Managing the Organization's Structure
AES Corporation is a global power producer that has recently been challenged by the largest of their Latin American investments, Eletropaulo Metropolitana SA. The company, the largest electricity distribution company in Latin America, has been accused of colluding with Enron, and purposely driving down their stock prices. Their default on payments on a $1.2 billion loan from National Development Bank of Brazil means the bank could seize the company, which, in the end, would actually improve the AES balance sheet, according to Hamilton (2003). This individual problem demonstrates a greater challenge for the company, organization wide. This paper overviews AES' organizational culture, their structure, and why the organization is going through major restructuring.Managing the Organization's Structure AES Corporation is a global power producer that has recently been challenged by the largest of their Latin American investments, Eletropaulo Metropolitana SA. The company, the largest electricity distribution company in Latin America, has been accused of colluding with Enron, and purposely driving down their stock prices. Their default on payments on a $1.2 billion loan from National Development Bank of Brazi
l means the bank could seize the company, which, in the end, would actually improve the AES balance sheet, according to Hamilton (2003). However, this laissez-faire, do-as-you-wish culture is quickly changing. Despite the fact that their loose culture was able to facilitate some innovations that helped the organization meet adversity, tighter organizational controls, with a greater respect for corporate process and procedure have been implemented. AES' Organizational Structure: AES prided itself on a loose, entrepreneurial management structure. Traditionally, the company has had a sparse corporate staff. This paper overviews AES' organizational culture, their structure, and why the organization is going through major restructuring. Entrepreneurship is encouraged to the extreme. This individual problem demonstrates a greater challenge for the company, organization wide. In addition, a general lack of investor confidence in any organization even remotely associated with Enron forced the organization to tighten controls, to regain this confidence. This has allowed their subsidiaries, located around the world, to work independently. Why AES is Going Through Organizational Restructuring: Several facets have spurred AES' decision to undergo organizational restructuring. AES' new structure, however, replaces the more typical corporate hierarchy. Instead the company preferred to eliminate executive management in favor of having employees in the field. As Roger Sant, former AES Chairman stated, "giving people the authority to make decisions is neither a substitute for providing leadership and training nor a reason to reduce oversight and accountability" (cited in Hamilton, 2003). As a result, there has been little discipline in the organization as the virtually independent units are able to conduct business in the manner they best see fit.
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