Failing Up: When Success Leads to Failure: Part 1

Imagine a once great leader who had fallen from his moral ivory tower and supported a culture of arrogance and greed. Executives engaging in unethical behavior incentivized by aggressive growth and profits.

Betrayal, corruption, and perverse incentives. Unethical actions and immediate gratification. Job losses and life savings were obliterated. Collateral damage. Severe consequences. Absolute failure. Yet, some "leaders" still slip through the ethical gatekeeper's grasp and Fail Up. So, who are these leaders who fail up? How did they get there, and how can you avoid becoming one of them?

With a Ph.D in Economics, some might argue Ken Lay's education failed him. Others might argue his natural inclinations led to his decline. Still, others would say that the business world, shareholder desire, and the need for immediate results led to Kenneth Lay's disastrous results as the CEO of a once-leading energy company, Enron.

How could a leader with experience in the government and private sector fail so significantly? From 1971 through 1972, Ken Lay served as the Commissioner's technical assistant and Vice Chairman of the Federal Power Commission. Lay then spent the next two years working as the Deputy Undersecretary of Energy at the U.S. Department of the Interior until 1974.

Within two short years at the Department of Interior, the private sector came calling. Lay was willing to listen and transitioned to the private sector, becoming an executive at the Florida Gas Transmission. Later in his career, Lay was known for his approachable, inspiring, and authentic leadership style.

Perhaps these positive leadership attributes were developed while at Florida Gas Transmission. Lay quickly rose through the leadership ranks. He became President of the Continental Resources Company and Executive Vice President of the Continental Group. Lay's career growth continued as his leadership skills developed. In May 1981, Lay became Chief Operating Officer and Director of Transco Energy Company.

Described as charismatic and approachable, co-workers enjoyed working with Lay. He was engaging, often walking the floors and spending time with staff at all levels. Lay's personable approach fostered loyalty and respect among his direct reports and peers.

Momentum

With momentum propelling him forward, Lay held the positions of President, Chief Operating Officer, and Director at Transco Energy Company, which held ownership of the Transcontinental Pipeline in Houston, TX. Lay was a big deal.

Described as charismatic and approachable, co-workers enjoyed working with Lay. He was engaging, often walking the floors and spending time with staff at all levels. Lay's personable approach fostered loyalty and respect among his direct reports and peers.

In 1984, Lay became chairman and CEO of the Houston Natural Gas Company. From his helm at Natural Gas, Lay led the successful merger of Houston Natural Gas and InterNorth in 1984 and was appointed chairman and chief executive of the larger company - Enron.

Government service. Private sector success. Leadership growth and significant career progression. Close ties with a former president. So, why did Enron collapse under Lay's leadership?

Metamorphosis

Under Lay's leadership, Enron metamorphosized from a regional Pipeline company into a global energy conglomerate. Pioneers in energy trading, innovation, and deregulatory advocacy.

A confidante and friend of the Bush family, George H.W. Bush called on Lay to be the co-chairman of Bush's 1992 re-election committee. Despite Lay's focus on supporting Republican causes, he made significant contributions to both political parties.

Government service. Private sector success. Leadership growth and significant career progression. Close ties with a former president. So, why did Enron collapse under Lay's leadership?

One word - corruption.

Scrutinized as if under a microscope, employees were ranked against one another (a form of weighted ranking), and under-performers were terminated. Every man and woman for themselves.

Corruption

On July 7, 2004, Lay was indicted on securities fraud and made false statement charges. Under Lay's leadership at the time, Enron went bankrupt. Enron's bankruptcy became the largest corporate bankruptcy in U.S. history. Investors and employees experienced significant financial losses.

A once approachable, admired, charismatic, and inspiring leader, Lay was criticized by his employees. Enron's collapse fueled betrayal and anger due to a corporate culture that lacked an ethical backbone and prioritized individual success over integrity.

As a leader, Kenneth Lay had lost his way. The very same employees who talked with Lay as he walked the floors hated him. Their jobs and life savings were gone in many cases.

Shattered into oblivion, trust no longer existed.

Reflection

Imagine a once great leader who had fallen from his moral ivory tower and supported a culture of arrogance and greed. Executives engaging in unethical behavior incentivized by aggressive growth and profits. "Rank and Yank" performance reviews were part of the playbook. Scrutinized as if under a microscope, employees were ranked against one another (a form of weighted ranking), and under-performers were terminated. Every man and woman for themselves. Just imagine the level of back-biting, back-stabbing, obfuscation, and omission that took place and would have continued if Enron had not collapsed.

The title of Leader is an honor bestowed upon you by those you serve. Remember, even the best leaders can go awry when their moral compass is clouded by dollar signs, promotions, proximity to power, and stroking one's ego.

Moral Gravity

What goes up must come down.

As unethical behavior rose, so did the likelihood of a collapse. Out of balance and harmony and away from the "hidden hand" that guides Capitalism. As risk-taking rose and nefarious behaviors continued to one-up the previous immoral actions, the law of moral and ethical gravity brought Enron to its knees. Evoluntariy Darwinism at its best.?

Do you see this kind of leadership in your business? Do you see these kinds of behavior in your organization? If so, what role do you play in accelerating the inevitable collapse? Or can you move the train onto the right tracks? Get the ship onto the right course?

The title of Leader is an honor bestowed upon you by those you serve. Remember, even the best leaders can go awry when their moral compass is clouded by dollar signs, promotions, proximity to power, and stroking one's ego.

Keep your finger on the pulse of your employees, customers, and communities. This strategy is a strength many non-profits possess yet can be incorporated into the for-profit sector.

Be a leader longer because you've created an ethical and, therefore, sustainable culture.

What's one thing you can do today to demonstrate ethical leadership? Will your industry, Business, or department remember you once you're gone?

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