Throughout this article, we will refer to the action taken by Continental Airlines in the incredible turnaround they staged in 1994/1995. In twelve short months, following a five-point turnaround plan, Continental went from net losses of $613 million to a net profit of $224 million. Not a bad effort for a year’s work.
Importantly, you don’t need a pilot’s license (pardon the pun) to apply these simple and proven strategies to any of the businesses you work for or own. The five strategies we will explore in this six part article are:
1. Develop a recovery plan and monitor your progress 2. Charge the right team with the job 3. Think “money-in” not “money-out” 4. Ask the right customers the right questions 5. Listen to those who know best how to do what you do better
The Continental Story:
In 1993 Continental Airlines were considered the worst commercial airline in the United States of America. They had just been rescued from their second bankruptcy in nine years, they had a nation-wide reputation for terrible service, they ranked tenth out of the ten largest US airlines in all key customer service areas as measured by the Department of Transportation and the company hadn’t posted a profit outside of bankruptcy since 1978.
In short, new CEO Gordon Bethune and Greg Brenneman (then a consultant for Bain & Company, later to become Continental’s COO and President) had their work cut out for them in turning the company around and saving it from a third (and almost certainly final) bankruptcy. In the year they began working together, the company posted its largest loss to date…$613 million.
So how did they approach the monumental task?
One word. Fast!
In Greg Brenneman’s words, “There’s not much time to think when your company’s failing, and that’s a very good thing.”
When time is tight and money is tighter, business owners don’t have the luxury of sitting around in long-winded strategy and planning exercises. They must think and act fast, and not look back.
There are no rear-view mirrors on airplanes because the runway behind is irrelevant. Likewise, Brenneman and Bethune saw no value in looking back and dwelling on what had caused the company to fail several times over. They focused instead on what they could do to make the business a success going forward. In keeping with this mindset, the business turnaround plan they introduced was called the “Go Forward” plan.
Culture’s role in turning around a business
Before we get into the 5 Key Strategies, – it’s important to note that both Brenneman and Bethune are quick to acknowledge they could not have achieved their semi-miraculous feat without the buy-in and enthusiastic support of their team. And by team, they refer to some 40,000 Continental employees at the time.
This in itself was incredible. The corporate culture at Continental at the time was so poor; employees routinely tore the company logos off their uniforms so they would not be recognized outside of the workplace as an employee of Continental Airlines.
Corporate culture and a trusting environment are areas of critical importance to any business success and one that is too often overlooked in favor of cost cutting and pure revenue focus. Getting the people factor right is a principle that we subscribe to passionately. We’ll focus on how best to do that in Strategy #5 – Listen To Those Who Know Best How To Do What You Do Best.
Strategy 1 – Develop a Recovery Plan and Monitor Your Progress:
Strategic direction is always important, and never more so than during a crisis or in a turnaround situation.
In times of crisis, you need to be prepared for a short supply of both time and resources and an abundance of stress and fear. These factors combined can result in managers making poor decisions.
Leaders must: 1. Find the most leveraged plan of action 2. Communicate it to everybody who will be involved in the turnaround 3. Stick with it 4. Monitor the company’s performance against it continually, using a few key business metrics
Too often, team members and managers are powerless to help implement a business strategy because they are clueless as to what the strategy is, or the strategy changes so frequently it’s impossible for team members and managers to follow a clear action plan.
Kellp this in mind when dealing with crisis. Fast action is better than slow. Slow action is better than wrong action. Proctive is better than reactive.
When Brenneman and Bethune took over at Continental Airlines, they were hard pressed to find a single employee who could articulate the company’s strategy. There had been so many over the past ten years, they’d stopped keeping track.
Key points: 1. Ensure that the strategy developed can be implemented in the time frame available, and that it is clearly communicated and understood by all involved. 2. Do not veer from the strategy unless it becomes apparent (through measurement) that it is not working. 3. Discover the key business metrics and measure them with monotonous regularity.
Next week: Stategy #2 – Charge the Right Team with the Job
Printed with premission from Pincipa, edited by Vicki M James