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ОглавлениеA joy-filled workplace gives people the freedom to use their talents and skills for the benefit of society, without being crushed or controlled by autocratic supervisors.
CHAPTER 1
My Introduction to Work
KENNY WAS A bright-eyed, smallish 2-year-old with an ugly scar and a slightly deformed face. He and his two older sisters had come to live as foster children at the Bakke home in Saxon, Washington, a few months earlier. They had been “temporarily” taken away from their parents by the county welfare department and placed in our family’s care for an indefinite period of time.
On this particular day, my mother had organized the evening work in her usual style. The kitchen was abuzz with activity. I was 16 years old and charged with cooking creamed peas for supper. My younger brother was carrying wood from the shed to the storage area next to the kitchen. Kenny’s older sisters were clearing dirty cooking dishes and setting the table with dinnerware. Mom was overseeing all of this as she swept the floor and kept an eye on the homemade ice cream being churned. No one was paying attention to Kenny, who watched the work scene in front of him while running his matchbox car back and forth across his highchair tray. Suddenly, the 2-year-old threw his car on the floor and picked up the spoon on his tray. “I want jobs, I want jobs, I want jobs,” he chanted as he pounded his spoon.
I think this little guy with a crooked smile and troubled past was saying, “I want to contribute. I can make a difference. I want to be a part of the team. I’m somebody. I want to have fun working, too!” Over the years, I have reflected on this moment and come to believe that it captures the early and substantial influence Mom had on my concept of fun in the workplace. Somehow, she created an environment in which everyone was energized, not from fear of punishment or promise of rewards but from a desire to accomplish something positive. She had unbridled confidence in our ability to accomplish the tasks at hand. I can think of few things she didn’t believe we could achieve, even at an early age. She gave us enormous freedom to work and make decisions. Somehow she made work so attractive that even an abused 2-year-old wanted desperately to pitch in for the sheer joy and excitement of it.
Like a lot of rural families with immigrant roots, we knew about work. My first regular job outside the home was as a 5-year-old when my grandfather hired me to chase the cows home to the barn each evening for milking. Looking back, I marvel at the skills I acquired while performing this job. I learned the importance of time, because I had to leave my house precisely at 5 p.m. to scour more than 180 acres of fields and woodlands and a mile of riverfront to round up the cows. I learned that they would gather in different places during rain, cold, or summer heat. I learned how to cope with darkness because it arrived at 4:30 p.m. during winter on the 49th parallel. I gained my initial understanding of stewardship—a concept that would become central to my life and that I will explain later in this book—when I was required to put 5 cents of the 50 cents a week I earned into the offering at church on Sunday. I voluntarily put the rest in my piggy bank. When the bank was full, I used the contents to buy government savings bonds.
When I was 7, I drove the tractor that lifted hay bales from the loaded wagons coming from my grandfather’s fields into the barn mow. This was exciting because of the pressure involved in stopping the tractor at precisely the right moment so that the bales would fall in the part of the barn where they were to be stacked.
For 10 years after I turned 6, I also picked strawberries for 25 to 30 consecutive days every June and July. When that season came to an end, my family and I would harvest raspberries, blueberries, and hay at local farms. In all of these endeavors, I had significant control of how fast I worked and how much time I spent on the job. I knew at the end of each day how good or bad my performance was.
The first “manufactured” goods I produced were bundles of kindling that my brother Lowell and I cut from old cedar logs. We sold them to relatives and their neighbors who lived in faraway Seattle. This experience taught me not only how to use an ax and a power saw but also how to package a product and how to price it for the marketplace.
When I was 13, my Uncle Aadne, who lived on the farm next door, gave me a young steer to raise. I sold it back to him 18 months later and used the money to start my own cattle business. Uncle Ralph from San Francisco invested over $800 in my purchase of eight Hereford heifers, the beginning of a herd that would reach 29 head of cattle by the time I left home for college. Unfortunately, this financially successful business ended abruptly when my mom phoned me at college to say that the cows had broken through the fences into the neighbors’ property “one too many times.” She had sent the entire herd to be sold at the regional auction barn.
These early work experiences were more important to my later understanding of the workplace and business than my formal schooling, including the two wonderful years I spent at Harvard Business School. In fact, I don’t recall the words “fun” and “work” being mentioned in the same breath during my time at Harvard.
Also crucial to my sense of what makes a workplace fun (or not so fun) were the six years (1970-76) I spent in the federal government—first at the Department of Health, Education, and Welfare, then in the Office of Management and Budget, and later at the newly formed Federal Energy Administration. It was during those years that I learned that having a purpose made work meaningful. I also came to understand the destructive tyranny of most central staff operations. For people who did not have the privilege of working in those central offices, the workplace was seldom rewarding or fun.
One of the most productive and exciting hours of my life was a car trip from Annapolis, Maryland, to Washington, D.C., in 1980 with Roger Sant, AES co-founder and my extraordinary business partner for over 20 years. Roger is the finest business strategist I have ever known. Without him, AES would never have come into existence or survived past the first few years. My gratitude to this remarkable person cannot be exaggerated. His great gift to me was providing the freedom to develop and implement the ideas in this book. He also graciously granted me the title of co-founder, although I was not deserving of the equal status this designation implied. Roger started the company; I helped. Few board members, even those who joined long after the company began, believed the co-founder premise. “Roger and the kids” was the way one board member put it.
We were returning from a conference where we had just decided to end the work of the Energy Productivity Center at Carnegie Mellon Institute (a research arm of Carnegie Mellon University), where I worked from 1977 to 1981. During the drive, we outlined our dream for a new company that would become Applied Energy Services, Inc. (later the AES Corporation and finally AES, The Global Power Company). As I recall, the only reference to the eventual values and principles of AES during that conversation was Roger’s comment as he dropped me off at my house: “And let’s make it fun.”
The business logic of the company was outlined in a study that grew out of the work Roger and I did at the Mellon Institute. (In 1984, the study was published as a book, Creating Abundance: The Least Cost Energy Strategy.) Our premise was that if the generation of electricity was not owned or regulated by the government, the competition among private owners would reduce prices to consumers and improve efficiencies and service. We launched the company in January 1982 with a bank loan of $60,000, which we personally guaranteed, and a million dollars from investors, including a few family members. (For a thumbnail history of the company, see Appendix A.)
A year after starting AES, Roger and I were returning from a frustrating visit in Los Angeles with the ARCO Corporation (later BP/Amoco). AES had an agreement with one of ARCO’s largest operating divisions to build and finance a new electricity-producing cogeneration facility at its Houston refinery. Our approach was fairly new at the time. We proposed to obtain financing for the facility without making ARCO responsible for any of the $181 million required. The ARCO treasury department (a typical staff department found in most large organizations) did not agree and would not allow the ARCO operating group to proceed with the project. “You can never do what you are proposing. It will never work,” was the response of some of the junior and senior treasury staffers at ARCO headquarters. They seemed to be saying, “We know all there is to know about financing and we are in charge here.”
At the time, ARCO was widely respected both inside and outside the oil industry as one of the most progressive and well-managed companies in the world. To me, however, ARCO seemed no different than the bureaucracy I had seen in the federal government. It had layers of hierarchy, and important decision making was the purview of a few senior people. Young, smart people in staff offices ran roughshod over executives with line responsibility for creating and running the businesses. It took over a year to persuade them to change their minds and get on with the project. The plant was eventually financed as we had proposed.
I asked Roger a rhetorical question: “Are ARCO and other large organizations the way they are because (1) they are large, (2) because of the age of the organization, or (3) because of their values, principles, and philosophy? I hope it is No. 3, because someday AES could be old and maybe large as well.”
I desperately wanted AES to be a different kind of organization. Our only hope of creating a radically different kind of company was if a particular set of principles could drive and shape the business regardless of its size, complexity, or age.
Our first attempt to write down the principles that would define AES did not take place until several years after the company started. Approximately 20 of the company’s 50 employees gathered for a two-day retreat at a conference center outside Washington, D.C. One of the sessions focused on completing the Seven-S framework made famous in the bestselling book In Search of Excellence, which was coauthored by Bob Waterman, an original member of the AES board. As the term suggested, Seven-S entailed organizing a business around seven qualities beginning with the letter “S”—strategy, skills, staff, and so forth. At the center of the Seven-S framework was “shared values.” Most of that day’s discussion focused on the central values we hoped would drive the company. We also dutifully described how we saw the other parts of the framework, but they seemed less important to us. After a few years, only the shared values remained an integral part of AES’s corporate discussions.
The shared values we wrote in the circle of the diagram that day were Integrity, Fairness, Social Responsibility, and Fun. Other important words were used from time to time to describe our aspirations, but they never made it to the center circle. Concepts like ownership, trust, and accountability were subsumed in the four overarching values we chose. No purpose or goal was defined at that time because the Seven-S framework curiously did not have a place to describe the primary reason that an organization existed. AES’s purpose was articulated a couple of years later, and in the ensuing years it gradually became an integral part of our shared values and principles.
When Roger Sant first used the word “fun” to capture the kind of working environment we wanted to create, neither of us could have guessed at its layers of meaning. It forced us to think through exactly what was meant by “fun” and the best ways to explain it. We defined fun to mean rewarding, exciting, creative, and successful. The idea that a company could be fun kept AES fresh and vibrant for years.
At the time, Apple Computer was the darling of the fledgling high-tech industry. One thing that set it apart was the beer parties it held every Friday afternoon. We were very clear that this was not what we meant by fun. Nor did we believe that business success or “winning” made work fun. Nor was fun related to the type of tasks an individual performed. What we meant by fun was captured many years later, in slightly broken English, by an AES employee writing from Kazakhstan: “The common principles of integrity, fairness, fun represent AES culture which are mostly convincing. They are also the basic spirits. I work on the site whether day or night, whether weekend or working days, whether with pay or without. In this kind of working environment, my talent was fully exerted. I felt a lot of fun to use my talent and experiences accumulated throughout years of hard work. I feel I am standing on the shoulder of a giant fulfilling the social responsibilities.”
People I have met—regardless of class, income, nationality, and education level—want a chance to meet the needs of their families while doing something useful for society.
Joy at work gives people the freedom to use their talents and skills for the benefit of society, without being crushed or controlled by autocratic supervisors or staff offices. The World Bank recently conducted a study of 70,000 poor people around the world. One of the questions asked of respondents was this: “What is your most pressing need?” The answer was not social services or homes or other material things. What these people wanted most was the freedom and wherewithal to be entrepreneurs. This was not surprising to me. People I have met—regardless of class, income, nationality, and education level—want a chance to make the most of their abilities to meet the needs of their families while doing something useful for society.
When we made “integrity” one of our shared values, we defined it in the classical tradition. The word is derived from the Latin integra , meaning wholeness or completeness. It is the same root word from which we get integer (whole numbers) and integration. It has to do with how things fit together in some cohesive and appropriate way. Being truthful is part of what it means to have integrity; living up to commitments is another.
I believe that integrity requires an organization to communicate the same message to the general public that it does to its own employees. That means openly admitting mistakes to shareholders, bankers, and governments. Readers of my letters in AES annual reports may have noticed that I took pains to discuss our mistakes and problems during the year. The letter was meant for all stakeholders who helped us achieve our purpose, not just shareholders. I believe they all deserve the same basic information, both positive and negative. Integrity also means fully explaining values and corporate purpose to all stakeholders, especially when these principles are unconventional, potentially controversial, or hard to understand.
Business executives don’t spend much time talking about values, so misunderstandings and disagreements are bound to occur. Once, when we were in Minneapolis to raise equity for AES, a potential investor left the breakfast early. On the way out the door, he laughingly told one of the investment bankers: “They can have all the fun they want, but not with my money.” Another humorous incident—there were many others that were not so funny—occurred when we prepared a slide presentation before a public offering of AES stock. We designed a chart to try to explain what we meant by “fun.” We gave it to our investment bankers to review:
The investment bankers reviewed the chart, added one circle, and sent back the revised version:
Several years later, when a consultant from McKinsey was giving a presentation about AES, one of our executives asked why he hadn’t mentioned our shared values. It turned out that the consultant was enthusiastic about our values—for all the wrong reasons. “They really reduce labor costs,” he said. “Employees love these values, and they work harder and more productively because of them.” This is the pragmatic line of thinking about values that I had fought since the early days of the company. It ignores the moral dimension of values and regards them as nothing more than a means to make money. The distinction was articulated by an Oxford professor named John Kay: “There is a real difference between saying to your workers, ‘We care about your welfare because we do,’ and saying, ‘We care about your welfare because that will make you work harder for us.’ ” Employees can tell when values are genuine and when they’re adopted for ulterior purposes.
I feel strongly that people should be able to bring many of their basic beliefs about life into an organization. AES people were encouraged to live their beliefs inside the business just as they would at home, in their places of worship, and in their communities. This was very popular with most AES people and somewhat novel. Most of us have heard the phrase “Business is business.” The phrase implies that business has its own set of rules. When we go to work, we’re supposed to leave our “Sunday school” or “homespun” values at the door. My view is just the opposite. Because our central values and principles were derived from mainstream values practiced by billions of people around the world, we hoped that most of our people could bring the key elements of their personal philosophies into the workplace.
Less popular was the idea that we should practice AES values both at work and in other areas of our lives. For example, integrity at AES meant that we did not cheat, steal, or lie on the job. It seemed logical that we should also adhere to those strictures in our private lives. “It’s personal” or “I’m on my own time” are no more appropriate excuses than “business is business” for not acting according to basic shared values whether we’re at work or not. Cheating on your income tax returns is not consistent with AES’s concept of integrity. If we became aware of such behavior away from the workplace, we would ask the employee to act in a more upstanding way—or to leave the company. My colleague Stu Ryan, an excellent strategist and an even better person, continually pressed me and other company leaders to deal aggressively with discrepancies between professional and personal behavior. I do not think we did a very good job living our values outside work. Many of our top people felt uncomfortable about becoming involved in the personal lives of other AES employees. I understood that doing so was delicate and difficult, but I thought we should at least struggle to achieve moral consistency.
When it comes to “fairness,” I often think we chose the right value but the wrong word. In my lectures, I often ask people to complete the sentence. “Fairness means treating everyone _______.” Ninety-five percent of the people I ask respond, “the same.” I usually respond, “I mean just the opposite.” The word “justice” better describes the standard we set for ourselves and AES.
I like the traditional Jewish definition of justice: “To each person what he deserves, to each one what is appropriate.” If I combine this definition with an assumption that each person is unique, I logically complete the sentence this way: “Fairness or justice means treating everyone differently.” We’ve all heard the story of the sergeant who stands before his troops and announces, “Nobody gets special treatment around here!” What fairness meant at AES was that everyone got special treatment. The interpretation of these concepts gets confused because of another concept we hold dear: equality. The logic of equality goes something like this: “I’m the same person or do the same job as another person, so I should be treated the same as that person.” Equality and fairness are not synonyms, however, and neither captures organizational justice the way I use it.
Leaders of organizations (including unions and corporations) consistently ignore the fact that employees are unique.
I can best illustrate my point using an example from my home. Even at an early age, my son, Dennis Jr., loved to spend hours of his time alone in his bedroom reading, designing games, and pursuing other solitary interests. His younger sister, Margaret, loved to spend much of her spare time in the kitchen or den with family members and friends. Whenever we had a party she was in the middle of the festivities, engaging older and younger people in conversation. When Dennis Jr. and Margaret misbehaved, my wife and I attempted to discipline them in ways consistent with their different personalities, even if both had committed the same transgression. It would have been easier and more conventional to punish them the same way, perhaps by sending them to their bedrooms alone for the evening with no TV or telephone privileges. But Dennis Jr. would have thought this was great, and Margaret would have felt she had been exiled from her family and cut off from her friends. We love them equally, but they are unique individuals, and we had to treat them differently in order to be fair or just.
While parents often understand that children need to be treated differently to get a fair result, leaders of organizations (including unions and corporations) consistently ignore the fact that employees are unique. Most managers prefer not to get enmeshed in the personal lives of the employees who report to them. This often makes it impossible to make judgments about individuals and their performance consistent with their personal differences. Furthermore, employees and their union leaders generally don’t trust managers to make fair judgments about individuals. As a result, businesses are forced to pigeonhole their employees according to artificial classifications such as years of service, union membership, level of education, and job title. If real justice or fairness were applied in organizations, it would radically change most of them, sometimes in very surprising ways—and almost always for the better.
In making “social responsibility” one of our core values, we recognized that every corporation is given certain rights and privileges by the state. In return, the company should operate in ways that benefit society and mitigate the potential negative consequences of its activities. Improving the environment is an obvious way to be socially responsible. For example, AES was widely praised for its programs to offset CO2 emissions from our U.S. and U.K. facilities by helping to plant 52 million trees in Guatemala and by preserving hundreds of thousands of acres of forest land in the Amazon region and in Paraguay. Charitable activities to help the disadvantaged and safety programs for employees and the public constitute other socially responsible corporate activities.
While these undertakings are important, I gradually concluded that we could serve society best simply by fulfilling the company’s mission. The primary social responsibility of AES was to be the best it could be at meeting the world’s need for safe, clean, reliable, and economically priced electricity. That took 90 to 95 percent of our resources and of our people’s skills and efforts.
For example, in Leflore County, Oklahoma, unemployment fell from 13.6 percent to 4 percent after AES built a 320-megawatt plant there. But that was minor compared with what happened after AES acquired a distribution company in the Dominican Republic in 1997. The year before we bought it, 385 Dominicans had died in electricity-related accidents within our utility service area—a fairly typical toll at the time. By 2000, the number of fatalities had dropped to 29. In other words, we saved hundreds of lives because AES took seriously its primary mission “to serve society in an economically sustainable manner with safe, clean, reliable electricity.” I can think of no other “project” AES has undertaken that was as socially beneficial.
The selection and identification of our shared values were just the first step in creating an ethos for AES. The role of these values and principles in the life of our organization became more important each year. After that first strategy session, I kept working to define what our values meant in a practical sense, both to me and to others in the organization. We then integrated the values into all aspects of AES life. As a result, we never needed special values or ethics initiatives or programs to encourage diversity or community involvement. These things were part of our everyday working lives. They were perfectly compatible with the way we did business. As Lynn Sharp Paine, a professor at the Harvard Business School, put it, “Values are not a ‘management tool’ or a special type of management system that runs parallel to a company’s audit or compensation system. Nor are they bits of ethereal matter … [they are] beliefs, aims, and assumptions that undergird the enterprise and guide its management in developing strategies, structures, processes, and policies. They constitute an organizational ‘infrastructure’ that gives a company its distinctive character and ethos—its moral personality.”
When we first defined our values, two of the AES senior leaders who had participated in the conference were skeptical. They had a hard-nosed, no-nonsense approach to business and took a dim view of the “soft, touchy-feely stuff” that they believed was on the table. Economics was “hard” and important; other things were not. Knowing the belief system and personalities of the two, I was not particularly surprised by their lukewarm response.
The surprise came the following year when we gathered for another strategy meeting. We decided to raise the Seven-S framework we had drafted a year earlier and asked for evaluations, including suggested changes. Almost immediately, the two skeptical leaders jumped into the conversation. “Don’t change anything,” one of them said. “We love these values. They really work! People like doing business with us. I think it’s because they trust us.” They were nonplused when I responded with a downcast face and silence. “What’s wrong, Dennis? We think this stuff is great. People like to do business with us because of fairness and integrity.”
“I think you have missed a most important point,” I said. “We are trying to live these values because they are right, not because they work.” High ethical values rarely conflict with pragmatic economic behavior. However, this does not mean that economics should be the reason or motive the organization undertakes to live the shared values. Amar V. Bhide and Howard H. Stevenson explained why in a Harvard Business Review article titled “Why Be Honest if Honesty Doesn’t Pay?” They wrote: “There is no compelling economic reason to tell the truth or keep one’s word—punishment for the treacherous in the real world is neither swift nor sure. Honesty is, in fact, primarily a moral choice. Business people tell themselves that in the long run they do well by doing good. But there is little factual or logical basis for this conviction. Without values, without basic preference for right over wrong, trust based on such self-delusion would crumble in the face of temptation. … And for this, we should be happy. We can be proud of a system in which people are honest because they want to be, not because they have to be.”
Why it’s important to live values and how we judge their efficacy were recurring questions inside and outside the company for 20 years. They were also the source of many disagreements between me and some AES board members and managers, not to mention students of management outside the company.
Related to the question of whether we should adhere to values simply because they are right is whether values should change when circumstances change. Should we adjust our interpretations of principles when the stock price goes down or our product doesn’t sell well or we make a mistake on an acquisition? My answer has been no, but it is a no that remains open to further examination and new insights.
I believe there is a transcendent truth behind principles like integrity and justice that does not and should not change over time and should certainly not be adjusted because of economic setbacks. Adjustments in definition and interpretation should take place only when we gain new understanding of the truth. Our understanding of the values may change with time, but the values and principles themselves are timeless. As an old rhyme puts it, “Methods are many, principles are few. Methods change often, principles never do.”
“Methods are many, principles are few. Methods change often, principles never do.”
There is little disagreement that the corporate values at AES arose out of the personal values of the co-founders. The transformation of personal values to organizational values is accomplished with the word “shared.” Shared implies that members of an organization agree on the definition and importance of a value. Sharing values, especially in a secular company, can run afoul of the popular view in our society that people should decide for themselves how values are to be interpreted. If individuals, whether they are vice presidents or board members, interpret values individually, the values are not shared.
We attempted to mitigate this problem through an extensive written and oral orientation for prospective employees before they joined AES. We discussed and defined our values so people could decide whether they wanted to be a part of the AES community. Discussions of our values continued at monthly and quarterly business review meetings. The company’s insistence on articulating its values in all types of settings mystified outsiders. A banker who worked with us expressed amazement at his visit to AES headquarters. “I went by an office and two VPs were arguing about whether something was fair or not. Can you believe that?”
At AES, revising the interpretation of a shared value required a leader who spoke for the entire organization to listen to the reasons for the proposed change, get advice from colleagues, and then decide if a change was appropriate.
I suspect that in most companies, especially ones that put a premium on individual freedom and diverse views, values are not really shared by the majority of the employees. The values either are adjusted frequently to suit changing situations, or they are defined so ambiguously that everyone can agree with them. As a result, they have very little effect on the behavior of the organization or the individuals who work there. They become especially irrelevant in times of trouble.
“Hey, Dennis, our organization has values too,” was a comment I sometimes heard from people outside our company. It was a helpful reminder that we were sometimes perceived as arrogant or even sanctimonious. Every person and every organization have values. But in this age of “tolerance,” it is politically incorrect to say that any of these values is more appropriate than others. The truth, however, is that some values are better than others. Truthfulness and selflessness, for example, are preferable to deception and selfishness.
Several articles I have read recently suggest that it doesn’t matter what purpose or set of principles you follow as long as you establish some set of standards for everyone to get behind. A friend of mine from California put this “all values are equal” philosophy in perspective when he recalled a conversation he had with a person he met on the beach. It concluded with, “Hey, that’s great. You’re into Jesus and I’m into surfing.” After hearing that story, I began to use the word “principles” along with the word “values” to describe the key concepts that guide organizational life. Principles connote less ethical relativism than values and more of the unchanging truths by which I believe we should live. The question is not whether we have values, but which values and principles really guide our behavior.
Since the early 1980s, many corporations have adopted values statements. Companies hang them on office and factory walls, post them on their Websites, and include them in their annual reports. The proliferation of values statements prompted one journalist to call them “a deodorant for self-interest.” There is often basis for cynicism. The values articulated by many companies have only a minimal effect on how they conduct their businesses. CEOs rarely talk about them at investor meetings. Try to think of a company that makes ethics one of its most important criteria for evaluating individual performance, calculating raises and bonuses, or awarding stock options. How often do principles drive the financial investments and operating strategy of a company? Paying lip service to values may be good public relations, but it is a hollow and cynical exercise. Values and principles mean something only when they affect everything we do, every day of the week.
My strong belief in shared values and principles does not mean that either AES or I consistently met the standards we set for ourselves. They were our aspirations, and they were deeply felt, but we were fallible like anyone else. At the same time, I resisted all efforts to lower our standards or to ease the burden of accountability that we imposed on ourselves. It was better to try our best, I felt, and be willing to come clean when we fell short of our goals.
In the early 1980s there was a small start-up company that shared office space with AES in Arlington, Virginia. The founders had designed clip-on neckwear for women to wear as an accessory to their outfits. After several false starts, the company leaders attended an industry trade show to see if they could market their bows. Somewhat to their surprise, they got orders for several thousand. When the president got back from the trade show, he came running into my office to tell me the good news. Then he paused and asked, “Dennis, how are we going to make all them bows?”
A year or so later, we were in much the same position at AES. Our power plant in Houston was under construction, and we were beginning to think about how to operate the plant. Most of us in the company had hardly seen the inside of a power plant, let alone worked in one. Board members who had significant industrial operating experience said, “You don’t know anything about operating a power plant. Get somebody who does.”
I followed their advice. Several advisers also suggested that we would need a whole different approach with our employees in the power plant than we had with the M.B.A.’s, engineers, and other college graduates who filled the home office at the time. “These people are different,” one board member said. “They want to be paid weekly, preferably in cash. They don’t care about your soft-headed stuff like values. Fun will be a totally foreign concept that is just not applicable to industrial operations.”
“These people are different” was the statement that troubled me the most. I remembered hearing the same kind of language used to belittle African-Americans in the ’60s. It turned out to be dead wrong. Would it be true of people hired to work at our new cogeneration facility in Houston? I wasn’t sure, and it took me over two years to confirm my original misgivings.
Once I did, I set in motion a revolution in that plant that dramatically changed the AES workplace and the way we operated our facilities. The shared values of the home office eventually would be used to guide every aspect of life at the plants—from hiring and compensation to organization and decision making. It was the beginning of an audacious effort to create the most fun workplace ever.
At another strategy conference in the late 1980s, an AES vice president asked the 30 people in attendance to close their eyes and make a “movie” of their lives. A number of people then shared the outlines of their movies with the group. The plots differed widely, of course, but the same theme cropped up again and again. In almost all the movies, people used their talents and skills to make a positive contribution in the world. Although it was hardly a scientific sampling of working Americans, the consistency of their goals was striking. We used the result of this exercise to start the process of defining the purpose of our company. If the goal of our individual lives was to make a positive difference in the world, shouldn’t we try to do the same thing as a corporation? During that conference we wrote the first draft of our company’s purpose—to meet the electricity needs of people and organizations. Over time this statement of purpose would be refined and become an important part of the shared values and principles of the company.
During the 1980s and early 1990s, my wife, Eileen, and I met weekly with five or six other couples for Bible study, prayer, and a discussion of our joys and problems. One of the key areas of learning from my time with this group was a deeper understanding of “stewardship”—the idea that we have a larger purpose than simply satisfying our own needs. I came to realize that what I had learned as a 5-year-old was incomplete at best. Stewardship was more than giving money to the church or contributing to other good causes. I learned that it was more about what I did with the money I kept and spent than the money I gave away. It was more about how I lived my daily life. It was about how I used my abilities and skills to make a positive contribution to society and to serve others.
About this time, I read a book by Peter Block (an author unknown to me at the time) entitled Stewardship-Choosing Service Over Self-Interest. It had an enormous influence on me. It showed me how my biblical understanding of stewardship could be applied to a major business. Stewardship is a concept that assumes the resources we are using belong to someone else. We are protecting them, taking care of them, making them useful—all for the rightful owner. For those operating within an organization, Block wrote, it is “the willingness to be accountable for the well-being of the larger organization by operating in service, rather than in control, of those around us. Stated simply, it is accountability without control or compliance.” My response was to make serving the needs of society the cornerstone of our corporate purpose.
Early in 1990, we began exploring the possibility of going public. Our privately held shareholder base was rapidly approaching 500 stockholders. Unless we took extraordinary measures to reduce the number of people who owned AES stock, we would be deemed a public company by law. One of our major concerns about going public was that serving shareholders might be incompatible with serving society. Could we maintain our values while striving to meet ambitious economic goals?
We consulted investment banking firms about our concerns.
There are four major shared values (at AES): to act with integrity, to be fair, to have fun, and to be socially responsible.
They were quite positive about our ability to live in the “public” world in a way that was consistent with our principles. I realized later that like many of us trained in sales, the bankers emphasized the positive aspects of our “strange” set of values and minimized the problems. One particularly persuasive banker even suggested that I owed it to the world to go public so that I could better spread the ideas of the company’s radical approach to organizational life.
Our board members were supportive of going public. I should have been more skeptical of their advice. I was already aware that some of them were very excited about the business prospects of the company but were less committed to our values than I was, or simply viewed them as a way to improve economic performance. I was convinced, however, that in spite of all the red flags, we could become a public company without losing our special qualities.
But a number of shareholders, many of them AES employees, were concerned that going public would change the company for the worse. Roger and I addressed some of their concerns with a letter to AES employees and shareholders in March 1991:
We have contemplated the pros and cons of being public since the beginning of AES. We have until now concluded that staying private made the most sense. However, we now believe that registration as a public company may ultimately be inevitable. … We continue to be committed to the purpose and values of AES. … To that end, we have established ‘Going Public Principles’ for ourselves. … These principles are: Make the process fun; if it stops being fun, we should change the way we are doing it or quit. … If we find ourselves tempted to change any significant elements of the way we do business, we must consider the change to be a major red flag and we should make the change only if our current rationale for acting as we do doesn’t make sense—independent of the public offering process. … We will do our best to uphold these principles [emphasis added].
True to our promise, we prepared the draft of our public-offering memo with a forthright paragraph under the “Business of the Company” section. It read as follows:
Adherence to AES’s Values—Possible Impact on Results of Operations. An important element of AES is its commitment to four major ‘shared’ values: to act with integrity, to be fair, to have fun, and to be socially responsible. See ‘Business—Values and Practices.’ AES believes that earning a fair profit is an important result of providing a quality product to its customers. However, 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 forgone opportunities. Moreover, 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. The Company intends to continue these policies after this offering.
When the draft document was reviewed by staffers at the Securities and Exchange Commission, they offered a number of helpful suggestions. The most intriguing was advising us to move the above paragraph to the first section of the document called “Special Risk Factors” with the additional title “Possible Impact on Results of Operations.” This is the equivalent of a warning label on a medicine bottle. Investors might be told that a company has very little existing business, that it is essentially controlled by two principals who might die tomorrow, that there’s no guarantee it will be able to attract any new business. In our case, the SEC officials thought our values were a hazard.
We should attempt to live according to a set of unchanging shared ethical principles, because it is the right way to live.
Some of our people were upset by the SEC’s reaction. I loved it. I could now say that the U.S. government thought it was very risky to attempt to operate a business with integrity, fairness, social responsibility, and a sense of fun. AES has continued in all of its public offerings to carry the original statement, with only minor changes, describing its shared principles.
We should attempt to live according to a set of unchanging shared ethical principles, because it is the right way to live. Our efforts to do so need not be sweetened with additional benefits, such as better financial results, more successful recruiting, happier employees, or even improved productivity. These goals are worth pursuing irrespective of the bottom line. It is not only whether I live a certain way that is important. It is whether the way I attempt to live is based on true and moral principles.
