The case of Alaska Airlines serves as a clear example of a company in dire need of change. The company’s previous history shaped its culture which eventually put it in a critical state. The executive managers held false perceptions about the status of their company and were unaware of the need for change until a dramatic event forced the company to reconsider its structure. A special task force was established to analyze the present condition of the company and implement the changes that would improve it. The subsequent events led to a slow but continuous improvement over the following years. This paper will provide answers to various questions about the change process that saved Alaska Airlines from a crisis.
Despite the established positive reputation of the company, and its relatively stable condition for the last few decades, its quality of service has gone down, and the number of passengers decreased dramatically. The most dramatic argument for change that the company experienced was a case of mishandled bags that led to an increase in complaints against the company and can be considered the beginning of the company’s problems. The mishandling was so severe that some passengers chose to involve the police to resolve the issue. Subsequently, the company started experiencing a slow but steady decline that required intervention to resolve it.
Melting Iceberg or Burning Platform
This situation can be described as a “melting iceberg” because the crisis would lead to a slow decline of the company until it would become unrecoverable. The main difference of a melting iceberg situation from the burning platform one is like the issue. A burning platform case would put Alaska Airlines in a situation where the management would have to choose between doing severe changes such as massive downsizing or closing the company. The situation presented in the case study is less urgent and was resolved without major losses for the company.
Executive leadership was under the impression that Alaska Airlines had an endless pool of customer loyalty. The company began in 1932 and quickly became the largest airline in the region. Over the decades it was bought by larger corporations and in the 1970s experienced some difficulties. However, it was saved by its new leadership and quickly became profitable due to new legislation and the construction of the trans-Alaska pipeline. The company continued to grow and was considered the dominant airline business in Alaska. This success created a false sense of security in the company’s management. Instead of working on creating new customers or ensuring loyalty among the ones that the company had, the management started to take them for granted. This eventually led to the constant mislabeling of baggage and negative attitudes among the company’s customers.
The management of the company also believed that it is futile to try to raise the bar of company service because of the resources that would be required to do so. The present condition of the company was not improving, but it was not critical yet. This situation created a desire to reduce further spending on innovations and improvements to the company structure. In a sense, mediocrity was seen as the only available option because more risky strategies would require funds that the present system could not provide. Both assumptions were challenged and had shown to be inaccurate. The first assumption was proven to be wrong in the years following the baggage mishandling incident, as the numbers of customers were steadily dropping year after year. If this trend would continue, the company had no chance of sustaining itself. The second assumption took longer to test, as it required some significant changes in the company to be implemented. However, raising the bar is one of the most successful decisions during the process of change. It allowed the company to not only prevent a crisis but also improve the provided service.
One of the earliest commitments that enabled the process of change was the attention to the hub operations. The results were analyzed to find the root causes and address them. Previously the company devoted only a small portion of its attention to these operations. However, to implement the change that the company needed, hub operations became a high priority. Daily meetings that lasted up to three hours were used to provide an accurate analysis of the situation. The meetings were mandatory and happened at the beginning of each day to make sure that all of the participants were aware of the issues and paid full attention to them. Despite their strict and demanding timing, the meetings were created as a place for safe and transparent discussions where every participant was free to discuss any issues they saw within the company. Suggestions and solutions could also be presented by any of the members to gain opinions from different perspectives. Accountability was prioritized over blame in these meetings because accusations would not serve to improve the situation. Nevertheless, early meetings involved a lot of negative emotions from their participants. In the end, the meetings allowed the task force to gain a more detailed picture of the situation and identify the possible root causes of the company issues.
Report Cards and Raising the Bar
Another commitment began to form around the need to implement report cards to measure the metrics on a company-wide scale. This system allowed the company to monitor the progress of its goals. By using report cards, the management gained an ability to easily compare the data of different departments, which was previously either very time consuming or impossible. However, the push toward a leaner company and the commitment to raise the bar of the industry was perhaps the most important steps toward change. The former allowed the latter, as the management of the company was afraid to provide significant funds toward such projects. Before the change process started, the company already invested in the development of lean operations, but the task force began implementing them at a faster pace, which allowed for further improvements. The prevalence of mediocrity in the company was addressed head-on, and a greater focus was put on customer satisfaction. The company became highly invested in creating relationships with its customers to ensure their loyalty.
The stakeholders included shareholders, company staff, company executives, passengers, and contractors. The shareholders have concerned with the downward trend of the company, and the creation of value for shareholders informed a lot of the changes that the company experienced. The company staff and primarily the pilots and ramp staff were resistant to change, which forced the company to negotiate. Both groups have developed lifestyles that were reliant on their current pay and were not willing to reduce it. The negotiations did not result in a satisfactory conclusion, and the pilots had to take a pay cut of almost 30% and the ramp workers had to be partially replaced with contractors. Company executives were the primary operators of change. Through their efforts, the task force was assembled and put into operation. Contractors were introduced at the end of negotiations with pilots. Unfortunately for the company, its previous actions created issues in current contractor negotiations. The issue with contractors was threatening the future of the company but was successfully resolved before any damage could be done to the company operations.
Senior executives were interested in the implementation of changes and led the change process with the help of a special task force along with the “VP of Seattle Operations.” Executives were motivated by the need for change, as the current condition of the company was threatening to develop into a serious crisis. They took all the possible measures to ensure that the goals they set can be completed and approached the choice of the leader with great care. However, pilots and ramp workers were initially resistant to implement new changes. As it was previously mentioned, the issue stemmed from the lifestyles that the workers developed during the previous years of working for the company. The negotiations with pilots went into arbitration, and the situation ended with them receiving a decrease in pay up to 30%. Arbitration was avoided in the case of ramp workers by the company replacing more than 470 members of staff with contractors.
Two conflicts arose during the process of change. One conflict was with the staff which included pilots and ramp workers. It ended in a maladaptive manner with the company reducing the pay of the pilots for up to 30% and choosing to outsource their ramp workers to a ramp vendor. Negotiations with the pilots went to arbitration and the ramp staff negotiations ended prematurely with the implementation of contractors and firing of 470 employees. The management of Alaska Airlines has previously levied $150,000 in penalties against the ramp vendor, and this situation created a divide in the vendor-airline relationship. The previous history with the ramp vendor left the company in a poor position of negotiation when outsourcing was needed. Thankfully, it was resolved adaptively. The leader of the task force organized a Vendor Oversight Group which created a plan on how the ramp vendor may be managed. In reality, the vendor wanted to resolve these issues and reform the partnership, but it required several changes on the part of the company. The plan was used to pinpoint which actions of the vendor could cause penalties and how they can be avoided. Not all the aspects of the plan were accepted by the vendor, but the relationship was restored enough to replace the laid-off members of the ramp staff.
Although the situation was handled with positive results, some issues could have been avoided by the task force if they considered the following during the preparation stage. The issues with the pilot labor union have been recorded years before the implementation of changes. Their reaction should have been considered during the preparation stage. The company was aware of the high paychecks that pilots and ramp staff received but seemingly did not consider that they could have become reliant on their wages to fund their lifestyles. A dramatic cut in the wages would mean a great change in the lives of the employees too, and their continued employment may not seem as attractive in the short-term. The personal nature of communications should have been emphasized.
The focus on long-term benefits could persuade the staff to wait through this period of change because it would eventually lead to positive outcomes for both the company and its employees (Hayes 2014, p. 271; Cavalcante 2012, p. 450). The negotiation tactics with the unions should have been prepared in advance, and the option to outsource the ramp could have been considered before the start of negotiations. Perhaps a system of bonuses could have been created for the staff that emphasized loyalty to the company. Neither of the groups could keep their current wages but some type of compensation or buffer method could have made the change process less dramatic and would allow the staff to adjust their lifestyles to those they could afford on their new wages.
The slow decline of the company should have been made clear to the staff to show the necessity of the changes. Transparency in communication is a powerful tool of leadership, and it could lead to better results during the labor negotiations. The negotiations that took place during the described case quickly came to a standstill, with neither side gaining any ground. While it is not unusual that the company side would not want to show weakness during the talks, such a tactic could only lead to unsatisfying results in this case. The company required change. Otherwise, it would eventually lose the ability to have any staff at all. This was not a move to purposely exploit the workers, but an attempt to save the company. Nevertheless, even if this message was given to the worker side, it was not communicated in a timely or effective manner. The message should have been put out much earlier, so that both sides had time to prepare demands that could be met or at least agreed upon during negotiations (Sharif & Scandura 2013, p. 185; Smollan 2013, p. 725).
Ramp Vendor Relationship
A move to improve the relationship with the ramp vendor could also have a positive effect. The task force was aware that the relationship with the vendor was strained and required additional attention. It could have been initially conceived as an option in case the negotiations with the ramp staff would not result in anything. By resolving the ramp vendor issue in advance, or at least preparing to resolve it before the negotiations start could put the task force in a more confident negotiation position. Its sudden implementation was likely met with a severely negative response when almost 500 people were replaced with contractors. The change was necessary, but if the option was considered beforehand, it could have been communicated during the negotiations. Perhaps it could sway the ramp staff to compromise or at least be prepared for the coming change.
To support the VP of Seattle Operations, I would provide them with additional communication experts as well as analysts. They would fulfill the need for the analysis of massive amounts of data and help during the negotiation process with the labor union. These aspects were perhaps the most problematic during the change process. As was described previously in the paper, the communication between the task force and the employees was not handled beneficially. Both pilot and ramp staff negotiations have not led to any agreement and almost resulted in negative consequences for the company. By assigning professional communication specialists to the team, I could have at the very least reduced the intensity of the negotiations and perhaps even led to a more positive outcome for all the parties involved.
The second edition is not as critical but could nevertheless streamline the change process in the company. The study reports that a large amount of data about the company was gathered and it required analysis. Since the company previously did not work with such large amounts of data, it was unprepared to handle it quickly. By adding dedicated analysts to the team, I would make sure that the data is processed in a timely fashion.
The main issues during the change process concerned poor communication. By considering the failure of negotiations, the company could avoid the costly conflict that occurred. Switching to a ramp vendor was not an inexpensive measure, and it was exacerbated by the previous history of the company. Better communication strategies were required to successfully conduct negotiations with the teams. The position that pilots and ramp staff expressed during negotiations was not achievable in the current state of the company, but this was not communicated. The results have shown that the task force was unprepared and lacked the communication expertise that was required from them. The ramp vendor solution seemed to have been improvised when the negotiations have shown signs of going nowhere. This is suggested by its sudden implementation halfway through ramp staff negotiations. Although the ramp vendor issue was resolved before it could affect the company, this option should have been considered beforehand. Perhaps a less expensive deal could have been struck (García, Mora & Sabater 2014, p. 246; Crump 2015, p. 131). Reduction of risks could have been achieved through transparent communication and careful consideration of the available options.
The cultural context for change could have enabled a greater sense of ownership because it would reframe the change as the only solution for the coming crisis. The employees of the company were not fully informed about the change process. It is possible that they held the impression that the company is only trying to increase their profits based on recent poor performance. The case with pilots and ramp staff was also based on how the previous culture of the company has shaped the lives of its employees. Even if people were not against change as a whole, their current living conditions have forced them to go against the change, despite it being unavoidable. By clearly communicating the reasons for the change and the present situation that the company was in, employees could have felt like they are an active participant in it, rather than a passive observer.
Reference List
Cavalcante, S 2012, ‘Preparing for business model change: the “pre-stage” finding’, Journal of Management & Governance, vol. 18, no. 2, pp. 449-469.
Crump, L 2015, ‘Analyzing complex negotiations’, Negotiation Journal, vol. 31, no. 2, pp. 131-153.
García, B, Mora, A & Sabater, A 2014, ‘Strategic accounting choice around firm-level labor negotiations’, Journal of Accounting, Auditing & Finance, vol. 30, no. 2, pp. 246-277.
Hayes, J 2014, The theory and practice of change management, 4th edn, Palgrave Macmillan, Basingstoke.
Sharif, M & Scandura, T 2013, ‘Do perceptions of ethical conduct matter during organizational change? Ethical leadership and employee involvement’, Journal of Business Ethics, vol. 124, no. 2, pp. 185-196.
Smollan, R 2013, ‘Trust in change managers: the role of affect’, Journal of Organizational Change Management, vol. 26, no. 4, pp. 725-747.