Help Aes Employees example essay topic

Strategy AES distinguishes itself through developing new products and applications at a low cost. It is committed to social responsibility and empowering its employees through its four main principles which include integrity, fairness, social responsibility and fun. It is "different" from other corporations because AES is focused on retaining its core values and culture as the corporation expands in size. The company's sources of sustainable competitive advantage include technical leadership through its innovative research and development team and its worldwide network of distributors and strategic partners. AES is committed to penetrating international markets, specifically in developing or emerging economies, and constantly improving on product development. The case states that AES believes their competitive advantage is a result of its "agility or speed and its ability to commit to corporate equity and to arrange complex financial transactions".

Structure AES is operating in a network structure. In this structure, employees form groups to solve problems and achieve common objectives. Employees may volunteer for task forces, without any formal credentials, because they are interested in a particular subject or want to set effective company policies. Although employees are not given a formal career path at AES, they are given latitude to move up the career ladder within the company to other positions. The organization has five hierarchical levels, consisting of a set of divisional / regional managers, and three additional levels that exist in the plant.

The plant organization consists of three levels: the plant manager, the seven area superintendents, and the front line people. The two co founders decided "to avoid creating bureaucratic organizations resembling the government" because of their bad experiences working for the government. As a result, the structure of AES is highly decentralized. This allows managers and employees to both take ownership of their roles and have input on the success of the company. It also allows individuals to develop leadership skills for potential promotions. This flat management structure encourages high employee involvement in all decision-making opportunities.

Systems The case revealed that AES uses four measures of performance; shared values, plant operations, assets and sales backlog. Shared values is described as how fun or fair the organization is along with how socially responsible. Plant operations are measured on the basis of how safe, clean, reliable and how cost effective a plant can be. Assets, such as the company's associates are tracked to determine what changes have taken place. And the Sales Backlog measures the contract revenues during the year. Systems also include the data integrity or systems information.

And as they noted in the case, AES' intentions are to grow internationally, which means that a common form of communication will play an integral part in the success of the organization. AES offers guidelines for its compensation and benefits package. Individual salaries are determined by looking at industry standards. In fact, there is no set salary schedule for individual jobs within the company. AES does offer three forms of incentive pay including, individual bonuses, plant performance bonus, corporate-wide bonus and annual raises. The company also offers a retirement system based on company stock and a tuition reimbursement program to assist employees attending school.

Staffing AES states they hire creative, trusting, responsible and unique people that enjoy a challenge. The goal of the hiring process is to select people who fit well with culture of the company. AES believes technical skills can be learned if the candidate is motivated and dependable. In fact only 20% of the Thames plant employees have college degrees with the remaining 80% coming from the Navy or General Dynamics. In addition, there are only twenty to thirty employees with an MBA at AES, most of whom are from non-U.S. countries. Since there is no human resources department at AES, recruiting, hiring and training are completed by plant personnel.

Employees volunteer to look at resumes, conduct phone interviews, and then conduct one-on-one interviews. So, once new hires begin with the company, senior employees will help to train them. Skills AES does not emphasize technical skills, but rather allows each employee to gain experience on the job and try new tasks throughout the company. Employees are given the opportunity to work in departments where they can gain valuable experiences and be challenged to develop in their career at AES. Responsibility and knowledge are distributed throughout the organization, which AES views as a competitive advantage. In fact, the chief financial officer, Barry Sharp stated that his job was "not so much as running a centralized finance function but rather as helping all the AES employees as they made important decisions about financing and investments in a very capital intensive business".

This level of trust and respect is what has helped to create a low turnover rate for the company. AES takes pride in being socially responsible by delivering electricity in a safe and reliable manner, as well as improving the lives of employees and members of the community. As a result, it has set up an employee environmental task force to address AES' industrial issues and how it affects society. This task force shows employees how to effectively manage and work with the environment. Style The leadership style of managers at AES can be described as informal. There are no formal policies or rules for employee relations.

Managers at AES are encouraged to use their own discretion when dealing with employees. They believe there is no one course of action that is best for everyone, rather, people should be dealt with on an individual basis when it comes to resolving performance problems or personal issues. The management style at AES focuses on empowering employees and enabling them to try new things. Employees are encouraged to learn on their own, by asking questions and soliciting help from others.

AES believes that set rules and procedures limit innovation, so management allows employees to complete tasks in their own way. Decision-making at AES is also decentralized and informal. Each plant uses a task force system made up of employees to make decisions on areas that affect all plant employees. The participatory style of decision-making at AES allows employees to be involved in every aspect of the company, from finances to health benefits. Shared Values According to the case of AES, Dennis Bakke described the company's mission as having "to steward resources to meet the needs of society".

Both Bakke and Sant used that mission statement to build a set of four core values for the company and its employees, including integrity, fairness, social responsibility and having fun. Having these values characterized and defined for each employee, helps to create a "shared understanding of the vision of the company". AES also has a set of core assumptions about the type of employees that the company will hire. The assumptions are that AES employees will be creative, responsible, fallible, unique people with the desire to make positive contributions to society. Because the company has a strongly defined mission statement and specific criteria for hiring individuals, AES is able to create an effective work environment.

AES is so dedicated to their mission that the SEC has required the company to "list its adherence to its values as a possible risk factor". The company had to include that information in its Common Stock Offering Prospectus. A key phrase from that description included "if the Company perceives a conflict between these values and profits, the Company will try to adhere to its values-even though doing so might result in diminished profits or foregone opportunities. The Company seeks to adhere to these values not as a means to achieve economic success, but because adherence is a worthwhile goal in and of itself". II. Problem Identification Statement: As AES continues to grow without a centralized structure, it will become increasingly difficult for the organization to sustain autonomy.

The company operates power plants throughout the world, but lacks a centralized management staff. A decentralized system will eventually create a lax culture resulting in ambiguity regarding employee benefits, compensation, training, development, and also discipline. Although AES strives to maintain its core values, their informal approach to management may cause them to not be as agile in a competitive industry. At times AES may be taking the right actions in risking profits over integrity. But, there needs to be a better alignment of its actions so that the company can remain competitive in its industry.

The issues that may arise from decentralization include a tendency to make decisions that benefit a specific segment at the cost of the organization. There could also be a duplication of services, which in turn wastes resources such as time and money. An example of an issue that arose from decentralization stated in the case was how some of the Shady Point plant employees had falsified reports and in turn reduced the company's market value by $400 million. A lack of control helped facilitate such an event.. Formulation of Alternative Approaches: The first alternative includes creating a human resources department within AES, which would be responsible for staffing, salary, training, compensation and benefits. AES can retain its flat organizational dynamics, but it will now also include an effective HR Department.

Each country where AES has a plant should have a human resources department suited towards their individual needs. Since AES will be dealing with a variety of cultures they need to be aware of the different labor laws and practices within these countries. Having a human resources department could eliminate the additional workload and decision-making required of individual employees. This will improve efficiency and provide more structure to the growing company. AES could even out-source their human resources activities to save time and money. This can help them to focus on their core competencies and help to increase efficiency.

The second alternative is to keep the existing system, but help the employees to create a formalized system of rules and procedures for managing themselves. The best way to do that is to create a HR manual. The manual can include comprehensive information regarding severance, benefits, retirement, vacation time, sick days, personal days and 401 K. HR seminars should be conducted interactive meetings to inform all employees of any changes. IV. Evaluation of Alternative Approaches and Recommendation: Having a centralized HR department could reduce administrative time by automating and customizing human resource functions. Also, it will make it easier for the company to design and implement the HR policies and practices that are common across the different cultures.

The HR system also can provide instant access to information such as: the policy and procedure manuals, descriptions for benefits received, rules governing the workplace, company policy of sexual discrimination, providing an outlet for creative ideas, suggestions or complaints, and most importantly to convey the company culture. AES' centralized system should be established, but not at the price of cross training. It will be imperative for the corporation to continue cross training, but in more of a structured manner. Volunteers should not be chosen to take on financial projects or HR tasks if they do not have any background in those fields, yet they should continue to learn and professionally grow by taking training courses or learning from co-workers. There may be some disadvantages to using this alternative, including resistance by company employees who valued participation in HR decision-making policies and procedures. AES believes in employee empowerment and giving their staff latitude in making decisions for the success of the company.

But, centralizing a particular role may cause some employees to feel slighted and even cause resentment within the company. Also, AES may have trouble in recruiting for the HR department. If it does not get current employees to apply for the positions, AES may have to go outside the company for staffing. Another option would be to out-source the entire HR department.

This may cause even further problems with employee morale since another company would step in and enforce HR policies for AES. Keeping the existing system with the addition of a company HR manual is an effective option because it will create a structured template for employees to follow in their daily interactions. AES can set up a task force to create this manual along with several town halls and open forums to come up with an equitable and fair HR manual. The participatory style of decision-making at AES has been effective for AES so far; however, as the company continues to grow, decisions may become too complex to be solved through the use of fluid task forces. As a result, policies and procedures in a HR manual can help to remove any ambiguity that may currently exist in employee relations. Many of these issues that need defining include, policies regarding discrimination, severance, reprimands and the like.

Creating individual guidelines for the various plants within each country may also be necessary. Different countries have different cultures; therefore, AES may need to make some cultural adjustments in the respective HR manuals. Having a HR manual will also help to prevent problems such as those experienced at the Shady Point's plant; where some employees falsified quality reports. The lack of formalized rules and regulations may have inhibited managers' ability to address the problem. Also, employees may have lacked an outlet to report the unethical behavior of others. In this particular scenario, AES directly went to the EPA who in turn filed lawsuits against that plant.

AES was correct in reporting to the EPA about the lack of integrity of Shady Point's quality reports. But, it seemed that in doing so Shady Point lost trust with AES headquarters and eventually returned to a rigid corporate structure. This rift with headquarters could have been prevented if appropriate rules and regulations were clearly relayed to all members of AES. The disadvantage to creating a HR manual may be some resistance by current employees to move to a universal set of rules and regulations. This is a typical problem seen in many companies facing change. Although employees may resist, it is going to be more difficult to implement the use of the manual if management does not cooperate or clearly communicate the changes that will take place.

Our group feels that the best option to choose is the use of a company HR manual. This is ideal because it incorporates some of the things the make AES unique. The company can use a task force approach to create the rules and guidelines in the manual. Creating a HR manual will allow the AES culture to remain the same but it will add an additional source of protection to the employees. It will offer concrete answers to specific HR issues and can be a resource that all employees use to find answers to employment concerns.

This approach will also free the employees from having to make specific decisions about individual HR matters and help them to concentrate on making AES a successful company. V. Action Plan: AES must create the HR manual through employee participation because employee involvement in corporate decisions is a fundamental part of AES' culture. The manual should have clearly stated rules and procedures so that each employee hears a consistent message. Most importantly, the HR manual will help redirect employees to focus on other activities including enriching job related skills and helping AES become more competitive in its industry. Since customs and cultures vary according to the particular country hosting AES, it is best to have specific manuals for each nation. However, the corporate headquarters should set guidelines and have final approval rights concerning the contents of the manual.

AES should also request an appropriate timeline for the completion of each manual being developed. AES can use its task force method to develop the HR manual for each of the countries housing an AES plant. Although AES is known to sacrifice profits to obtain employee satisfaction, they also need to review specific employee benefits to ensure that they are feasible. AES needs to make sure that all decisions, especially costly items such as employee health care, fit into the company's budget. The items in the HR manual should include, but are not limited to: o Employee health care Vacation time and sick leave Training of new employee so Cross training of employee so Tuition reimbursement o Disciplinary action so Sexual harassment policy Ethics policy, including how to report unethical behavior Employee assistance, such as counseling o Retirement planning Once the manual is completed and approved by company headquarters, AES needs to communicate the policy to all employees. The company also needs to ensure that every employee reviews the HR manual and signs their name upon receipt of the manual.

In taking this action, AES will clearly demonstrate how seriously it values the contents of the manual as well as prevent any employee from claiming ignorance about the company's HR policies. Further communication can be achieved in a town hall format in which employees' questions and concerns will be addressed. It is imperative that the AES management keeps open lines of communication with employees. This will help to reduce any misunderstanding that may occur. Often, people resist change because they do not understand the changes that are taking place. AES should schedule one town hall per quarter to allow employees to voice their opinions on the new HR manual.

If the policies in the manual are determined to be ineffective in the field, the town hall can address how to review the manual and make changes if necessary. Finally, the members of the HR manual task force should be adequately compensated for the time and effort they put into the project in addition to their regular job duties. A monetary bonus or compensatory day off will be required to reward them for their hard work and diligence. The next step for AES is to establish a human resource information management (HRIM) system. A HRIM system will allow employees to access information contained in the HR manual through a company intranet. A HRIM system could also help AES employees track their training and development, look for courses to take, search for job openings or cross training opportunities throughout the company, and locate benefit information.

As AES plants become more geographically dispersed, a HRIM system will help to communicate the company's values and strategy to all employees.

Bibliography

1. Organizational Alignment: The 7-S Model, Harvard Business School, November 19, 19962.
Human Resources At The AES Corporation: The Case Of The Missing Department, Graduate School of Business Stanford University, February 1997;