A Micro Look at Leadership Development
by Freda Turner, Ph.D.

Are leaders made or born? This has been discussed by management scholars for years. As an educator, I can tell you leaders are not born as great leaders, great managers, or great CEOs. In fact, each is born a baby.

Take Jack Welch who retired as CEO of General Electric. He was born in Salem, Massachusetts. Jack was the son of a railroad conductor. As a child, Jack stuttered and was the shortest kid in his class picture. Another organizational turnaround leader, Gordon Bethune, CEO of Continental Airlines, the 5th largest airline in the nation, was also born as a baby to a crop duster. Both of these turn-around leaders share similar childhood stories reporting their families taught them ethical values, the importance of hard work, learning new skills in various jobs and caring for other individuals. Both CEOs report learning negotiation skills in their childhood and attribute a great deal of their early focus and success to mentors, frequent job changes and continued education.

Taking a micro look at Gordon Bethune’s leadership tactics, there are several lessons one can learn on developing one’s own leadership style and that of others:

1. Measure what really matters to reach organizational goals

Cutting costs may actually cost an organization money. For example, cutting costs by putting less cheese on a pizza can make the product so unpalatable that no one will purchase it. Upon assuming CEO responsibility at Continental, Gordon Bethune found that prior leadership had several cost cutting strategies. They had filed Chapter 11 bankruptcy protection twice in the last 10 years before Gordon took over and the management team honestly thought continued cutting costs would save them from a third bankruptcy. They had implemented the following cost cutting strategies in hopes of regaining market share.

  • They discontinued paying travel agents booking bonuses;
  • They had not given employees a pay raise in some time;
  • They discontinued giving frequent flier mile bonuses.

When Gordon took over as CEO, Continental only had enough cash to operate another six months. They were heading toward bankruptcy fast. He notified travel agents that he would start paying them a bonus to book passengers on Continental and reestablished the frequent flier program to attract business travelers. Customers started returning. He communicated to employees that if the DOT (Department of Transportation) raised Continental airlines ratings he would give every employee in the organization a $65 month bonus. Previously only pilots got a bonus. He wanted to convey that running the airline was a team effort and it took baggage handlers, telephone operators, and gate staff alike to improve their customer ratings. He provided bonuses to all team members including secretaries.

DOT measures airlines in on-time percentage of planes that land within 15 minutes of scheduled arrival, number of mishandled-baggage/ customer complaints, number of passengers who are denied boarding, etc. In 1995 – one year after taking over as CEO, customers & profitability started returning. Employee turnover, sick leave and employee injuries went down. In 1996, Continental was selected for a customer satisfaction award.

Leadership lesson: measure what matters to reach organizational goals and cutting costs/benefits is not always the answer.

2. Organizational Culture is about dignity and respect

To increase employee morale, Gordon started holding meetings with all employees in his office, where employees had been forbidden to enter previously. He wedged his door open and everyone went to casual dress to decrease management/employee barriers. Gordon sat with employees and not at the head of a table during meetings; provided an employee hot line so employees could contact him with suggestions/ideas on how to improve organizational performance. He personally returned calls and employees started to realize that the management team was really listening to their suggestions/providing feedback. He painted the airplanes boldly so that employees would be proud of their company. He wanted Continental employees and passengers to know their airline as the “Proud Bird with the Golden Tail.” He also left employees a weekly voice mail message. Once when he forgot to leave it, numerous employees contacted him concerned that he was ill. He used sports as an example to get his managers on his “team-focused” strategy. “A football team can’t be successful if it doesn’t work together,” he said.

Lesson learned: It’s all about collective behavior - running an organization must be viewed as a team sport full of communication.

3. Open book management

With only capital to operate for 6 months, Continental conducted an open book management technique. Gordon called together suppliers, lease holders, employees, and finance lenders. He opened the books. He shared that Continental only had enough capital to operate for a few more months and in order to create a win/win for all; he needed to collaborate with each attendee to renegotiate loan rates, lease agreements, and work out new supplier agreements. In short, no profits, no future.

Leadership Lesson: Open book management works with business partners and employees.

4. Know all parts of the business

He likens this approach to being a coach who must know the sport, the calls the referees will make, and understand why. Gordon had worked in the mechanical department early in his career, and obtained his flight certificates and management expertise as he rotated from function to function. This allowed him to communicate with employees within the various departments.

Lesson learned: job rotations/additional credentials widen a developing manager/leader's perspective.

5. Contingency theory/environmental factors.

Contingency theory states that business is dependent on many factors – often-external environmental factors - bad weather, storms, union strikes - factors that shut down flights. Often boards of directors forget these daily occurrences. Once Continental had been hit by a severe ice storm that destroyed eight engines. Sadly, this occurred before Thanksgiving, one of the busiest times in aviation. Collaborating with outside vendors, the Continental team got the engines repaired and never missed a flight.

Lesson learned: develop external business partnerships.

6. Systems theory

Organizations cannot be run piece-meal. Every department must know how their work impacts other departments. A business cannot just address one or two problems for the system to work at full throttle. One example involves the safety department and repair department.

Lesson learned: All departments must work together to achieve one organizational mission/goal – not just departmental goals.

7. Eliminate processes and programs that do not make money.

Increasing market share had been a previous Continental strategy. Upon examining this strategy of owning the biggest market share, the management team found that 18% of the routes were cash negative. The team elected to change course and eliminate non-profitable routes. GE’s Jack Welch implemented the strategy that each business within GE must be either number 1 or 2 within the industry or he would close it down. He later modified that strategy to be 10% of the market. This strategy change resulted in billions in revenues.

Leadership lesson: Review strategies to ensure they make sense.

8. Hire the best “team focused” talent with a good product and ensure all team members want to win

An individual having brain surgery would obviously select a top surgeon and organizations must have the best talent to function at their best. Continental hired a financial professional who created a new financial system that tracked expenses/revenue by the day instead of quarterly reports. This led to better fleet planning/maintenance activities. Knowing their financial health by the day instead of by the quarter put the management team in a proactive position to make immediate changes.

Lesson: Organizations need the best talent for the competitive edge. No one person knows everything but collectively, talent provides a winning edge.

9. Business is people

Create, develop and maintain good employee relationships and grow talent.

Leadership lesson: like a pizza, no one part is more important than another – it takes all ingredients that are of high quality for the best outcome.

10. Complacency kills

Organizations must continually reinvent their services, needs, and look at their customers for changes. Had the railroad industry had a strategy to remain in the lead in the transportation industry, today they might have a bigger market share. Organizations lose the competitive advantage by ignoring change, employees, cash flow, services, products, and partners.

Lesson: Organizational success can not be on autopilot. Implement employee suggestion programs and measure what matters to reach the goals of the organization.


Freda Turner, Ph.D. is a researcher of best business practices and is affiliated with the University of Phoenix Doctoral and Graduate Studies Programs. She may be reached at fturner@email.uophx.edu.

Articles by Freda Turner | More like this in Executive Performance, Personal Development and The HR Refresher in The CEO Refresher Archives

   


Copyright 2002 by Freda Turner. All rights reserved.

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