Joy at Work. Dennis W. Bakke
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for status and power. But there are other powerful forces within most organizations that push them toward centralization, putting almost all important decisions in the hands of managers, supervisors, officers, and owners. These forces include:
Information and data-gathering technology: John Naisbitt’s book Megatrends suggested that technologies like the Internet would help decentralize organizations, make them more democratic, and give power to more employees. Is this true? Is the Internet making the workplace more fun? It is too early to give a definitive answer. It is clear, however, that the same technology that can allow people to make decisions in a decentralized manner also can be used in the opposite way—to centralize everything.
One of my vice presidents invited me into his office not long after we started operating our first power plant in Houston. On his desk he had a computer that had the control panel for the plant. “Dennis, I can essentially watch and control the operations from here. I can get one for you as well, and we can add all the new plants as they go commercial.” I told him not to bother and suggested he get rid of his as well. This kind of centralization can have a major negative effect on the workplace. It reinforces the idea that plant employees are automatons who have little or no control over the way they work or how their plant is organized and operated. It seems straight out of Orwell’s 1984.
More often than not, lower-ranking people are closer to the problem and better positioned to come up with a solution.
Top-down responses to mistakes and problems: Ken Woodcock was AES’s first full-time business development person and probably our most effective one. Early in the company’s history he came to the monthly business review meeting with a problem. A competitor seemed to be following him from place to place making pitches to potential customers within two weeks of Ken’s visit. Someone suggested that the problem was the internal newsletter that we published monthly to keep everyone at AES informed about what we were doing and what companies we might be interested in acquiring. It was showing up on a competitor’s bulletin board. The obvious solution was to have Ken be a little less specific. One senior person, however, was adamant that the entire letter be reviewed by me before it went out. No one objected to the new policy. Within minutes of leaving the meeting, I realized that we had taken a decision away from the people responsible for our newsletter.
It was a minor issue, but it alerted me to the inadvertent ways we undermine decentralization when someone makes a mistake or a problem arises. There is an intrinsic organizational assumption that mistakes or problems could be avoided if high-ranking people made all the decisions. But more often than not, lower-ranking people are closer to the problem and better positioned to come up with a solution, especially if they seek advice from their colleagues. The tendency to turn to top executives was most pronounced when our stock plummeted in 1992 and again in 2001-02. When the share price turned south, many board members pushed for centralization, which seemed to provide reassurance that the business was being run in a conventional and “safe” way.
Government regulation: The Sarbanes-Oxley Act of 2002, which requires CEOs and CFOs to certify financial results, will have a similar effect of centralizing decisions and making the consequences of work less important and meaningful to the people who actually do the work. Government agencies almost always want to make top executives responsible for every aspect of a company’s operations. Do they really believe this will make the organizations behave more ethically? I do not believe there is credible evidence that this is true. What I do know is that it will drain the joy from those deep in the organization who have the satisfaction each day of knowing that they have responsibility for making their part of the business more productive and successful—and more ethical.
Service suppliers: For years it seemed as if every banker, insurance company representative, coal supplier, and anyone else who wanted to sell AES services of some kind called my office for an appointment. They hoped to persuade me or the CFO or some other central officer that they should get a large chunk of AES’s business. This seemingly benign process can easily result in central purchasing of services for plants all over the world.
Over time, I realized that I needed to get out of the middle of these supplier relationships. The people at our various business units and on business-development teams knew far better than I what they needed and who could best supply it. I restricted my involvement to telling suppliers that we would love to pursue the possibility of using their services and products—and then directing them to the appropriate AES people.
The acquisition of knowledge and expertise: One important goal at AES was acquiring knowledge that could be applied to our business. If not approached carefully, this, too, is a process that can be a force for centralization. When people at AES learned things important to the company’s success, we had a tendency to put them in charge of the area or department where this knowledge would be most essential. Our logic was simple: People usually feel comfortable making decisions about subject matter that’s familiar to them. They also enjoy having people turn to them for their newly acquired expertise. The downside is that their colleagues have a tendency to stop learning and instead become dependent on them, often deferring to them for decisions. This creates its own kind of centralization, not at company headquarters but at the plants themselves, which have the ultimate responsibility for making work fun.
Ordinary workers need independence and a feeling of control if they are going to show initiative and risk failure.
Tom Tribone told me of an analysis of several years of operating data at an ARCO chemical plant where he had worked as a young engineer. Operating performance was significantly better on weekends, when supervisors and other leaders and engineers were not in the plant. His conclusion was that staff technicians were more engaged and reacted more quickly to problems without bosses looking over their shoulders. When supervisors were in the plant, the technicians tended to wait for them to manage the situation.
Another illustration of this point came from the people who were building a new porch on our home. When I asked them for a progress report, they replied, “Depends on how much time the boss spends here. We get the job done faster when he is away. No one waits around for him to tell us what’s next. We don’t wait for him to solve the problems. We don’t expect him to anticipate when we are going to need more supplies.”
People become passive under the control of bosses. Ordinary workers need independence and a feeling of control if they are going to take on responsibility, show initiative, and be willing to risk failure. Putting one’s talents on the line is essential to creating a healthy and fun workplace.
Boards of directors: I tread lightly in this arena for fear of being misinterpreted. My board was responsible by law for what happened inside the company just as I and other officers were. It was not particularly difficult for AES officers to rely on plant technicians or business development people to make decisions regarding environmental compliance, capital investments, or the plant reserve fund. We knew these people, worked with them every day, and trusted their judgment.
It is much more difficult for part-time board members to defer to employees. Chances are that the board members have not even met them, let alone know them well enough to have confidence in their decisions. The natural tendency is for board members to want a senior officer or plant manager to make important decisions. They argue that society and shareholders hold them responsible for the performance of the company.
It is a good argument, but only up to a point. Senior leaders and board members are responsible, but they cannot possibly approve—or even keep track of—every decision the company makes. If the board insists that top management make 200 decisions it ordinarily wouldn’t make, that still means tens of thousands of decisions are made elsewhere in the organization. We bear the same responsibility for these decisions as we would for the 200 we made. If we delegated these 200 decisions to people deeper in the organization, who are probably better equipped to make them anyway, it wouldn’t reduce our liability or our chances of being sued. It would, however, make a huge difference to the people away from headquarters who experience the joy of playing an important role and knowing that the company trusts their judgment.
Paternalism: On my first visit