SAS An organisational Design Context Essay

This essay has a total of 1725 words and 9 pages.

SAS An organisational Design Context




ORGANISATION DESIGN

CASE STUDY: Scandinavian Airlines System (SAS), page 921 "The Strategy Process", Mintzberg et al.

"Evaluate How Successful Jan Carlzon's Cultural Change Was in SAS?"

I feel it beneficial in terms of my understanding of the case to provide a brief précis
and highlight any areas that I will expand on at a later stage in the analysis. The above
mentioned man joined the company in 1989 as President and CEO and quickly initiated a
series of major changes within SAS and its subsidiaries.


Despite success until the '80's a continuation of this was reliant upon a strategy of
change, as increasing competition within the airline industry made it progressively
difficult to survive in. SAS was experiencing problems that were to some extent unique to
them concerning the location and the country's small population and high personnel costs
resulting in high operating costs. After 17 years of profits SAS declared losses in
1979/80 and 1980/81.


They had been losing market share due to its fleet mix and route network not meeting the
market needs. Combine this with the declining reputation for service and punctuality and
SAS had a massive problem. Carlzon felt that the company had lost sight of what their
customers wanted, as he put it, "they had become a product driven airline instead of being
a service driven airline" (p.924). He recognised that a new strategy was required to turn
things around.


The market that SAS was operating in was different to the one Carlzon experienced at
Linjeflyg and so he was unsure as to whether increased flight frequency and cutting fares
would work to great effect. The most stable market niche within the airline industry is
the full fare paying business traveller but due to the recession businesses were cutting
back on 'First Class' travel. Carlzon however decided to pursue the full fare paying
passenger after a bigger slice of the "pie", but this was not without its problems with
bankruptcy imminent and alienation of tourist passengers being of major concern, should
his plan not work.


Carlzon's Strategy.

SAS dropped 'First Class' and replaced it with 'Euro Class' which was cheaper than
competitors and gave customers more amenities and entitled them to separate check-in,
roomier seats and a better standard of 'plain' food for example. An aggressive advertising
campaign, improved flight scheduling and punctuality accompanied this, the idea being to
differentiate the business class passenger from the 'cattle class'.


"If the business traveller benefited from a particular service or function, it was
maintained or enhanced, otherwise it was cutback, or dropped altogether" (p.925). Expenses
were to be seen as resources with the cutting back of expenses that didn't contribute to
revenue.



Cultural Revolution.

Having talked of the strategy, this could not have been achieved without major
restructuring of SAS. They had previously been preoccupied with returns on investment,
centralisation and technology with no customer orientation in what was becoming a service
driven industry. Employees had a very poor view of customers and as one senior manager put
it, "Taking control of a situation and bypassing regulations in order to please a customer
were not the things to do in SAS" (p.926). To subsume a whole range of changes introduced
by Carlzon I think it is sufficient to say that he turned a company of bureaucrats into a
company of businessmen with an emphasis on the customer.


The traditional method of focusing on instructions has now been replaced with an emphasis
on information, with the result being that a front line employee had the power to make the
decisions to please the customer. This is a prime example of empowerment where the people
who perform the task make the decisions about the task and decisions are pushed down the
hierarchy.


The above paragraphs provide a summary of the changes without going into too much detail
of all the changes he instigated. He basically wanted employees to "throw out the manuals
and use your head instead!" (p.927). He saw this as a way of releasing " untapped reserves
of labour resourcefulness by facilitating employee responsibility, commitment and
involvement."


The Problems Carlzon Encountered

There were various problems he had to overcome whilst trying to initiate these changes,
the first being the confusion and frustration of middle managers that were being bypassed
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