Tuesday, May 6, 2008

Continental Airlines CEO Larry Kellner bet business on being on time, and won

Continental Airlines CEO Larry Kellner bet business on being on time, and won

A ‘View from the Top’ by leader of one of most successful turnarounds in U.S. aviation transportation history


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In an industry known for stiff competition, market volatility and demanding customers, Larry Kellner has a formula guaranteed to smooth out the ride.

Speaking to a packed audience of students and faculty Oct. 11 at the Graduate School of Business, the Continental Airlines Inc. chairman and CEO gave excerpts from his leadership playbook that led to one of the most successful turnarounds in U.S. aviation transportation history.

Credited with taking Continental from bankruptcy to the world's fourth-largest airline, Kellner engaged his audience in a lively tour behind the scenes of the highly competitive and tumultuous airline business—to provide a view of some of the planning processes that earned this company its present day success. His speech was part of the student-run "View from the Top" speaker series, which brings executives to the school to discuss their experiences and leadership styles.

When Kellner became the CFO of Continental in 1995, the carrier was ranked the nation's worst airline in terms of customer complaints, lost baggage and on-time arrivals. "It was a pretty broken company," Kellner said. "And it wasn't just a one-off problem. This was the culture of 'How can we make it cheaper? How can we do it with less?' And we were lousy …, getting tons of complaints. We were losing bags because we were late, and late because we were losing bags."

Confronting $2.3 billion in debt defaults, no cash and a third potential bankruptcy, Kellner came up with a turnaround plan that defied conventional wisdom and some of the standard operating practices of the times. "If you don't spend any money you're not going to make it," he said. The number one priority: Bring flights in on time. "We needed to tell [our employees] that was the most important thing they do, and to put incentives behind it." The decision: For every month the company made it to the top five for on-time arrivals, employees would earn an additional $65.

Within 30 days, Continental moved up to fourth place for on-time arrivals, and within two months, gained the number one slot—a ranking it holds today. "All of a sudden the employees who had been ripping the Continental patches off their uniforms when they went to Wal-Mart after work were in the company store buying Continental hats," Kellner said.

Continental's "Go Forward" plan gave employees more ownership in the firm 's success and more transparency about how the company was run. "If you want to be successful in any business, you need a plan that tells you where you're going. You've got to communicate the plan. … And you've got to treat people with respect and dignity."

Continental's mission was simple—summed up in four key elements:
# An operating plan that "makes reliability a reality";
# A financial plan that "funds the future";
# A people plan that encourages and supports "working together"; and
# A marketing plan delivering a "fly-to-win" strategy.

Kellner said: "You have to understand what it is you want to do. If the plane is there waiting at the gate but the Jetway is not attached, you're not there yet. You can't get the door open."

In a business where every minute counts, it is important, he says, that when you've been on a long flight, in a small seat, you don't sit for 10 minutes waiting for the Jetway to arrive to disembark. "My job is to keep our employees happy and focused on a business plan that works. If they keep you happy … our shareholders will be happy," he said.

Since Kellner joined the carrier, Continental has won more awards for customer satisfaction than any other airline. Having survived two bankruptcies, the aftermath of the Sept. 11, 2001, terrorist attacks, the second Gulf War and spiraling fuel costs, Continental's strategy—under Kellner's leadership—continues to pay off.

Kellner himself is a three-time winner of CFO Magazine's CFO Excellence Award. Says Kellner, "You've got to constantly reinvent the business, reinvent the way you do it, and keep your product fresh. I fly our competitors on a regular basis—I want to see what they are doing, how they are rolling out their service, what we can take from them. I will gladly take anything anyone does that's smarter."

April Neilson is a freelance writer.

Source: http://news-service.stanford.edu/news/2007/october31/kellner-103107.html

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