Managment Tips From One Company That Almost Crashed

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SAN FRANCISCO-What can an airline executive teach credit union leaders? Plenty, it seems.

Gordon Bethune former CEO of Continental Airlines, said when he first arrived at the airline in February 1994 it was ranked 10th in customer service-out of 10 major carriers. Things were even worse than they had seemed from his vantage point at his previous position as an executive with Boeing.

"When I worked at Boeing, Continental wooed me, and I told them right after I had my frontal lobotomy I would be there," he recalled. "You can never really tell about a company until you get there, but what I discovered was it was a really bad place to work."

For starters, Bethune told the audience at NAFCU's Annual Conference here, the airline had already twice filed for bankruptcy. Morale was perilously low because people were "played off against each other" and forced to compete for scarce resources.

Bethune put together a four-part business plan designed to help turn the company around. He said it was titled "Go Forward" as a not-so-subtle hint at where the focus for management and employees should be.

"Do you know why there are no rearview mirrors in jet airplanes? Because at 500 mph who gives a crap what's behind," he said to a roar of laughter.

According to Bethune, credit unions can draw two lessons from his efforts to jump start a moribund company. First, he needed people to quit worrying about what had happened and look to the future, which he said is similar to today's financial services climate in the wake of a recession. Second, he saw that Continental in the mid-1990s was not playing to its strengths, which he asserted is a key for any business that wants to succeed.

'Stop Doing Things That Lose Money'

What Bethune and the rest of Continental's management did was, simply put, "stop doing things that lose money." It cut out unprofitable routes and discontinued its wildly unpopular no-frills product, and leveraged its hubs in the New York City area (Newark Airport) and Houston to reach popular destinations.

Next, Bethune ordered an examination of the flight schedule, which only operated on "average" flight times and did not account for variations based on the seasons, days of the week and holidays. Between refunds, bunking its passengers in hotels and buying them tickets on competitor airlines, Continental was spending $6 million per month as a result of being chronically late.

The solution: Bethune offered to share half of that money, $3 million, with every single employee if the carrier could get into the top five in on-time ratings. As part of an overall culture change, he began recording a daily voicemail from the CEO that employees could listen to from anywhere in the world that told them the on-time rating, the stock price and any other noteworthy news from the company or the industry.

"Successful companies have people who want to come to work," he said. "People are the ones who make a difference. Working together works for Continental. Everyone is now in the same boat, and it has changed the dynamic of the company. When employees are ambivalent, things get in their way of being on time. But when they have an investment, they make sure the plane gets there on time."

The key word, Bethune noted, is incentive. He noted sometimes a horse speeds up when the jockey hits it with a whip, but sometimes it runs even faster when the jockey stops whacking it.

After getting through a rough patch in February 1995 with a little help from his former employer, Boeing, Bethune said Continental has earned money every month since after years of burning cash. In the highly competitive airline business, it has continued to thrive.

"Any company needs more than a marketing strategy and a business strategy. Nothing can be 10th place out of 10 and survive. Even in the pizza business, sooner or later it has to make a good pizza. What you measure and reward is what you get-we measured and rewarded being on time. Know what your product is, know what your product is going to look like in your market, and value your people."

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