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Business Practices

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Business Practices

Companies must have satisfied employees to satisfy customers. Continental Airlines is a perfect example of how a company can succeed by putting the emphasis on the employees and customers. Continental demonstrates remarkable turnaround from a disastrous performance.

In the early 1980's, the management of Continental believed that the only way to save the company was to lower airfares, and to reduce all possible expenses. In doing so, it demolished the product and their quality of service. For instance, in the early 1990s, pilots could earn bonuses if the fuel burn rate on their airplane fell below a specific amount. The program motivated pilots to fly slowly, which often resulted in missed arrival times. Because of the delays, it was sometimes necessary to divert customers to the competition. Another example of this horrible "low-cost" approach was the CALite program. Continental replaced all first-class seats in some airplanes with coach seats to lower the cost-per-seat. This failed when airplanes were swapped during adverse weather conditions; the business class seats were not available to the passengers that had paid for them. Moreover, CALite eliminated all food on flights, all travel agent commissions, and all corporate discounts. This infuriated many of their very important customers. After 15 years of this "low-cost" approach, Continental had succeeded in creating services that nobody wanted.

Continental's organizational culture was terrible. Many of the employees felt ashamed to work for Continental. Some employees were so ashamed, that they removed the logo from their shirts. To make matters worse, Continental had put in place a horrible communication structure: Nothing was told to the employees unless it was absolutely necessary. Most employees found out about company activities, plans, and performance through the public press. They did not have ways to share their ideas nor ask questions. For example, if an employee came up with an idea for improving service for the first-class passengers, there was a useless form to fill out. The information was hardly ever collected, and was never used as a source of possible improvements for the company. Furthermore, there were so many rules to follow that employees could not possibly do what was the best for customers.

The Department of Transportation ranked Continental tenth out of the ten largest U.S. airlines in all key customer service. Especially abysmal scores for on-time arrivals, baggage handling, customer complaints, and voluntary denied boarding. Continental had been through two bankruptcies and ten presidents over ten years. It also had not posted any profit since 1978.

The "Go Forward" plan was implemented under Gordon Bethune, Continental's chairman and CEO, and Greg Brenneman, president and COO. This plan had four components: (1) "Fly To Win" as a marketing plan, (2) "Fund The Future" as a financial plan, (3) "Make Reliability A Reality" as a product plan, and (4) "Working Together" as a people plan. In "Fly To Win", the plan was designed to build up Houston, Newark and Cleveland markets by drawing more business fliers than leisure fliers. The "Fund The Future" was designed to restrict the balance sheet to gain liquidity and to sell on strategic assets. The "Make Reliability A Reality" showed business travelers that Continental is reliable and regained trust and confidence of customers. Finally, with "Working Together," the purpose was to change Continental's organizational culture to an environment in which people enjoy working together for the company.

With Go Forward plan, Continental begged forgiveness from the customers they had previously treated poorly. The "forgiveness campaign" had two parts. First, they collected angry letters from customers and then divided them amongst the officers-executives through the rank of vice president. Furthermore, Continental assigned one officer to each city in their system. Then they started making phone calls. The goal was not only to apologize, but also to explain their plans to fix the company. Each phone call took easily an hour, since the customer was invariably frustrated and wanted to let them know just how badly. Customers usually appreciated the time and effort.

To improve the level of customer satisfaction, Continental concentrated on what frequent business users had to say. These customers regularly paid full fare and traveled often. Their demands were simple: airplanes and terminals that are safe, comfortable, and attractive. Other concerns were on-time flights reliable baggage handling, and good food at mealtimes. With the exception of safety, Continental had failed on all of these accounts miserably. The first thing they did was painting the exteriors of every airplane to match the interior. All the

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