Frankly, I don’t know why so many people are surprised at Enron’s crash. Many critics are musing that cute accounting techniques, egregious management, and unethical corporate behavior took Enron from its riches to ashes debacle. But when we peel back the Enron onion, I think we will find that the company suffered as a dysfunctional organization.

Its board of directors was asleep at the switch, its board and audit committee were paid too much to be objective or to challenge management, its accounting and law firms were bought to turn those overseers’ heads, and its management was cooking the books. But probably most importantly, Enron’s management was allowed to run amuck unabated by the board. Does anyone need a better definition of a dysfunctional organization? Today when you open the dictionary to look up“dysfunctional,” you’ll see a big fat picture of Enron. With no rules or guidelines, it’s only human nature for people to make up their own.

The current business environment in the U.S. is ripe for dysfunctionality. Running on Internet time and competing on a global scale are causing organizations to be challenged and stressed like never before. Progress is measured in quarterly increments rather than against a long-term plan. Strategies are put in place, then changed the next month. Small companies are merging, huge conglomerates are splitting up. Businesses are acquired, their excess resources are divested, and then the businesses are sold - typically at a loss. Employees are hired and laid off a few months later - and then new employees are hired to replace them.

This environment of constant crisis and change presents unique opportunities for business leaders to either shine - or fall on their keisters. One only needs to look at obvious behaviors and attributes to see how various organizations are reacting. Among the attributes that can be characterized as dysfunctional are unstable employer-employee relationships, fear of change and risk, avoidance of responsibility, lack of confidence, silos, black boxes, hidden agendas, and turf battles.

Those problems, if they exist, will eventually contaminate the entire organization. Anyone who has studied human behavior knows that the only way to survive in a dysfunctional environment is to become dysfunctional oneself.

Dysfunctional organizations have these common characteristics; what’s uncommon among them is leadership with ability to sense dysfunctional behavior and the guts to fix it. Is your organization in danger of becoming another Enron? Are there indicators of organizational dysfunction in your business? If you’re not sure, read on to discover the six most common attributes of dysfunctional organizations that I have observed.

Broken-Down Communication

Declining sales and profits are only telltale symptoms of root problems. Enron’s bankruptcy wasn’t the result of declining financial performance, but of much greater organizational problems, one of which was poor communication - between the board and management, management and employees, the audit committee and auditors, and among managers.

Sometimes poor communication is an accident, and sometimes it’s not. Poor communication is the best way to hide incompetence. If no one knows the whole plan, no one can judge whether it is good or bad. If an idea is later proved to be a mistake, you can deny it was yours. If a message is not clear, personal agendas can remain hidden. No one can criticize the strategy if no one can understand it.

In dysfunctional organizations, there isn’t talk among departments. Silos are built around business units, and divisions are created between management and employees, so black boxes, turf issues, and hidden agendas thrive. Interdepartmental meetings are not held or are ineffective, and interdepartmental cooperation is unheard of. Documentation is poor or uneven, and important information is not shared. Knowledge is power, and in a dysfunctional organization, sharing information would mean giving up power.

Strategy du Jour

Many organizations have settled into a constant crisis mode where management is never satisfied with performance, everyone is always over budget, everything needs to be done faster and cheaper, and everyone’s job is in constant jeopardy. Strategies constantly change and sometimes are based on no more than the latest hot-selling business book or a recently attended motivational seminar.

Over time, unrelenting stress causes burnout or break down, and employees ultimately give up. A fear-driven, pressured, strategy-du-jour environment forces them to lose confidence and leave their brains at home.

Constant change whipsaws organizations. Let me illustrate this point: Draw a triangle, three inches on each side. Now imagine tipping the top just a bit, say a quarter inch. What happens to the bottom? It slopes at a whole new angle! A little change at the top creates huge sweeping change at the bottom. If managers constantly change strategies, they shouldn’t be surprised when nothing gets done.

Self-Deception

Dysfunctional organizations fool themselves by comparing themselves to other, more dysfunctional organizations – they’re practicing the Bigger Fool Theory: “If you think we’re bad, at least we’re not as bad as them.” But who’s the bigger fool?

These organizations focus on relative success instead of absolute success by selectively looking outside their walls to rationalize their results and behavior. I was on the board of directors of a company where the CEO consistently used businesses in the bottom third of the industry as the peer group to which he compared his company’s results. I always challenged his logic. Obviously, he was using this group to make his own company look better than it really was.

Unclear Corporate Values

Dysfunctional organizations are rife with infected moral values. Enron management encouraged employees to invest in Enron stock while executives were selling it. Other companies might say “employees are our greatest resource,” yet don’t provide adequate training or competitive salaries and benefits. They might expect complete information from employees, yet not reveal bad news to employees or board members. “Do as I say, not as I do” becomes the message.

Messed-up companies don’t adhere to ethical standards or insist on compliance with them. They profess pious platitudes and pontifications, but even the board and management don’t pay attention. Without a corporate values statement, the organization is running in random motion, making up standards along the way.

Lack of Discipline and Accountability

One clear indication of dysfunction is the lack of decision-making processes and accountability. An easy way to identify this is to listen for indirect statements, like “sales are down” versus “the sales force is not meeting plan,” or “quality is poor” versus “production is building defective products.” They don’t pinpoint the cause of the problem. It is as if “sales” and “quality” have a life of their own.

In dysfunctional organizations, employees operate without clear goals and objectives. There seems to be no cause or reason for events. No one is accountable for anything or to anyone. It usually starts at the top, with the board not governing properly or holding the CEO and management accountable. Then what the hell do they expect from employees? Metaphorically speaking, the apple doesn’t fall far from the tree.

Lack of Structure

Trademarks of dysfunctional organizations are lack of clarity in job responsibilities and lines of authority. Pretty soon, an organization gets used to no structure and people begin to like it because they can’t be held accountable. “Groupthink” starts to run the organization. Decision making creeps along at a slow trickle while people blame each other behind their backs for the organization’s problems, never discussing them face-to-face.

I’ve observed many entrepreneurs and company founders who are visionaries and good strategists, but who are unable to create an operational structure. Often they are afraid to bring in professional management to round out the management team, so they just keep trying to do everything themselves, even though they have out-stripped their capabilities.

One by-product of dysfunctional behavior is that the decision-making system is broken. Another is that there’s a strong disincentive for recommending changes or even suggesting that there might be a better way of doing things. Because there is no structure, progress can’t be measured and employees can’t be truly motivated.

Of tantamount importance, the business doesn’t know when it has accepted risk or who the risk takers are. That happened in the case of Enron. It proved to be very chaotic, very dysfunctional, and fatal.