Management Self-Development - Case Study Example

CEO of continental Airlines – Larry Kellner Introduction. Larry Kellner has been Chairman CEO of Continental Airlines for the past five years, having spent a 14 year career with the airline. Whilst Kellner’s departure to return to private equity at the end of the year was announced in July; the central objective of this paper is to provide a detailed report of Larry Kellner’s career at Continental Airlines as well as a review of his career prior to joining the airline. Furthermore, in reviewing Larry Kellner’s career, this paper shall contextually evaluate Kellner’s career prior to the airline and his development with the airline from joining to becoming CEO in December 2004 with particular reference to management style of the US airline, particularly in a tough market. It is submitted at the outset that Kellner’s management style at Continental Airlines highlights the importance of implementing an efficient interrelationship between creativity at business operational level, employee relations and customer relationship management (CRM). Accordingly, in Section 2 I shall firstly present a summary of Kellner’s career charting his graduation from South Carolina University to an exemplary career in private equity. This will be followed by a discussion of his eventual move to Continental Airlines and role in the continued growth of Continental Airlines and air transportation. In Section 3, I shall evaluate Kellner’s role and management philosophy in running Continental Airlines and how this has benefited the company in tough market conditions including increasing competition, personnel management and burgeoning oil prices. 2. Larry Kellner Career Biography Kellner’s career in private equity and as business strategist has been prolific and the Business Week (2009) Executive Profile highlights the Kellner’s achievements as graduate from South Carolina University and recipient of the distinguished alumni award in 1998 (www.investing.businessweek.com). After graduating in a Bachelor of Science and Business administration degree, Kellner worked for and became Executive Vice President and Chief financial Officer of the Koll Company followed by his appointment as Executive Vice President and Chief financial officer of American Savings Bank FA from November 1992 to May 1995 (www.investing.businessweek.com). Mr Kellner joined Continental Airlines in 1995 and became director in 2001, going onto replace Gordon Bethune as CEO in December 2004. Kellner recently announced his departure from Continental airlines; however his role at Continental has been heralded as being a prime example of successful cohesion of creative business strategy, employee management and CRM as highlighted by Hurd et al (2004). I shall now consider the impact of Kellner’s management style on Continental US in Section 3. 3. Kellner’s Implementation of Creativity, Employee Management & CRM. For example, the work organisation paradigm has historically been structured on the basis of “scientific management” as extrapolated by Hamel and Prahalad (1990). However, the literature review of the work organisation demonstrates that this has changed and in turn demonstrated a shift towards companies adopting an organisational structure intended to unlock creativity and commitment of their employees as a benefit of growth (Pfeffer, 1995). Moreover, leading economist Joseph Schumpeter (1942) incorporated the term “creative destruction” as a central element of the contemporary capitalist business model; describing the process of transformation that accompanies radical innovation. As such, it has been propounded by Reinert & Reinert (2006) that Schumpeter’s “creative destruction” analogy envisaged entrepreneurial vision as the force of sustained, long term economic growth, with the gales analogy symbolic of the destruction of monopolistic markets, which facilitated abuse of market position and power. In propounding such a vision of capitalism, Schumpeter (1942) extrapolated the business model framework for competitive markets, stating “capitalism, then is by nature a form or method of economic change”. Furthermore, Schumpeter (1942) argued that innovation was the key to success and survival in a capitalist state. Schumpeter further argued that failure to adapt would ultimately result in the demise of the business, coining the process “creative destruction”. To this end, Metcalfe (1998) suggests that Schumpeter’s theory suggests that the evolution and sustainability of a successful business model is not dependant on how capitalism administers existing models, but rather with how it destroys them through creativity to survive long term growth. Moreover, the proliferation of different business models, work patterns has meant that the success of the working organisation is inherently dependent on greater participation and employee empowerment, through the concept of the “learning organisation” (Porter, 1996). Interestingly and analogous to the position regarding Drugs Inc, many of these companies are in high pressured industries exposed to international competition, which forces corporations to constantly re-evaluate the working organisation model. Hamal and Prahalad (1994) argue that a central element of this is the shift in how companies compete with each other, with the underlying basis of competition moving towards “soft” factors such as reputation, service and market placement and positioning. This in turn reflects the evolution of the “knowledge-based economy” (Hamal and Prahalad, 1994). It is submitted that this has been a classic tenet of Kellner’s management strategy in incorporating, which has fuelled Continental US’s growth in a customer orientated and competitive marketplace. Indeed, Hurd et al (2004) posit that the central factor in ensuring continued growth and profits is creativity as “Questions answered from detail data lead to new, more detailed questions and will reveal new opportunities. Asking questions is the best way of doing business. Continental has proven it time and again” (p.30). To this end, Hurd et al (2004) refer to Kellner as a “marginal manager” (p.30) and that his strategy epitomises the creativity in innovation approach to business strategy as “when he focuses on costs and revenues, his mantra is margin, making more than he’s spending. Like many companies, employees are one of the key resources at Continental, and more productive employees means better margins” (p.30). Moreover, Hurd et al (2004) highlight the point that Kellner has been instrumental in acknowledging that need to address internal employee management and participation as instrumental to business success. For example, a central element of organisational behaviour is rooted in employee management and employee personality. Employee management involves the balancing of numerous differentiating personal characteristics which make them unique. Understanding these variances in individual traits and personality is vital to effective employee motivation and performance. Various assessment tools and theories-based on human nature provide perspectives in understanding individual performance in the workplace. Furthermore, if we consider the learning organisation model; this is an evolving notion which has become increasingly incorporated into the modern company and multinational philosophy. In its simplest form, Richard Karash (1995) propounds the ideology underlying the learning organisation: “A learning organisation is one which people at all levels, individuals and collectively are continually increasing their capacity to produce results they really care about”. The ideological underlying principle behind the learning organisation is that it produces a flexible workforce with a shared vision, which in turn ensures internal stability within an organisation. Mike Wills (1998) defines the learning organisation as a “group of people who work together”. He further defines it as a “company, corporation, firm, enterprise or institution, or part thereof, whether incorporated or not, public or private, that has its own functions and administration. For organisations with more than one operating unit, a single operating unity may be defined as an organisation”. Pedler, Burgoyne and Boydell (1991) define the learning organisation as “an organisation that facilitates the learning of all its members and continuously transforms itself to achieve superior competitive performance”. Moreover, within the contemporary business framework, personnel management theory highlights the importance of efficient employee relations and collective employee morale in achieving specific goals (Argyris, C 1999). As such, Pedler & Aspinwall (1998) argue that the learning organisation theory is central to this. Accordingly, it is evident that Kellner has arguably implemented the learning organisation model as management practice and Hurd et al (2004) comment that “Kellner believes that employees rarely make mistakes on purpose. But without the relevant data, the thousands of decisions…… In an environment without reliable information, a person is set up to fail” (p.30). Furthermore, Hurd et al (2004) highlight the point that previously at Continental there was one daily performance report with no financial data and historical data was inaccessible. However, Kellner wanted to pool relevant company information and make it accessible to customers and employees alike to increase loyalty and thereby maintain stability in growth. To this end, Hurd et al (2004) highlight the point that “actionable information is a double bonus and, in Kellner’s experience, employees flourish when they are given the opportunity. It’s a win-win situation. Empowered employees mean employees are motivated. Continental earns accolades for every aspect of its operations and in 2003 the company ranked on the Fortune 100 Best companies to work for list” (p.31). Furthermore, Kellner’s purpose in implementing a learning organisation model was part of his vision to continuously improve the airline and Hurd et al (2004) comment that “every day Kellner has his eye on thousands of seemingly small things, asking how Continental might improve. Leadership sets the pace” (p.31). Additionally, in empowering employees, Garvin (2000) suggests that it is imperative for individuals at all levels within the organisation’s hierarchy to have problem solving capabilities, thereby highlighting the interdependency of employee performance on optimum organisational performance. Pedler (1998) further argues that an individual must firstly improve self development, which can then be distinguished between actual and desired situations in problem solving scenarios. As part of the learning organisation, team co-ordination is vital and careful consideration must be given to the selection of team members. As such Tompkins (2002) submits that commitment to success, complementary personalities, skills and necessary talents are vital to accomplish organisational goals (p. 28). As such, the effective co-ordination between employee personality and performance is vital to optimum team performance as highlighted by Kellner’s implementation as regards Continental with Gloor and Cooper (2007) highlighting the point that Kellner “doesn’t just listen, but he also takes action” (p.7). Indeed, this has been Kellner’s view of employee management directly correlates to his understanding of the need to implement effective CRM systems as part of business strategy in the airline industry. Indeed, Yu (2004) asserts that the airline industry has long understood the value and impact of operations research, and we’re proud to be leading the way……. Larry Kellner and Gordon Bethune understand the value of technology at the airline, and they have been great supporters of our efforts” (p.15). CRM has distinctly altered the way that companies view strategy, with a distinct shift from product focused strategy to customer relationship management, which Ryals & Knox (2001) posit is “underpinned by information systems convergence and the development of supporting software, which in turn promises to significantly improve the implementation of Relationship Marketing principles”. CRM essentially stems from relationship marketing and early works of Berry (1983) and Reichheld (1996), which indicated that a 5% growth in customer retention rates culminated in a mean customer lifetime value figure ranging between 35% to 95%, with knock on effects on profit margins. There are many definitions of CRM but in broad terms, CRM is defined by Christopher et al (1991) as an all embracing approach which integrates sales, customer service, marketing, field support and other functions that touch customers. Moreover, Galbreath (1998) posits that effective with effective CRM activities “an enterprise performs to identify, select, acquire, develop, and retain increasingly loyal and profitable customers”(p.14). Furthermore, in the contemporary marketplace, it is submitted that CRM is correlated to the theoretical rationale for the benefits of adopting blue ocean strategy and arguably underpins the justification for blue ocean strategy in corporate planning; which supports the argument for the potential benefit of CRM in organisations in the retail industry in particular. Accordingly, it is further extrapolated at the outset that the contemporary marketplace, particularly in context of the evolution of the internet business model has forced businesses to rethink corporate marketing strategy and this is further highlighted by the proliferation of the multi-channel retailing paradigm as required retailers to “innovate” in order to maintain position in the marketplace (Levy & Weitz, 2008). Therefore, the contextual backdrop of the contemporary marketplace arguably highlights the benefit of organisations using CRM in business growth strategy. Moreover, Kellner has clearly acknowledged this in his management strategy at Continental and Denove and Power (2007) highlight the point that in the airline industry, “one of the worst –yet most frequent mistakes airlines make is keeping customers in the dark regarding delays” (p.107). In further underlining Kellner’s implementation of effective CRM, Denove and Power (2007) further comment that “Larry Kellner, the current CEO of Continental, and Bethune’s handpicked successor says, “what makes customers angry is when they are told not to leave the gate area because the flight is likely to board in ten minutes. The same announcement is made eighteen times over a three-hour period and people are now hungry, tired, and frustrated. We focus hard on avoiding that” (p.107). In highlighting the value of the customer, Kellner has asserted (in Denove and Power, 2007) that that customers want to be informed honestly and that “statistics show that if you tell the patient in great detail about the procedure beforehand – they call it good beside manner – the patient will be much more relaxed about the whole thing than if they have no idea what’s coming next,” (p.107). As such, Kellner’s implementation of effective CRM has been ruled by the need to work with the customers and deliver their expectations: “When something doesn’t quite work out, out, you tell them why it doesn’t work out. When you don’t know, you tell them you don’t know” (In Denove and Power, 2007, p.108). However, Kellner has taken matters further and directly engaged with customers himself; a prime example being his participation an online forum for frequent flyers to improve services and a meeting with the group. Yu (2004) comments that “Getting their most loyal customers together –at customer expense – was a tremendous opportunity for the Continental executives to understand the needs of their passengers” (p.6). Accordingly, the above analysis highlights that during his period as CEO for Continental US, Kellner’s approach as a marginal manager has resulted in the implementation of a learning organisation model, thereby increasing employee performance. 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