February 8, 2011

Warning signs that your company will become the next Enron

Look at company email behavior and you’ll see the problem

David SparkHere’s some of my coverage from the ICIS Conference in St. Louis. I was covering the event for Dice and Dice News.

When a company is sinking, everyone knows, and everyone gets scared. They look to others for support and start agreeing with each other’s concerns.

These were the findings of the research paper “Understanding Communication Network Cohesiveness During Organizational Crisis: Effects of Clique and Transivity” by Shahadat Uddin, Shahriar Hasan Murshed, and Liaquat Hossain of The University of Sydney.

The team from Sydney base their knowledge of crisis behavior within an organization by scanning all the emails passed around at Enron, just before the company collapsed. Looking back, the emails showed people forming cliques, as people felt safety in numbers, and their communications became more transitive meaning people were more apt and eager to agree with each other.

To avoid being the next Enron, Uddin recommends organizations track the behavior of emails over time and compare it to previous months or the same month in the previous year. If they notice that there’s more transitive and cliquish behavior then it could be a sign of impending doom.