Investigation Into Aes

Introduction

[Grant] AES is an independent global power company consisting of competitive generation, distribution, and retail supply businesses in 33 countries. Their generating assets include interests in 177 facilities totalling over 59 gigawatts of capacity.

[Markels] The AES Corporation is comprised of four lines of business:

* The contract Generation Segment

* The Competitive Supply Segment

* The Large Utility Segment

* The Growth Distribution Segment

The Company's goal is to help meet the world's need for electric power in ways that benefit all of its stakeholders while building long-term value for its shareholders.

During the 1990s AES enjoyed phenomenal growth and startling shareholder returns.

[Wetlaufer 1999]

Question. 1a) The AES Company is run by executives with unconventional beliefs on management techniques, and who stress the importance of exercising social responsibility. It rational is based on decentralisation, empowerment, team-based organisation, incentive compensation, job security, and some controversial policies and practices. The company is committed to social responsibility and providing fun for employees.

Unlike any other global organisation, AES look to treat all of their employees as responsible adults who are capable of making decisions and taking risks for the company. This is based on their belief that the more authority figures there are in a given structure, the more likely it is that the employee will not make decisions for themselves.

[Wetlaufer] Roger Sant (CEO) says that: "Invariably, people will rise to the level of trust and dignity you invest in them".

The company has tried to eliminate all groups of functional specialists, and are left with only one - an accounting group - this is based at the corporate office and gathers financial information on the organisation for reporting and auditing purposes.

AES Organisation Structure

[Wetlaufer 1999]

[Wetlaufer] AES group their activities into 11 regions; each region has a manager who is responsible for between 5 to 20 plants, each plant has a manager who oversees 5 to 20 teams within the plant, each team containing 5 to 20 people, including a team leader.

Whilst the structure shows solid links between levels, these are seen as soft - with employees able to directly access whichever level they feel is appropriate to complete their accepted task.

What is striking about the AES organisation chart, is how few layers of hierarchy there are.

Teams are based on areas of responsibility (i.e. control room team, fuel team, water treatment team etc.), and those teams have total responsibility for their given area, both in terms of operations and maintenance. AES ensure that there is never more than one specialist in a team, believing that more than one would cause conflict and therefore damage efficiency. They state that the team itself should be made up wholly of well-rounded individuals who support multitasking. There is also support for employees to rotate within the Plant, so that individuals are able to appreciate the problems faced by other teams, and to give employees a better understanding of the business.

As can be seen from the AES organisational structure, whilst the accounting department is based at the corporate headquarters, it is not seen as an integral part of the business.

[Wetlaufer] The co-founder have gone on record in stating that once they have developed a way of decentralising this task, this function will also be devolved to the Plant level.

AES have several thousand employees but no 'legal' or 'human resources' staff and they make business development and strategic planning part of everyone's job, not just the province of the centralised organisation.

[Wetlaufer] Dennis Bakke: People .... "are not assets like fuel or money".

Bakke has a fundamental belief in people's creativity, intelligence and problem solving-skills.

From the above points, it can be clearly seen that the AES structure does not follow the rules of a traditional organisation chart, but that is not to say that it lacks structure. It can be very loosely compared with the hybrid 'Flat Organisational Structure', which results in a broad span on control.

In AES functions have been eliminated, as have many of the management and supervisory roles.

[Grant] The Company itself see their structure as a honeycombe, with small, flexable self-managed teams who operate cooperatively without centralised direction.

Emphasis is wholly on working teams that take responsibility for everything to do with their sphere of operation; and individuals within these teams, who are encouraged and allowed to take decisions and take risks for the company within agreed parameters.

AES does not support a division of labour, or specialisation, believing that 2 specialists will cause conflict and therefore affect efficiency. They argue that the better the specialist is, the worse for the organisation - as people with in their team will stop contributing. The company places 'team', above 'functional' synergy. This, however, leads to the wheel being continually being reinvented - a task that the organisation believes leads to learning opportunities for individuals.

AES has a bottom-up loose organisational structure, and a dedicated company minded workforce, which allows the company to quickly adapt to new ideas, technologies and market forces. Teams are fluid, with employees able to be a member of a number of teams at the same time. Responsibility is pushed to the lowest possible level.

AES is highly decentralised and non-hierarchical organisation, they have minimised bureaucracy and emphasized project teams to develop & operate its Plants.

Questions.1b) The following is a SWOT analysis of AES, used to identify its business standing:

Internal Strengths Internal Weaknesses

* Excellent