Aes Honeycomb Case Analysis
1. Describe AES’s organizational structure? What are its authority structures and control processes? What role do values play in this structure?
AES organization has developed a unique decentralized “honeycomb” structure (See Exhibit 1) based on its core values. Their innovative authority structure empowered people at every organizational level to make decisions and take responsibilities according to the business needs. It helped company to achieve flexibility and accelerate decision-making processes. The corporate core values (integrity, fairness, fun and social responsibility) became a foundation to the organizational structure. All vital organization processes heavily depended on employees making decisions against those core values. The families managed all processes from procurement to customer relations. Executive management did not oversee the individual families. The corporate control process was not clearly developed - it could only be performed by employees shifting between jobs. While sincere devotion of managers and employees to the core values made AES successful, the company suffered severe problems when some employees of Shady Point stepped away from those values.
2. What are the causes of the Shady Point episode?
There are several causes of the Shady Point episode that led to the problem: 1) Failure to follow corporate values. The AES organization structure heavily depends on its values. It is crucial for this type of organization that every employee’s values match the corporate values. Knowing this, The Themes Plant hires employees against values, provides value trainings and monitors employees’ performance against values. However, it was not the case in Shady Point. “It was no formal plantwide hiring practice”[5]. Unlike Themes Plant, Shady Point’s hiring was “much less elaborate” with each family managing “its own hiring practices.”[5]. The new employees were neither carefully screened nor educated about values. They simply did
AES organization has developed a unique decentralized “honeycomb” structure (See Exhibit 1) based on its core values. Their innovative authority structure empowered people at every organizational level to make decisions and take responsibilities according to the business needs. It helped company to achieve flexibility and accelerate decision-making processes. The corporate core values (integrity, fairness, fun and social responsibility) became a foundation to the organizational structure. All vital organization processes heavily depended on employees making decisions against those core values. The families managed all processes from procurement to customer relations. Executive management did not oversee the individual families. The corporate control process was not clearly developed - it could only be performed by employees shifting between jobs. While sincere devotion of managers and employees to the core values made AES successful, the company suffered severe problems when some employees of Shady Point stepped away from those values.
2. What are the causes of the Shady Point episode?
There are several causes of the Shady Point episode that led to the problem: 1) Failure to follow corporate values. The AES organization structure heavily depends on its values. It is crucial for this type of organization that every employee’s values match the corporate values. Knowing this, The Themes Plant hires employees against values, provides value trainings and monitors employees’ performance against values. However, it was not the case in Shady Point. “It was no formal plantwide hiring practice”[5]. Unlike Themes Plant, Shady Point’s hiring was “much less elaborate” with each family managing “its own hiring practices.”[5]. The new employees were neither carefully screened nor educated about values. They simply did
Bibliography: [1] Strategies for Systems thinking, by Peter Senge [2] Designing and Managing the Information Age Organization, by Professor Lynda M. Applegate, Harvard Business School, HBS 9-196-003 [3] The Human Moment at work, by Edward M. Hallowell, HBR 99104 [4] Note on organization structure, HBR 9-491-083 [5] AES Honeycomb, LYNN SHARP PAINE, HBS 9-395-132 Exhibit 1. Schematic of AES’s honeycomb organizational structure Groups of “families” of 5-10 employees each located around the world. Authority is granted to the families.