Culture Eats Strategy: Lessons from the Sicilian Mafia and Enron's Disastrous Downfall

It's been a while since I wrote an article for the Strategic Edge. I was away on a deserved leave of absence for my annual dose of R&R where I found myself engrossed in two powerful narratives - the eye-opening documentary, "Enron: The Smartest Guys in the Room," and the timeless classic, "Mario Puzo's: The Godfather."

As I immersed myself in the chilling account of Enron's colossal collapse and the riveting story of the Sicilian Mafia portrayed in "The Godfather," a profound realisation dawned upon me – Culture, that invisible force that shapes and drives organisations. The intricate interplay between culture, strategy, and success unfolded before my eyes, urging me to pen a piece that uncovers key lessons for myself, business leaders and any like-minded friend.

In this article, we journey through the riveting world of Enron's rise and fall, where a toxic culture fueled by greed and deceit led to a devastating downfall. We unveil the allure of the Sicilian Mafia's unwavering loyalty, a world where the Mafia thrives despite the absence of traditional corporate strategies, while a Fortune 500 behemoth like Enron crumbles under the weight of a toxic culture.

Let's uncover how culture can be the game-changer that leads to either resounding success or utter disaster for any organization.

The Culture of Deception: Unraveling the Scheme at Enron

In the acclaimed documentary "Enron: The Smartest Guys in the Room," the inner workings of Enron are laid bare, exposing the catastrophic consequences of a culture dominated by greed, deceit, and manipulation. At the core of Enron's meteoric rise was a culture that revered innovation, risk-taking, and financial prowess. Unfortunately, these very qualities would eventually mutate into a toxic mix of arrogance and dishonesty.

The company's leaders, obsessed with short-term profits and stock price growth, engaged in accounting trickery to create a facade of prosperity. They manipulated financial records, concealing enormous debts and inflating profits to entice investors and drive stock prices ever higher.

The documentary shines a light on the notorious "mark-to-market" accounting practice, allowing Enron to book potential future profits immediately, regardless of whether they were ever realized. This tactic painted a financial landscape that veiled the company's true state. Employees were encouraged to aggressively employ accounting tricks, and those who challenged the ethics of these practices were either silenced or sidelined.

The Downfall: The House of Cards Collapses

As Enron's fraudulent practices reached a tipping point, the house of cards began to crumble. The company's true financial reality was exposed, leading to a rapid and spectacular fall from grace. Shareholders suffered enormous losses, thousands of employees lost their jobs and retirement savings, and the repercussions rippled through the financial world.

The documentary reveals that Enron's toxic culture permeated every echelon of the organization, corroding trust both within and beyond its walls. As investigations unraveled the web of deceit, the once-celebrated leaders faced indictment and ignominy. The Enron scandal became synonymous with corporate corruption and served as a stark warning to the entire business community.

Examples of Enron's misdeeds are aplenty. They manipulated financial records, bullied and silenced dissenters, and rewarded unethical behavior. The toxic culture that permeated every level of the organization eroded trust among employees and investors alike, culminating in a scandal that rocked the corporate world.

To watch the enlightening documentary "Enron: The Smartest Guys in the Room," see below:

The Sicilian Mafia: Unbreakable Bonds

In stark contrast to the disreputable tale of Enron, we shift our focus to the Sicilian Mafia - an organization shrouded in secrecy, yet exemplifying the potency of a steadfast and unified culture. But beneath the criminal exterior lies a remarkable example of how a strong culture can bring success, regardless of the challenges faced.

Now, we're not endorsing illegal activities, but we can't deny that the Mafia exemplifies a strong culture. With unwavering loyalty and a code of conduct etched in stone, they managed to thrive even without a traditional business strategy. Their unity and cohesive culture enabled them to achieve goals that, on the surface, seemed impossible.

But of course, we're not suggesting you adopt any mafia-like practices in your company. Instead, let's take inspiration from this powerful example to understand how culture can be a game-changer.

The history of the Sicilian Mafia traces back to the 19th century in Sicily, Italy. Originally emerging as a response to the oppressive feudal system, the Mafia provided a form of justice and protection to the local community. Over time, however, it evolved into a sophisticated criminal organization, embracing extortion, racketeering, and illegal activities. The rise of Prohibition in the United States during the 1920s saw the Sicilian Mafia's influence expand significantly, as they became deeply involved in bootlegging and smuggling operations. This period marked one of their thriving phases, as they established powerful connections both within Italy and across the Atlantic.

The Sicilian Mafia, thrived for centuries with a culture that bred loyalty, silence, and secrecy. They were organized into a hierarchical structure, where each member knew their role and adhered to a code of conduct known as "Omertà." This code demanded absolute loyalty to the "family" and forbade members from cooperating with authorities or divulging any information.

Through this united and tight-knit culture, the Sicilian Mafia was able to survive and prosper, even when facing relentless pressure from law enforcement and the government. Their unwavering commitment to their culture allowed them to navigate through challenging times, escape prosecution, and continue their operations.

By the mid-20th century, the Sicilian Mafia faced numerous crackdowns from Italian authorities and law enforcement. The 1980s were particularly tumultuous, marked by a bloody internal conflict known as the "Second Mafia War." During this time, high-profile assassinations and confrontations with law enforcement led to widespread arrests and convictions of key Mafia figures. The organization's structure began to crumble, and informants from within the Mafia ranks began cooperating with authorities, leading to further dismantling of their operations. The Sicilian Mafia's influence waned, and despite occasional attempts to regroup, they were unable to regain their former dominance. While the Mafia still exists today, it has been significantly weakened, and law enforcement efforts continue to target its remnants.

Insights from Great Authors and Leaders on Strategy

So, we've established that culture matters. But what do the great authors and business leaders have to say about strategy? Well, let's hear it from some renowned minds.

Author Peter Drucker, the guru of modern management, once said, "Culture eats strategy for breakfast." His words continue to echo across boardrooms and C-suites.

Jim Collins, in his iconic book "Good to Great," emphasized the importance of getting the right people on the bus before figuring out where to drive it.

"Culture does not change because we desire to change it. Culture changes when the organization is transformed; the culture reflects the realities of people working together every day." - Frances Hesselbein

These visionary leaders recognise that strategy without a solid cultural foundation is akin to building a house on shifting sands.

Transforming Corporate Culture: A 7-Step Approach

Now, let's get practical. How can a business transform its corporate culture to ensure it aligns with its strategic objectives?

Let's explore a 7-step approach to transforming corporate culture and positioning it ahead of even the greatest strategy:

Step 1: Assess Your Current Culture

Embark on a candid evaluation of your organization's existing culture. Engage employees and stakeholders in open conversations to grasp prevailing values and behaviors.

Step 2: Define Your Core Values

Craft a set of core values that align with your organization's mission and vision. These will guide the cultural transformation.

Step 3: Lead by Example

Leaders must embody the core values, setting the tone for the entire organization.

"Investing in culture and creating a positive, productive culture is the work of everyone in an organization." Brian Chesky, co-founder of Airbnb

Step 4: Involve Your Team

Encourage employees to actively participate in the culture-building journey, fostering a sense of ownership.

Step 5: Recognize and Reward

Acknowledge and celebrate individuals who embody the desired culture, reinforcing its importance.

Step 6: Implement Cultural Initiatives

Initiate programs and workshops that promote the core values and integrate them into daily work.

Step 7: Continuously Evolve

Culture is dynamic - regularly assess progress, adapt, and address challenges.

My Take-away: The Culture-Strategy Nexus

As we conclude our enthralling journey, we unveil the undeniable truth - culture eats strategy for breakfast. Like the Sicilian Mafia's enduring success and Enron's tragic fall, the right culture can be the difference between triumph and catastrophe. Let us be wise leaders, prioritizing culture over fleeting strategies. It's up to us - to craft a culture that drives success, where strategy becomes the cherry on top. For it is in the fusion of culture and strategy that the most extraordinary organizations are born.

Remember, building a strong culture takes time and dedication. But when culture and strategy work hand in hand, your business can achieve greatness beyond imagination.

About the author: Leo Ngatiah is a sales and distribution expert with a keen interest in strategy and innovation. He is currently pursuing his Masters in Strategy at Strathmore Business School, and also serves as an Area Manager for Kenya Wine Agencies Ltd, where he oversees sales and distribution in Nairobi. With years of experience in the industry, Leo has developed a deep understanding of sales and distribution dynamics, and is always looking for innovative ways to improve business outcomes.