This memo gives substantial facts about the management system of AA firm who is accused of malpractice by the District Attorney over its audit process of Enron Company. It provides the detailed analysis of the management framework of the company with keen attention of how faults made by the company unfolded. Additionally, it gives the main reasons why the firm should remain stable in the market. The architectural structure of the management has been discussed in details to depict sustainability of the same.
The three-legged stool framework
In the organizational context of Enron Company, the three-legged stool structure has been employed. This structure entails the sustenance of the firm’s overall performance by the use of three components of management. These components include the criteria of evaluation of performance, the inception of the rewards to the employees and the assignment of decision rights. The structure of management of the company has over the years worked basing their concept on these three components. As it stands, there is an autonomous employee growth in the company that has led to its high profitability. It should be noted however that if any one of these components fails to function properly, the effect is felt in the whole organizational structure (Brickley, Smith, & Zimmerman, 2009).
The three management constituents, therefore, form the architectural DNA of the company. In the case presented. On the component failed and a corrective measure needed to be effected to ensure proper functioning of the whole structure. In performance evaluation, the firm has put in place various statutes which would ensure that the employees maximize their potential. These statues include and not limited to time management, quality work delivery, and high level of honesty and integrity when carrying out the work (Brickley, Smith, & Zimmerman, 2009). On the account of the rewards, the firm permits awards in accordance to merit. It also looks into how the reward is going to benefit the employee and change his or her status. On the decision rights assignment, most of the employees in the firm are given the autonomy to make substantial decisions that would ensure success for the same. This autonomy, if not abused, would help the employees grow in their fields of operation. In the next section, this memo gives an in-depth understanding of the allocation of the decision rights and how it affected the audit quality at the AA (Brickley, Smith, & Zimmerman, 2009).
Decision rights assignment
As pointed out clearly, AA shredded the incriminating documents for the Enron Company. This act done by the AA was an act stipulated in the policy of the company regarding the disposing of redundant materials. Additionally, the company framework is based on the three-legged stool model of management. The decision-making at each department is therefore quite diversified throughout the employee fraternity. Every employee is therefore solely responsible for their actions. As an audit firm, AA allows autonomy in decision making for every employee that holds a senior position. If the employee misuses this authority to make the right connotation, they would be responsible for the actions. This policy is wholly discretionary since it gives the workers an opportunity to be self-governing. A stern action is usually given to those staffs that make decisions that go against the company statutes. As it stands, a particular employee of the enterprise of the company shredded the audit documents of the Enron Company (Brickley, Smith, & Zimmerman, 2009). Furthermore, the same staff was responsible for the managing the review process of the whole company. This atrocious act of shredding the documents solely falls on him.
According to the model adopted by the corporation, it is important that if one part of the three components is failing, then an immediate action should be taken to restore the balance. The action of firing the employee responsible for this act is a corrective action to restore the balance. The company is therefore deemed to be strong in unveiling quality audit. The worker in the question is, therefore, a bad code which needed to be removed for proper continual of the company operations. The decision making of AA audit firm is decentralized to allow for autonomy and cooperation from the business entire employee fraternity. Therefore the provisions made are to ensure that the employee maximizes their potential in their jobs and also grow in it (Brickley, Smith, & Zimmerman, 2009).
Performance evaluation system
Currently, the AA audit firm uses the three sets of criteria to evaluate the performance of its employees. These three sets are interconnected to bring the real performance standards of a company. The first one is the quality of work produced by the workers. Since the firm employs qualified staff, it is only expected that he or she depicts high-quality work. In this audit firm, there are set standards of quality that must be met by every inspection of any case. As it stands, the employee who was fired exemplarily completed the audit work at the Enron Company (Brickley, Smith, & Zimmerman, 2009).
The quality of the job was inspected by his superiors, and it was found to be of high quality. This background check is done to ensure high quality for the audits done for various firms. The second component is time management. Time management for the company depicts the level of commitment that the staff has towards the enterprise. Every worker in the firm is expected to carry out their tasks at the time stipulated and ensure the high-quality result simultaneously. The expelled employee indeed finished the work in the time specified as verified by his superiors. This model allows for profound transparency in the work procedures and handling of the documents from the top level management to the subordinates. The third criterion is the delivery of work with honesty and integrity. Indeed as employees carry out their tasks, they are expected to exhibit a high level of integrity and honesty in their work. The documents presented to the board for approval was indeed deemed, to be honest, and showed the exact and fair financial position of Enron Company. In this prospect, the three-legged stool model has been effectively utilized.
The reward system
AA firm pays its employees based on a variety of merits. These values transcend from the quality of work done, the timeliness and the integrity of the same. The compensation plan for this company is performance based. The employee with the best performance gets the best rewards. The forms of rewards that the staffs get are such as salary increment, promotion, bonuses and other noncash benefits such as trips. The firm has a team in the department of human resource that is responsible for providing the best candidate for these rewards. Additionally, the compensation plan has been structured in such a way that every employee feels appropriately paid through their salaries (Brickley, Smith, & Zimmerman, 2009).
From the three components of the architectural structure of AA audit firm, it is evident that the rights to decision part failed to function properly. This has led to the whole structure not working properly. The employee directly involved in the Enron’s case misused his decision-making rights and went ahead to shred the paper. The company took a quick action of firing the employee to rescue the stool from being unbalanced. The employee in question, therefore, was the wrong code which needed to be removed. As it stands, the company is indeed a well-functioning organization which has maintained its integrity and honesty. In fact, the company performance can be measured compared with the big five companies such KPMG, Ernest and Young, PWC, and Deloitte among others. The proper management of the firm has made it be on the competitive edge since it produces reports with the high level of integrity, reliability, and honesty.
Brickley, J. A., Smith, C. W., & Zimmerman, J. L. (2009). Managerial economics and organizational architecture. Boston: McGraw-Hill Irwin.