Chapter 6–Leading to Workplace Joy Business guru W. Edwards Deming said a leader’s job is to drive fear out of the organization so that employees will feel comfortable making decisions on their own. Most leaders do not show the humility to make that process a priority. But to Bakke, a willingness to serve and help others do better is crucial in a leader. Leaders must interpret an organization’s shared values and principles. They are advisers to everyone in an organization, and they demonstrate integrity as the organization’s collective conscience, pushing it to reach its goals and live up to its ideals. Leaders must realize that character is transparent to those around us. People “catch” character, virtue, and values by observing and practicing “right” behaviors and actions, and making them habits. When a leader acts as if he or she is the center of the organization, everyone else feels extraneous. It takes courage for a leader to delegate and free his or her people to act, exercising their natural gifts and fulfilling their potential. Leaders who create dynamic, rewarding, enjoyable workplaces love people, love spending time with them, and love affirming that they are worthy and important. Where leaders and board members can exercise tight control is on issues that affect the strategy and shared values of an organization. With the exception of those required by law to be made by top executives, all other decisions, including those with major financial implications, should be delegated to team members who are closest to the matter under consideration. Leaders must serve as advisers—advisers able to distinguish an organization’s unchanging principles from its constantly changing strategy. Bakke and AES board members became active advisers on every important issue facing the organization, which tended to offset their loss of enjoyment in surrendering decision-making control. Bakke believes the result was that AES directors were far more influential, committed, and engaged than those of more conventional companies. Leaders must also put a high priority on accountability. When the Shady Point problem occurred in 1992, Bakke took a 30 percent reduction in his own pay that year as the most senior person responsible for adherence to AES values. Other corporate officers and leaders in the plant also took pay reductions ranging from 10 to 20 percent. Taking responsibility must become a habit in order for each worker to trust in the organization and partake in the joy and accomplishment that the workplace offers. Chapter 7–Purpose Matters Corporations exist at the pleasure or sufferance of society, since the state grants them their special status and associated rights and responsibilities. Consequently, they must achieve broader and more meaningful purposes than just making money. Bakke expects to see any modern, progressive, socially responsible organization striving to achieve three goals: • to serve society with specified services or products; • to operate in an economically sustainable manner; • to achieve these results while rigorously adhering to a defined set of ethical principles and shared values. As individuals tend to act in ways that are consistent with their personal goals and missions, so do organizations. Yet, corporate boards generally consider noneconomic goals “soft,” and capitalists tend to assume that a company’s primary purpose is to make profits for shareholders. These attitudes open the door to executives who misuse their enterprises as means to make themselves rich, powerful, or profligate, or all three. To Bakke, this is wrong. In early purchase negotiations with Allegheny Power, for example, Allegheny wanted to pay considerably less than AES was asking. Bakke and Sant resisted until they realized that their goal wasn’t to make the maximum amount of money for AES but to finance the deal, cover expenses, and profit enough to generate a reasonable return on the investment. The figure Allegheny offered did that. While AES lawyers were aghast that the partners had agreed to a lower figure, the economics of the lower price worked for AES, and the customer was better served, too. To Bakke, the words “serving” and “stewardship” more appropriately describe the work of corporations than “selling” and “management.” Employees are not owners of resources but guardians or stewards of them. Companies that recognize that fact, and give a high priority to serving society, energize their employees. Most corporate CEOs know their company’s success and its total value result from the contributions made by all stakeholders, not just shareholders. Thus, every business decision, from compensation to strategic planning, should be evaluated on whether the economic and noneconomic criteria serve all of a company’s purposes. Board members and other company leaders should back this wholeheartedly and stress its value with investors, banks, communities, and other stakeholders. It is perfectly appropriate to aim high. Goals should not be set according to how easy or hard they are to measure. They should be set because they’re right. Chapter 8–Potholes in the Road Study at Harvard Business School helped Bakke learn why people dread work. Bakke and Sant sought to change that, taking their lead from business theorist Peter Drucker. Among his ideas: Stress self-discipline and individual responsibility in the workplace; make the same person responsible for both planning and execution; and use supervisors to assist subordinates. At the AES Beaver Valley plant near Pittsburgh, Pennsylvania, Bakke first recognized a way to defuse union-management tension. When the leader of its Oil, Chemical, and Atomic Workers International Union asked him, “What do you think of unions?” he responded, “I don’t think much about unions. My job is to eliminate management. If I succeed in doing that, I don’t know what unions are for.” Leveling management helped create good relationships with AES unions. Some examples: • To negotiate a contract with union leaders at new AES hydroelectric facilities in Brazil, AES sent its own group of union leaders, not managers or attorneys. The resulting generous deal did not break the AES bank, and it left the Brazilian workers feeling a sense of accomplishment. They had negotiated successfully and felt ownership in their workplace. • When AES bought three California power plants from another company, union members chose to continue working under AES rather than to transfer or terminate. The union’s research team had observed AES Shady Point and found people there to be self-motivated, dedicated to company values, working in effective teams, and leading by example. • After AES put everyone on salary and removed the management layers against which unions defined themselves, people at several plants found they no longer needed union protection and voted, without AES prompting, to decertify. 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 traditional centralized ones, and they perform just as well or better over the long term, because they tend to be much more rewarding workplaces. Job security, a chief concern at many businesses, is an illusory goal. In our dynamic world, every job and every person are in a constant state of flux. Bakke finds it obstructive, demoralizing, and costly to let people stay in jobs when they’re not needed, especially when their creativity and energy can be better used elsewhere in society. Toward that end, he advocates generous severance arrangements to compensate people leaving organizations. The right-size workforce is the number of people needed to make the workplace fun.