Corporate Performance

Management
Case Study Analysis
BLEMBA 67 Weekend
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 Corporate Performance
Case Study Analysis

1st 2nd 3rd 4th

Cineplex AES Innovation at Real Madrid
Entertainment Corporation Timberland Club de Futbol
The Missing Thinking Outside The Business of
The Loyalty
Department The Shoe Box Soccer
Program

Case 1 Case 2 Case 3 Case 4

Human Resources at AES Corporation
 Q1: Who is the protagonist?

The Protagonist:
Dennis Bakke, The CEO of AES.

Dennis Bakke was 1970 MBA of Harvard Business School and worked in various Government departments e.g. Department of Health,
education and welfare and Office of Management and Budget before moving to Mellon Institute Energy Productivity Center in Washington,
DC.
The History of AES Corporation:
- AES (Applied Energy Services)
operated Electric Power
Plants. Supplying electricity to

1981 1986 1991 1995 customers world-wide in a

Was founded by Supplying consulting services Selling electricity to customers in

socially responsible way.
Went public as AES
Roger Sant and to the energy industry, first the United States, England,
Dennis Bakke
- Current Manpower strength:
power plant in Houston Northern Ireland, Argentina, and
China, and Pakistan 25000 employees
 Q2: What are his objectives?

Could AES, soon to have some 25,000 people located literally all over the world following a recent purchase of power
plants in Kazakhstan, continue to operate with virtually no staff functions and, specifically, without any human resource
staff anywhere in the corporation?
a. Could what worked for so long continue to work as the corporation grew and operated increasingly on a global basis?
b. Could the advantages of flexibility and having virtually every employee feel responsible for almost all aspects of the corporation’s
operations continue to outweigh the costs of an absence of specialization and the need to have people always learning new tasks and
new things?
c. Was this continuous learning of new things really a disadvantage at all, or as Bakke thought, how one created a real “learning
organization?”
d. What Bakke recognized was that AES was different from most other corporations. How different should and could it remain?
e. How should it deal with the strains that growth and geographic differentiation would inevitably place on an organization that had
always been managed by a strong set of values and a shared culture?
 Q3: What problems, opportunities, and risks do I, as the
protagonist, face?
The challenge of operating a large corporation like AES without a centralized human resources
PROBLEMS
department.

OPPORTUNITIES ● The potential for increased innovation and flexibility, as employees are given more autonomy
and latitude to take on new challenges and responsibilities. This approach can also foster a
culture of learning and development, as employees are encouraged to seek out new knowledge
and skills to help them succeed in their roles.
● The absence of a centralized HR department can help to reduce bureaucracy and streamline
decision-making processes, which can lead to greater efficiency and agility.
● AES's commitment to its values and social mission can help to attract and retain employees who
share these values and are motivated by a sense of purpose beyond simply earning a paycheck
Q3: What problems, opportunities, and risks do I, as the
protagonist, face?

● Inconsistent HR practices across different locations and business units, which could lead to legal
RISKS
and compliance issues.
● The potential for employee dissatisfaction and turnover due to the lack of a centralized HR
department to address employee concerns and provide support.
● The absence of centralized staff functions could make it difficult to implement and enforce
consistent policies and procedures across the organization.
● The company's unique approach to HR could limit its ability to attract and retain top talent,
particularly in a competitive job market.
Q4: What evidence do I have to make the decision? Is the
evidence reliable and unbiased? Can I improve it?
The AES Core Values
INTEGRITY
Ethical concerns, stakeholders
interest and societal needs. Company
would strive to meet all these three
together.
SOCIAL RESPONSIBILITY
Company exist to meet the needs of
the society. It must carefully manage
capital, employee and intellect to
meet societal needs. In order to meet
these goals company follows a
number of processes e.g. every plant
should be operated in clean, reliable,
safe and cost effective manner.
The Company Assumption of The Employee:
FAIRNESS
- Were creative and thinking individual- Capable of
AES believes every employee is
learning and making decision, like to control their work
unique and accordingly everyone will
be treated justly in corporate and environment and can be trusted.
organizational matters. - were responsible-can be held accountable;
- Were fallible;
- Had desire to make positive contributions to society,
FUN associate with a winner and a cause, like a challenge.
- Were unique persons, deserving respect, not numbers
Establishing an environment in which or machines.
people can use their gifts and skills to
make a difference in society without
fear of being accused of as a noise
maker.
Q4: What evidence do I have to make the decision? Is the
evidence reliable and unbiased? Can I improve it?
How AES Operationalized Its Value:
- Most plants operated without any shift supervisor. Project subsidiaries were responsible for all major facility-specific business functions,
including financing and capital expenditures. Every AES person were encouraged to participate in strategic planning and new plant design for
the company. Company usually engaged multi-skilled teams to develop projects.
- Examples of Decentralized Organizational Practice:
- AES project teams handled project financing and raised funds from banks and other lenders. Though, the company had a CFO but his
direct involvement in fundraising activities were minimal.
- Another example was building of a $40million plant in Maryland done by a team of just ten persons. A project of this size required
doing many jobs with considerable expertise in regulation, procurement and technical matters. With two exceptions all were less than
40 years old and have had very little prior experience of doing such complex jobs.
Four Measure of AES Plant Performance:
- Shared values: How did we do in having an organization that was fun, that was fair, that acted with integrity, and was socially responsible?
- Plant operations: How safe, clean, reliable, and cost effective were our facilities?
- Assets: What changes occurred in our assets, including AES people, during the year? This was a measure of project development and
construction progress and an indicator of future earning potential.
- Sales Backlog: What happened to our backlog of contract revenues during the year? This was indicator of success in business development
activities.
 Q4: What evidence do I have to make the decision? Is the
evidence reliable and unbiased? Can I improve it?
HR Function Practices at AES Corporation

AES hiring done by the plant personnel. Company looked for self-motivated and dependable employees.
HIRING Employees were hired based on their fit with the company.

COMPENSATION & AES was not pay leader. They wanted those who liked their place to work. They used their pleasant work
BENEFIT environment as a pull to bring employees.

There were three forms of incentive pay

–Individual bonus;
INCENTIVE PAY –Plant performance bonus: Distributed equally among all members;
–Corporate wide bonus based on the overall results of AES: typically about 10%.
The total bonus comes to about 20% to 25% of annual salary.
Q4: What evidence do I have to make the decision? Is the
evidence reliable and unbiased? Can I improve it?
HR Function Practices at AES Corporation

As part of performance individual conducted his/her own self-appraisal;

PERFORMANCE
Individual annual salary raise was made by taking this annual appraisal and observations and suggestions from
MANAGEMENT
peers and area and non-area superintendents.

Company had contributory retirement system where company paid 100% matching payment for first 5% of
RETIREMENT employee contribution. Most people contribute around 20% to 25% mostly in company stock. Company maintained
a five year vesting period for stock purchase which means unless someone holds the stock for five years it cannot
SYSTEM be encashed.

In AES most promotions were done from company internal markets. Job vacancies were posted. Any one from any
plant could bid for it. Job applicants were interviewed by plant superintendents and promotion decisions were
PROMOTION made at area superintendents meetings.
It was company deliberate policy of not to fill up any senior position from open market.
Q4: What evidence do I have to make the decision? Is the
evidence reliable and unbiased? Can I improve it?
HR Function Practices at AES Corporation

TRAINING & Most training were on the job type. Experienced employees trained new employees. People sometime booked
DEVELOPMENT course from outside if they needed. There was no centralized training facility in a plant.

There was no formal career path for employee in AES;

Individual find his/her own way to choosing a career and grow; This desire to grow and learn is critical being an
CAREER employee of AES.
AES had a tuition reimbursement program under which any employee working for an academic degree would have
DEVELOPMENT got back 80% of the tuition fee. He/she would get another 10% if he/she gets a B and another 10% if he/she got an
A in the course.

Company had no formal policy of job security;

EMPLOYMENT Security was in skill and expertise that the employee develop in the company;
SECURITY Company never had any organization wide lay-off policy.
 Q5: What alternative courses of action are available?

- Could AES continue to operate with virtually no staff functions and, specifically, without any human resource staff anywhere
in the corporation?
- Company followed the principle of decentralized management and had only five levels of hierarchy, three at plant level, a set of
regional presidents or divisional managers who were expected to oversee the plants and projects in their areas and the CEO.
- The corporate culture and organizing principle came to be called “honeycomb”, where there were large number of small,
flexible interrelated teams working on projects and learning in the process.
- There was no corporate staff. Every division had responsibility for its strategy and business development, finance, engineering,
environment compliance, safety and all other human resource issues and operations.
- The widespread diffusion of both knowledge and responsibility was one of the key sources of AES competitive advantage.
- In order to have more effective organization, the HR function is preferably be done by the line managers themselves.
- By having a strong culture a business organization may do away with many staff functions and in the process can reduce its
operating cost substantially.
- So AES Corporation can continue operate by the existing human capital management model.
Thank you BLEMBA 67 Weekend Class