Slide 1-2
Intro
Nick
So we will be presenting our article titled, “Organizing for Empowerment” which
talks about the AES Corporation. A global energy company on a mission to
empower all of its employees. AES Corporation was founded in 1981 by Chairman
Roger Sant and CEO Dennis Bakke. They currently own 90 electricity plants in 13
countries and employ approximately 40, 000 people.
Slide3
One of the few management topics that has received much attention recently is
empowerment. The ability to make important decisions without top down
interference is becoming more and more popular in many corporations. This trend
has been depicted in many of the previous presentations, such as “Managing
Without Managers” and “Grassroots Leadership” these theories are not possible
without implementing empowerment. So we decided to investigate this topic a little
further, because as future managers it will give you a broader perspective.
The article is in an interview format and therefore we will be presenting it in the
same way. I will be interviewing the three AES representatives here: Courtney
Gehring, Chris Bezooyen and Ulf Geerds. Our critic standing in for this interview
will be Catherine Henderson.
Hello Ladies and Gentleman
I just want to thank you for joining us in this interview as we take a look at
empowerment
So lets turn the floor over to the AES representatives…
Slide 5
Nick- Did you set out to make AES a poster company for empowerment?
Courtney- Well Nick I wouldn’t say that we wanted to make AES a poster company.
Our main goal was to create a different kind of company that we our selves would like to
work for. We based our company around four basic principles fairness, integrity, social
responsibility and fun. We felt that we must put trust in our employees and that we need
to make them feel that they are a important part of the company. We do this by giving
them a lot more responsibility and expect them to be accountable for the results. We
realized that people work a lot better and are more loyal towards a company when you
engage their hearts minds and souls.
Slide 6-7
Nick- What goes on within AES that makes those experiences possible.
Courtney- Well we first designed our company to make sure that power gets distributed
throughout the organization. Everything about how we organize gives people the power
and the responsibility to make important decisions. We obtain this by having a lack of
hierarchy and mainly organize around small teams. Another thing that allows us to
distribute power is our corporate structure along with our practices in hiring,
compensation and information flow. At AES we treat every person as if they are a CEO
and try to eliminate all groups of functional specialists. We are moving towards a system
in which each team has total responsibility for its area both in terms of operations and
maintenance. We feel that the more authority figures you have above you, the more likely
it is that you wont make decisions yourself.
Catherine- You say everyone makes important decisions!? So they’re basically saying
that they would potentially let a janitor make decisions regarding millions of dollars for
investing. Are you serious?
Courtney – Yeah why not, we feel that all our employees deserve to a chance to gain
insight into all the areas of our operations. Actually a few years ago we allowed our
maintenance team to invest some of the extra money that the company had. They did
their research and looked at a whole bunch of different options and actually recieved a
better return on the investment than our previous group did that was working from head
office. Of course their were some guidelines into which types of stocks they could invest
into, mainly ones that were not so risky but the final choice did come down to them and
everyone benefited form it.
Slide 8
Nick - How does this CEO perspective get formed?
Courtney – There are many ways that we do aim for that goal. One of the main one is
job rotation. We want all employees to have a good idea of all of the different operations
of the plant. All these employees are generalists and know most aspects of our operations
inside and out.
Catherine- Just think about the cost to train these people in every area!! The costs would
be outrageous. What happened about the traditional form of specialization?
Slide 9-10
Nick - Well excuse me miss but I was just about to ask! Doesn’t eliminating
Specialists hurt efficiency?
Courtney- We feel that the process of learning and doing is what creates engagement and
that it is worth the trade off. The people that take on these roles instead gain a sense of
control and total responsibility. People will arrive to the level of trust and dignity that you
invest in them. Also involving people changes them forever and even though it may not
have a large effect on the company, the experiences gained is worth it.
Slide 11
Nick- How is hiring handled, then, in particular without an HR
department overseeing the process?
CourtneyHiring the right people is essential we look for people who don’t just accept our value but
are enthusiastic about them. Usually we do have lots of people to choose from and it
allows us to pick those that are ready to make important decisions and be held
accountable for them. Basically we look for best cultural fit first before their expertise.
Slide 12
Nick- How do you approach performance evaluation?
CourtneyWe do visit a lot of our plants and listen to peoples concerns. Also we have employees
fill out surveys that are read by all of us, approximately 10,000 of them. These give us a
good understanding of what is going on and where principles are lacking in the system.
One example of where we realized our principles where lacking was in a facility in
northern Ireland. The plant leaders here put a limit on the amounts that individuals could
spend without prior approval. Approval processes are inconsistent with our principles and
we would like to see limits like this abolished at every level of the company.
Catherine- Limits abolished?! Aren’t you the least bit concerned about bankruptcy?
What happens after one bad investment by someone who has little knowledge about
investing!?
Courtney- Its simple these people learn from their mistakes. If given the opportunity you
would be surprised to see how well people can make decisions. These limits take the fun,
the responsibility, and therefore the mental and emotional engagement out of their work.
Slide 13
Nick- So I’ve heard that you really don’t like the hourly wage system why is that?
Courtney – I’ll let you handle this one Chris..
Chris – Sure thing Courtney, Nothing is wrong with the hourly wage system in general,
however, but we find that salary paid employees feel more motivated. They come to
work because they feel responsible to do so, not just coming to put in time. Also,
traditionally there is a role distinction between hourly paid positions and salaried
positions. The floor workers are paid by the hour and the managers are paid a salary.
This is inconstant with our principles because it promotes a hieratical structure. We make
it the employee’s choice, at this point, about 50% of our workers who used to get paid by
the hour have converted themselves to salary, we would like to see more go to the salary
approach.
Catherine- Hourly wages can be an incentive to work harder and longer, and workers
will be more likely to put in some overtime. How motivated are your employees going to
be to stay at the office longer if they know their pay isn’t going to change for that month
anyways?
Chris- Incentive won’t be financial. It will be because they own the project. They’ll be
there regardless of the financial compensation. Which agrees with our principles,
fairness, integrity, social responsibility and fun.
Slide 14
Nick - So far, you've described the mechanics of AES in terms of its organizational
structure and its approach to hiring. What other managerial practices make
empowerment work?
ChrisWe have very few secrets at AES
- financial and market information is widely circulated
- for SEC purposes, every one of our people is considered an
"insider" for stock trading.
- The system works because people volunteer information – they share knowledge
- If we want employees to be able to make major decisions on their own they must
have the information readily available to them
Example
Flora Zhou
- Purchasing a plant in Vietnam
- 200 – 300 replies to email asking for advice
- Sarah Slusser, had experienced a similar situation with a plant in the Yucatan
- Was able to help Flora reduce bid by providing her with more information
- Lowest bid by 2 tenths of a percentage
Slide 15
Nick- So far you have said that the mechanics of your company take care of
enforcing accountability. What happens when these mechanics fairness, integrity,
social responsibility and fun fail?
Chris-We have some enforcement through financial penalization, such as a loss of a bid…..
-Loss of bid results in no bonus, however sometimes not taking a bid is better if the
investment turned out to not be a good one.
-case where the employees lied about the water treatment test results, they where
demoted and even top management took pay cuts up to 30%
-In the case where the test results where lied about the top management took a pay cut
because they felt it was their responsibility hire and teach leaders who will hire and teach
employees not to do such things
-accidents in plants, one accident cut 25%, two 50% and three everyone loses bonus.
-one year they had four fatalities and everyone company wide took a 10% cut too their
wealth sharing plan bonus.
Catherine- Punishing everyone in the company for the mistakes of a few is ridiculous,
how is it possible for people on the other side of the world to have a prevented those
accidents? This is something I would not put up with if I was working there.
Chris- This binds everyone in the company, making everyone feel connected to everyone
else. Also it will make everyone more consciences and careful of their actions.
Slide 16
Nick- Ok so correct me if I’m wrong but are all mistakes penalized financially? Why
is AES so forgiving in this aspect?
Chris- No, only serious mistakes are penalized financially
- AES is forgiving because everyone’s been on the front line making decisions and
making mistakes.
- Because of how the company is setup, peer support is astounding and forgiveness
follows from this.
- If people own up to mistakes the organization is ready to forgive.
Slide 17
Nick- If AES’s mechanics push responsibility and accountability away from
corporate headquarters – what is left for you to do?
Chris- we as the leaders fell that we are left with the four roles
- Advisers, people bring them issues to get opinions
- Chief guardians of principles, this role is played down because the people inside
the company are hired and taught in a way that upholds the principles. The
-
-
internal controls keep the principles guarded. The guardian role comes out most
often when they teach or write.
Chief accountability officers, again this is taken care of in the internal mechanics,
but they are the back up. If no one else asks, they do. In this capacity the leaders
act more as accountability officers to the world outside of the company such as in
the example of the boilers in Jacksonville.
Chief encouragers, attend orientations and plant meetings, give speeches at
parties. “what is your work if you don’t see the meaning in it? You have to
celebrate this meaning.”
Slide 18-19
Nick- you’ve described how empowerment works, but the question arises: Why
empower in the first place?
Chris- Like Courtney said above, we started this company to be something different then
everyone else. We developed our four principles and empowerment and this company
followed. Our principles where developed because we believe companies must start
focusing on benefiting society, putting their stakeholders before the bottom line.
Capitalism is in great jeopardy if we hold on to the bottom line first notion. Companies
must exist primarily to contribute to society, to meet its needs. The idea here is not to get
wealthy, its to improve the world.
Slide 20
Nick – Ulf, You want to make money at AES, though, don’t you?
Ulf-profits are a consequence of doing a good job
But -profits are not the central purpose
-You have to make money or the business wouldn’t be sustained, and generally profits
represent how well our missions are being carried out
-we don’t feel as though the shareholder is the most important group of people in our
company
All stakeholders play a roll
 AES people
 Customers
 Communities
 AND Competitors
-competitors make us better AND credible. If we don’t surpass them or do a better job in
our market, we will go out of business
Catherine- That contradicts itself. You say profits are the consequence of doing a good
job. Therefore, when profits are low, you change your perspective to regain higher
profits. Isn’t that using profits as a main motivator?
Ulf- Yes it is one of our motivators, however it is not our central purpose. Our first goal
is to achieve our four principles; fairness, integrity, social responsibility, and fun.
Slide 21
Nick- Can you think of an industry or situation where empowerment isn’t
applicable or appropriate for safety or regulatory reasons?
UlfNo not really
-possible in other companies as well
-However, empowerment means also more accountability for the employees
-we see the biggest problem in the giving up of power for the higher management.
Catherine- But some employee’s don’t want to have responsibility where would they go.
Ulf- That is true but if you give them only a little bit of accountability even these
employees will start to grow with it.
Slide 22
Nick- AES has expanded- both by building plants abroad and by forming alliances –
have there been new or unexpected challenges?
Ulf-It was easier than expected to expand the company to different areas of the world.
-Sometimes the Non-American employees understand and apply the AES concept faster
than the American once
-All values that guide AES exist all over the world. though they might be slightly
different
Catherine- Wouldn’t these values have different meanings in different countries?
Ulf – Yes it is true that they differ slightly, but the core meaning for fairness, Integrity
social responsibility and fun are basically the same
Slide 23
Nick- What about alliances?
Ulf-AES does not work very well with other companies
-We do not like to give up our value system so we can easier work together with other
companies that have a hierarchy system.
-However:
we have a new situation in Los Angeles. There they work together with the Williams
Companies but only on contract base. No real partnership.
Slide 24
Nick – What will happen to AES when you, the founders, are gone?
UlfWe the founders are a little bit worried that the company might turn away from
empowerment
-However, we think there are enough people in the company who want the system of
empowerment to stay.
UlfSlide 25
As a closing remark:
Our empowerment system of AES is a unique approach in the business world. Our
company’s main drives are the four core values: Fairness, Integrity, social responsibility
and fun. As well as, teams did replace the standard hierarchy structure. Even so, AES
system is not 100% perfect and needs some adjustments other companies are more then
welcome to learn from our approach to empowerment.
Nick – Well thanks for your time, and there might be some questions that the class
would like to ask.
Slide 26
But first what are the four principles that make empowerment possible?
So any questions?