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Enron Mail |
Don,
Attached is my latest effort. It entailed fairly drastic "restructuring and reorganization" of the earlier draft. My revision effort has been directed at improving the focus of the paper. The new story is the following: 1. Enron was formed as a regulated gas pipeline company in the mid-eighties. 2. Economic and competitive conditions conspired to force a dramatic reorganization of the company almost immediately. The result was the creation of a new, unregulated energy trading operation. The strategy of the new unit was to capitalize on business opportunities in the deregulation of markets that was occuring at the time (mid-eighties until now). 3. The business model adopted for the new unregulated business was that of a "gas bank". The analogy to a commercial bank posed a very difficult problem to Enron's management in that there was no source of liquidity to the market from a central bank authority. As a consequence Enron had to develop its own very elaborate risk management procedures. 4. Another consequence of the new business model was that it required a different set of employee skills and talents. Specifically, it required were bright, energetic and innovative individuals capable of identifying entrepreneurial opportunities and starting new businesses. Furthermore, a new, flatter organizational structure entailing decentralized decision making was required to facilitate quick response to changing market conditions. To monitor and manage this new "empowered" labor force required that the firm develop new personnel policies and procedures. 5. Three primary tools of personnel management were adopted: (i) measure performance semi-annually, (ii) tie compensation closely to performance, and (iii) allow personnel free movement within Enron to seek out the best opportunities. 6. Other attributes of the Enron model include consideration for asset optionality, recognition of the value of networks in adding value to trading platforms, and the use of mark-to-market accounting for business transactions as a means of ensuring transparency and promoting prompt actions. If my "story line" sounds better than the draft I have attached its because its the last thing I've written. At any rate I look forward to hearing your comments and to getting this wrapped up. Thanks and i look forward to seeing you in February. John - Enron_Paper_1_26_01.doc John D. Martin Carr P. Collins Chair in Finance Finance Department Baylor University PO Box 98004 Waco, TX 76798 254-710-4473 (Office) 254-710-1092 (Fax) J_Martin@Baylor.edu web: http://hsb.baylor.edu/html/martinj/home.html
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