Groupthink and the Airline Industry: Strategic Business and Forward Growth - Case Study Example

Groupthink and the Airline Industry: Strategic Business and Forward Growth By YOU Academic Organisation This paper explores the strategic business successes of four companies in the airline industry. Specifically, a phrase attributed to John Maynard Keynes offers that "Its better to be roughly right than precisely wrong", which is the basis of this work, offers insight into the phenomenon of groupthink; a situation which exists when a group remains focused on a singular mindset. The potential benefit or detriment of groupthink will be applied to the airline industry in this work, illustrating whether group consensus is actually best for contemporary business organisations. Introduction A phrase attributed to renowned author, John Maynard Keynes, offers that "its better to be roughly right than precisely wrong". From a business perspective, this suggests that a companys objectives for strategic growth can benefit from a mass of ideas generated by various organisational staff, rather than reaching group consensus about an idea that is thoroughly incorrect for sustaining the business. Attempting to reach group consensus, from a strategic viewpoint, can lead to a phenomenon known as groupthink, which involves a team of business professionals who remain devoted to a singular cause, often losing sight on other available options which would be better suited to sustaining business objectives. Groupthink mentalities have been known to cause long-term detriment to strategic business decisions, which suggests that contemporary companies should pool their ideas, rather than remain blindly focused on a singular concept. This paper identifies the activities of four reputable companies in the airline industry, measures their total performance over a recent period and will offer a solid conclusion as to whether groupthink is suitable for an industry leader long-term. This paper will further examine the strategic direction of these four firms and formulate a conclusion as to whether it is truly beneficial to be at least roughly right than completely incorrect in business. Understanding Groupthink Groupthink is a system of thinking that occurs when business professionals are thoroughly occupied in a unified in-group, when the group members determination to reach group consensus overrides their motivation to logically assess more appropriate courses of action (Janis, 1982). There are generally three predictors of groupthink mentality, including member arrogance, over-commitment, and when extreme loyalty to the group exists (Scharff, 2005). What this suggests is that when a group of professionals conduct formal meetings for the purpose of identifying an appropriate business strategy, members can become easily influenced by the cohesion within the group and, rather than generate a tremendous amount of ideas, the group members begin to adopt the same thoughts as those of the influential in-group. Contemporary literature offers the strategic value of brainstorming, or a meeting environment in which members are promoted to formulate as many ideas to a problem as possible with no censoring of ideas (Nickels et al, 2005). Providing different perspectives on a particular business issue allows a greater pool of potential solutions to be considered, likely offering senior-level executives a better understanding of the business environment. In groupthink, the desire to establish team unity often undermines the distribution of alternative ideas. This understanding of groupthink reverts back to the phrase "its better to be roughly right than precisely wrong". Brainstorming and the uncensoring of various ideas offers the team a much better opportunity for at least one of the team-generated ideas to maintain validity and relevance to the business issues being discussed. Desire to achieve group consensus will lead to a unanimous approval of a decision, which by design, may be completely incorrect to the issue at hand. The Industry Leaders & Performance Discovering how groupthink may play a role in the strategic performance of the airline industry, it became necessary to examine the current operations of four airline companies: Ryanair, easyJet, Southwest Airlines and British Airways. Having examined all of these companies annual reports, several key factors were apparent in senior-level leaderships perceptions of the threats to their industry: Higher fuel costs and competitor activities driving a need to expand their businesses. Most interesting to the groupthink phenomenon was Southwest Airlines, which distributed a report to shareholders as dictated by three company leaders: The Chief Executive Officer, the President and the Chairman of the Board. Most unusual in Southwests situation was the acknowledgement of a group mentality, suggesting that all three individuals are instrumental in dictating forward strategic policy. As part of Southwests strategy, the firm announced layoffs as one factor leading toward profitability in 2006, as well as providing customers with modest fare increases. Throughout the shareholder announcement, it is clear to see that this leadership group is quite proud of their accomplishments in their industry. This group consensus of their short-term strategic business results reflects an inferred instance of groupthink mentality. Where other airline industries offer two separate statements, one from the Chief Executive and another from the Chairman of the Board, Southwest indicates unity: Often an indicator of groupthink mentality. Teamwork, though quite important, does not require implicit trust, as unconditional trust among group members can create a form of "group myopia" that often leads to "a negative effect on performance" (Erdem, 2003: 229). Using Southwest as the most relevant example in the airline industry, formulating strategic business decisions with multiple group members (in this case senior executives) can serve to bring long-term detriment to the firm. Though the company indicates that 2005 and 2006 were both years in which profitability was realized, adapting to a fluctuating air travel industry requires multiple team member input. Southwest, the same as the others in this industry, recognise higher fuel costs as a major hindrance to total profitability. Despite this, Southwest has emerged as a primary leader in the airline business in terms of profitability, which indicates that their short-term growth initiatives are meeting with success. However, Smirchich & Stubbart (1985) suggest that strategic managers should gain awareness of "less-obvious values and symbols that pervade their organisations". This statement indicates that strategic leadership must become aware of the internal factors involved in the business operations, such as organisational culture and belief systems, as another relevant factor in how their business performs, not just the more obvious factors such as rising fuel costs. Nowhere in the Southwest Airlines annual reports is there mention of their awareness of the factors driving internal performance. Rather, automation and layoffs are the primary focus to increasing profitability. Is this a long-term success indicator for the airline company or a product of groupthink, in which all three senior executives appear to agree that adding potential detriment to employee job security is a secure business opportunity? Because the shareholder statement heralds their performance, it is likely to infer that groupthink, to some extent, exists within Southwest Airlines. Quite different from Southwest is Ryanair, a European airline company. Rynair offers information in its 2005 Annual Report which highlights its flat management heirarchy, which involves diminished management layers between the subordinate employee and the senior executive. Further, the company heralds its reward policies, each designed to offer compensatory reward for employee performance. With these statements, Ryanair promotes utilising staff members as a source of information, which could likely be attributed to its enormous success in the European airline industry. Quite similar to Ryanair is easyJet, another European carrier. In its 2006 annual report, easyJet promotes its own flat management heirarchy, offering its stern commitment to diversification in terms of its employee relations policies. easyJet describes the value it places on employee input, through the free distribution of organisational information. Further, the firm contributes much of its success from the employees and their hard work and dedication to the business. Quite outside of the groupthink phenomenon, easyJet experienced a 21% increase in total revenues due to its more liberal policies regarding subordinate employee input (easyJet Annual Report, 2006). According to Waldmeir (2006), groupthink is a dangerous buiness situation, offering that the "wisdom of many is a great thing and sharing knowledge leads to remarkable advances for companies". In the situation of easyJet and Ryanair, their modern practises at recognising employees as valuable informational sources promotes that groupthink maintains no acceptable position within these firms. The Chairmans statement from the British Airways 2006 Annual Report indicates a less-than-desirable financial outcome for the year. Further, the Chairman points out that 2006 was a year of transitional leadership, almost in an attempt to justify poor performance for the year. Reading through the list of current executives in British Airways suggests a more rigid management heirarchy, with the Chairman promoting the many meetings undertaken by Board leadership to discuss strategic direction. New senior-level leadership at British Airways has provided the firm with new opportunities and new ideas for methods to change its current growth initiatives. However, Witzel (2004) offers that admitting an objective party to a professional group is the proper solution to facing up to problems that the existing team members may not have been prepared to confront; or willing to acknowledge. Having offered this, the new Chief Executive at British Airways will likely be forced to find alternative measures to break the groupthink mentality which has caused the company to find less-than-desirable performance results in 2006. Moreover, nowhere in the annual reports is acknowledgement granted to subordinate employees for their contributions in streamlining business success through the usage of their ideas. Perhaps this illustrates an organisation with tight managerial control systems and the firm belief that the senior executives can bring top-notch performance through their group activities. However, having experienced lessened profitability and growth in 2006 might be an indicator that groupthink activities occur routinely at British Airways. The task of strategic management is to "create and maintain systems of shared meanings that facilitate organized action" (Smirchich & Stubbart, 1985: 724). What this suggests is that leaders in senior-level positions must not impose his or her own beliefs on the subordinate staff in an attempt to coerce belief in personal viewpoints regarding strategic intent. Rather, the goal is to create an environment that is conducive to expressing thoughts and opinions, thus creating a system of shared meaning which creates genuine momentum within the company and genuine motivation to perform. Within companies in the airline industry which maintain more rigid command hierarchies and formulate the majority of business decisions, this view of strategic management is lacking, likely leading to a senior- level groupthink mentality. In the case of British Airways, the indicators exist which point toward minimal subordinate staff input, leading to decreased organisational performance. Conclusion In the airline industry, company professionals must understand both the internal and external environment if they are to make decisions which will bring long-term benefit to the company. In the case of British Airways and Southwest Airlines, a competent understanding of competitor trends and other external factors exist, however their internal awareness appears to be significantly lacking in their Annual Reports. In opposite accord, easyJet and Ryanair, two substantially smaller companies, are experiencing continuing growth and extended profitability. Both companies, similarly, acknowledge the extraordinary inputs of their staff members which their executive leadership recognises as a key to experiencing continued growth. Few could argue against the fact that most companies hire their chief executive officers to fulfil the role of policy maker and to guide strategic intent within the firm. However, an organisation which consists of individuals who are extremely loyal to other senior staff members will likely choose the options generated that most favour group consensus. This can be illustrated by the vast system of senior executive management tiers at British Airways and Southwest Airlines, where groupthink mentality is most likely to exist. Though Southwest Airlines has found increasing profitability, nothing innovative and unprecedented has been reflected in their annual reports, suggesting that current policies believe that what has worked previously will always work. Ryanair and easyJet, struggling to achieve greater market share, reflect instances of innovation, creativity, and diversity of communication as a forward goal in their respected businesses. This is likely an indicator that long-term growth and superior performance can be accomplished by putting an end to the firm desire for senior group unity and replacing this style of management with a more visual and dynamic role and including subordinate inputs as reputable sources of information to aid the business long-term. Employee and subordinate staff input allows a firm a better chance to at least emerge roughly right, than to adhere to group expectations and be precisely wrong at creating a workable strategic policy. Further research into these case studies would be beneficial in solidifying whether groupthink actually exists at the aforementioned airline companies in order to determine conclusively whether groupthink tends to lead to precisely wrong business activities. Word Count: 2086 Bibliography Erdem, Ferda. (2003). Optimal trust and teamwork: From groupthink to teamthink. Work Study. London, 52(4/5), pp.229-230. Janis, I.L. (1982). Groupthink: Psychological studies of policy decisions and fiascoes. 2nd ed. Houghton Mifflin. Nickels, W., McHugh, J. & McHugh, S. (2005). Understanding Business. 7th ed. McGraw Hill Irwin, p.219. Scharff, M. (2005). Understanding Worldcoms Accounting Fraud: Did Groupthink Play a Role? Journal of Leadership & Organizational Studies, 11 (3), p.110. Smirchich, Linda & Stubbart, Charles. (1985). Strategic Management in an Enacted World. Academy of Management Review, 10(4), pp.724-736. Waldmeir, Patti. (2006). Why groupthink is the genius of the internet. FT.com. London, p.1. Witzel, Morgen. (Aug 4 2004). The test of team-building: The corporate life cycle: Company managements must gain professionalism early in their lives. Financial Times, p.11. Appendices: 2005-2006 Annual Reports of easyJet, Ryanair, British Airways and Southwest Airlines Read More