Furloughs and Layoffs - the Southwest Airlines Way

Gary Kelly, chairman and CEO of Southwest Airlines Co., outlined steps Monday the company plans to take in attempt to prevent furloughs and layoffs through 2021.

Includes: 'Effective immediately, Kelly's salary is reduced to $0. It will be that way through the end of 2021.'

Any such example around the industry? 

Read more about the essence of Southwest Airline culture:

https://beyonddisruptions.blogspot.com/2020/08/what-can-be-learned-from-sustainable.html

Old Habits die Hard - The Pike Syndrome Revisited

A dark cloud is hanging over the airline industry. 'Extreme uncertainty' coupled with 'complexity' have become words that keep many paralyzed and even content with old habits that offer them security, however false.

Without seeing the way out in hard to predict situations, we restrain ourselves from taking actions that can assists us with going through this hard time without making the future of our organisation too risky or potentially unsustainable.

This kind of paralysis resembles the condition named the Pike Syndrome - the analogy used to remind us of what happens when we remain blind to our habits and in denial of reality, even when they start threatening our existence.

Time to revisit The Pike Syndrome.

A Leader’s Framework for Decision Making

If you are a leader at any level struggling to understand why your best intended decisions don’t work as expected, the chances are that you are mixing up the contexts in which you are making these decisions.

You certainly know that your actions depend on the situation, and that you can make better decisions by adapting your approach to changing circumstances. The question is which approach to use in a particular situation to avoid making the wrong decision when faced with systemic complexity and extreme uncertainty?

In their timeless article “A Leader’s Framework for Decision Making” David Snowden and Mary Boon provide some 7answers. Helpful for freeing yourself from habitual thinking driven by traditional management paradigms.

"A Leader's Framework for Decision Making"

Rethinking Monopolies and Their Profit Taking

Isn't it time to rethink the monopolies and their profit taking? What are the alternatives? Seth Godin explains:

"Once an organization reaches scale, particularly if it feels like a monopoly, it’s tempting to “take profits.”

This means less investment, fewer staff and a lot less care. Those things are expensive. Easier to simply keep the money.

And those things involve emotional effort. Easier to simply point to the bottom line, as if that’s the point.

Lazy managers dump the emotional labor on overworked frontline staff instead of creating systems that create value for everyone.

And lazy shareholders reward quarterly earnings instead of understanding the long-term ramifications of failing to serve customers.

“We don’t care, we don’t have to,” is often the last slogan once-great institutions have emblazoned on their door."

What can be learned from the sustainable success of Southwest Airlines that retained its superior investment-grade ratings in times of extreme uncertainty

Southwest, Ryanair and easyJet are the only three airlines that retained investment-grade ratings from S&P Global Ratings, after the credit rating agency downgraded a host of carriers and slowed the pace of its air travel recovery forecast. In a report published last week, S&P analysts said that superior ratings come from the low-cost model, “robust liquidity”, and greater relative exposure to healthier short-haul and leisure markets. 

What these kind of ratings don’t tell us is that the superior ratings come mostly from immeasurable values which are beyond hard facts, things that drive sustainable growth and success, like leadership, culture, relationships with employees and passengers. This is what the unwavering success of Southwest is made of. Unlike any other airline, it has been profitable every single year between 1972 and 2019, and this year it tops the league of the most successful airlines in times of extreme uncertainty.  

These are the kinds of things that cannot be copied or enforced by any kind rules. It is all about setting the overall framework and the right tone that radiates from true leaders. Herb Kelleher, ex CEO and co-founder of Southwest Airlines and his team have shown us the way and generously shared their experiences.  

Here are some quotes from Herb’s interviews that I hope will be more deeply heard at this unsettled time. And more importantly, inspire so much needed actions to adapt to the new circumstances in the way that will speed up the recovery:

On strategy 

Herb Kelleher liked to say, “We have a strategic plan. It’s called ‘doing

things.” He never allowed himself to become bogged down by too much strategic thinking or analysis paralysis. He believed that all he needed was an overall framework. Nothing more. And he came up with something very basic. For Southwest Airlines, his vision and the basis for this framework was simple; low cost, superior service, people first.

"This framework approach gives a long-term horizon. It liberates from the contingencies of the moment. At a time when everything is created, deployed, and measured in real time, strategy and execution are one. Sequential thinking, which requires putting strategy first and execution second, is becoming more and more outdated, even irrelevant. Today’s business relies on a constant back and forth between the two."

"Because you can’t really be disciplined in what you do unless you are humble and open-minded. Humility breeds open-mindedness — and really, what we try to do is establish a clear and simple set of values that we understand. That simplifies things; that expedites things. It enables the extreme discipline. When an issue comes up, we don’t say we’re going to study it for two and a half years. We just say, “Southwest Airlines doesn’t do that. Maybe somebody else does, but we don’t.” It greatly facilitates the operation of the company. "

"When planning became big in the airline community, one of the analysts came up to me and said, “Herb, I understand you don’t have a plan.” I said that we have the most unusual plan in the industry: Doing things. That’s our plan. What we do by way of strategic planning is we define ourselves and then we redefine ourselves." 

On leadership
“As far as leadership is concerned, I think that everybody needs to be a leader in order to have a successful company. Because everybody, by example, sets a leadership standard. I don’t care whether you’re checking bags or loading them in the bin or no matter what you’re doing.  You’re setting a standard for other people and we want people to all, all our people to be leaders. We think everybody is a leader no matter what their job is. We want everyone to be a leader. They’re setting an example by their conduct and they should be inspirational.” 

On who comes first 

“Employees came first, customers second, shareholders third.  If the employees serve the customer well, the customer comes back, and that makes the shareholders happy.  It’s simple, it’s not a conflict, it’s a chain. If you treated the employees well, if you cared for them, if you value them as people, if you gave them psychic satisfaction in their jobs, they would really do a great job for the customers and the customers would come back, which would be good for the shareholders. Most companies didn’t operate that way. So, we turned the pyramid upside down, in effect, and said the employees come first and they always have.  Not just in our minds but in our hearts as well.”

On Focus
“You have to focus intently upon what’s important and what’s unimportant, not be trapped in bureaucracy and hierarchy. Be results- and mission-oriented. Keep it as simple as they possibly can, so that the values and the destination of the organization    are well understood by all the people that are part of it — so that they can feel that they are truly participants in it. The business of business is not business. We’ve always said, “The business of business is people.”

           

On three main things
“We basically said to our people, there are three things that we’re interested in. The lowest costs in the industry — that can’t hurt you, having the lowest costs. The best customer service — that’s a very important element of value. We said beyond that we’re interested in intangibles — a spiritual infusion — because they are the hardest things for your competitors to replicate. The tangible things your competitors can go out and buy. But they can’t buy your spirit. So, it’s the most powerful thing of all... 

How do we get low costs? Through a lot of things, including the inspiration that you give your people, their productivity, the fact that they feel that they’re doing something that is really significant and that they enjoy.”

On talking jargon and labelling

"We have never used the fancy titles for empowerment, total quality, etc. Every time you talk jargon you find that people assume that they have the same thing in mind when they really don’t. We don’t apply labels to things because they prevent you from thinking expansively."

On culture as a competitive advantage

“The intangibles are far more important than the tangibles in the competitive world because, obviously, you can replicate the tangibles. You can get the same airplane. You can get the same ticket counters. You can get the same computers. But the hardest thing for a competitor to match is your culture and the spirit of your people and their focus on customer service because that isn’t something you can do overnight and it isn’t something that you can do without a great deal of attention every day in a thousand different ways. This is why I can say our employees are our competitive protection.”

On keeping the culture values alive

“We decided that we had to institute another limitation on expansion, one which is cultural in nature. We simply cannot increase our staff by 10% per year and expect to maintain the same kind of environment and culture we have, and that is important to us.”

“We were a little concerned as we got bigger that maybe some of our early culture might be lost, so we set up a culture committee, whose only purpose is to keep the Southwest Airlines culture alive.”

On empowering people 

“If you create an environment where the people truly participate, you don’t need control. They know what needs to be done and they do it. And the more that people will devote themselves to your cause on a voluntary basis, a willing basis, the fewer hierarchies and control mechanisms you need.” 

“Provide guidelines only, not rules. Give your employees the flexibility to make decisions on the spot.”

On relationship between employees’ pay and productivity 

“We’re perfectly happy with having, generally speaking, the highest pay for employees in the domestic industry. They reward us with tremendous productivity, which lessens the effect. And the other airlines disadvantaged their people. I’m not saying they didn’t have to, in the sense of “either we do this or we fail,” so it’s not a criticism. I’m just talking about the economic effects of it.”

On company mission

"The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit."

On learning it by doing it

"I learned it by doing it, and I was scared to death." 

So, here we are, facing the biggest leadership challenge ever! The question is, can we get anywhere close to this kind of culture with minds stuck in the legacy world? 

Of course, we can start moving towards it if we become open to rechannelling the work and information to their natural flow. The opening starts with the engagement of employees through creation of space for collaborative hubs and opportunity scans supported by latest technologies. These are the things that have been at the heart of my consulting work, that I have written and talked about and described in my book. 

Connect and Collaborate to Disrupt Disruptions - my presentation during the Virtual OPS 2020/IBS

Here is the link to my presentation during the Virtual OPS 2020 organised by IBS Software. I was talking about how we can better connect and collaborate to disrupt both strategic and operational disruptions. I sincerely thank Daniel for the opportunity.

I explained what it takes to establish the missing links between strategy and operations, the process that engages people from around organisation to resolve the complex, real-life problems, and a new role of technology to make this happen.

The process revolves around Opportunity Scanning technique that combines near real time data and insights essential for validating strategies. It also helps with understanding the emerging patterns that need concerted action to prevent avoidable losses.

https://lnkd.in/dhaU-nJ

#airlines #StrategyOperations #innovation #futureofwork

Connect and Collaborate to Disrupt Disruptions

I am inviting you to join me on 4 August during Virtual OPS 2020 organised by IBS Software when I will be talking about how we can better connect and collaborate to disrupt both strategic and operational disruptions at times of extreme uncertainty and growing indebtedness.

Here are some highlights.

The profile of operational disruptions is changing. This time they are dominated by frequent strategic adjustments resulting in unknown, yet avoidable losses generated by slow and often less than appropriate response to changes in market demand. So far, the way we used to connect and collaborate to reduce disruptions haven't been successful and this needs to change. 

The question is, how can we reinvent collaboration and become the co-creators of the new connected, resilient organisation where strategy and operations become closely linked? What is the role of people and technology in making this happen?

You can register at http://ops2020.ibsplc.com/

COVID Caused Losses Are Showing Up - A Call For Getting Closer To Reality

It has been just announced that Delta Air Lines posted a $5.7 billion net loss in the 2020 second quarter, and is cancelling 500 out of 1000 planned daily departures in August.

We cannot condemn the airline bravery and optimism at these critical times, but can question if decisions based on comprehensive real-time strategic feedback, yet to become a practice, could have reduced these losses?

Big unexpected losses happen and will be happening around the industry not just because of unpredictability of market demand, but because of the reliance on methods for planning and measuring airline performance set in the 1950s, unsuitable for managing complex organisations at times of extreme uncertainty.

It takes only a little shift in habitual thinking to understand that getting the strategic feedback based on the near real time insights is the only way to keep adapting to the new circumstances before surprising losses show up in the profit and loss statements.

Things change faster than ever and we need to find ways to align with reality faster than ever.

The Leadership Challenge: How To Survive Indebtedness, The Next Pandemic Hurdle For Airlines

“The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think and act anew”     -Abraham Lincoln

Only a few months ago airlines stepped into 2020 ready to be bigger and better than their competitors, buy more fuel efficient aircraft, fly more - even to busiest airports, carry more passengers with more seats in the cabin, increase retail revenue to compensate for higher costs of their operation, and hope for a more profitable year ahead. No one could have imagined that only a few months later the COVID pandemic would bring the system to a halt and that the magnitude of the current crisis would be set to leave a big mark on the future of air travel.

“A tough future is ahead of us”, said IATA CEO Alexandre de Juniac recently, and continued: “Containing COVID-19 and surviving the financial shock is just the first hurdle. Post-pandemic control measures will make operations more costly. After surviving the crisis, recovering to financial health will be the next challenge for many airlines… Paying off the debt owed to governments and private lenders will mean that the crisis will last a lot longer than the time it takes for passenger demand to recover.”

There are many signals to suggest that recovery will be slow and may take unexpected turns and twists for many airlines. Unpredictable market conditions will inevitably cause problems with planning at all stages, from deciding which routes to fly, to costing, pricing, and allocation of resources. Frequent disruptions caused by rescheduling, flight delays, and cancellation will become sources of unforeseen losses. Preventing and minimising the negative impact of changes while learning through this trial-and-error phase will be crucial for airline survival.

The way we used to plan and make decisions will no longer work. Top down planning without insightful operational feedback will lead to more disruptions, more dissatisfied passengers, and unexplainable rise in costs. This time, there will be no historical references to rely on. Replacing them with unfounded intuitive predictions will lead to more failures and rise in indebtedness. And this has to change.

Managing through crisis means managing through disruptions, and seeing them as an opportunity for learning and validating our plans and strategies. Disruptions bring authenticity to decision making, they point to things in need of improvement and with the right technique, enable insights into interactions between data, people, and processes that can make these improvements possible and measurable.

Preparing airlines for the age of growing uncertainty and disruptiveness has been my passion for many years. Using my diverse and relevant experience across the industry, key insights and expertise, I have created and have been using a method and technique to equip leaders, regardless of their hierarchical rank, with knowledge and experience necessary to cope with disruptions of any scale. The method enables them to make informed decisions in hard to manage situations, to adapt, and make their airline more resilient to future challenges.

I couldn’t have predicted the vastness of the current crisis, but found the principles, practicality, and ease of implementation of this method useful to support airline endeavours to expand, conscious about ongoing risks, reduce debts, and find new ways to get out of crises more quickly while harnessing human values.

Making some progress in this situation requires a new approach to planning and decision making where deep insights in what is happening on the operational side become essential for creation of adaptive strategies.

This relies on cross-functional interactions that transcend organisational divisions and provide answers to currently unanswerable questions - the work supported by the OpportunityScanning technique and controlled focus. Here are some of the key aspects of this technique:

Data and insights
To make sense of data and human interactions, data need to be accessed near real time when it is possible to get insights into the origins of problems. As Satya Nadella, Microsoft CEO said, “it is not just seeing these things, but taking action. Data is only useful if you in real time or near real time can predict something better, can automate something better, can gain an insight - those are the outcomes that drive your data. That's the true measure of your success with data.”
Relational metrics
Introduction of relational and actionable metrics is crucial for making necessary adjustments and for measuring progress. This enhances the system view of business that looks more like a flexible learning network that needs constant fine tuning and occasional upgrades to keep up with changes in the operational environment. Introducing non-linear measures of cost and quality respecting their true nature becomes crucial for understanding what needs to improve.
Cross-functional meetups
These are collaborative events where the same operational problems were looked at from different organisational perspectives followed by prioritised actions.
Action maps
What makes it all actionable are the relational action maps created during the cross-functional meetups.

This constant moving back and forth between strategy and operations is one of the key things that distinguished Southwest, the most successful airline in history from other airlines. Their founder and former CEO Herb Kelleher explained: “At a time when everything is created, deployed, and measured in real time, strategy and execution are one. Sequential thinking, which requires putting strategy first and execution second, is becoming more and more outdated, even irrelevant. Today’s business relies on a constant back and forth between the two”.

This practice has been instilled in Southwest from early days. Traditional airlines, however, have to act quickly to turn things around, and leaders and executives need a very rapid training in this field.

It couldn’t be done before because of the rigid organisations, information, and management structures shaped by 50+ years old industry standards and the existing business and education systems. The result: anything that is out of sequential views and measures is taken out of consideration including understanding and managing cost and revenue. The reason behind this is the lack of transdisciplinary knowledge based on the real-life experience - vital for making decisions that benefit the entire organisation. The new approach with previously described basics offers these opportunities through collaborative learning during earlier mentioned meet-ups and other practices described in my book and other published work.

So, we now have a historic opportunity to start afresh and act anew, to do things that will ensure a more sustainable future for the aviation industry.

I am here to support leaders to develop approaches and tools that will not only help them navigate their airlines through the current ever-changing situation, but also help with building new foundations which will allow for more astute leadership based on an integrative view of their business, making airlines ready for the next evolutionary step.

I will continue to share my insights into must-do changes in traditional management that stand in the way to creating adaptable strategies, to get ready to face the world of accelerating changes with more certainty. I will be providing leaders with a unique opportunity to discuss their starting points, their vision for the future and the steps they need to take to get there whilst avoiding the well-trodden, well-documented pitfalls. I look forward to connecting with as many of you as possible.

   

If you are interested to book a slot for my customised consulting with guidance on how to implement OpportunityScanning technique into your organisation, you can contact me at jasenka@astuteaviation.com. 

#airlineleaders #managingreality #strategicinsights #airlinefuture

The work is art. The job is not necessarily the work.

I wonder how many of us misunderstand the word art and how liberating it can be to know that we can all become artists and creators in anything we do. Here are some Seth’s quotes that may change the way we do things for the better:

‘An artist is someone who uses bravery, insight, creativity, and boldness to challenge the status quo.

Art is a personal gift that changes the recipient. The medium doesn't matter. The intent does.

Art is a personal act of courage, something one human does that creates change in another.

The job is what you do when you are told what to do.

Someone can always do your job a little better or faster or cheaper than you can.

The job might be difficult, it might require skill, but it's a job.

The job is not the work.

Your art is what you do when no one can tell you exactly how to do it. Your art is the act of taking personal responsibility, challenging the status quo, and changing people.

I call the process of doing your art 'the work’. It's possible to have a job and do the work, too. In fact, that's how you become a linchpin.’
                                                                                         Seth Godin, "Linchpin: Are You Indispensable?"

Is It an Organisation or Organism You Work With?

I like Seth's blogs. He brings freshness and simplicity in explaining the complex things, just like in his latest post 'What kind of org?': "Maybe you work with an organization. They have systems and charts and boxes. But the very nature of an organization is that someone developed it, figured it out and has to approve its changes. After all, it’s organized. Perhaps you work with an organism instead. An organism constantly changes. The cells develop, die and are replaced. It adapts to the current environment or goes away. If you engage with a culture, if you’re part of an organism, you’ll do better understanding the system that it lives in. The org chart is insufficient. And of course, organisms tend to be more resilient than organizations." To better understand the system we are in, and make our organisation more resilient we need to change the way we see it, to understand the flow of work, and get the sense of connectedness between data, people, and processes. The process is not difficult to implement and will be the key to making progress once airlines restart the operations. Will blog more about it – stay tuned.

Preparing For The Next Step: Why Things Go Wrong?

I thought that the following quote from my book ‘Beyond Airline Disruptions – Thinking and Managing Anew’ can inspire existing and aspiring leaders, in the midst of immense difficulties, to start thinking anew and get better prepared for the fresh start in a less complex but more uncertain world. Before we find out more about the next steps, let’s first see why things go wrong and what needs to improve?

"When we make plans, we expect that most things will respond in a linear way, that more input will get us more output. If we want more passengers, we add more flights, fly to more airports (even if overcongested), squeeze more seats into the plane, pack more people in. We also want to be bigger and stronger than our competitors. The bigger we become, the more we are inclined to ignore the critical resource limitations and issues of quality.

In real life, however, most things don’t respond in a linear way (quality and cost in particular). This is why we fail to notice the critical point beyond which the quality of outcome turns downwards. From that point on, adding more flights or having more passengers only make things worse. This happens whenever the traditional way of thinking and doing makes us ignorant to what is happening now, when we are unable to understand early signals of this decline and are deluded by the occasional rise in profit. In this way, we unknowingly increase complexity and are later surprised by unexplainable losses, unforeseen disruptions and loss of reputation.

The chart below shows dependences between growth, quality of outcome, money and time. These relationships are essential for understanding the current state of business and its future prospects.

Why is it so easy to pass the turning point without noticing it? On the surface, it is about quality and connectedness of data and information which come from multiple sources with different measuring and reporting criteria. By the time they reach decision makers, these data are aggregated, then apportioned, freely interpreted and compared so that in the end, their value is reduced to the level that decision become risky but with unknown consequences.

At a deeper level, however, the problem with quality of data is related to fragmented organisation, top-down management where decisions don’t follow the natural flow of work, and measures of system performance that are detached from operational reality. It is also about legacy mindset, which sees the system as stable, boxed structure, that only trusts the official information that comes from the same sources year after year, packed in standardised reporting formats, no matter the quality. Analysing these data with unknown origins further distorts information, allowing for free interpretations.

By making decisions based on too many assumptions, we unknowingly create more problems elsewhere and are unable to measure their impact on the system due their complexity. When we compare the planned and actual results published in company reports, we cannot say what is beyond these figures, what really happened and why, and what we need to improve. Regardless of amount of data we collect and analyse, sometimes the impact of our decisions is minor, and sometimes it can have longer-term implications on the system performance that we wouldn’t be aware of. 

This is because the system we are in is not designed to manage things we are facing in real life. Complexity arises from interactions between people and processes that are the very nature of airline business, but existing information systems and management do not recognise it. Hence the detachment between strategy and operations, plans and reality."


This time the chances are that we may start below the turning point which may be painful in the beginning, but then it will be up to us to decide whether we want to know or not when things start to go downwards.