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Popular City Hotels Pondicherry hotels. Save up to on booking Continental. Continental AM Larnaca. Continental AM Athens. Did you know that there are no rearview mirrors on an airplane? The runway behind is irrelevant. Our Go Forward Plan had four cornerstones. Fly to Win was the market plan: we were going to build up our Houston, Newark, and Cleveland hubs, for instance, and expand our customer mix from backpacks and flip-flops to suits and briefcases.
Fund the Future was the financial plan: we were going to gain liquidity by restructuring our balance sheet and selling off nonstrategic assets. It was my opinion then, and remains today, that every company should have a strategy that covers these four elements—market, financial, product, and people—whether it is in a severe crisis or not. But we had to try—40, jobs were at stake. It was scary.
And for me, it was a defining moment. I wanted to make things happen. I held a paying job when I was in third grade, and no one even blinked. In the summer of my junior year in high school, I mowed lawns from a. Most important, even with all the work ahead, turning Continental around seemed like it was going to be fun. Grueling—without a doubt. Embarrassing—maybe, if we failed. But fun—yes. I know most of them thought we were on drugs. But who else was there volunteering to save Continental?
The board approved the plan, and we were on our way. In spite of my reservations, I signed on. I truly believed the men and women of Continental could make the airline great again. We just had to get in there and do it. Strategic direction is never more crucial than during a crisis.
The same team that leads a company into a crisis is rarely able to get it back on track. The hard news about a turnaround is that you have no choice but to sweep out the old to make way for the new. Break the doom loop by apologizing for your mistakes and focus on delivering a better product. Ask the customer in seat 9C the right question. There is a huge gap between what customers want and what they are willing to pay for. Make sure you know the difference. The foundation of any successfully run business is a strategy everyone understands coupled with a few key measures that are routinely tracked.
Now, strategic direction is always important, but I would make the case that it is particularly important during a turnaround. In crisis situations, managers usually have limited time and financial resources. If you have very little money to spend and you have to spend it very quickly, you had better have a clear idea of the most leveraged plan of action.
Moreover, pressure and fear often make managers do erratic, inconsistent, even irrational things. Continental was a case in point. Oh sure, people paid lip service to strategy. I knew the fastest way to make money was to stop doing things that lose it. I sat the scheduling team down and started asking questions. There was silence. It would be cheaper. It was our story and we were sticking to it to borrow a line from a country-and-western song.
It was pure common sense. We needed to stop flying seat planes with only 30 passengers on them. We needed to get people to their destinations on time with their bags. We needed to start serving food when people were hungry. We needed to create an atmosphere where people liked coming to work. There was nothing complex about the Go Forward Plan: it was just a matter of logic and common sense.
To implement the plan immediately and in its entirety, we sold it to our coworkers with energetic zeal. We knew that the two of us could not save Continental on our own. But if we could get every employee headed in the same direction, we had a chance. At the same time, we chose 15 or so key performance measures to track relentlessly and to compare against our competitors.
Moreover, the measures had to be aligned with the Go Forward Plan. To monitor our performance in the marketplace, we decided to track our monthly load factor, revenue per available seat mile, and quarterly cost and profit margins. To monitor our product, we decided to track our monthly on-time performance, mishandled bags, customer complaints, and the rate of involuntary denied boardings. And to monitor the progress of our people plan, we decided to track turnover, sick leave, attrition, and on-the-job injuries.
Finally, and perhaps most important, to monitor our financial progress, we announced we were going to track cash. Let me tell you why. On Thanksgiving Day in , I discovered that we were going to run out of cash on January 17, —payday—and no one even knew it.
I mean, no one had a clue. As you all know, cash is the lifeblood of any business. Without it, all your great plans to have a product you are proud of and people who like coming to work every day are meaningless. The buzzer will go off before you attempt the last shot, and you will lose. The reason tells you a lot about how people act when their companies are in a self-destructive mode. Some of the finance people had regularly been inflating our profit projections by plugging in overoptimistic revenue estimates.
They felt pressured to do so, they said. In our business, revenue comes from credit card receipts. Naturally, our cash-flow forecasts always came in lower than projected because revenue and thus, credit card receipts was overstated.
Will things suddenly look okay in the cockpit? Will you land short of your destination? You bet. We could either declare bankruptcy or we could try to convince our creditors that the Go Forward Plan was going to work and then craft a very quiet restructuring.
It had to be quiet because if the press caught on, the headlines would send more customers running, taking our revenues with them. A couple of days later, I found myself in a room with our largest creditors. I took them through the current situation, what we were doing to fix it, and the help we needed from them.
They began ranting and raving. After a while, when it became apparent we were going nowhere, I got up to leave the room. You run the company. Maybe it was the hour days I was working. Maybe it was the fact that I had seen a client of mine do largely the same thing during a real estate restructuring, to great effect. Maybe I was just fed up with the fact that everyone seemed to have a problem but no one had any solutions. But a few minutes later, the creditors came to my office and asked me to come back in.
Things were much calmer. With the help of some talented financial experts, within a few weeks we had worked out a plan to restructure our debt. After that crisis was over, we knew we would never lose track of our cash again. I have never seen the team that managed a company into a crisis get it back on track. Instead, managers who have gotten a company into a mess are usually mired in a puddle of overbrained solutions.
No one in the company trusts them any more. They got us into this hole, the thinking goes, how are they going to have the sense to get us out of it? Those are the main reasons we decided to clean house when we took over at Continental. But there were others. People want to be led, not managed, in a time of crisis.
They were too busy trying to knock each other off. In fact, for 15 years, the way to get ahead at Continental was to torpedo someone and then take his or her job. Gordon and I were determined to present a united front. No one was going to come between us; if they tried, they were out. I will always remember my first meeting with all the officers at Continental. I want you to listen to what he has to say, and when he tells you to do something, you assume it is coming from me, and do it.
In the span of a couple of months, we replaced 50 of our 61 officers with about 20 individuals. We were cutting bureaucracy and costs but also putting important stuff—like the right culture—back in. All new hires had to have three qualities. Second, they had to be driven to get things done. Finally, they had to be team players, willing to treat everyone with dignity and respect in an extremely collaborative environment.
Every turnaround involves creating a new culture. We needed to create a culture at Continental where people liked coming to work. So when we let people go, we went out of our way to be fair by honoring their contracts and letting them resign with dignity. We are often asked how we got such great people in the span of only a couple of months, especially at a company that appeared to be going down the tubes.
The answer is, we started by hiring people we knew, many of whom were our friends. That expedited the process of screening candidates and greatly reduced our hiring mistakes. One of our techniques was to find people who were in a number two position in their current job and ask them to join Continental in the number one spot. We promised them full control of their domains. And we sold Continental as if it were already a winner.
We offered them options along the way, so if the shareholders won, they would win. We went through the entire organization—from the highest supervisors to the baggage handlers.
Many companies in crisis mode will change the CEO or president and leave it at that. In my opinion, that approach is like changing only the lead husky on a sled-dog team. Four dogs back, the look and smell stays the same. You have to do it fast, right away, and all at once. Every turnaround involves cost reduction, and Continental was no exception. Most companies that are in trouble, however, tend to develop a myopic focus on cost.
They forget to ask simple questions like, Do we have a product people want to buy?
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