Andrea Lavin, Popular Press Blog wk 2

Continental Airlines: "Go Forward Plan"

In1994, Continental Airlines was in serious trouble.  At that time, they had filed for chapter 11 bankruptcy twice, had a horrible reputation for their flights never being on time, for losing luggage and for giving dreadful service.  To make matters worse, they were facing huge debt.  The company made some major organizational changes starting with a brand new CEO, Gordon Bethune, who spear headed instrumental changes that made a historic comeback for the company. (Burkitt, 2010, para. 4)   Bethune created the “Go Forward Plan” which was focused on company morale and establishing trust and loyalty with customers.  (Burkitt, 2010, para. 4)   In an interview with Financial Times, Bethune reported that change was key in creating the turn around.  At the time of the interview, the company had reported record profits over 13 consecutive quarters.  Bethune said of his progress, “If you treat your staff well, they do their jobs properly.  Contented customers tell their friends and your profits rise.  The only way to have a good company is to have employees who enjoy working there everyday” (Skapinker, 1998, para 5).   

The CEO’s notions about employee satisfaction and a company’s profitability echo Maslow’s groundbreaking theory of motivation, which suggests that humans are motivated by a hierarchy of needs that are physiological, social and psychological.  According to Maslow's theory, for a human’s full growth and development, all needs must be met. (Moran, 1998).   In Images of Organization, Moran explains this theory “had powerful implications” because it indicated that the ideology of the time, which was to provide a wage and a steady job, was confining the worker to lower levels of development.  (Moran, 1998)  From this theory it was discovered that giving a worker conditions that allowed for personal growth could simultaneously help the company reach its goals.  (Moran, 1998)

Maslow's Hierarchy

At Continental, Bethune gave his employees cash rewards for the good performance. A Financial Times article in 1998 reported he offered a $65 bonus for every month Continental was in the top half of the US airlines punctuality table, in addition to the profit share for the company’s financial performance.  (Skapinker, 1998) Of the financial motivation Bethune said, “employees value cash”, and went on to say that offering employees shares alone is not as effective as cash. (Skapinker, 1998)  Bethune’s cash/bonus reward system, and it’s effectiveness over shares or stock, was identified in Designing Organizations That Are Built to Change, (Worley & Lawler, 2006).  Worley and Lawler explain, “In comparison to bonuses, stock plans are likely to be less effective in motivation change because the line of sight between the desired behavior and reward is less clear.” (Worley & Lawler, 2006) 

Bethune implemented some basic strategies that are in alignment with The Star Model framework: strategy, people, structure, rewards, and processes.  (Galbraith, 2011).  He would fly customers where they needed to go and offer cash incentives to his employees.  The money would come from an estimated $6 million a month that was being used to cover expenses such as money for hotel rooms and tickets on competing carriers, which were a direct result of late planes. (Townsend, 1998).  Punctuality improved rapidly, sick leave plummeted and staff was proud of their work.  (Skapinker, 1998)   

Bethune’s strategies delivered results.  In 1996 and 1997, Continental Airlines received the J.D. Power Award of customer satisfaction.  In July of 1998, Continental reported a record second quarter earning of $275 million, the highest in company history at the time. (Townsend, 1998)  Gordon Bethune retired from Continental Airlines in 2004.  His structural changes illustrate the star model in action, Maslow’s theory of motivation, and also depicts a successful large-scale effort for company change as discussed in Designing Organizations That Are Built to Change, Worley and Lawler (2006).   In their article they identify, what Bethune knew, that  “people have a market value; jobs do not.” (Worley & Lawler, 2006, p. 20)  

While reading this week’s assigned literature, I kept making mental notes of the ways the theories and ideas presented fit into my own work experience.  I have worked for both companies on each side of the “Mechanistic” and “Organic” management and organization scale, as described by Moran (2006). I was so inspired by the information presented, particularly the data on the correlation between work environments, employee moral, and the over all performance of the company, that I even considered emailing one of the articles to my former boss, just as an FYI.   I decided against it, but still wish this was required reading for CEO’s everywhere. 

References:

Burkitt, L. (2010, May 14).  Comeback Companies. Forbes Magazine.  Retrieved on September 23,         2012 from http://www.forbes.com/2010/05/13/apple-ford-hp-cisco-audi-adidas-cmo-network               comeback-companies_print.html

Galbraith., J.R. (2011). The Star Model, pp. 1-6

Galbraith, J.R. (2002). Designing Organizations, pp. 73-90

Morgan, G. (1998). Images of Organizations: Executive Edition, pp. 35-67

Skapinker, M. (1998, October 15).  Lifted by a change of atmosphere: Interview Gordon Bethune.           Financial Times, p. 12.

Townsend, A. (1998, October 22).  Continental Airlines; Boss Saved Airline.  Dayton Daily News,  p.       7B.

Worley, C. & Lawler, E. (2006). Designing Organizations that are built for change, MIT Sloan                  Management Review, 48(1), pp. 18-23