Enron = normal … accident, that is.

Enron = normal … accident, that is.

A normal accident implies that given an organization, various unpredicted failures will occur.  As we see in Organizations and Organizing, “it is virtually impossible to predict and protect against all the ways in which such systems can fail.”  This term poses a lot of debate, because it is hard for many people to accept that failure is inevitable.  Although many organizations try to prevent any problems through extensive training and simulation, I believe there is no way to possibly account for anything and everything. It’s important that accidents and failures are studied so that most of the glitches can be worked out, but there will always be times when a failure will have to be accepted.  The question is, is Enron a failure we have to accept? Meaning, is it appropriate to say parts of Enron were a normal accident? I believe they were.

Tightly coupled systems, like Enron, are prone to larger and greater faults.  In a tightly coupled system the accident process happens fast, and it becomes hard to isolate the failed parts from those that are successfully running.  This is due to the “interactive complexity” of a system, where problems in one part of the system lead to unexpected outcomes in another. Recovery from the initial issue becomes impossible as problems continue to spread. This is what leads to the overall chaos and disaster of the system.

Normal accidents are usually discussed in the context of high-risk technologies such as nuclear power plants, chemical plants, ships, dams, etc.  For my paper, I would like to argue that the accounting and finance systems of Enron acted as high-risk technologies. This poses the problem on the people.  Should they have known that normal accidents are always a part of a highly coupled system?  Theory says that “with experience, better designs, equipment, and procedures, the unsuspected interactions were avoided and tight coupling reduced.” (Perrow, p.5)  Employees of Enron were highly experienced and probably should have realized the effects of a tightly coupled system.  Although they were constantly creating and naming new branches of Enron, each branch was still interconnected with the main organization.  Enron also adopted a Titanic-esque philosophy, believing that they were the unsinkable ship. They convinced themselves that moving debt and assets around was a legitimized behavior.

Playing the devil’s advocate role, I would like to propose that maybe people, such as Ken Lay, Rebecca Mark, and Jeff Skilling, are less important in the downfall of Enron than other factors.  Technological innovations played a large role in the demise of Enron as well.  Structured finance, market deregulation, and stock options were three innovations that carried large weight at Enron.  These innovations, mixed with Enron’s tightly coupled system, lead to a faulty organization that would inevitably fail.

Advertisements

One Response

  1. […] of Enron and a concept called “normal accidents.” The title of this post is called Enron = normal … accident, that is.  I found this post to be interesting since this author and I sort of wrote about the same idea in […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: