This Q&A with Enron juror Wendy Vaughan in Inc magazine confirms the warning signs of a company going under.
Vaughan, a small business owner from Katy, Texas, confirms that the systemic arrogance, self-delusion and intoxication with growth were the three big problems at Enron that led her to the decision to convict Ken Lay and Jeff Skilling.
Vaughan says: "There are a lot of lessons. In business, you're supposed to be aggressive and to push the limits. But you've got to respect the people who work for you–you've got to listen to them and take care of their needs. If they are not happy with how the business is going, you have got to listen to them. You can't have an 'I'm the boss' mentality. You can't treat problems as if they don't exist. Ultimately, I'd say that the biggest lesson for me is that, if you're not going to run your business with ethics as a priority and as the center of your business, you shouldn't be running it at all."
What's refreshing about this is that it's just common sense. No legalese, no complicated financials. And while the interview itself is not necessarily earth-shattering, Vaughan points out that none of this is rocket science.
Which raises questions about why it keeps happening and why no-one picks up on these sorts of things until it's too late.
Vaughan's views, which would have been shared by her fellow jurors, confirms what I have always believed are the five warning signs of a dysfunctional organisation:
1. Disorganisation of thought processes within the organisation, particularly from its leaders.
2. Individuals in the organisation who share a delusion.
3. Different components of the organisation lose the capacity to communicate with each other, resulting in fragmentation and one part of the organisation undermining the other's agenda.
4. The organisation behaves as if it is unaware of its fragmenting, delusional state.
5. The organisation loses its capacity to deal with the external environment, including shareholders, customers and regulators, and in some cases, seems to be completely oblivious to the real world.