One of a series of case studies about companies over the last century that have transformed impossibilities into “repossibilities” . They attained greater success because of – not despite – the crisis they faced.
Specifically, this case study offers readers some interesting and practical lessons in:
- How to address the ‘right problems’ when it comes to customer satisfaction
- How to ensure that making the customer happy also keeps your bottomline healthy and
- How to bring together employees to make things happen for the customer and for the business
Bad Trouble in Good Weather
George Bethune stood staring out the window of his executive office overlooking downtown Houston. The sky was clear and bright – a perfect day for flying. He turned from the view and let out a sigh as he sank into his chair. No matter how beautiful the day was, it wasn’t going to help Continental Airlines. After all, the weather wasn’t the problem, it was everything else.
In early 1994, when the Board had called Bethune and asked him to take over as COO, he knew that the company was in trouble. That’s precisely why they had contacted him; he had a great record at Boeing and before that, with other airlines. He knew what it took to salvage businesses on the brink of failure. He also knew what most travelers knew – when you fly Continental, forget any hope of arriving on time or receiving good service!
Even so, he had relished the opportunity to head the nation’s fifth largest airline. Continental did not seem irredeemable to him – after all, many airlines were chronically behind schedule and as for issues caused by poor management, there would be few large organizations that hadn’t faced such challenges. He figured that he would go in and do what needed to be done. So, by the time he was made CEO in November 1994, he received a few shocks discovering just how badly off the company really was.
Top of the Unpopularity Charts
During the previous decade, Continental had filed for bankruptcy not once, but twice, and was even on the verge of having to file for Chapter 11 a third time. Meanwhile, leadership had changed hands some ten times. In public polls and industry rankings, they were almost always voted among the worst. Out of the nation’s top-ten largest airlines, Continental was the most likely to be over 15 minutes late. They were also responsible for damaging or losing more baggage than any other major airline. It was no surprise then that they received three times as many complaints as the industry average. In other words, Continental was top of the charts when it came to the number of irate customers!
Not surprisingly, the financial numbers reflected this. The stock had been steadily falling for years and the company had made no profits for years. In 1995, they had to report their tenth straight year of losses. It was the fifth largest airline but it was losing altitude fast! Bethune knew that time was running out. What he needed was a plan that amounted to a miracle — a plan that had to tackle seemingly insurmountable problems head on.
With everything going wrong, there didn’t seem to be a limit on the number of things that needed to be set right. And yet, everything pointed to one fundamental problem. It was all about people. Continental had long ago stopped respecting its employees and its customers. Employee morale was abysmally low, and understandably so. The previous CEO had made a habit of union-busting, resulting in a severely underpaid workforce, shockingly high work-related injuries, and nearly a 50% turnover rate.
Employees were outwardly ashamed to even admit that they worked for the company. It was common practice to take off the company pin when off duty just to avoid having other airport staff realize which airline they were affiliated with. These weren’t the kind of staff who would care very much if a bag went missing or if customers were not greeted with a smile. No wonder customers suffered! In an effort to cut costs, frequent flyer programs had been slashed, making Continental even more unpopular with well-paying business travelers.
Bethune realized that if Continental wanted to crawl back from the dead-end it had reached, it had to start with putting customers first. And that was not going to happen magically. He decided that change had to begin with employees first. In a service industry, he could do nothing unless employees were motivated towards treating customers well and convincing them to fly Continental again. Deciding to begin with putting his own house in order first, he reached for the phone to tell his assistant to schedule a meeting with the Board. It was time to reinvigorate his people with a purpose – that they were going to make people love to fly with Continental again.
A Four-Point Plan to Win Them Back
As Bethune later wrote in his autobiographical account, by the end of 1995, Continental had gone from “worst to first.” In less than a year, Bethune and his newly appointed wingman, COO Greg Brenneman, managed to engineer what is now considered one of the fastest and most formidable turnarounds in corporate history.
How did it all happen? Having realized that the problems were all with people, Bethune focused his solution on people as well. He launched the ‘Go Forward Plan’ – a program that above all focused on bringing satisfaction back to the people involved with Continental, whether as customers or employees.
Bethune and Brenneman identified four key areas, starting with providing the infrastructure for the company to succeed and ending with a focus on employee engagement in the cause.
The first fundamental step was to offer services that people actually wanted. This was the “Fly to Win” market strategy, designed to ensure that the airline was actually providing services that were in demand. This required re-routing to add popular destinations and in some cases ending service to less preferred areas. It meant changing ticket prices to better reflect comparable flights with other air carriers as well as customer expectations. Continental also brought back some of the frequent flyer programs that had been cut and started including food on some flights. This meant spending money, but it was money spent carefully on services that mattered, especially to business travelers who had previously been more than a little reluctant to fly a company known for shoddy service.
The second point – “Fund the Future” – focused on the financial end of the plan, again with an emphasis on ensuring customer satisfaction. As Bethune expressed it, “You can make a pizza so cheap that no one will eat it. You can run an airline so cheap that no one will fly it.” Instead of slashing costs, the new approach would be to spend more money only in ways that would help to generate profit. Reinvesting in the fleet, was one of the major ways to do so, including ordering new Boeing planes as well as making improvements to travelers’ in-flight amenities and comforts.
While the new planes and changed routes were a start, the third goal to “Make Reliability a Reality” was perhaps the most directly related to improving customer service. Bethune declared to the force that he wanted their service to be like clockwork. From here on out, Continental was going to provide customers with a reliability they could always count on – from on-time departures to the general knowledge that they could always expect the highest-level of service from helpful and pleasant staff. To show that he meant business when it came to customer service, Bethune linked company bonuses to on-time performance.
Finally, the company needed to have a workforce willing to provide this to the customers, which is where “Working Together” came into play. In other words, he needed his team of 40,000 to want to actively work to meet these goals, which is why “Working Together” became the real rallying cry for the Go Forward Plan. This meant cultivating a community of satisfied employees who were actively invested in Continental’s mission and wanted to see success for the company. At the time, Continental employees were still paid lower when compared to those with competing airlines. The plan therefore did include higher wages as well as some unique incentive programs. For instance, twice a year, a raffle was held for those with perfect attendance. The prize? Ford Explorers.
On the one hand, this approach did require allocating more of the budget for employee compensation. On the other, the profit gained by doing this far exceeded the cost of not doing so. For instance, Brenneman calculated that it cost the company $5 million for every month that they were chronically late. One of the new incentives was to pay every employee $65 (approximately $2.5 million total) for any month the company ranked in the top-three for timeliness.
Ready for Takeoff
Within months, Continental was already experiencing unprecedented, tangible results. In March 2005, Continental came in first for domestic on-time performance among the ten largest airlines. The next month they again ranked as number one. Then later that year, for four consecutive months – from August through November – they were named the best when it came to handling baggage. They also placed second in overall satisfaction and fewest complaints.
The sharply heightened level of service was not going unnoticed. Word was quickly spreading that Continental was no longer synonymous for “poor service,” but rather with “how to do it right.” And the numbers were proving it.
Employees were obviously more satisfied, and committed to the company (not to mention working under improved conditions) as evidenced by the decrease in turnover rate by 45%, worker compensation by 51%, and sick leave by 29%.
This was having a direct impact on overall sales as worker productivity sky-rocketed to meet the Go Forward challenge. And on July 18, 1995, Continental announced the largest quarterly profit in its history.
From Worst to First
By December 1995, things were even better. The stock price multiplied fourteen times from $3.25 per share to $47.50 and was named Best NYSE Stock for the Year. Moreover, the company ended the year having not only made a profit for the first time in over a decade, but the largest annual profit in the entirety of its 61-year history: $224 million! It was certainly a far cry from the $202 million loss of the previous year.
In 1996, they went on to see their profit more than double to $556 million. That year they also received the J.D. Power Award for Best Airline on flights of 500 miles or more. It was the first of countless awards to come. Since the initial implementation of the Go Forward Plan, Continental has remained committed to the principles set forth in it, each year identifying new ways to better live up to the four goals as needs and times have changed.
In so doing, even when faced with the external crises post- September 11th or the current financial collapse, they have remained at the top of all major national and global airlines in all categories – from Most Admired Global Airline to Best Executive Class Airline to Best Flight Attendants in the US.
Lessons for Your Business
Inspire with purpose! Change didn’t start until the company had a big, provocative goal – one that benefitted customers and employees. Customers naturally seek value and the people in a company are created to fulfill a purpose. Extraordinary results come only from extraordinary efforts. Extraordinary efforts reflect relevant, credible goals and the sine qua non, trust. The resulting ROI on employee morale (14X in stock price alone) is, well, extraordinary!
Employee commitment is not all about money. While the money certainly communicates loudly, other elements like working conditions, management communication and recognition, make just as much impact on employee motivation.
Spend Money to Make Money. The increased cost of employee salaries and support programs certainly increased company costs. But it more than paid off in revenue, profits, and imagery. The goal, however, is to spend money in ways that most bolster customer and employee satisfaction. Increased profits come with increased investment.
Manage costs, don’t just cut them. Hard times sometimes push management teams to cut costs wildly. But cost cutting by itself cannot grow revenues, which is the key problem. Cost management needs to take into account the potential loss of business or customers that may happen.
| From Worst |
To First! |
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How to Get There
What does it take to achieve gains like these?
We introduced this case with a bold claim that companies can actually become exceptionally successful by learning how to transform impossibilities into “repossibilities”. But the opportunity to do this is not the same as actually doing it. There needs to be a process and a catalyst to actually make this happen. Of course, a challenge does not need to be life-threatening for a company to become remarkably more successful from overcoming it.
Based on learning from this and other companies, we have created a 90-day process for identifying and implementing the kind of change that is right for your company. We call this Repossibility™ Planning:
- Repossibility Assessment: This one-day overview of your company’s marketscape helps your leadership team think about its existing challenges in new ways, finding several areas for exploration into new ways to grow revenue.
- ProspectScan: Our creative exploratory research with both your “near” customers and “next” prospects identifies revenue opportunities by finding new ways of connecting with them. We distill and communicate this in Prospect Personas powered by the Key Buying Insight.
- Repossibility Workshop: We bring intelligence from your customers and their customers to identify directions that will enable your company to exploit the opportunities turned up by the downturn. The workshop infuses your team with opportunistic energy and vision, building momentum to take action.
- Direction Selection: Based on your target’s reactions to your potential directions, we refine and select with you the strongest single direction for re-engaging direct and end customers so you drive a greater share of your industry value chain.
- Market Activation Plan (M.A.P.): Using our unique web-powered CollaborAction™ process, the MAP engages employees in your company to embrace an exciting new way of engaging direct and end customers in a way that overcomes fear, builds buy-in, generates energy, and taps employee passion that overcomes the traditional barriers to implementing success.
Of course, a company can accomplish all these changes on its own. In fact, no amount or quality of consultants can change a company. But an outside catalyst can accelerate and enhance the adoption of a new revenue-generating customer strategy. These five characteristics are indicators that working with an independent, focused, and experienced partner would help:
- You believe that what worked for your company in the past is not necessarily the best path for you now. Many companies continue to do what worked in the past, even though those strategies have little chance of success in the current environment, simply because inertia makes a change too risky for internal employees to recommend.
- You believe the infusion of fresh, independent, outside perspective could have a catalytic impact on your entire company.
- You believe the smart, experienced employees already in place are the best to help form and implement the vision that will take your company from where it is to where it needs to go.
- But you are busy running your company as it is. You don’t have internal people sitting around who can take your management team through a proven process.
- You want to get started in the right direction now, before more of your resources, time, and energy are depleted and give yourself the most time to reap the benefit of your turnaround effort.