Managing and Leading Strategic Change - Essay Example

?Running Head: Managing and Leading Strategic Change Managing and Leading Strategic Change [Institute’s Managing and Leading Strategic Change Introduction It was in 1994, when the fifth largest commercial airline of US was facing one the worst nightmares that one could ever imagine. Despite earning revenues of over 6 billion US dollars, the company’s balance sheets were constantly showing a net loss since 1985. Furthermore, the company had taken bankruptcy 11 protection a couple of two in the same decade, 1983, and 1990. Despite the fact that the company was able to get out of its bankruptcy filling of 1990 in April 1993 but still situation was no better for the company. It appeared as if the company is trapped from all directions and all its attempts to get out of it were in vain (Gamble & Thompson, pp. 376-377, 2008). Since 1983, nine different CEOs who came in with the slogan of change, tried their luck and as the figures show, they were not very successful. Not only the company was in trouble from the financial side but as it has been mentioned above, that the company was surrounded by trouble from all directions. High turnover, infighting between employees and departments, employee absences, use of sick time, customer complaints, and highest number of mishandled baggage reports, ranking last in terms of on time arrival and others would just be a glance at the terrible conditions in which “Continental Airlines” was still somehow surviving (Neff, Citrin & Brown, pp. 258-259, 1999). It was in February 1994, when Gordon Bethune took the charge of the company as the Chief Operating Officer (COO) and President and later in that year as the CEO as well, he knew that the company needed a hardcore strategic change and strong implementation of that change as well (Bethune & Huler, pp. 73-74, 1999). Quite understandably, it was his responsibility to do the same (Rollinson, pp. 195, 2002). This paper is an attempt to explore, analyze, and critically look at the strategic change that Gordon Bethune was able to bring in Continental Airlines during the later half of the 1990s and early 2000s. Discussion Gordon Bethune’s “Go Forward Plan” For making this strategic change, Bethune and his friend Brenneman, adviser to the company (and later taking on the post of COO and President whereas Bethune would remain the CEO and Chairman), introduced a “Go Forward Plan” which had four parts, aimed at putting the company back on track in 1995. The four pats were the market plan: “Fly to Win, The Financial Plan: Fund the Future, The Product Plan: Make Reliability a Reality, The People Plan: Working Together.” The plan was to implement all these changes simultaneously, since they would create a multiplier effect (Hartley, pp. 78-84, 2010). Implementation and Leading this Strategic Change (Go Forward Plan) Bethune knew that despite this plan was approved by board of directors with all the trust, confidence and enthusiasm, employees would view this plan with all possible suspicion and mistrust. Therefore, the first thing, which Bethune did, was to open the doors of the executive lounge of Continental, which had been protected from any visitors since many years like some castle. Employees now need only to show their IDs and gain entrance into Bethune’s office. After opening the doors for employees, Bethune initiated a new ritual of arranging open houses at the end of each month at the Houston headquarters. Just to ensure that employees feel comfortable around executive, the concept of causal Fridays came into being, except for the employees who had direct dealings with customers (Palmer, Dunford & Akin, pp. 284-285, 2008). One of the previous managements of Continental had tried to repaint all the planes but failed to complete the same due to limited financing and immense pressure for cost cutting. As of late 1994, the planes were in the same condition, not painted uniformly. Bethune felt that repainting the planes would send a message of revival, newness, and better operations to the customers. Therefore, Bethune issued orders for repainting of all the 200 planes in the fleet by July 01, 1995 (Hayes, pp. 156-157, 2007). When expressed their thoughts about the fact that it impossible to repaint 200 planes in this short time frame, people got a chance to see the other side of Bethune which would remain hidden for rest of this strategic change management (Burnes, pp. 136-137, 2004). With these actions, Bethune was able to achieve all sources of power. Bethune had legitimate and reward power, which stemmed from his management position. However, he was able to earn referent and expert power with these statements. As the time passed, and employees started understanding the real strategic vision of Bethune, they found themselves growing more and more respect for Bethune. However, on the other side of the picture, it appears that Bethune could have done it much more for sustaining and leading that change. As mentioned earlier, Bethune opened the doors of his office and executive floor for many of the employees to come. However, rather than hoping that employees would come to you, it would have been better if Bethune would went to them all by himself. The point worth noting here is the fact that before Bethune, nine different faces have tried to use almost the same tips and tricks, maybe in different way. In these sorts of circumstances, one cannot expect employees to make an effort and come to Bethune office. They have lost all the faith in organization and management the best way here could have been of “management by walking around (MBWA), which is one of techniques that is very effective when leaders want to stay informed about the strategic change process. Implementation of Fly to Win Market Plan First, Continental Marketing Executives started treating their travel agents as partners. For the past few years, travel agents for Continental Airlines found their commissions reduced and had lesser benefits to offer to customers in order to woo them to select Continental above others. Furthermore, Continental’s poor on-time performance, baggage handling, customer satisfaction ratings, and others made it even more difficult for travel agents to continue with Continental. Therefore, the focus was on travel agents to give them above average commissions, add the benefits, which can help them in wooing customers, back to Continental, and use their feedback for important decisions (Krass, pp. 124-127, 2000). Second, Bethune and Brenneman jointly agreed that Continental Airlines should target business class customers, the ones that are ready to pay higher premium for a comfort, security, and loyalty. In this regard, Continental executives made personal class to all the business executives that used to fly with Continental, apologizing with them, with hat in hand assuring them that Continental would not disappoint them this time (McMillan, pp. 422, 2008). Third, Bethune introduced his new idea of “Row 5 Test,” which meant to ask from any hypothetical person sitting in the Row 5 of the plane. Bethune idea was to only introduce such facilities for which customers are ready to pay a premium and avoid the ones about which customers are not concerned. Fourth, Continental realized that almost 70 percent of the losses that Continental was incurring were rooted in the Continental Lite routes. Continental has its inspiration coming from the Southwest Airline’s low fare/no frills model. It realized that its customers are more interested in paying full for all benefits and especially they wanted frills on flights that were of more than an hour (Randall, pp. 525-529, 2004). In light of such information, one can include example of the ‘Change Management Continuum Model’ (Burke, pp. 23-25, 2007) that gives significant importance to ‘support’ & ‘inform’ factors as imperative for strategic change in the organization, and the analysis indicates the same happened in the Continental. In specific, inform phase endeavors by the provision f wakefulness to employees that is essential for change in their performance, a step that enables optimistic alteration in the organization. (Burke, pp. 29-34, 2007) Implementation of Fund the Future Financial Plan In order to get out of the credit crunch of 1994-95 and in order to improve the position for future years, Bethune and management decided to under take following steps. First, Continental realized that it would have to cancel its order for new planes. Second, many of the excessive inventories parts were sold and maintenance contracts were renegotiated or reassigned to lower cost contractors (Mintzberg, pp. 16-19, 2008). Third, Bethune introduced new CFO to the company, Larry Kellner, who made sure that by 10 AM all the credit card receipts of the previous day were on the desk of the executives eliminating the mistrust and suspicion on the operations of finance department. Fourth, in 1997, Continental initiated a three-year program, which would bring up the salaries and wages of employees in line with the market wages. Fifth, Continental initiated code-sharing programs with various other airlines to ensure cost savings and economies of scale (Hill & Jones, pp. 35-38, 2007). These actions deserve to be appreciated and complimented as a part of managing the strategic change. When Bethune joined the company, the company was technically insolvent, however, within one year, Bethune made sure that the company puts profit, which continued to increase until 2001. Furthermore, the important part is that all these actions were in line with the strategic change actions. The actions at that had taken a defensive approach to build and maintain and all its financial actions were in line with the same. Implementation of Making Reliability a Reality Product Plan First, the goal was to boost the on-time performance of the company since this was the most important driver of customer satisfaction. Bethune decided to pay 65 US dollars per month to every employee (excluding managers) if they company was able to make to the top five companies in terms of on time performance (Balogun, et.al., pp. 94-96, 2004). Bethune realized that if the company would pay half of the amount that it loses every month to its employees in form of bonuses, it would create a great win-win situation for both the company and its employees. Within no time, Continental appeared in the top five lists consistently. Looking at the progress, the management decided to increase the bonus and increase the standards as well. It was now 100 US dollars and for first position (Carnall, pp. 63-69, 2007). Second, efforts were aimed at improving the baggage handling capabilities of the company since this was the element, which was at the heart proving the reliability of the company. Third, various other product offering have been improved in form improved meals, music playing during flights, introduction of Coke and new beers as drinks and others (Clegg, Kornberger & Pitsis, pp. 41-47, 2005). Despite the fact that it may appear initially that it was a waste of resources; however, at the end of the day, this strategy really worked in turning the overall organziational culture. Almost every literature acknowedges that successful startegic change management requires change in the overall organziational culture. For instance, ‘hierarchy of needs’ of Abraham Maslow is one of the examples of change-related models and theories that is still enjoying significance in textbooks of organizational management. The expert believed that individuals have five phases of needs (psychological, safety, belongingness, esteem, and self-actualization.) In addition, human beings travel from lowest level to the highest and do have any ability to skip any stage (Griffin, pp. 117, 2007), and for this reason, change remains a constant component of every human being, and subsequently, every organizational culture. Without the same, strategic change can not take place. Rewarding all employees together for successes and failures, whether or not they are directly involved was one clear step towards chnaging the organizational culture of the company. As mentioned earlier, the culture of Continental was that of fear, mistrust, anger, internal poltics, hatred and infighting to the highest possible levels. Quite understandably, the company was going nowhere with this sort of culture. However, by rewarding employees together, Bethune was able to create a sense of mutality, team work, interdependence, collaboration and contribution amongst the employees. He was to incorporate the sense of wrist watch in the company where no part is useless. Removing even screw from the watch would make every thing else of no worth. The employees felt the same way that they are a small yet significant part of Continental’s huge wrist watch. They felt that we would get rewards together and even get punished so it is in our own best interests to work together. While analysing tactics of Bethune, one come across the model of Theory X & Theory managers by Douglas McGregor (Griffin, pp. 99-102, 2007) who proposed the model of classification of managers in their own styles in terms of how they handle their workers. In the Theory X, managers seem to have a negative perception regarding their workers as useless, indolent, and unwilling to work, and subsequently, managers use force against them. On the other hand, managers of the Theory Y take their employees in a positive manner while considering them reliable, determined, and focused, and subsequently, use the factor of motivation for them. In this regard, analysis indicates that Bethune was representing managers of Theory Y. Implementing Working Together Plan The main ideas behind the working together plan was to win the hearts and minds of employees and the same could be done only by building bridges of trust. Burning the manuals and empowering the employees was one-step towards it. The next step was to pay employees in terms of profit sharing plans, as soon as the company started making sustainable profits. In the early 1995, management decided to make sure that all the managers of the company rated high on being team players. One being the best and four being not so good was the criteria. Executives held constant discussions with the managers regarding the same trying to coach them on this criterion. However, at the end of the day, many were let go, who had constantly received a rating of four. The same was done in the top management of Continental as well. When Bethune joined the company, there were almost 61 Vice Presidents of the company, however, with in a year or so, half of them either left the company or were asked to do the same (David, pp. 432-440, 2007). Starting in 1996, Bethune also decided to reward employee on perfect attendance with a 50 USA dollars gift certificate for the employees that have been present for six months. Company picnics, parties, and extra events became more prominent and rates for turnover kept on going down (Hiatt & Creasey, pp. 149-157, 2003). Important here to note is that the whole change process that Bethune implemented at Continental was in line with eight steps of change presented by John Kotter, professor of leadership at Harvard Business Review in Boston. This is one those strategic change implementation models, which has been praised and acclaimed by many different authors in their writings and analysis. Let us a have a brief analysis of the same. Kotter’s first step is about creating urgency for change. Right from the day one, as soon as Bethune took that position he created hype for spinning off the company. He knew that the change is needed, by any means. Repeatedly, he had been saying that he would initiate and lead the change, with all the force and power. In fact, he communicated this sense of “to do at all costs” and sense of urgency to all possible employees. For example, consider this situation. During one of the open house sessions, when one employee stood up and expressed his feelings that he is ready not to believe Mr. Bethune since he is almost the tenth guy that has come to him telling him a new plan. The employee strongly believed that “this goddamn place broken” and it is bound to fail, it is bound to self-destruct (Hatch, pp. 237-241, 2006). The on record reply of Bethune to that person is “I don’t know about you, but I don’t know of any self-respecting pilot, regardless of what predicament the airplane is – its on fire, its upside down, its spinning around, whatever - who stops trying to fly the airplane before it hits the ground. You can step off if you want to. However, I am going to fly this company where it is going (Hartley, pp. 78-84, 2010). Second, it is about forming a powerful coalition. As mentioned earlier in the paper, that Bethune along with himself brought his friend and consultant Greg Brenneman to take over the position of COO and then President, Larry Kellner (CFO) and brought many other vice presidents so that he could form strong group for implementation of his plan. Third, it is about creating a vision. This entire paper is an attempt to present his vision of the “Go forward plan” divided into four different sub plans. Fourth, is about communicating the vision to all people. As mentioned earlier in the paper, that Bethune held plenty of open houses, meetings, seminars, presentations just to make sure that all the employees are well aware of his vision and know where the company is going. Fifth, empower others to act on the vision. Bethune steps to change the culture of the company where a clear manifestation of the same. Manuals were burned; managerial positions were cut down, teamwork could be seen, consultation and mutuality become the order of the day and other steps changed the culture to make it more and more compatible with the vision. Sixth, Bethune by awarding employees in form of on time bonuses, company parties, and picnics created those short-term wins for the employees that turned in to long-term wins for the company. Seventh, consolidate improvements and produce still more changes and eight, institutionalize. Both these also remained a part of this approach as during the late 1990s Bethune built on that change to introduce new systems and made sure that the change becomes a part of the company’s culture. References Balogun, J. et al 2004. Exploring Strategic Change. Pearson. Bethune, Gordon, & Huler, Scott. 1999. From Worst to First: Behind the Scenes of Continental's Remarkable Comeback. John Wiley & Sons. Burke, Wyatt Warner. 2007. Organization change. Sage Publications. Burnes, B. 2004. Managing Change. Pearson Education UK. Cameron, E. & Green, M. 2004. Making Sense of Change Management. Kogan Page publishers. Carnall, C. 2007. Managing Change in Organisations. Pearson. Clegg, S., Kornberger, M., & Pitsis, T. 2005. Managing and Organizations: An introduction to Theory and Practice. Sage. David, Fred R. 2007. Strategic management: cases. Pearson Prentice Hall. Gamble, John E., & Thompson, Arthur A. 2008. Essentials of strategic management: the quest for competitive advantage. 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