Despite facing bankruptcy, employee dissatisfaction, and a negative reputation in the past, Continental Airlines has successfully transformed itself into a highly regarded and financially stable airline. The company now provides excellent service and punctuality, making it one of the industry’s top carriers. This remarkable turnaround has not only led to improved customer perception but also increased employee satisfaction. In fact, Continental Airlines received recognition as one of Fortune Magazine’s “100 Best Companies to Work for in America.” From its previous rank of 40th, the airline climbed up to the impressive 23rd position in 1999. It is worth noting that this accomplishment is particularly noteworthy considering the airline’s extensive workforce of over 50,000 employees.
Continental Airlines has successfully transformed into a reputable global airline and company through the critical assessment of its situation by a team of individuals. This team thoroughly evaluated both the past performance and future prospects of the company, leading to two possible options: continuing on the same path, which would result in another bankruptcy and potential demise, or implementing significant changes to become an exceptional airline. Displaying courage, the Board of Directors decided to hire Gordon Bethune as their leader. Bethune’s straightforward approach stemmed from his background as a former Navy aircraft mechanic with practical management insights, allowing him to focus on more than just financial performance. Under his guidance, he inspired the entire team to strive for excellence and regain customer trust. Bethune’s grounded strategy played an indispensable role in Continental’s eventual success.
According to the Merriam-Webster dictionary, change is defined as the act of making something different or giving it a different position, course, or direction. It also involves replacing something with another and undergoing modification. On the other hand, management refers to the art of managing, conducting or supervising something, and using means to achieve an objective. It encompasses those who manage or direct a business enterprise.
In 1995 at Continental Airlines, all of these transformations occurred under the leadership of Gordon Bethune. Gordon, known for his straightforward nature, is highly respected by all employees – from top executives to the newest ramp agent. He strongly supports his people and their products. Despite facing challenges, he vigorously fought for the position of Chief Executive Officer.
After experiencing ten different leaders in the span of ten years, the Board of Continental had grown tired of searching for someone to lead the company. They were not interested in finding another “leader”; they had already gone through ten of those. The Board simply wanted someone to step in and “take over.” Consequently, they allowed Gordon to take charge for the next ten days until the upcoming board meeting, during which he would have the opportunity to address the Board and a decision regarding his position would be made. The timeline was tight, and the pressure was high. Gordon understood that the company desperately needed a significant overhaul in every possible aspect. His first move was a simple one; he wedged a doorstop under the previously locked doors of the executive suite, symbolizing a change in management much like an “under new management” sign placed in a restaurant window. This action marked both the beginning of his distinctive management style and the kind of culture he envisioned for Continental. Bethune then spent the following ten days secluded with Greg Brenneman, who worked as a consultant for Continental at the time and has since become the President and Chief Operating Officer. Together, they devised a plan to present at the board meeting. Gordon recognized Greg’s expertise in turning companies around and sought his partnership in this endeavor. The entire process was sure to be quite challenging. With only ten days available for this particular board meeting, Gordon and Greg not only had to create their customary financial and operations presentations but also had to generate a plan that would fundamentally alter the course of a $6 billion corporation.Continental Airlines was on the brink of undergoing a significant transformation that would generate both disappointment and pleasure for critics, customers, and employees alike.
Manipulating the numbers was easy for Gordon and Greg, but changing the hearts and minds of employees was difficult. These employees had experienced multiple leaders, pay reductions, and distrust over many years. The people of an airline are as important to the product as the planes. Reengineering became necessary.
Everyone is aware that reengineering is related to processes. To the relief of many workers, the focus is shifted from them to the work. During that time, employees were doubtful of anyone coming to implement “change.” The concepts of change and reengineering processes are reflected in statements such as “Let’s analyze process failures instead of blaming individuals” and “If there is a problem, it’s because the process is not functioning correctly; individuals are doing their best to make it work.” While employees already knew these things, they appreciate having a leader or a management figure who believes in these ideas to bring about change. Continental failed not only in its processes but also in supporting its employees. When a company finally has a leader capable of implementing changes, improving processes, and fixing them, employees should be content, right? However, there’s an issue: employees are human beings, and reengineering processes means change, which poses various challenges for people. Continental Airlines employees had already experienced ten changes in ten years, leading to a lack of trust within the organization. Any reengineering project that fails to consider the difficulties individuals face with change and does not address these issues systematically and structurally is destined to fail. Knowing he was facing such odds, Gordon made sure his team understood that he was standing with them in this process.The various states of change in the reengineering process, as outlined by Jeaneanne LaMarsh of LaMarsh and Associates, include the future state, current state, and delta state.
The future state of change involves the idea of desiring a change, but not necessarily the changes in the plan itself. Employees may have their own ideas about what should change, and this change often revolves around someone else changing, not themselves. For Continental, both aspects came into play. The current state of change involves the belief that although the new way of working may be much better, employees do not perceive much wrong with the current way of working. They may view improving things by adjusting and manipulating their current practices, rather than implementing drastic and difficult changes outlined in the plan. It can be challenging for them to envision the impact of their individual changes and the overall effect. In this case, the employees lacked faith in any change making a difference, leading them to question the need for change altogether. Having experienced multiple changes over the past decade, they had become apathetic at this point. Finally, the delta state of change involves considering the new change as highly desirable and viewing the current way as unsatisfactory, but perceiving the process of transitioning from the current state to the desired state as too challenging, energy-consuming, and confusing.
In addition to possible resource constraints, Continental Airlines employees were fatigued and demotivated. They desired concrete evidence of change, not just empty words from higher-ups. To accomplish this, communication, reinforcement, and rewards were needed. Both companies and individuals must embrace change in order to survive, but they have the freedom to determine how they approach it. Successful companies opt for an organized and structured methodology that enables swift implementation of changes while minimizing disruption felt by those involved. Continental’s turnaround resulted in immediate and comprehensive change. As all companies face challenges with implementing changes, those who succeed gain a significant advantage over struggling competitors. Change management is crucial for successful business process reengineering implementation. Gordon and Greg developed a simple plan called the Go Forward Plan that focused on moving forward instead of dwelling on past mistakes. This plan aimed to be relatable to everyone, introducing the concept of the delta state of change
The Go Forward Plan encompassed four components: a market plan, a financial plan, a product plan, and a people plan. These parts were not meant to be followed in a sequential order, but rather needed to be continuously and simultaneously pursued. The submitted points of this plan to the Board included Fly to Win, Fund the Future, Make Reliability a Reality, and Working Together. These words were clear, conveyed industry terminology, and represented optimism (Bethune/Huler). Thus, this became the new blueprint for achieving success.
Fly to Win had a determined plan to cover the market and change its external image. This plan was communicated as aiming to achieve top-quartile industry margins. The airline needed to grow in ways that would generate profit and improve the balance between business travelers and leisure travelers. The focus was on expanding international airline alliances and reducing unnecessary costs. They decided to stop doing things that were not profitable. They also approached major travel agents humbly, seeking their support. Additionally, they wanted to restore their previously successful frequent flyer program, which had been eliminated in a previous cost-cutting effort, in order to regain appeal among their target market.
The financial plan, named Fund the Future, was implemented by Continental Airlines to turn the company around. In his memoirs, Gordon joked about the importance of having funds for a future to exist. The plan included reducing interest expenses, establishing franchise hubs, and laying the groundwork for future growth. The fleet plan, development of hub real estate, and generating a strong cash flow and improved financial flexibility were prioritized. Initially, the interest rate on new fleet was over 21 percent, but it has now dropped significantly to below 7 percent. In addition to financial concerns, avoiding another Chapter 11 Bankruptcy was a top priority. To achieve this, leases were renegotiated, payments were deferred, debts were refinanced, and the pricing structure was changed. Unlike most reorganizations, Continental Airlines continued with their Go Forward Plan, which involved addressing issues related to the product and the workforce.
Make Reliability a Reality: the product plan focused on creating an industry-leading product that Continental could be proud of. The ultimate goal was to consistently rank among the top in key Department of Transportation (DOT) measurements: on-time arrivals, baggage handling, complaints, and involuntary denied boardings. The key to achieving this was the employees’ commitment. Their willingness to provide this service was crucial. To incentivize their efforts, there were easily measurable goals in place, with cash rewards offered for achieving them. Employees would receive a $65 check for reaching the top second or third position in on-time performance, and $100 for securing the first place in DOT ranks. Though these amounts may seem small, they represented a strong link between each employee and the company’s objectives.
Michael Hammer, the well-known authority in business reengineering, recently admitted that many reengineering projects have been disappointing because a vital element of his original corporate reengineering formula has often been disregarded. This overlooked factor is the people involved. However, Bethune and Brenneman were already aware of this and took care not to neglect their employees. The Continental company’s successful turnaround centered around its corporate culture. The goal was to establish an organization where employees eagerly anticipated each workday and received recognition for their contributions. This entailed treating one another with dignity and respect, prioritizing safety, implementing employee-friendly internal initiatives, improving communication, and ensuring equitable compensation for both staff and the company. These accomplishments were made possible through various internal programs for continuous learning and professional growth, diverse communication publications (daily, monthly, quarterly), and gradual salary increases to meet industry standards.
Bethune presented his four-point plan to the Board, who reluctantly accepted it due to lack of alternatives. As mentioned earlier, the Board preferred a symbolic figure rather than a true leader, having experienced ten unsuccessful leaders before. Nonetheless, Gordon managed to persuade them that achieving substantial outcomes with their financial and people-oriented strategies required a strong leader. He firmly believed he was the ideal candidate for the position and has remained in that role for five years and counting.
Continental Airlines underwent a challenging and lengthy transformation, which was not easy, smooth, or immediate. However, this change was driven by a well-defined plan that emphasized focus, vision, tangibility, and a commitment to its people, product, and customers. The Go Forward Plan in 1995 provided the foundation for Continental Airlines’ resurgence from despair and potential failure. Today, the company continues to set and assess quarterly goals aligned with these guiding principles. As a result of this approach, Continental Airlines has achieved consecutive record-breaking annual earnings since 1995 and shares profits with employees through profit sharing programs. Employees have received over $95 million in on-time bonuses. Absenteeism has reduced by 31 percent and employee turnover decreased by 52 percent. To further motivate employees, drawings are held every six months to award seven Eddie Bauer edition Ford Explorers to those with perfect attendance. Over 60 vehicles have been distributed so far. Continental Airlines has also received multiple awards including recognitions from J.D Power (its third award in four years), Fortune’s “100 Best” list, and Frequent Flyer Program of the Year distinction.The achievements made by Gordon Bethune and Greg Brenneman in their leadership roles provide solid proof of the significant positive changes they implemented. Although some may argue that their approach lacks scientific basis, its undeniable effectiveness cannot be questioned. They devised and executed a successful plan that continues to generate favorable outcomes. Currently, Continental Airlines is highly respected within the airline industry and esteemed by its customers as well as employees. Through skillful management, Continental not only embraced change but also flourished in the process. This trend persists today with continued measurable success.
Works Cited
- Merriam-Webster On-line Dictionary; www.m-w.com. 2000.
- LaMarsh, Jeanenne. “The People Side of Business Reengineering: The Key Success Element.” BPR Online Learning Center, Quality Leadership Center, Inc. December 1999.
- Bethune, Gordon with Scott Huler. Behind the Scenes of Continental’s Remarkable Comeback: From Worst to First. John Wiley & Sons, Inc. New York, 1998.
- Boyd, John. “Creative Business Reengineering.” Computing Japan. March 1997, Volume 4, Issue 3, p. 48.
