Jul/Aug 2005

It's a Whole New Ball Game

By Robert Liparulo

Imagine companies where people have fun at their jobs. Where labor-management divisions are nonexistent and multimillion-dollar decisions are made by the rank and file. That's Dennis Bakke's bold vision for corporate America. Click here to apply.

Dennis Bakke wants to change the world. He wouldn't word it that way, would probably blush at the mere thought. But what else would you say about a man who built a $27 billion company--the global energy behemoth AES--with a management style that flies in the face of everything business gurus have preached for a century? A man who left that company only to travel to universities and seminars decrying all that's wrong with corporations today? Who has written a book about his leadership ideas (titled Joy at Work), and who spends untold hours promoting it to anyone who will listen--when he doesn't need the royalties and doesn't want the fame? A man who encourages the working masses to rise up and demand change? (Well, maybe not. But you can send your boss an anonymous e-mail at dennisbakke.com, encouraging him to read Joy at Work.)

At first glance, Bakke's notions about how companies should operate appear not only admirable but also downright reasonable. "Organizations," he says, "should be built around four core values: integrity, fairness, social responsibility and fun."

Hey, all right! Break out those motivational posters of mountain climbers and Kerri Strug.

Then he keeps talking and you realize how revolutionary, how out of sync with the real world, his ideas are: "The purpose of business is not to make money or even to provide jobs. Profit is important so a company can survive, but a business' reason for being should be to serve and meet the needs of the world."

OK, you're saying. Good shtick; heard it before. It's what companies are supposed to say.

Difference is, Bakke (pronounced "baa-key") means it. His idea of "fun" is not after-work beer bashes or casual Fridays. Rather, he says, "it's a joy-filled, rewarding, creative work environment, free of autocratic supervisors and staff offices, where each and every employee could fully realize his or her talents for success." In other words, "joy at work" means everybody being free to make important decisions about how the company functions and his own role within it.

"When you empower people, they shine: they work hard, they work smart, they make great decisions," Bakke says. "And because what they do every day affects other employees and customers and the community and the future of the company, they love it, they matter--that's joy.

"There's an assumption in business," he continues, "that only managers can make decisions, and the closer you get to the executive offices, the more important those decisions become. I believe every worker is gifted and as capable of making important decisions as corporate officers are--perhaps even more so, since they are closer to the core of operations; they're in the trenches."

In practice, Bakke's philosophy looks like a Frank Capra movie. In 1996, Oscar Prieto was a chemical engineer who'd worked for AES only two years. He was at a meeting when a senior executive asked for a volunteer to represent AES at a sit-down with investors from France and Houston about the possible acquisition of a huge Brazilian power company. Next thing he knew, Prieto was jetting off to Paris and Rio de Janeiro to orchestrate AES' $400 million buy-in. Eighteen months later, he was a director at one of Brazil's largest power suppliers.

"That's what happens when you raise your hand around here," Prieto told a reporter.

Then there's Tommy Brooks, who was working in the control room of an AES plant in Texas when he was asked to help start up a plant in Connecticut. Flattered, he agreed. Then he had second thoughts and told Bakke--who was visiting the Texas plant--that he didn't have the experience or know-how the job would demand. Bakke convinced him otherwise.

Brooks went on to lead a 15-person work team and--more important--his confidence skyrocketed. Now, he's a minister at the Ninth Street Church of Christ in Fort Smith, Arkansas, where he applies the lessons he learned at AES to motivate the church staff and inspire his congregants.

"Dennis Bakke believes in people," Brooks says. "By challenging me and encouraging me to do more than put in my time, he made me see my worth, my abilities. He let me rise higher than I ever would have."

New Thinking

To empower each of AES' 40,000 employees, AES decentralized the functions that are normally administered from a headquarters office. The company had no human-resources, legal or public-relations departments. Instead, employee compensation and work schedules, as well as a plant's relationship with its local government and community, were determined by work groups within each locale.

Whereas most large companies have perhaps a dozen management layers between, say, a newly hired janitor and the top dog, AES had three layers.

"Every employee should feel like a part owner of the company that employs him," Bakke says. "He should have a say in the way things are done, and he should be financially rewarded when the company does well."

Bakke believes hourly wages unfairly segregate workers from management and discourage true participation. In 2002, 90 percent of AES' worldwide workforce was salaried, with a chance for performance bonuses and stock options, similar to the deals executives got.

Bakke's ideas are as wild to our ears as Henry Ford's assembly line was to the zeitgeist of 1913. The assembly line, however, reduced laborers to drones, making for boring work and uninspired workers. Bakke's mission is to shed mindless repetition and meaningless labor from our work lives. "Only one in 10 people is happy with his job," Bakke says. "That's not the way God intended it. After the fall [of man], work became more difficult, but it did not become evil. God meant it for good, not drudgery."

AES' unusual business model faced plenty of naysayers, primarily investors and bankers: Low-level workers are making $400 million decisions? Setting their own compensation? Handling their own PR? Are you crazy?

But it worked. Interestingly, while Ford's assembly line reduced the time required to assemble a motorcar from 12.5 hours to 1.5 hours, Bakke's reversal of that trend also dramatically improves performance. AES found that its empowered workforce could accomplish twice as much with half the people. Its plants operated more efficiently with a third the staff required by competitors' plants. And you better believe that kind of utility affects the bottom line. Between 1990 and 2002, the company's revenue soared from $200 million to $8.6 billion. Bakke, too, was handsomely rewarded. In 2001, Forbes named him the 312th richest person in the world, with an estimated net worth of $1.6 billion. This was money earned not by manipulating workers or taking advantage of their need to feed their families, but by giving them more--more money, more control over their jobs and more fun.

AES' success turned the criticism into praise--but for all the wrong reasons, Bakke says.

"We need to do these things because they are right, not because they work. If a company does the right thing because it works, as soon as profits dip, it'll abandon the right thing for whatever it thinks will bring the profits back. Why you work is more important than what you do."

Hmm. The man made a billion bucks at AES, and he says he gives away 99 percent all of his income--doesn't that prove that making more money in order to give more money is an honorable objective? "The 'making money' part is what's not right," he says. "Perhaps you're objective is 'to serve others by providing financial resources.' You need money to do that, but the money isn't the focus; the people and their needs are."

He adds a comment that most likely he didn't learn at Harvard Business School (his alma mater): "Everything you do should be for love. You should love the people you're serving, whether they're your customers or your employees. That's biblical. It's just right."

Bakke is quick to point out that he doesn't think profits are evil.

In fact, one of AES' stated goals was "to operate in an economically sustainable manner." "If your organization is good for society and good for its workers, then of course it should survive to continue doing these good things," he says.

No Joy Ride

Anyone who's gone against the grain, even for the right reasons, knows it's not all fun and games. Whenever AES suffered a serious setback, fingers immediately pointed at Bakke's approach to operations. In 1992, nine technicians at an Oklahoma plant were caught falsifying water test results. Investigations showed that no manager outside the water treatment area knew what had been going on, but this and other unrelated factors caused the company's stock to plummet 60 percent.

"The pressure to abandon our 'crazy' ideas of decentralization were enormous," Bakke says. In fact, the Oklahoma plant did opt to return to "proven" methods of management, and added shift supervisors, an assistant plant manager and an environmental staff department. "I knew in my heart," he says, "that decentralization was best for the company and for our employees. I convinced the board to give me another chance to prove it." Before long, the stock price and the company's reputation had rebounded.

Still, he believes that senior management is ultimately responsible for the actions of employees. For the debacles of 1992, he personally apologized to each director and took a deep cut in pay. The problems also delayed his appointment to CEO by at least two years.

Disaster struck again in 2001 when poor market conditions and financial shenanigans at another energy company named Enron pushed AES' share price from a high of $70 to under $5. Shareholders and board members began screaming for heads to roll. Bakke volunteered to take the hit, and in 2002, he retired from AES.

"I was frustrated and sad to leave," he admits. "But fighting to stay probably would have hurt the company, and I didn't want that." Though no longer part of the company's operations, he remains AES' largest individual shareholder.

Since Bakke stepped down, AES has increased personnel at headquarters and created a human-resources department, but the way it operates and treats its employees have pretty much stayed the same. One change that disappoints Bakke was made to the company's stated values. Instead of a "joy-filled, rewarding, creative work environment," AES now defines "fun" as "winning."

Personal Crusade

After hearing Bakke speak at the Wharton School of the University of Pennsylvania, student Mark Sinatra had to take a deep breath. "When he said, 'business was never meant to maximize shareholder value,' 80 MBAs nearly had heart attacks," he says. "His theory that senior executives need to let others 'take the shot' goes against everything we overachieving Wharton students believe, that it will be our place as executives to take initiative and run with it. But it makes sense, and it has definitely worked for him."

Sinatra's enthusiasm "is not the way business leaders respond to my message," Bakke reports. "They hate it. Students see the wisdom and appreciate it, because they have not yet tasted the power that comes from being the boss, from making important decisions. As a leader, I had to give up some of that joy so others could experience it. I tried to limit myself to one major decision a year. Believe me, it's not easy to hand over control once you've felt how thrilling it is to possess it. But good managers have to do it, they have to."

Let's get this straight--business leaders ignore his message; proceeds from his book are like a raindrop in a lake for this man, who will give away most of it anyway; and the guy's way too humble to think the limelight is anything but a nuisance. So, what's it all for?

"God," comes his answer. "As a Christian, I can't sit back and watch companies blow the chance to make work positive for employees, to do what they're supposed to do for mankind. I'm not saying, 'Do it Dennis Bakke's way.' I'm saying, 'Do it God's way.' Love. Serve. Is there a Christian out there who will deny this is what we are supposed to do? Running a business doesn't except you from that."

He pauses, thinking. When he speaks again, there is no doubt that it's in the voice that encouraged Tommy Brooks to become more than he thought he could be, the voice that stirred hard-line MBAs into thinking less about profits and more about people.

"That's why I'm doing this," he says. "It's what I was designed to do."

Bakke's Top 10

1. When given the opportunity to use our ability to reason, make decisions and take responsibility for our actions, we experience joy at work.
2. The purpose of business is not to maximize profits fo rshareholders but steward our resources to serve the world in an economically sustainable way.
3. Attempt to create the most fun workplace in the history of the world.
4. Eliminate management, organization charts, job descriptions and hourly wages.
5. Fairness means treating everybody differently.
6. Principles and values must guide all decisions.
7. Put other stakeholders (shareholders, customers, suppliers, etc.) equal to or above yourself.
8. Everyone must get advice before making a decision. If you don't seek advice, "you're fired."
9. A "good" decision should make all the stakeholders unhappy because no individual or group got all they wanted.
10. Lead with passion, humility and love.

Bring the Joy Home: The story behind the rubber-band ball

Dennis Bakke says the foundation of a fun workplace is the values and character traits inherent in an organization's top people. "What they bring to work with them is what work will become for everyone else there," he says. By all accounts (personal stories, company performance, etc.) he succeeded at this during his time with AES. Then couldn't the principles that make work fun, dynamic, invigorating and productive also work at home, with the family?

"Absolutely," he says. "Emp-owering employees requires some risk; they're going to make mistakes. But we know that from those mistakes come more experience and better decisions. The same holds true for children. Parents should allow their children to take risks, to learn from their mistakes. And kids need to know it's OK to fail. Not being afraid to try is more important than never failing."

True to his nature, Bakke wanted to do more than talk about his interest in future generations. After his retirement from AES, he and his wife, Eileen, founded Imagine Schools, which runs 40 K-12 charter-school campuses in 10 states. (Bakke is the company's president and CEO.)

Bakke was so effective in instilling his values in his own children--the same values that made AES hugely successful--one of them inadvertently created the symbol that stands for Bakke's revolutionary views on leadership. His then-12-year-old son, Peter, showed him a rubber-band ball he and his sister made. "See all the different colors and sizes of rubber bands?" the boy said. "They represent the different abilities and cultures of AES people." He bounced the ball, then stripped off a rubber band and tossed it to the floor. "You see, it doesn't bounce by itself," he said.

What better example of the teamwork required to grow great companies--and great families?

Robert Liparulo is a regular contributor to New Man and the author of the soon-to-be-released novel Comes a Horseman (WestBow).