Continental Airlines: Business Turnaround Legend

Updated on June 2, 2017
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John writes about topics related to business, organizational behavior and consumer science. He holds a PhD in Psychology and a MBA.

Continental Airlines Aircraft
Continental Airlines Aircraft

Continental Airlines

The ability to inspire and motivate others to reach important key goals is vital to organizational success. Business theorists Kouzes & Posner suggest that to enlist people in a vision, leaders must know their constituents and speak their language.

This article will examine the organizational impact of inspiring and motivating others in the context of the five practices of exemplary leadership as offered by James Kouzes and Barry Posner’s book, The Leadership Challenge.

Gordon Bethune, the former chairman and chief executive officer of Continental Airlines (Continental) from 1994-2004 is presented as an example. A brief history of Continental is provided for background purposes.

An exploration of how Bethune inspired employees is presented with specific focus on how he changed the atmosphere from negative to positive, how he touched hearts and minds, how he demonstrated empathy and how he impacted the organization’s culture.

Continental and United Aircraft at Gates
Continental and United Aircraft at Gates | Source

Brief History of Continental Airlines

Continental Airlines was a major U.S. Airline in the United States that operated domestic and international passenger flight service. Founded in 1934, the company was headquartered in Houston, Texas. In 2010, Continental merged with United Airlines, creating one of the largest airlines in the world.

This merger however may very well not have happened had it not been for the steady leadership of the company’s former chief executive officer, Gordon Bethune, who took the company from near financial collapse in 1994 and help to transform the organization into a profitable, powerful and admired global airline.

It is important to note that the decade proceeding Bethune’s leadership, Continental was essentially managed and run by Frank Lorenzo; an individual who many believe caused great harm to the carrier. Lorenzo and was largely hated by most all employee groups, particularly the pilots.

Losing Money
Losing Money

An Airline About to Close

In the early 1990’s, Continental Airlines was a failing organization. It has filed for bankruptcy twice in its past, once in 1983 and then again in 1990. Employees were angry, unmotivated and highly distrustful of company management. During the previous decade, workers had seen their pay slashed, benefits taken away and jobs cuts.

The previous chief executive, Frank Lorenzo (former head of Eastern Airlines), was so hated by employees that he had personal body guards around him at all.

After Lorenzo exited the airline, the company board of directors began a search for a new chief executive, hoping to salvage a company that was quickly losing altitude. After an exhaustive search, the board of directors named Bethune Continental’s new chief executive in 1994.

At the time of he took the reins of the company, the airline had only enough money to stay in operations for a few months and its stock was nearly worthless. In short, Continental at that moment in time was unprofitable and quickly dying. Moving swiftly to rescue the company, Bethune enacted a series of changes at Continental that breathed new life into the organization, which had the immediate impact of increasing employee morale and strengthening the company’s liquidity.

Gordon Bethune
Gordon Bethune | Source
Continental HQ
Continental HQ | Source

Inspiriting Employees

One of the first things that Bethune recognized needed change at Continental was employee morale. This would be no easy task as many workers at the airline felt completely detached from the organization, which was due in large part to the previous management team.

Lorenzo, the former chief executive, was cut off from employees and did not communicate. The executive offices had guards posted at the doors with emergency “buzzers” that could be activated when disgruntled employees came to air concerns.

Bethune immediately created change by establishing an open door policy and encouraging employees to visit the corporate offices and talk about concerns with management.

Additionally, Bethune held weekly “Town Meetings” at different cities throughout the company’s global network and established an employee information hotline to recap highlights of each meeting. These important steps helped Bethune to gain the trust of employees and by extension, care about their work.

Go Forward Plan

  • Create smart route structures people want to fly
  • Invest in the airline for the future (aka new planes)
  • Make travel reliable so that customers trust company
  • Treat one another with respect

Changing the Work Atmosphere from Negative to Positive

As stated previously, employee morale at Continental prior to Bethune’s leadership was dismal with a work atmosphere that could be characterized as negative. Transforming the atmosphere to something positive and productive initially proved difficult however, over the course of time, employees began to trust Bethune and his management team.

A significant factor in this transformation had a lot to do with a corporate plan Bethune enacted called the Go Forward Plan (GFP). The program itself was concerned with several key elements. These key elements included:

  1. Fly to win.
  2. Fund the future.
  3. Make reliability a reality.
  4. Treat one another with respect.

Each point in the GFP contained very basic information that workers intrinsically understood. In addition, GFP contained incentives for reaching important milestones, such as having near perfect on time performance.

Within one year of enactment of the GFP, Continental began making a substantial turn around and realized huge gains in revenues and customer satisfaction GFP, under Bethune’s leadership, also saw a massive shift in employee attitudes about the company, changing it from a negative working atmosphere to something very positive. For the first time in many years, employees were proud to work at Continental and cared about the product they produced.

Touching Hearts and Minds

Bethune’s leadership at Continental was transformative in nature. One of the major ways in which he was able to turn the company around, going from what he described as “Worst to First” was to establish personal relationships with employees. He did this by doing the following:

  1. Personally reaching out to employees and calling them at home to congratulate them on a job well done.
  2. Publicly celebrating important company victories, such as surpassing an on-time performance goal.
  3. Doing the work of frontline employees when possible, meaning working at the ticket counter, working on the ramp and flying the plane. Bethune was a certified Boeing 757 pilot.

As stated previously, it was no easy task to gain the trust of employees however, through a deliberate and focused effort on the part of Bethune and his management team, Continental realized major change towards the positive, which was in large part due to Bethune’s ability to touch hearts and minds.

Continental 757
Continental 757 | Source

Demonstrating Empathy

As organizational leader of Continental, Bethune took over a company in 2004 where employees felt management did not care about personal lives. The previous chief executive, Frank Lorenzo, in large part helped to create this perception. Under Bethune’s leadership, employees of Continental experienced a sea change in this area. Bethune demonstrated empathy for employees in the following ways:

  1. Actively listening to worker concerns.
  2. Restoring some pay and benefits.
  3. Personally reaching out to employees by telephone during personally difficult times.

As with other areas of change at Continental, the process of change was challenging and slow. In time however, workers understood they had an organizational leader who truly cared about the work being conducted and their personal lives.

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Positive Impact on Organizational Culture

Gordon Bethune’s positive impact on the organizational culture at Continental Airlines cannot be understated. The previous chief executive at the airline had created a climate of fear, uncertainty and doubt with a high degree of acrimony. Employee groups routinely went to battle with one another and created what Bethune described as “caustic environment”

Through Bethune’s GFP, he and his leadership team led by example and empowered a massive change in the organization’s culture, moving a company from a culture of apathy and acrimony to one of prideful work and harmony. This is not to state that everything was perfect when Bethune led Continental however, the positive impact he had on the company’s culture was evident according to most metrics used at the time to measure employee satisfaction.

Conclusion

The process of leadership is multi-factorial and can have different meanings to different people. Because one is in a position of authority does not mean they are necessarily a leader.

In the case of Continental Airlines, this was indeed the case when comparing the management styles of Frank Lorenzo vs. Gordon Bethune. Where Lorenzo was seen as a person of authority, he was not considered to be a leader by most all employees. Bethune on the other hand was seen as an authority figure and leader by workers. He helped to transform a failing airline into a profitable, reliable and powerful airline. Bethune, by most all measurements of success, demonstrated exemplary leadership at Continental.

Questions & Answers

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      • profile image

        Gary Sachs 

        2 years ago

        UAL

        What a waste, for Continental to have to endure.

      • profile image

        JP 

        2 years ago

        Nice article. Gordon is an amazing keader, and I am privileged to have worked with him. One correction in your timeline: When Lorenzo left in 1990, Hollis Harris, the President of Delta, took over as CEO. He was well liked by employees, but the board fired him because he was against layoffs during a financially difficult time. Bob Ferguson took over, and led the airline through the disastrous Cal Lite experiment. Boeing was a large stakeholder in the airline and wasn't happy with its performance, so they insisted that Bethune, a Boeing exec, be inserted as President. Ferguson was fired shortly thereafter, and Gordon was promoted to Chairman and CEO.

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