Business Practices Essay

This essay has a total of 2548 words and 12 pages.

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 carpets in the airport terminals were replaced. The old
Continental logo was redesigned as well. The renovation was completed in six months.
Continental received high marks from customers and employees. In fact, many of them could
perceive Continental was changing visibly. To assure on-time arrivals, flight schedules
were rewritten by the Department of Transportation according to what pilots and airport
operators advised. Continental also offered employees a reward: For every month, each
employee would receive $65, if the company finished in the top five out of ten airlines in
"on-time performances" as measured by DOT. With in months, most flights were on time and
regularly finishing in the first place. The food policy was adjusted to reflect the time
of the day, length of flights, and class of service. For instance, the breakfast is now
served on 7:00 A.M. Nowadays, the first-class meals consist of items like fresh pasta,
soups, sandwiches, and freshly baked cinnamon rolls. In 1995, Continental made a profit of
$224 million, and in1996 it more than doubled that.


Finally, Continental had to regain the faith the employees had lost in the company. The
company needed to establish new culture, where employees are liberated and can perform
effectively. Establishing communication with employees was the most significant element in
the new Continental culture. It began with replacing 50 of the 61 officers with 20 new
individuals, who were people-oriented and team players. Thus, officers are now more
accessible to employees. There are bulletin boards throughout the system to inform the
employees of daily news. Newspapers and magazines are published to inform what is
happening in the company. Officers of Continental hold an open house every month for
employees to get answers to the questions they have. A 24-hour hotline was put in place to
handle employees' suggestions and to improve employee involvement. Continental set up
incentive plans for employees, for example, employees can earn up to 15% of Continental's
profit. The sales forces receive payments linked to the gains in revenue from business
travelers. Reservation agents receive bonuses based on responsiveness and the number of
completed calls. As a result, the proportion of customer reservation calls answered within
20 seconds jumped from 20 percent to more than 90 percent, the best in the industry. In
1999, Continental was named one of the Best Companies to Work for in America by Fortune
magazine.


Through hard work and open-minded policies Continental has pulled back from their
nosedive. Continental's new focus on employee and customer satisfaction has resulted
record profits and shareholder satisfaction. The basic principles of marketing mix
(Product, Price, Promotion, and Place) were applied with great success. Continental
illustrates the point that the "5th P", or People, is truly the most important.


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.

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