Change Management in Delta Airlines - Research Paper Example

Change Management in Delta Airlines Table of Contents Introduction 2 Company Overview 2 Diagnosis 3 Plan for transforming the organization 5 Kotter Eight Step Model 6 Conclusion 9 References 11 Introduction This project would reflect the analysis of Delta Airlines. Delta Airline is one of the most renowned American Airlines whose headquarter is located in Atlanta, United States. The first part of the project would be dealing with the business overview of the company. It would represent the present business situation of Delta Airlines. The next portion of the project would be dealing with the diagnosis of the business conditions of Delta Airlines. This part would be discussing the mission and vision statement of the company followed by its objectives and business strategies. The third part of the project would reflect change management within the organization by implementation of Kotter’s eight step approach. The Eight Step Model of Kotter is one of the most popular models for scheduling, implementing and finally sustaining a change process. Company Overview As already discussed above, Delta Airlines is a popular American Airline whose headquarter is located in Atlanta, United States (Federal Aviation Administration, 2013). This airline generally operates both international and domestic networks having its service routes in all the continents excepting Antarctica. The company along with its subsidiaries operates more than 5000 flights regularly. The company employs 80000 employees approximately (Delta Airlines, n.d.). The hub is located in Hartsfield Jackson Atlanta International Airport, which is one of the busiest airport in the world, in terms of passenger traffic as well as the total number of take offs and landings. It is the sixth oldest international airline because of its foundation date. Moreover, it is one of the oldest airways in United States as well. The company is one among the 4 founding members of Sky Team Airline Alliance, the other 3 being Air France, Aeromexico and Korean Air. The company has been declared as the largest airline in the world in 2011and 2012 in terms of the total fleet size and the scheduled passenger traffic (Rediff, 2013). It has also been rewarded for becoming the second largest airline in respect of the total revenue-passenger kilometers carried in the year 2012. The Delta Connection provides regional service to the company. Diagnosis The foundation of the company is based on the reliable and safe air transportation, providing differentiated customer service to the travelers or passengers. Delta Airlines leads in the airline industry for providing the best airline transportation. The company entered into the industry in the year 2013 by further strengthening its business strategies. It is continuing to improve the performance by executing strategic initiatives. While many of the competitors of the company were focusing on the restructuring efforts or the significant integration, Delta Airline undertook the strategy of advancing its market position across the globe. The innovative business strategies of Delta Airlines (including the re-branding technique) have helped the company in strengthening its position in the world. The acquisition of Northwest Airlines proved to be one of the successful business strategies for the company. This strategy helped the company in reshaping the business goals. In past few years, the company has taken various steps in improving its balance sheet, expanding its operations by getting into global partnership, investment in airlines, such as Virgin Atlantic and finally purchasing oil refinery. It increased its flexibility in these two years in order to reduce its flaws and strengthen the market reputation. However, the launch of the company’s song as a low cost airline followed by its ‘codeshare agreement’ with the Northwest Airlines and the Continental Airlines initiated the declining phase of Delta Airways. This incident took place in the year 2003 when the CEO of the company left his position amidst the huge loss and uncertainty (Ireland, Hoskisson & Hitt, 2008).The performance of the company started deteriorating to such extent that in July 2004, the credit ratings had a fall from B to CCC+ (as rated by S&P), because of the increasing financial or debt risk. According to Ireland, Hoskisson & Hitt (2008), S&P reduced its credit ratings by almost four times in the year 2004. The credit analyst of S&P, Phill Baggaley stated that the company is in urgent need to cut the overall labor cost by implementation of other cost reduction and cost control strategies across its business operations. The company decided to continue the cost cutting technique in order to reduce the cost structure. This needed a wide range of change of most of the business processes. The concept of cost cutting resulted in the pay cut of the executives by 1 million, as demanded by Delta Airlines. The unions were also ready for the cost cutting up to an amount of $ 705 million. The company implemented the cost cutting method by reducing the executive payment by almost 10 percent. In a similar manner, the salary of the pilots was reduced by 32.5 percent. In December 2004, it was found that the company had incurred a loss of $ 22.2 billion, where the high fuel cost and the low profit margin were the major reasons responsible. In order to retain the market share, the company changed its pricing strategy to ‘SimpliFare’. This fare structure matched with the low fare airlines. The company tried hard to recover from its position by improving the performances even in growing losses. As two major United States airlines were under the bankruptcy state, the recovery of Delta Airlines from its financially distressed situation was uncertain. The company needs to take effective actions in order to improve the companies’ chance to succeed in the most difficult situation. Plan for transforming the organization There were several flaws in the decision making of Delta Airlines. The company requires making change, which would help in recovering from the present situation. Change acts as one of the most essential characteristics in effective management (Hussey, 2000). Change management is the structured approach towards the modification in the present situation of any organization to a better situation in the future. It is important for every organization to change its strategies with the changes in customer tastes and preferences, technological changes, changes in the legal framework of the country, change in the leadership etc (A. Mills, Dye & J. Mills, 2008). In a similar manner, Delta Airlines needs to implement a change process. At first the reason behind the urgency of change is required to be detected followed by changing the vision strategy to initiate the change process (Taylor, 2009). The next and most important step requires communicating this changed vision strategy in an appropriate manner. It is equally important to remove the obstacles associated with the change process. The company should plan for achieving short term goals in order to gain success in its long term plan. It is to be kept in mind that the change needs to be deepened within the organization, so that it stays permanently. These steps would enable successful implementation of the change process in its long run. Delta Airlines should use Kotter Eight Step Model to implement this change process within the organization. Kotter Eight Step Model This is a model of change management proposed by John Kotter in 1996. This model is identified as one of the most popular models for scheduling, implementing and finally sustaining the change. The eight step model provides an uncomplicated planning for the change process (Beitler, Gupta & Sabri, 2006). It divides the entire change process into eight different parts as shown below: Step 1 – Establishing a sense of necessity/urgency: - This is the first step of the model which includes creation or development of a sense of urgency. This step involves thorough analysis and finding of convincing reasons in the context to the fact that why the organization needs to adapt the change process in its management. The above diagnosis clearly suggests that the organization is in need of a change in order to sustain in the market and hold back its market position. A series of decisions taken by the company proved to be unfavorable and resulted in its financial distressed situation. In order to hold its market share, the company chose a pricing strategy, which could not provide high profit as well. The company is facing immense pressure from all its competitors as well as from the external environment. Thus, they should plan for expansion in order to regain back their position. There should be new differentiated strategies for the business travelers as well as the passengers, who are travelling with family, for increasing the net profit margin. In order to gain public attention, the company requires seeking a deliberate change uniformly (Kinicki, 1999). Step 2 – Creating the directing/guiding coalition: - This step is generally characterized by the formation of a cross functional group of individuals, who would possess the power of leading the change process. The company should engage a group of individuals in planning for innovative pricing and promotional strategies in order to increase its importance as well as differentiate its services from the competitors. For example- The advertisements should display the differentiated service offerings of the company in such manner that it would help in attracting a wide range of customers to choose for Delta Airlines while planning to make journey. Step 3 – Developing a change vision strategy: - This step would include development or creation of a change vision strategy, which would be acting as a guide to the change process. The vision of the company should be gaining the major market share in the airline industry of United States within a time span of two years. As the company is offering low fares, it should go for low price strategy and high customer offerings. Step 4 – Communicating the change vision: - This step includes implementation of an effective communication strategy to communicate the changed vision to all the stakeholders (both internal and external). The communication strategy should not only notify the vision but act as a strategic plan to promote this vision statement widely. In order to communicate the change in the vision to the employees, the company requires creating a buzz in the work environment that the change is actually occurring for the overall betterment. Moreover, in order to notify this change to the customers, the company can plan for showcasing the change through some big platforms like conducting promotional activity during a big sports event or arranging some musical programs. Step 5 – Eliminating obstacles: - This step involves elimination of the barriers to the change process in order to successfully implement the change. The barriers which come from the external environment are unavoidable in some cases and beyond control. It becomes very important to identify the barriers first in order to strategically plan for their elimination. The procedures in which these types of barriers can be identified include focus group interviews, questionnaire, brainstorming sessions, interaction with the key individuals etc. Next sub step includes the elimination of these barriers by reducing their chances of occurrence. This would be done with the help of reminder systems, opinion leaders, feedback programs etc (Nice, n.d). Step 6 – Generating short term wins: - This step includes planning for short term improvements in order to fulfill the long term goal of the company. In other words, the short term objectives and goals can be developed and achieved for providing huge moral boost which in turn motivates to strengthen the strategies towards meeting the long term goals. It is also very important to recognize as well as reward the individuals who put great effort for the betterment of the organization. A performance appraisal would be effective to evaluate the performances of the employees. Rewarding them for their performances would motivate them in putting more effort in meeting the goals of the organization. Step 7 – Consolidating gains and producing more changes: - According to Kotter, most of the organization changes get weakened as the success is generally affirmed at an early stage. But it is important to implement the real change in such manner that it penetrates deep in the organization. Let us take an example- If a new product is launched by implementation of a new system, it is fine. But if a large number of different products of the organization are produced using the same system then it can be commented that the system is working properly as it has deepened in the organization. In the long run process, the organizations keep looking for enhancement. Quick success is only indication of what is to be done for achieving the long term success. The short term improvements should be utilized in an effective manner in order to develop further new changes within the organization. There are strategies required to give boost to these new changes. In this particular step, the organization might opt for various other innovative changes by utilizing the short term improvements. Step 8 – Anchor the changes in the culture: - This is the last step in this model. According to Kotter, in order to incorporate the change management process in the organization and make that change permanent, it is very important to implement that change within the core of the organization (Global Literacy Foundation, n.d.). Thus, the company should focus on the fact that the change is being implemented in every segment by putting immense continuous efforts. The company should showcase the efficacy of the newly implemented change within the organization to the employees. This will help in creating a sense of trust in the mind of all the employees related to the change process (Glasgow, n.d.). Conclusion Delta Airlines has its foundation based on the safety and reliability in the air transportation services, where it provides high quality services to the passengers. The offering of high services at comparatively low fare helped in increasing the demand of Delta Airlines in the market. The company entered into the industry as a stronger airline in the year 2013 by further strengthening its business strategies. The company was performing well by improving its strategic initiatives in effective manner. But the performance started declining with the launch of the company’s song as a low cost airline followed by its ‘codeshare agreement’ with the Northwest Airlines and the Continental Airlines initiated the declining phase of Delta Airways. After this incident, the company suffered big losses and uncertainty. The credit rating came down drastically, indicating high financial risk for the company. However, the implementation of change process within the organization might help the company in recovering from its present state. It has been suggested that the change should be implemented using Kotter’s eight step model. This model would help the company in approaching in a step by step manner towards the change process. The eight individual steps would help in successfully implementing the change process and ensure the fact that the change has been adopted in every segment of the organization. The changed vision strategy needs to be well defined and well communicated to the external as well as the internal stakeholders of the company. While the company makes plan for successful implementation of the change process, at the same time it should also plan for elimination of the barriers to the change process. The change needs to be deepened within the organization in such manner that it remains permanently and helps the company in turning back to its previous state. References Beitler, M. A., Gupta, A. P., & Sabri, E. H. (2006). Purchase order management best practices: Process, technology, and change management. Florida: J. Ross Publishing. Delta Airlines. (no date). Stats & facts. Retrieved from http://news.delta.com/index.php?s=18&cat=47 Federal Aviation Administration. (2013). Airline certificate information - Detail view. Retrieved from http://av-info.faa.gov/detail.asp?DSGN_CODE=DALA&OPER_FAR=121&OPER_NAME=DELTA+AIR+LINES+INC Glasgow. (No Date). Kotter's 8-step change model: Implementing change powerfully and successfully. Retrieved from http://md.glasgow.anglican.org/wp-content/uploads/2011/05/Kotter-on-change.pdf. Global Literacy Foundation. (no date). Kotter's 8-step change model. Retrieved from http://globalliteracy.org/content/kotters-8-step-change-model. Hussey, D. E. (2000). How to manage organizational change. London: Kogan Page Publishers. Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2008). Understanding business strategy: Concepts and cases. Connecticut: Cengage Learning. Kinicki. (1999). Organizational behavior. New Delhi: Tata McGraw-Hill Education. Mills, A. J., Dye, K., & Mills, J. H. (2008). Understanding organizational change. Abingdon: Taylor & Francis. Nice. (no date). How to change practice. Retrieved from http://www.nice.org.uk/media/AF1/73/HowToGuideChangePractice.pdf. Rediff. (2013). The world's 10 largest airlines. Retrieved from http://www.rediff.com/business/slide-show/slide-show-1-the-worlds-largest-airlines/20110915.htm#1 Taylor, R. T. (2009). Leading learning: Change student achievement today. California: Corwin Press. Read More