Alaska Airlines: Navigating Change gives us the backend perspective of how leadership turned a struggling airline company back to the epitome of their industry. Shedding light on a multitude of flawed operational processes and instability throughout their organization hindering them from reaching their full potential. Some of the biggest problems contributing to the disappointing performance of the company included the engrained “just good enough” culture which led to untimely flights and employees excusing themselves for underperformance by “blaming the system” (Bruce, Patterson & Baker, 2015). The financial situation for Alaska Airlines proved very bleak as well, especially struggling with costs associated to the wages of employees. The organization established a reputation for having the highest wages for employees due to the unionization of labour throughout segments of the company (Bruce, Patterson & Baker, 2015). Strong unions allowed the employees to hinder the company by initiating lengthy negotiations regarding salary and working conditions which consumed the company’s time and resources as disputes would go on for years (Bruce, Patterson & Baker, 2015). To address the issues Alaska Airlines decided to outsource ramp vendors which led to companywide productivity and performance to drop as employees felt that leadership had lost faith in them (Bruce, Patterson & Baker, 2015). Staff began to lose motivation due to their sense of security within their positions and felt an absence of trust and commitment on the organizations part. Another pivotal concern for Alaska Airlines was the lack of key performance indicators and training programs for new employees. Lacking effective job-training and ambiguity in what’s expected in relation to performance employees’ new employees struggled, especially with such a high turnover rate (Bruce, Patterson & Baker, 2015). Ben Minicucci was chosen as the individual to salvage the company through implementing a plethora of change management practices after a stretch of underwhelming results. He centralized all of his decision making on three overarching themes/values: leading with passion, driving personal accountability, and managing with data (Bruce, Patterson & Baker, 2015). Which was backed by a sentiment of “cross-divisional collaboration and alignment” throughout the organization (Bruce, Patterson & Baker, 2015). Throughout this report I discuss various issues plaguing Alaska Airlines and possible solutions to their problems as well as recommendations for how Alaska Airlines can improve their business model moving forward.
What tools could leaders have used to increase awareness of internal and external issues?
When analyzing the situation of Alaska Airlines throughout the 1990’s and early 2000’s it is evident that the majority of issues stemmed from a lack of internal management controls within the organization. Alaska Airlines could’ve avoided this by becoming more involved and interactive with lower level employees. One inherent mistake that hindered the ability for leadership to recognize issues is the lack of performance management because of the lack of performance indicators (Bruce, Patterson & Baker, 2015). The balanced scorecard (BSC) is a management framework that allows companies to better assess performance in order to identify and improve inefficiencies within a process (Amartunga, Baldry & Sarshar, 2001). This is accomplished by taking a “balanced” approach towards an organization and taking a range of performance indicators to accurately reflect the compartmentalized performance of the company (Amartunga, Baldry & Sarshar, 2001). Alaska Airlines should have implemented this strategy by defining what it means to be successful in relation to financial processes, customer relations, learning and growth opportunities, and internal business processes while keeping key performance indicators revolving around their centralized goal. These surveys have the potential to shed light on issues like understaffing throughout departments which put a large amount of strain on employees (Bruce, Patterson & Baker, 2015). The BSC framework is a proven model for improving overall strategy and processes and is implanted in half of all Fortune 1000 companies and Alaska Airlines could greatly benefit from it (Gumbus & Lussier, 2006). Leadership should have held monthly or quarterly meetings where employees could stay informed of company direction as well as where they stand on a more macro level. The meetings could also include a section that would give employees a platform to voice their opinions and concerns. This would’ve allowed leadership to not only recognize underperformance, but determine what department or processes the organization should allocate resources towards improving and what employee concerns need to be addressed. For example, this would’ve allowed leadership to reassure employees that the outsourcing of ramp vendors would not occur throughout the rest of the organization giving them a sense of security. When employees were notified of the outsourcing of the ramp vendors it triggered a mass panic amongst them and caused them to lose confidence in their organization (Bruce, Patterson & Baker, 2015). These employee concerns led to a high turnover rate and lack of productivity although if Alaska Airlines implemented this strategy it would’ve minimized or avoided the issue (Bruce, Patterson & Baker, 2015). Another practice that would’ve improved internal communication would be an anonymous forum or survey to assess the business practices in place. This is another way to have employees express their concerns with Alaska Airlines in a safe manner where they will not receive any negative repercussions.
Alongside the abysmal management of internal control, a series of external factor also contributed to the underperformance of the company. There are a variety of external components outside the control of organizations that affect an industry such as the economy, politics, competitors, customers, and even the weather for companies like Alaska Airways (Jessee, 2018). The organization lacked the ability to adapt in a time where the external environment was constantly changing around them (Bruce, Patterson & Baker, 2015). The company should’ve implemented customer analysis in order to reassess their market position on a regulatory basis (Campbell & Cunningham, 1983). The purpose of the analysis is to identify target customer needs and determine how Alaska Airline can satisfy those needs. This framework would’ve allowed the organization to determine the areas of focus for their customers which would’ve shed light on the problems of their current business model at the time. Furthermore, with Minicucci’s data driven approach to decision making it would’ve allowed them to identify ways to improve processes like mishandled bags and delayed flights (Bruce, Patterson & Baker, 2015). Another tool that could’ve been implemented to recognize external issues is conducting an environmental scan. This analysis would’ve provided the company with relevant information that would expose possible threats and opportunities for the organization. The most common form of environmental scan is PESTEL which is an acronym standing for people, economic, social, technological, environmental, and legal (Jessee, 2018). This would have allowed Alaska Airlines to both recognize and react to changes in the external environment such as the changes in crude oil prices and societal hesitation for flight.
Which issues were foreseeable, and which were completely unpredictable?
One of the most prominent issues with Alaska Airlines was the employee perspective and culture revolving around how to provide exceptional customer service. The employees held a “it’s OK to be late, so long as we’re nice” view on their job and had a tendency to “blame the system” when providing a subpar costumer experience which contributed to an overall lack of accountability which hurt the Alaska Airlines brand (Bruce, Patterson & Baker, 2015). Alaska Airlines was positioned in the middle range of airline quality although working on reducing inefficiencies has the potential to get them to the top of the airline industry. Globally 96% of consumers agree that customer service is an essential factor in their choice of brand loyalty (Nextiva, 2019). Furthermore, employee retention is pivotal in the profitability of a company as a 5% increase in customer retention can produce 25% more profit for an organization (Nextiva, 2019). Bad customer service can easily become the downfall of a company and Alaska Airlines could’ve avoided this issue when it first arose.
Another issue that greatly contributed to a decrease in performance and productivity was the company’s labour disputes with ramp vendors. After a long extraneous negotiation process with ramp vendors in order to cut costs due to a lack profitability, the union declined a 15-20% pay cut. Soon thereafter management realized that the current workforce had a series of bad habits that were engrained too deeply within them leading Alaska Airlines to layoff employees and outsource the function (Bruce, Patterson & Baker, 2015). Layoffs can lead to an enormous level of stress on employees, leaving them on “edge” as they wait in anticipation to see where the organization cuts their costs next. This led to Alaska Airlines employees to crumble under the pressure leading them to meltdown in the face of customers over scheduling them (Bruce, Patterson & Baker, 2015). Management should’ve done a better job of foreseeing the obdurate employee backlash by simply understanding human nature. In contrast the company did not address the issue and allowed the turnover rate to grow for an unnecessary amount of time (Bruce, Patterson & Baker, 2015).
Another issue that stemmed from poor planning on the hands of leadership, the timing in terms of outsourcing the ramp operations. The organization implemented the change during one of the most critical times in the fiscal year, right before the holidays which is peak traveling time (Bruce, Patterson & Baker, 2015). The company laid off some of their most experienced staff and expected the new contracted employees to perform at the same level of quality. The new workers lacked sufficient training and were unfamiliar with the complex operational systems in place (Bruce, Patterson & Baker, 2015). This lack of training also contributed to an overall decrease in productivity and high turnover rate which leads businesses left to spend money on onboarding new employees.
As much as corporations can prepare for what’s to come, there are some events that nobody can plan for that negatively affect profitability and productivity. Alaska Airlines faced one of these events first hand with the tragedy of Flight 261. The event hit extremely close to home for everyone involved with the company and was taken personally by most (Bruce, Patterson & Baker, 2015). An Alaska Airlines jet was departing from Puerto Vallarta, Mexico carrying 88 passengers on route to San Francisco crashed just North West of Los Angeles before it could reach its destination (Bruce, Patterson & Baker, 2015). Most employees felt a direct connection to the tragedy as 12 passengers on board were crew members and 32 passengers were either family members or close friends of Alaska Airlines employees (Bruce, Patterson & Baker, 2015). This tragedy could’ve never been predicted by an organization and the most a company can do is try and mitigate risk and recover quickly when such a tragedy occurs. Another instance similar to this event were the repercussions of 9/11 on Alaska Airlines and the airline industry as a whole. After that tragedy took place the general public became hesitant to fly and no longer wanted to travel by plane leading to a decrease in demand causing many airlines to file for bankruptcy (Bruce, Patterson & Baker, 2015). These unforeseen circumstances led Alaska Airlines suffer and profits dropped drastically although governmental programs allowed them to stay above water (Bruce, Patterson & Baker, 2015).
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