Managing Human Resources: AES Corporation Case Final Exam Case MGT 412 Respectfully submitted by: Frank Rizzo AES Overview: AES managers exemplify the leadership it takes to run an HR-minded organization. Leadership is mandatory for the success of AES as the organization continues to have a competitive advantage over its competitors. The core competency of AES is the core values that all their employees follow. Bakke’s description of the purpose of AES is “to steward resources to meet the needs of society.
AES strategic goal is to continue its success to meet the needs of society but to do this AES has established the most impressive HR-minded culture that all their employees perform. AES employees are given the freedom to do their work as long as it follows the corporate strategy. Employees are compensated by their performances that provide the success of AES for many years. My recommendation comments on the need for AES to grow and continue to effectively use their human capital.
Employees look for career growth, new projects to conquer and for some people that might end if AES doesn’t consider moving more into the global market. I recommend that AES hire or recruit a full time HR staff that will help them move into the global market by conducting research, organizing the company to fit into local culture and lifestyles. This is a strategic move that will be easy for AES to make because they can continue their core competency as an HR-minded organization.
AES Investment Orientation: AES clearly shows that it has adopted an investment orientation towards human resources. Their mission statement states that its people are the central of its strategic strategy. Bakke’s describes the purpose and mission of AES is “to steward resources to meet the needs of society” which shows that he sees the people as being central to its strategy. There are four major factors that affect how “investment oriented” a company is in its management of human resources. 1.
Management values: AES mission statement includes the core value: “Fun…For us, ‘fun’ means establishing an environment in which people can use their gifts and skills to make a difference in society without the fear of being squelched. Creating a fun workplace environment requires a positive view of humanity that begins with the people who work in the corporation. ” This is the most important value in their mission statement because it sets the philosophy of the organization that prevents the depreciation of its human assets and gives them a competitive advantage that is not replicable. 2.
Attitude toward risk: Blakke understands the trade-off between risk and return. AES holds to its values so strongly that it had to list its adherence to its values as a possible impact on the results of operation on the Securities and Exchange Commission. AES shows that their employees are an investment for their success and have developed strategies to reduce the risk of losing their investment. 3. Skills needed by employees: Technical skills at AES are believed to be easily learned by anyone. People that are self-motivated, dependable and are looked at as a characteristic that fit the organization.
These characteristics are developed skills that are not transferable to other organization because many corporations do not give you the freedom to work and make frontline decisions. 4. Cost-benefit analysis: Most employees at AES are paid on a salary system which enables the workers to “be their own boss” and the freedom to make their own decisions. If an employee sees the need for a capital improvement they simply get some bids that are cost effective and implement them. This gives AES the advantage to enhance efficiency
Inclusion AES has developed an effective strategy to manage their human assets as an investment. This approach helps make sure that AES’s strategic HR practices match perfectly with the organization’s overall strategy. Investment Orientation towards HR: AES continues to sustain their competitive advantage over competitors because they don’t rely on technology, patents or position, but on how they manage their workforce. The top three people management practices that AES emphasize are participation and empowerment, employee ownership and incentive pay. 1.
Participation and empowerment: More autonomy is expected to be associated with greater job satisfaction because workers have more freedom to determine their own effort and work schedule. 2. Employee ownership: Since AES employee ownership is combined with a management style that encourages employees to share ideas and information, AES has grown 6% to 11% per year faster than would be expected otherwise. 3. Incentive pay: At AES bonuses are given to employees to serve the following purposes: to create incentives to reduce costs; to pay people for doing a good job; and to encourage employees to think like shareholders.
EAS known’s that it is important that their people management practices are interrelated and it is difficult to do one thing by itself with a positive result but the top three people management practices that AES that are most lacking are high wages, taking the long view and measurement of the practices. 1. High wages: Higher wages typically attract more applicants and send a message that the organization values its people. Too some people higher wages are a must when looking for job if the wage does not meet their desire economic amount they will search for other employers.
AES does not need to pay the highest because they think that people will fake liking the culture and values but I think they are not offering enough on the front end of a position. AES will improve customer service by providing a higher base compensation which wll create a greater stable and able workforce. 2. Taking the long view: It is stated in the AES case that employees are welcomed to take on new project even if they have no experience. Bakke has stressed the goal of making “every person a business person” which AES encourages employees to do new things but in the short-run I believe this is efficient.
If they need to be quick in acting to the changes in external environment their staff will act slow because they don’t have enough experience in a certain field and this will hurt AES. Taking the long view works for the long-run problems that might come up later in the growth of the organization. 3. Measurement of practices: The measurement of practices is revolved around what the corporation has done in the past for example their monthly feedback forms evaluate what AES has done but rather it should state what AES ought to be doing to sustain its competitive advantage.
Strategic Mission of AES A strategic mission statement in very simple terms it explains the company’s purpose and the reason for existence. AES purpose or mission is “to steward resources to meet the needs of society. This statement is followed up by a set of four core values. 1. Integrity-AES strives to act with integrity and all of its activities 2. Fairness-AES aspires to give everyone special treatment 3. Social responsibility-the first step in this process is to ensure that everyone generating plant is operated in a clean, reliable, safe and cost-effective manner. 4.
Fun-creating a fun workplace environment requires a positive view of humanity that brings with the people who work in the corporation. AES Process of Strategic Management AES operates as a resource-based-view (RBV) firm. AES relies on the organization’s resources and capabilities, rather than the environmental conditions which is the basis for the organizational decisions that they make. AES views social responsibility and the concern for the environment as a critical component of their external environment. In the case AES does not analyze the external environment when it comes to competition.
However the AES thrives on the technological sector of the environment to look for ways to improve their processes and procedures. Employees conduct a cost-benefit analysis if they get an idea for capital improvements. The only threats that I believe AES worry about is damaging their social responsibility to the environment and they have come up with creative project to plant trees designed to reduce the greenhouse effect produced by burning of coal to produce power. The primary strengths of AES are their human capital and their leadership.
AES division managers help all employees develop effective skills to improve their work ethic on an everyday basis. A very important part of strategic planning process is how the element of culture influences behavior and impacts the overall performance and to accomplish this AES uses what is called a “honeycomb” which captures the idea of relatively small, flexible, interrelated teams of people working on projects and activities. AES goals and objectives are to meet the needs of society they only achieve this by using their HR strategy as a framework.
AES has aligned its practices, policies and programs that align their employees to achieve the organization’s objectives. AES has made sure their HR strategy will serve to ensure a “fit” between corporate strategy and individual HR programs and policies. AES HR Managers/practitioners AES has adopted a strategic approach to HR and the people that are the HR managers and practitioners at AES are everyone. All employees at AES contribute in some way as an HR manager. For example there are no formal job descriptions and individual responsibilities are very fluid.
AES is not a single person focused with a strong leader who does everything it seems in the case that AES continues to have a competitive advantage because they use decentralization and empower the workers to be business people. AES has reaped the outcomes of strategic HR with increased performance, employee satisfaction and enhanced shareholder value and they have done this through staffing with people that fit both the strategy, culture of the organization and finally a key focus on society. HR Minded Worldwide View
AES has a set of core assumptions about people that are in rising use to help design and manage its organization. The specific assumptions are the AES people: 1. are creative, think individuals– capable learning in making decisions, like to control their environment and can be trusted 2. are responsible— can be held accountable 3. are fallible 4. desire to make positive contributions to society, associated with the winner and a cause, like a challenge 5. Are unique persons, deserving respect, not numbers or machines.
The evidence that supports AES manages its human resources in a manner consistent with an HR minded worldview is documented by their core assumptions about people. Some examples are that their employees value their freedom and are free to make their own decisions at AES frontline employees are their own boss. All employees have contributed to make a list of jobs to be done and basically everybody do them. They understand that their employees are fallible because with such a relaxed work environment discipline is a challenge at AES and they won’t be governed by a set of rules for the 1% of people who get out of align.
AES Organizational Design and Job Design AES uses trust to manifest how they organize and manage their work. They moved all employees to a salaried system which no one is paid by the hour. Basically they all develop a list of jobs to be done and they just do them. Employees feel like they’re their own boss which enables them to redesign for improvements. Employees that have freedom to do their job how they want to will give the employee a personal achievement and receive instant feedback from a job well done.
Employees at AES perceive their work to be important because of their social responsibility to society. AES has developed a work system that is designed to motivate all their employees because their employee gets feedback of how the company’s performing based on financial information and stock price. Each employee directly knows that they affect the outcome of AES and its impact on society. AES Staffing Practices AES has developed an integrated, strategic approach to staffing. In the case their programs and polices are in compliance with federal, state and local labor laws that prohibit discrimination.
To ensure this compliance with these laws and to assist with staffing AES has developed an effective hiring program. The Interview questions that are asked of all new applicants relate only to the “fit” to their organization. The questions are set up to get rid of people who are complainers, not happy, blames others, doesn’t take responsibility, not honest and who doesn’t trust other people and only hire people that fit AES culture. This program secures the success of the firm and demands employees who participate in the program to remember the culture and mission of the company.
AES’ Training and Development AES clearly understands the integration between training, performance management and compensation. Training and development of employees is a key strategic issue at AES. They use their employees to their fullest ability for example AES will move their people into other areas in an effort to improve performance, experience employees train new employees, employees feel free to book courses if they need it. However AES doesn’t have any formal career paths but individuals are to ask them-selves where they can contribute the most.
Performance management is conducted by letting employees know the financials of the organization and this gives employees feedback on their performance. AES compensation package is generous and tells the employees thanks for doing a job well done. Their training is design and delivered with the strategic context at AES and this commitment is received by all employees to ensure the organizations success. Pay-for-Performance AES uses both an indirect and direct compensation system. To ensure optimal levels of performance from employees in meeting AES strategic objectives employees are given three types of incentive pay.
The first is individual bonuses, second is a plant performance bonus, based on safety, the plant’s environmental record, cost, and the electricity production. Finally a corporate wide bonus based on the overall results of AES. AES bonuses can range from anywhere between 20% and 25% of an employee salary. The organization uses an individual equity theory which is the fairness about pay differentials among individuals who hold the same job by giving employees incentive plans to receive part of their compensation based on their incentive package.
AES decision to move all their employees to salaried as opposed to hourly compensation is a good move by AES. I believe that AES is in compliance with FLSA requirements because employees at AES exercise independent judgment in carrying out their job duties. So employees are considered as an exempt class from overtime policy. Employees have the freedom to make their job as easy as it needs to be so it’s up to them on how they would like to manage their time. AES “HR-Minded” Organization
AES is clearly an HR minded organization because they realize the human element is clearly the most critical to their success. AES has managers at all levels in the organization the are increasingly aware that a critical source of competitive advantage often comes not from having the most ingenious product design or service, the best marketing strategy, state-of-the-art technology or the most savvy financial management but from having the appropriate systems for attracting, motivating and managing the organizations’ human resources.
AES has created an entrepreneurial atmosphere and behavior, strategic leadership that contributes to the well-being of mankind and serves as strong actor and provides leadership in multi-state committees. My recommendations to AES will let them follow their same HR minded practices with their strategic purpose of the organization but with a little modifications for continued success. It was clear in the case when one of the employees commented on their internally-generated pressure for growth.
I recommend that a strategic decision being made by AES is to involve some plan to conduct business that has been conducted in the U. S. and move into more of the global arena. Since the acceleration of global financial markets and information networks have created tremendous opportunities in less developed countries. First I would recommend that AES make its employee survey include global topics such as the external environment and how they could help or affect AES and to evelop a continuing education that allows employees understand the effects of globalization. Finally I recommend that in order for AES to continue to grow globally they will need at some point have to develop full-time HR staff that would help the leaders of the future organization keep their same core values but create an operation that fits with local culture, customs and lifestyles. The new HR staff researches issues such as compensation and benefits, considers recruiting strategies and secures a local labor attorney or consultant.
HR will then use the information gathered and begin to develop specific HR programs, policies plans, determines staffing needed and compensation levels. HR then will consider the effects of local labor laws on operation and begin to implement its staffing plan. Finally AES HR will lay the ground work for training and figure out the performance and compensation system. I know that AES strategy for global operation will include HR as a key strategic partner, facilitating the implementation of human and cultural dimension of their operation for maximum success.
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