotions and
transfers came quickly, without providing time to learn industry details. Those who did not
produce deals were quickly redeployed and soon after, often, terminated.
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Linkage 3: The Way in Which Corporate Culture Came to
Subvert Management Controls at Enron
Skilling used numerous methods to reshape organizational culture in a way that celebrated
attempts to exploit and “bend the rules,” often through the subversion of management controls.
Under Skilling, an extreme performance-oriented culture that both institutionalized and
tolerated deviant behaviour emerged. The lauding of “creative risk-taking” and “revolution” led
to not only stretching, but also circumventing and breaking legal and ethical boundaries.
Resistance to bad news created an important pressure point on information sharing internally
and externally. Fierce internal competition coupled with huge incentives led to private
information, deceit and extensive efforts to bolster short-term performance. The culture that
evolved under Skilling, and its impact on Enron’s control systems, strategy and operating
environment can perhaps best be understood by the comparison, as illustrated below, to that
which existed under Richard Kinder.
As Enron entered market areas where it did
not enjoy a comparative advantage, its
mercenary corporate culture combined with
the subverted control infrastructure meant that
Enron lost its ability to keep track of relevant
risks. Skilling was able to bring together a
number of structural factors that enabled the
Enron expansion and re-branding of its
corporate image: deregulation, the high-tech
investment bubble, enhancements in
technological capabilities and a hungry and
increasingly expectant investment community.
Although there were favourable developments
in Enron’s institutional environment, Skilling
largely brought these elements together in a
cohesive package and promoted a culture
celebrating creative deal making, innovation,
entrepreneurship and mercenary practices.
The PRC system, meanwhile, worked to
encourage private networks of loyal
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employees who gravitated towards powerful players for protection. Even though very
knowledgeable risk management personnel staffed the RAC Group, over time they became
increasingly reluctant to turn back projects that looked bad, since the corporate ethos held that
the driving force of its business model was its ever-growing flows of deals. Rejecting them
often meant “political death” for RAC members since the project proposal people could lose
their bonuses and so would take revenge during the PRC process. Moreover, they were not
inclined to reject proposals for fear of real repercussions from Skilling.
As former employees Peter Fusaro and Ross Miller highlight in What Went Wrong at Enron:
Everyone’s Guide to the Largest Bankruptcy in US History, Enron’s ‘rank-and-yank’
machinations created “an environment where employees were afraid to express their opinions
or to question unethical and potentially illegal business practices. Because the rank-and-yank
system was both arbitrary and subjective, it was easily used by managers to reward blind
loyalty and quash brewing dissent.” The PRC was a powerful mechanism for preventing the
emergence of any subcultures that might run counter to the mercenary organizational tone set
by Skilling’s leadership.
Enron’s bonus regime, a key mechanism aimed at aligning individual and corporate goals,
exacerbated the competitiveness of the Skilling-designed PRC as employees used several
tactics to manipulate the system. An important consequence of this, and one that would play
a big role in Enron’s demise was that traders started to push through over-valued deals.
Sometimes they would change the price projections at the last minute before signing the
contracts in order to favour their short-term trades at the expense of the originators’ long-term
contracts. Skilling’s PRC had a Darwinian nature since it instilled a competitive streak in every
employee.
Thus, the reality of Enron’s business practices flew in the face of its Code of Ethics. By mid2006, some sixteen Enron accounting and finance managers, including CFO Andrew Fastow,
had pleaded guilty to various criminal offences, including fraudulent accounting practices and
manipulating quarterly earnings reports. The contrast between Enron’s moral mantra and the
behaviour of some of its executives was startling.
What Enron clearly demonstrates is that once employees align themselves with a particular
corporate culture – and invest heavy commitment in organizational routines and the wisdom
of leaders – they are liable to lose their original sense of identity, and tolerate and rationalize
ethical lapses that they would have previously deplored. Once a new and possibly corrosive
value system emerges, employees are rendered vulnerable to manipulation by organizational
leaders to whom they have entrusted many of their vital interests. The Enron demise, then,
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points to numerous risks associated with degenerate cultures: the risk that a culture motivating
and rewarding creative entrepreneurial deal making may provide strong incentives to take
additional risks, thereby pushing legal and ethical boundaries; resistance to bad news creates
an important pressure point of culture; and internal competition for bonuses and promotion
can lead to private information and gambles to bolster short-term performance. At Enron,
these risks ultimately subverted the company’s elaborate web of controls.
Lessons for Managers
Enron offers a number of important insights for managers. Firstly, it underlines the vital role of
top management leadership in fostering organizational culture. The footprint of Jeffrey Skilling
is conspicuous in all accounts of Enron’s organizational culture. Enron’s plight also highlights
the vulnerability of rank and file employees to prevailing cultural norms, morals and sanctions.
Particularly in the absence of counteracting forces or dissenting opinions, increasing
identification with an organization’s cultural values is likely. Andy Fastow, the former chief
financial officer of Enron, responded to a scathing cross-examination by stating, “Within the
culture of corruption that Enron had, that valued financial reporting rather than economic value,
I believed I was being a hero.” During his trial, Mark Koenig, Enron’s former head of investor
relations, told jurors “I wish I knew why I did it. I did it to keep my job, to keep the value that I
had in the company, to keep working for the company. I didn’t have a good reason.”
Secondly, within organizations, the impact of culture and leadership on even most the
sophisticated management control system must not be overlooked or minimized. It is often too
easy to consider cultural and management control systems separately, with cultural being a
soft issue and management controls a hard one. Managers must always remember that a
culture created through a reckless and overly aggressive leadership style can lead to
individuals taking actions that can subvert even state-of-the-art management controls.
Organizations need to distinguish more carefully between leadership styles such as that of
Kinder, which expected high but fair performance and those that demand excessive and
ultimately unattainable levels of performance.
Finally, the Enron saga speaks to the importance of not abandoning professional integrity.
Perhaps, the most important lesson for managers to take away is to use personal cultural
capital to find a working environment that matches one’s personal values and principles. If
they don’t match, one should leave and find a company that does. As with the Challenger
disaster in our epigraph, Enron should be a wake-up call for managers in all organizations.
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Please follow the following guidelines to complete this Assessment:
Written Report:
Prepare a 2500 – 3000 word written report (not including executive summary, contents and references)
which identifies and evaluates the main change management methods and theories employed by ENRON.
In your report, ensure that you address the following issues:
1. Identify the nature and drivers of the change management process, and critically evaluate
how issues can be effectively managed through this process. (Refer to a Change Management
perspective (NOT Cultural Web or BSC models) to illustrate your answer). (Learning Outcomes
1)
2. Describe the initial corporate culture of ENRON and analyse this culture utilising the culturalweb model. Based on your cultural web evaluation propose the Key Drivers of Change at
ENRON. (What appear to be the key strengths of the new culture?). Propose a model of the
new ENRON culture. (Learning Outcomes 1 & 2)
3. What steps might ENRON management have taken to overcome resistance to change?
Evaluate barriers to change and the ways to overcome them with reference to appropriate
theoretical models and behaviours. (Learning Outcomes 3 & 4)
4. As a change agent, identify and evaluate performance measurement framework where
measures (key performance indicators) that played a significant role in this case study & it’s
importance to measure performance. Propose Balanced Score Card (BSC) Evaluating
existing performance measurement framework and methods of measuring progress for
proposed BSC (Learning Outcome 4)
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References:
Johnson, G., & Scholes, K. (1999). ‘The Cultural Webb’. In: Exploring Corporate Strategy, (5th edition).
Prentice Hall Europe; Pearson Education Ltd.
Kaplan, R. S., & Norton D. A. (1992). The balanced scorecard – measures that drive performance.
Harvard Business Review, January – February, p. 72. The Harvard Business School Publishing
Corporation.
Kaplan, R. S., & Norton D. A. (2004). ‘The balanced scorecard strategy map’. In: Measuring the Strategic
Readiness of Intangible assets. Harvard Business Review, February, p. 55. The Harvard Business School
Publishing Corporation.
Individual Assignment 1: Business Transformation and Change
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Assessment Instructions – Report Format
In this part, you are required to write a report on ENRON (as defined above). Your report
should:
 Your assignment should be word-processed. Each new title should be highlighted in
bold. You should have a cover page for the assignment.
 Your cover page should include your name, subject number and submission date.
Pages in the assignment should have a title at the footer.
 Students are required to provide a word count at the end of the report.
 be 1.5 line spaced, contain a standard table of contents and sectioned as required.
 A recommended structure for your report is as follows:
o Cover page
o Executive summary
o Table of contents
o Introduction
o Contents (as per report format above)
o Conclusion
o References
 And should be able to meet the standards of a business document suitable for
presenting to senior management. i.e. evident through use of appropriate formatting,
has been spell checked uses an appropriate standard of business English, inclusion
of a table of contents and headers and footers (as required) and suitable use of
information which should be referenced using the current APA 6
th edition referencing
format for all quotations and referencing. Plagiarism is strictly prohibited.
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Case Study Analysis Section
You are required to write a Case Study Analysis in an appropriate format as structured below:
Introduction/context – In this section you are required to introduce the background to the scenario
and the change process that occurred.
Analysis – In this section you are required to critically analyse the change management methods
and theories as detailed in the report format above (points 1 to 4).
Conclusion – In this section you are required to summarise the success of the change management
process of ENRON in this case study.
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Business Transformation & Change – Assessment 1: Marking Guide
Total Marks: 70
LO Assessment Criteria
Evidence Judgement
Marks
Available
Marks
Awarded
The report structure
should follow:
The report contains a
clear introduction and
conclusion and is
professionally formatted
 Write an introduction which provides
a brief introduction to change
management theory and of the
change process that occurred with
the organisation.
 The candidate draws conclusions
and/or inferences that are consistent
with the findings and success of the
change management process
The introduction must provide a
short summary of change
management theory and exactly
what happened in this
organisation in terms of a
change process in ENRON.
The conclusion must be succinct
in terms of the findings from
the case study and a short
summary of the change
management process in ENRON.
4
4
The report uses an
articulate writing style
which sets the content
out in logical order,
linking the different parts
of the report together
 You are required to include a cover
page, an executive summary, an
accurate table of contents and set
out as per the report format above
The report that you produce
must have a cover page, a short
executive summary (100
words), a table of contents and
follows the report format (page
18).
4
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The report is supported
by appropriate
theoretical and industry
references. All references
use APA 6 conventions
 You must use APA 6th edition
referencing in your assessment
answers
The report must follow APA 6th
edition referencing.
3
The report addresses the
following issues:
To achieve this you must produce evidence as
detailed below.
1 Discussion and
evaluation of two Change
Management theoretical
perspectives
 The drivers of the change
management process at Enron are
discussed,
 Critically evaluate how issues can be
effectively managed through this
process (Application of Change
management theories to Enron)
The drivers of the change
management process must be
detailed and then discussed in
terms of appropriate theoretical
models.
The student must include a
critical evaluation of how issues
that have arisen, can be
managed effectively through
this process.
6
6
1 & 2 A Cultural Web model
analysis of the initial
corporate culture of
ENRON
 The initial corporate culture of
ENRON is described & Analyse this
culture utilising the cultural-web
model.
The student must describe the
corporate culture of ENRON by
applying & analysing culturalweb model as defined by
theory.
Evaluate the activities and
responsibilities of participants
within a change programme in
proposed cultural-web model
4
4
Individual Assignment 1: Business Transformation and Change
21
A model of the new
ENRON culture with key
strengths identified.
 Based on the cultural web evaluation,
Propose a model of the new ENRON
culture. (What appear to be the key
strengths of the new culture?).
The student must propose a
new model for the culture of
ENRON, with the key strengths
identified and detailed
appropriately. This model must
be based on theory and detail
the strengths as appropriate.
5
3 & 4 Resistance to change at
Enron: the barriers
overcome by
Management (with
reference to appropriate
theoretical models).
 Evaluate barriers to change and the
ways to overcome them with
reference to appropriate theoretical
models and behaviours
 Identify and evaluate Leadership
Styles of Enron & Recommend
appropriate Leadership Styles with
propose change structure
The student must detail the
possible barriers/resistance to
change which came about and
the steps the management
could have taken to overcome
them earlier.
This must all be evaluated
against theoretical models,
Leadership styles (behaviours)
that are appropriate.
5
5
4 The KPIs that have been
central to this case study  Identify and evaluate
performance measurement framework
where measures (key performance
indicators) & it’s importance to
measure performance played a
significant role in this case study
Evaluate existing performance
measurement framework and
methods of measuring progress
for proposed BSC
Students must define Key
Performance Indicators (KPIs) in
accordance with propose BSC to
measure performance
8
8
Individual Assignment 1: Business Transformation and Change
22
Evaluate issues facing change
agents, those that have played a
focal part in this case study and
suggest why.
4
Total 70
Marker: Lamith Caldera Marks awarded (out of 70)

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