Lay It on the Line

On August 31, 2001 – eight days after Jeff Skilling resigned and Ken Lay returned as CEO – Lay sent his first major initiative to the entire company. He called it “Lay It on the Line.” The unintentional pun on his own surname cleared every level of review without comment. Over 4,000 employees responded in three days. On October 2, Lay published the results. Sixty-one days later, Enron filed for bankruptcy.

“4,000 of You Responded”

The results email went to every employee worldwide. It landed in dozens of mailboxes across the corpus. It opened with gratitude, then delivered four sections of data that, read today, constitute the most comprehensive internal snapshot of Enron’s workforce in the final months.

The top five issues employees identified:

1. Stock price
2. The PRC (the performance review system)
3. Employee/internal morale
4. External reputation and image
5. “Walking the talk” of integrity and respect

The fifth item. Four thousand employees, asked to name what was broken, put “integrity” in the top five. This was the company that would produce the largest corporate fraud prosecution in American history.

The sentiment questions were worse than the rankings:

SELECT body FROM read_pst_messages('zl_campbell-l_000.pst') WHERE node_id = 2178852

Read that list from top to bottom and watch the numbers decline. Commitment to staying: 64%. Would invest their money: 60%. Treated with respect: 60%. Then the freefall. Encourages risk-taking: 47%. Supervisor has a clear view: 46%. Executive management has a clear view: 41.6%.

Less than half. Fewer than half of Enron’s employees believed the people running the company knew where it was going. They were right – though for different reasons than the 58.4% imagined.

The attribute comparison was where the mask came off. Employees were asked whether Enron had become more or less associated with each trait, comparing 2001 to 2000:

Only 17% believed the company had become more ethical. Nearly 37% said less trustworthy. Almost 42% said more self-serving – by a margin of more than five to one over those who said less. And 39% said more arrogant, three to one over those who said less.

The self-serving number is the one that lands hardest. Enron’s own employees, in aggregate, looked at their own company and concluded that it had become more self-serving. They were not reading the Wall Street Journal. They were reading the hallways.

When asked to name what they liked about working at Enron, the top answer was “People.” Not the business model. Not the stock options. Not the free-market ideology. People. The high quality of people was the most widely cited aspect. Talented. Creative. Learn from one another. The thing that worked at Enron was the thing that had nothing to do with the fraud.

“Here’s What We’re Going to Do”

The second half of the email was Lay’s action plan. Five issues, five responses. Each one a promise. Here is what was promised, and what happened.

Stock Price: Lay attributed the decline to market conditions, California, India, broadband, and commodity prices. “Very few companies have demonstrated the earnings growth, and future earnings growth, as has Enron.” Mark Koenig would host Brown Bag sessions. Greg Whalley and Mark Frevert would hold filmed discussions with employees. The stock was at $25 on October 2. It would be $0.26 by November 30.

The PRC: The performance review system would shift to annual reviews. The forced distribution curve – the mechanism that required managers to rank the bottom 10% for potential termination – would become optional. An employee task force would provide feedback. Reforming the PRC eight weeks before bankruptcy was like rearranging deck chairs, except the deck chairs had been ranked and the bottom 10% had already been thrown overboard.

Employee Morale: A new “Employee Relations” function would report to the Office of the Chairman. Cindy Olson would head it. Vice presidents would complete “Executive Impact & Influence” training. Supervisors would complete an online course called “Communicate!” that used “Enron scenarios and a combination of video, voice mails, e-mails and meetings notes.” The scenarios Enron was about to generate would not be covered.

External Reputation: Better internal communication. A Q&A on the intranet. Meetings starting mid-October. “The more you know about our strategy, performance and challenges, the more you can help disseminate accurate information about our company.” The accurate information, when it arrived in November, was a restatement of four years of earnings.

Integrity & Respect: “Enron’s values will have more importance in each employee’s evaluation.” Focus groups on ethics. A feature column in Enron Business. “We ask that all employees, regardless of level, hold themselves accountable for the way they interact with people on a daily basis.” The people who most needed to read that sentence were not filling out surveys.

His closing line: “We will conduct another employee survey early next year. Please continue to send me your feedback and let’s continue to work together and keep Enron one of the best places to work in the world.”

There would be no next year. There would be no survey. The feedback Lay received early next year came from the SEC, the Department of Justice, and the Senate Commerce Committee. In 2004, he was indicted on eleven counts of securities fraud, wire fraud, and making false statements. He was convicted on ten of them in May 2006.

“An Excellent Example of Integrity”

The replies started arriving the next morning. Salome Kern was a specialist in Enron Broadband Services’ London office. She wrote on October 3:

SELECT sender_name, body FROM read_pst_messages('zl_lay-k_000.pst') WHERE node_id = 2154084

She used the word “integrity” to describe the response to a survey in which thousands of employees said the company lacked integrity. The parenthetical – “the information wasn’t sugar coated and that’s refreshing!” – lands differently when you know Lay was selling his own stock while telling employees the price was a bargain. But Kern had no way to know that. She was in London. She read the email. She thought: at least they’re being honest with us.

That same morning, Janet Dietrich, an executive in Enron Energy Services, forwarded the survey results to her contacts with a six-word annotation: “This was an excellent note.”

“My Moral Is Optimistic”

Roberto Volonte was a plant manager in South America. He had been at Enron since March. He managed 17 people. He wrote to Lay on October 11:

SELECT sender_name, body FROM read_pst_messages('zl_lay-k_000.pst') WHERE node_id = 2156804

“Sorrry by my late answer.” He was apologizing for responding nine days after a company-wide email – to the CEO of a company with 20,000 employees – as though Ken Lay were waiting by the inbox. “I thrust that next year will be better.” He meant “trust.” “My moral is optimistic and I transmit the same at the other 17 employee of the Plant.” His English was imperfect and his loyalty was not.

He had been on the job six months. He managed 17 people in a country that was not his home. He was writing to a man he had almost certainly never met to say: I am committed. I will work. Next year will be better. There would be no South American operations to manage next year.

“Thanks. Interesting.”

Jeff Dasovich, in government affairs, received the survey results forwarded by a colleague named Michael Tribolet on October 3. His entire response:

SELECT sender_name, body FROM read_pst_messages('zl_dasovich-j_000.pst') WHERE node_id = 2119108

Two words. No elaboration, no enthusiasm, no resistance. “Thanks” for forwarding it. “Interesting” as a complete sentence. In the hierarchy of corporate email responses, “Interesting” is the word you use when you have something to say and have decided not to say it.

Dasovich spent his days navigating regulators and legislators in the California energy crisis. He knew what a company looked like from the outside. He read the numbers – 37% less trustworthy, 42% more self-serving, 41.6% believe in executive management – and he wrote: “Thanks. Interesting.” The driest two-word review in the corpus.

“Concerned Shareholder”

Scott Beilharz wrote on November 7 – five weeks after the survey results, one week after the SEC opened its formal investigation, the day before Enron would restate four years of earnings. He had left for General Electric. But he had a claim on the survey that nobody else in the inbox could match: he invented the slogan.

SELECT sender_name, body FROM read_pst_messages('zl_lay-k_000.pst') WHERE node_id = 2169220

The man who named the survey had fled to GE and was watching from outside as the company failed to take its own advice. His misspellings of “bonuses” and “their” tell you the email was written fast, in anger. Managing Directors grilling steaks and lobsters on the golf course. Their kids there. The arrogance that Enron was “perceived to have” – except 39% of its own employees had already confirmed it was not perception.

“I would hope that Christmas parties, bonues etc will be scaled down this year.” Twelve days later, Ken Lay canceled the holiday party entirely.

“Concerned shareholder” – the subject line he chose, in lowercase, like a form he was filling out. That was his relationship to Enron now. Not an employee. Not the man who named the survey. A concerned shareholder, laying it on the line one last time, to a company that had asked for honesty and was about to drown in it.

See Also

• Ken Lay – Author of the survey, publisher of the results, maker of the promises
• Jeff Skilling – His August resignation triggered the entire initiative
• Jeff Dasovich – “Thanks. Interesting.”
• Cindy Olson – Named to lead the Employee Relations function that never materialized
• Performance Review Committee – The PRC that employees ranked as their #2 concern
• Delete Everything, Cancel the Party – The email retention policy and the canceled holiday party, the same weeks
• Everything Is Fine – Lay’s all-company reassurance emails during the same period
• The True Believers – Letters to Ken Lay’s inbox from employees who still believed
• Enron Bankruptcy – Filed December 2, 2001
• Stock Price Collapse – From $90 to $0.26