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AES Corporation Sky Pearson Name of University

2 AES Corporation Being independent producers of electrical power, Applied Energy Source (AES) Corporation is considered as one of the largest around the world. Roger W. Sant and Dennis W, Bakke who both worked in Federal Energy Administration (FEA), incorporated the said company in 1981. It has branches in 28 countries including United Kingdom and the United States and supplies more than 59 gigawatts of electricity and has millions of customers across the globe (AES Corp. 2006; Hamilton 2003). AES faced numerous crises in the past, which affected their business as a whole. The major ones include the 2001 Californian power crisis, the collapse of the Enron Project in 2001, recession of Argentina where AES has a branch, and the negative effects caused by the 9/11 Bombing. These affected the finances of AES and consequently led to the lowering of AES market value. The company went through a difficult time accessing the capital markets. To be able to survive the changing global market environment, a major restructuring effort took place in 2001, which includes the financial and organizational aspects of the company. The competition among power services is getting stiff and with the advent of globalization it is essential that constant changes are necessary for improvement. Whether in developed or developing countries, companies that operate in the current dynamic and hostile environment are vulnerable. The different functional areas within a company need to be mobilized to confront the growing threats. Global factors critical to the anticipated changes must be confronted by the AES in order to survive. To be able to meet the threat of global competition and sustain AES place in the power service industry, it must be able to create an effective strategic plan.

3 . Including information technology as part of the overall operations strategy of AES can increase and improve its information flow and accuracy, thus AES can make more frequent ontime deliveries, shorter time to market, lower cost of sales, and improved customer and supplier satisfaction. The numerous developments in the information technology, such as mini and micro computing, have facilitated the implementation of management information system (MIS). Davis and Olsen (1985, p. 6) describe an MIS as an integrated, user machine system for providing information to support operations, management, and decision making functions in an organization. The system uses computer software and hardware; manual procedures; models for analysis, planning control and decision making; and a database. Operational processes within AES can be more efficient when MIS is integrated in the organizations information technology process. When data and information are considered as resources, it is then essential to have an effective management of such resources. MIS is a very useful tool to manage data and information since it could provide relevant, complete, and appropriate information and even provide means to analyze the information. When these resources are effectively managed, this could lead to an effective managerial planning, control, and decision-making. It is important to note that the important aspects of MIS namely the data, hardware, software, and personnel should be managed effectively and efficiently for AES to benefit from MIS (Edelman 1981). Every aspect of management in the modern age relies heavily on information to thrive. Nothing moves without information and it is generally believed that information is power and that he who has it has power. It is an important resource needed to develop other resources. Changing circumstances and environments have necessitated the need for the proper dissemination of information at various levels of management. The development and use of MIS

4 is a modern phenomenon concerned with the use of appropriate information that will lead to better planning, improved decision-making and better results of an organization. Organizational Culture The development of an organizational culture is a natural sociodynamic process that transpires regardless of the intent of executive management. However, it may also be influenced by management as exemplified by AES. In some instances, organizations may develop a homogeneous culture but in todays contemporary organization, it is also inevitable that unique and divergent sub-cultures may evolve for separate departments or sub-groups within an organization. In AES, the company employs creative, trusting, responsible and exceptional people who enjoy challenges. During the hiring process, the company selects people who could adapt to the companys culture. Employees are mostly college degree holders and a few MBA graduates. Generally, the employees are made up of non-US citizens. The company does not require potential employees to be highly skilled in the technical aspect of the job since they believe that this could be learned as long as the individuals have high motivation and could be relied upon. The company has an unconventional way of running its organization. In fact, it does not have any human resource department and recruits, hires, and trains employees via plant personnel (Markels 1998). AES employees could freely try new tasks in the different aspects of the company for them to gain more job-related experiences. The top management believes that this is essential so that each employee would have better chances of career growth inside the company. Also, the company has created multi-functional roles in which employees are free to cross boundaries and participate in any aspect of the work. It sheds away hierarchy and decision-

5 making is decentralized among different teams. The company believes that this kind of practices would help empower every employee who works in the company. The company is supportive of risk-taking and stands behind the mistakes that might result from such an unusual structure. Its mission is to provide clean, reliable, safe, low-cost electricity around the world. Moreover, the company believes that profit is not the main goal of the organization but its goal is to share its values to its employees and clients. One of the values is to put safety first for its people, contractors and communities. Integrity is another value that the company advocates and it is how the company conducts its business and interacts with one another and stakeholders. Commitment is also included in the companys shared values and this includes commitment to the clients, co-workers, owners, suppliers, and business partners. AES believes that this value would help the business in making a positive contribution to the society. Striving for excellence is another value that the company adheres to. Lastly, having fun at work is a value that AES practices as well. The business culture of the company is free of the conventional bureaucracy that most business companies practice. Knowledge is shared among its employees. It has a mix amount of accountability, and allows its people to have opportunity for growth within the company. AES is not only concerned with the companys success but also with its peoples success. Organizational Structure AES has a network structure wherein each power plant has small, flexible, self-managed teams who are able to operate cooperatively and efficiently without any centralized direction. The employees form groups to solve problems and achieve common objectives. Employees may volunteer for task forces, without any formal credentials, when they are interested in a particular subject or want to set effective company policies. A large percentage of AES people are active

6 in new business development. Decision making by workers is supported through a dynamic team-based approach where team members collaborate for new projects and advise and help educate project decision makers with current knowledge (AES Corporation 2000). Through the initial development of a knowledge structure and resulting knowledge culture and empowering knowledge workers within the knowledge team framework, AES has achieved continued growth in the power services industry, which in general has suffered ups and downs. While the employees are not given any formal career path at AES, they are given latitude to move up the career ladder within the company to other positions. The organization has five hierarchical levels, comprising a set of divisional/regional managers, and three additional levels that exist in the plant. The plant organization consists of three levels: the plant manager, the seven area superintendents, and the front line people. This was done to minimize bureaucratic organizations like government organizations, thus the organizational structure of AES is substantially decentralized. AES believes that the companys organizational structure allows not only the managers but also the employees under them to have a sense of ownership. This would make all employees feel that the success of the company is in their hands and that their inputs are very much important. It also allows individuals to develop leadership skills for potential promotions. This flat management structure encourages high employee involvement in all decision-making opportunities. Process of Change for AES To be successful, an MIS must be designed and operated with due regard to AES organizational and behavioral principles as well as technical factors. Management must be informed enough to make an effective contribution to system design. Information specialists,

7 which include systems analysts, accountants and operations researchers, must have full awareness of the functions of management to ensure that the management and information specialists could come up with a more effective MIS suitable to AES needs. To achieve this, AES must change its unconventional way of running its organization. Employees must be given formal career path at AES and train employees to become management and information specialists. Systems analysts, accountants and operations researchers must also be trained to have full awareness of the functions of management. It should be noted, however, that there is no simple checklist of essential features which, if followed, will automatically produce the perfect MIS. What is required is an awareness and understanding of key principles and functions so that the design, implementation and operation of the MIS are the result of informed decisions and judgement rather than random development without considering the real organizational requirements. Managing information resources can be a very complicated task, due to rapid changes in this field. Generally speaking, there are two options available to managers such as in-house operation and outsourcing. In-house operation requires the AES own data processing facilities and personnel. This approach allows users to receive MIS services faster and easier. However, it requires the company to use the equipment and employ MIS personnel to ensure that the facility is fully functional or outsourcing deals with subcontracting MIS tasks to professional MIS companies. With professional help, the task can be achieved more efficiently and effectively. However, the response time to acquire services might be a little longer and, very often, the communication channels between subcontractors and users might not be well established. Different MIS are designed for different management functions. User involvement is almost a necessary condition for MIS to succeed. To improve the likelihood of system success

8 and user involvement, an MIS department must be created within the AES organization. An MIS department manager has to deal with people and lead them under given user styles and organizational culture. For this reason, the managerial behavior of MIS managers plays an important role in developing MIS. MIS implementation is an ongoing process of organizational change. Research has focused on human and organizational factors that affect the success or failure of implementing a new information system. Too often, the results of the same decisions work well in one organization but fail miserably in another because of the differences in organization behaviors. The organization behaviors include decision styles, communication styles, leadership styles, and organizational cultures. Possible Outcomes Computers are very useful in the modern world. Almost every business and organization relies on computers for its IT system. In several specific fields, on the other hand, MIS has become an invaluable tool. MIS assists as strategy support. Since a computer could not create business strategies by itself, a computer aids management in understanding the effects of the managements strategies, and aids in effective decision-making. MIS could be used to transform data into information that could be useful for decision making. While a computer could provide financial statements and performance reports to assist in the planning, monitoring and implementation of strategy, the MIS could provide a valuable function since it could collate into coherent reports unmanageable volumes of data that would otherwise be broadly useless to decision makers. By studying the reports from MIS decision makers are able to easily identify patterns and trends unlike if the raw data were consulted manually. MIS could also use these raw data to run simulations. It could create hypothetical scenarios that give answers to presumed

9 issues regarding modifications that need to be implemented in a strategy. For instance, MIS systems could provide predictions about the effect on sales that an alteration in price would have on a product. These Decision Support Systems (DSS) can enable more informed decision making within AES than would be possible without. MIS could also be used for data processing. MIS could provide valuable time saving benefit to the AES workforce. Traditionally, business information had to be manually processed for filing and analysis, with the use of MIS, business information could now be entered quickly and easily into a computer by a data processor. This enables users of MIS to formulate better decision making in a faster way and can enables AES to respond quicker to problems and issues it faces. Critique on MIS In all but the smallest organizations management rarely observe operations directly. They attempt to make decisions, prepare plans and control activities by using information which they obtain from formal sources and also by informal means such as face-to-face conversations, telephone calls, through social contacts and so on, such as in the AES work environment. One of the formal sources that AES can use to factually observe operations is via the management information system or MIS. A management information system is generally thought of as an integrated, user-machine system providing information to support operations, management and decision-making functions in an organization. As a matter of fact, an MIS is a special-purpose system useful for management in an organization. MIS is an accessible and rapid conveyor belt for appropriate high quality information from its generation to its users. For an MIS to be effective, it should posses a well conceived, designed, and executed database. Its level corresponds to adaptive

10 decisions. The characteristics of MIS in practice include an information focus, designed for managers in an organization; structured information flow; an integration of data processing jobs by business function, such as production of MIS, personnel MIS and so on; and inquiry and report generation, usually with a database (Argyris 1991). The MIS era has eventually contributed a new level of needed management information. However, it should be noted that the new thrust in MIS is on the uses to which the information is put and not how it is processed. The emphasis is on managing the information as a resource, which is important, and not on the intermediate processing stage. Managements are faced with an accelerating rate of change and an ever more complex environment. To face this kind of work environment, factual information could significantly help managers to gain knowledge and lessen uncertainty. Thus, it is usable by the manager for its intended purpose. Without relevant information, no manager can function effectively. With the utilization of MIS, management get things done through people, by using relevant information retrieved from MIS. For instance, the efficient performance of an organization is dependent very much on the internal performance of the organizations resources. An organizations output performance is directly related to the motivation and performance of its human resources. MIS has the ability to monitor a high staff turnover rate and can identify in what particular department such occurrence happens. It also has the ability to pinpoint which particular category of staff contributes to the poor performance. A high turnover rate of clerical staff can also mean that there are certain management practices that do not address issues like providing for career progression, personal development or training opportunities. Through the identification of poor human resource management, corrective measures may be taken which will in turn improve the organizations

11 output performance. This feature of MIS can significantly help AES since it does not have a human resource department. Surveys show that countries using advanced computer equipment have had relatively little success in providing management with the information it needs (Argyris 1991). Reasons discovered include the following lack of management involvement with the design of the MIS; narrow or inappropriate emphasis of the computer system; excessive focus on low-level data processing applications predominantly in the accounting area; poor appreciation by information specialists of managements true information requirements and of organizational problems; and lack of top management support. Conclusion AES needs to employ changes in its organization to be able to compete in todays competitive environment. The different functional areas within the company need to be mobilized to confront the growing threats. Global factors critical to the anticipated changes must be confronted by AES in order to survive. To be able to meet the threat of global competition and sustain AES place in the power service industry, it must be able to create an effective strategic plan through the implementation of MIS. The business environment is changing on a daily basis. The competition is everywhere, from cost cutting to marketing strategies. To maintain competitiveness, management must improve the efficiency of operation without sacrificing the quality of products and services. To achieve this task, making timely and correct decisions is the key to success. Since good decision making requires quality data and timely information, an MIS is specifically designed to provide information on a timely basis. An MIS also provides different types of information based on users need to improve effectiveness and efficiency.

12 References A power producer is intent on giving power to its people 1995, Wall Street Journal, 3 July, p. A1. AES Corporation 2000, Potholes in the road, Part 2, viewed 8 September 2008, retrieved from www.aesc.com/culture/founders/fcpotholes02.html. AES Corp. 2006, Answers.com, viewed 8 September 2008, retrieved from http://www.answers.com/topic/the-aes-corporation. Argyris, C 1991, Management information systems: the challenge to rationality and emotionality, Management Science, pp. 291-314. Baroudi, JJ & Orlikowski, WJ 1989, The problem of statistical power in MIS research, MIS Quarterly, vol.13, no.1, pp. 87-106. Claver, E, Gonzalez, R & Lopis, J 2000, An analysis of research in information systems (19811997), Information & Management, vol. 37, pp. 181-195. Cooper, DR & Schindler, PS 2003, Business Research Methods. New York: McGraw-Hill. Davis, GB & Olsen, MH 1985, Management information systems: conceptual foundations, structure and development, New York, NY, McGraw-Hill. Edelman, F 1981, The management of information resources: A challenge for American business, MIS Quarterly, vol. 5, no. 1, pp.17-27. Franz, CR & Robey, D 1986, Organizational context, user involvement, and the usefulness of information systems, Decision Sciences, vol. 17, pp. 329-56. Hamilton, MM 2002, AESs new power center; struggling utility overhauls corporate (lack of) structure; [FINAL Edition], The Washington Post, 2 June, p. E01.

13 Ives, B & Olson, MH 1984, User involvement and MIS success: A review of research, Management Sciences, vol. 30, no. 5, pp. 586-603. Markels, A 1998, Power to people, Fast Company, vol. 13, March, p.155. Miller, J & Doyle, BA 1984, Measuring the effectiveness of computer-based information systems, MIS Quarterly, March, pp. 17-25. Sanders, GL 1984, MIS/DSS success measure, Systems Objectives, Solutions, vol. 4, pp. 29-34. Salton, G 1975, Dynamic information and library processing, London: Prentice-Hall International. Power plant builder tries to reenergize environmental image 1992, The Washington Post, 6 July, p.F1. The principles behind its power 1998, The Washington Post, 2 November, p. F12. The power of a team: Arlingtons AES corporation 1996, The Washington Post, 12 February, p.F12. Zoikoczy, P 1981, Information technology: An introduction, London: Pitman.