The 700 Club with Pat Robertson

Dennis Bakke

Co-founder and CEO (1994-2002), AES Corp., an international energy corporation which had $8.6 billion in revenue in 2002 with 40,000 employees in 31 countries

President and CEO of Imagine Schools, which operates 70 charter schools in 10 states

MBA, Harvard; graduate, University of Puget Sound


Dennis Bakke: Joy at Work GETTING STARTED
Bakke grew up enjoying work on his family farm in Washington state. After earning his Harvard MBA and working for the federal government for 6 years in Washington, D.C., he realized how central staff operations tend to exert "destructive tyranny" over organizations. When he and business strategist Roger Sant brainstormed forming a private-sector company to generate electricity, Sant said, "Let's make it fun." They launched AES in January 1982 with a $60,000 personal bank loan and $1 million from investors, including family members. One of their first steps was a 2-day retreat where the 20 employees hammered out their "shared values" - integrity, social responsibility, fairness and fun. To Bakke, fun is not the Friday afternoon beer blast or the annual holiday party. Rather, fun means a joy-filled, rewarding, creative work environment, free of autocratic supervisors and staff offices, where each and every employee can fully utilize his talents for success. Bakke says an organization's values can't change with the ups and downs of the stock price or be seen as a management tool or system that runs parallel to the operation.

Bakke's workplace philosophy: 1) It's a myth that the purpose of business is to make money and maximize profits for shareholders. The purpose of any business should be to provide a service to society in an economically sustainable manner. 2) Eliminate management, organization charts, job descriptions, hourly wages and the entire human resource department. 3) When given the opportunity to use our ability to reason, make decisions and take responsibility for our actions, we experience joy at work.

Today's management structures and attitudes towards workers are rooted in the Industrial Revolution. Managers can get educations, take responsibility, oversee budgets and make decisions. But workers are considered lazy and irresponsible, capable only of hourly wages, in need of constant training and supervision and not to be trusted to make sound decisions. But Bakke says decentralizing makes more sense, since lower-ranking people are most often closer to the problems and better positioned to come up with solutions.

In June 1992, as AES' shared values and principles campaign was well underway, nine technicians at AES' new plant in Shady Point, Okla., conspired to falsify water test results reported to EPA and the state of Oklahoma. AES also conducted two confidential and anonymous values surveys and no employee mentioned anything amiss. So, when the guilty Shady Point workers said they had falsified samples because they feared losing their jobs, Bakke and Sant were baffled. They issued an open letter: "No one at AES has ever lost his job for telling the truth, nor will they ever as long as we have anything to say about it." (Bakke took a 30 percent reduction in his pay that year as the most senior person responsible for adherence to AES values. Character is transparent.)

Between the Shady Point news and a Florida interest group's challenge to a new AES power plant, the stock price sank 60 percent. Bakke soon realized that the stock price was more important to most AES leaders and board members than the breach in AES values. Those who had applauded the management philosophy when the stock price was high now believed AES was foundering because of the very same decentralization, lack of organizational layers and unorthodox operating style. Bakke realized he had done a poor job of teaching the intrinsic worth of the shared-values concept.

Gradually AES became a different kind of organization. They improved management and increased workplace joy by cutting the layers of supervision between the CEO and entry-level people. They retained 3 layers from top to bottom, and in rare cases, four. Everyone, from entry-level to CEO became an "AES business person" with equal rights and opportunities. Decentralized and integrated, the environment supported trust, freedom and individual action. Operating units took responsibility for everything in their areas: budgeting, workload, safety, schedules, maintenance, compensation, capital expenditures, purchasing, quality control, hiring and firing, education, economic performance, long-term strategy, charitable giving and community relations. Every team member got an on-the-job education in what it takes to run the business and an appreciation of their colleagues' work. In AES' experience, the typical restructured organization can accomplish twice as much with half the number of people.

Bakke realized that arbitrary pay structures maintain two classes of people: management and labor. So he took the novel approach of putting everyone on salary. It took him three years of lobbying to persuade AES plant leaders that they could experiment and create a voluntary program. When it started in 1993, only 10 percent of worldwide employees were paid a salary. When Bakke left in 2002, more than 90 percent of 40,000 employees in 31 countries were paid salaries just like the company leaders. Most became more productive, took more responsibility, initiative and pride in their work. It gave them more time with their families and communities and it built their self-respect.

Pushing decision making down to the lowest possible level creates risks that big mistakes will be made, but Bakke believes that freedom in the workplace is worth it. Decentralized organizations make no more mistakes than centralized ones. They perform just as well or better over the long term because they tend to be much more rewarding workplaces.

Thousands of shareholders inside and outside the company blamed Bakke when the AES stock price plummeted from $70 a share in 2000 to the post-Enron low of $5 a share in February 2002. They lost confidence in his leadership and refused to follow him when things got tough. The executive team hired lawyers and consultants to protect AES and called for a major reorganization of the company and moved to centralize decision making. Bakke resigned as CEO in June 2002.

As Bakke grew up in a Christian home he observed that people seemed to get more credit for contributing to society if they did it within a Christian rather than a secular context. Searching for intersections between his desire to contribute, his calling and his faith, Bakke joined Bible studies and began to formulate his values and principles based approach to business. Bakke says God in not a typical boss. He delegated decision making to humans from their introduction in Eden. Adam's and Eve's jobs were to act as stewards. God appears pleased by all human work, not preferring one type over another. The Creator has delegated the decisions about Earth's stewardship to us, and we ought to take that responsibility as a sacred trust and as a duty to honor our Creator in all we do.

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