Excerpt
Table of Contents
1. Introduction
2. Synopsis
2.1 Continental Airlines
2.2 Fletcher Jones
3. Theory of Business
3.1 Continental Airlines
3.2 Fletcher Jones
4. Competing Values Framework
4.1 Human Relations Model - Collaborate
4.1.1 Continental Airlines
4.1.2 Fletcher Jones
4.2 Open Systems Model – Create
4.2.1 Continental Airlines
4.2.2 Fletcher Jones
4.3 Internal Process Model - Control
4.3.1 Continental Airlines
4.3.2 Fletcher Jones
4.4 Rational Goal Model – Compete
4.4.1 Continental Airlines
4.4.2 Fletcher Jones
5. 4 + 2 Business Success Formula
5.1 Continental Airlines
5.2 Fletcher Jones
6. The Five Practices of Exemplary Leadership
6.1 Continental Airlines
6.2 Fletcher Jones
7. Conclusion
References
1. Introduction
The strengths and weaknesses of two corporate icons, Continental Airlines and Fletcher Jones and Staff will be analysed in this case study using various theories and frameworks to compare the two companies, with particular attention to contrasting the different leaders in each and where their approaches and leadership styles proved service or disservice to the success of their organisations. The key frameworks covered are: Drucker’s (1994) Theory of Business, Quinn et al’s (2011) Competing Values Framework, Nohria et al’s (2003) 4 + 2 Formula for Business Success and Kouzes and Posner’s (2002) The Five Practices of Exemplary Leadership. In order to differentiate Fletcher Jones the man in this case study, the company will be referred to as it was originally named, Fletcher Jones and Staff.
Quoted in relevant areas of the case study is Anthony Robbins, who is considered a world authority on the psychology of leadership and organisational turnaround.
2. Synopsis
2.1 Continental Airlines
In 1993, Continental Airlines was ranked tenth among the ten largest airlines in the United States. The company had been through two bankruptcies and was quickly approaching a third. In 1994, the idea of leading people through a turnaround nobody believed was possible, together with the belief that the people of Continental Airlines could make the company great again, inspired Greg Brenneman and Gordon Bethune to lead Continental Airlines from worst to best in its industry (Brenneman, 1998).
2.2 Fletcher Jones
The Australian clothing company and icon Fletcher Jones and Staff began with one man’s vision to build a workers’ cooperative where every employee would benefit from his company’s success. The organisation saw rapid expansion and success from the time of its establishment in the 1940s right through to the 1970s, with over 55 retail stores and close to 3,000 employees. In the 1970s, changes in the external environment such as the reduction of tax on imports, left the organisation fighting for survival and facing receivership (SBS, 2009).
3. Theory of Business
In his paper, Drucker (1994) presents the theory of business as the assumptions that a company makes about its market, customers, competitors, technology and its strengths and weaknesses. Drucker (1994) outlines four specifications of an effective theory of business and some of these will be used in this case study to analyse the challenges faced by the leaders of Continental Airlines and Fletcher Jones and Staff.
3.1 Continental Airlines
Drucker (1994) states that a company’s assumptions about its environment must fit reality. Until 1993, it seemed that Continental Airlines was not aware of its customers’ needs and wants, and therefore its assumptions were not realistic. For example, when Continental Airlines removed business class seating to fit more seats in their aeroplanes, the values and behaviours of their business traveler were not considered. As a result, they lost business travelers to other airlines and faced a significant drop in revenue (Brenneman, 1998).
Conversely, in 1993, Brenneman and Bethune sought out to build Continental’s theory of business around the environment’s reality, just as Drucker (1994) describes necessary. They paid particular attention to asking their staff the right questions. They surveyed former and prospect travelers to familiarise themselves with what the market wanted, asked them the right questions and used the information to form the company’s theory of business in direct response to their customers’ requirements (Brenneman 1998). Continental Airlines became aligned to the reality of its environment and it proved successful, just as Drucker (1994) assures.
“Successful people ask better questions, and as a result, they get better answers. Businesses succeed when their decision makers ask the right questions about product lines or markets or strategic planning.” -Anthony Robbins.
Continental Airlines saw a change in presidents ten times in ten years. With such a constant change in management, the company’s theory of business as defined by Drucker (1994) also changed constantly, creating a procedural culture of ‘do nothing and wait for new management’ throughout the organisation (Brenneman, 1998). In order to turn the company around, Brenneman and Bethune, knew they needed an effective strategy that was clear, focused and consistent as is Drucker’s (1994) description of a valid and effective theory of business.
When Brenneman first arrived at Continental, the staff could not tell him what the company’s strategy was. Brenneman and Bethune knew that for their ‘Go Forward Plan’ to be effective, the company’s mission and strategy had to be regularly communicated to everyone at Continental Airlines (Brenneman, 1998). Drucker (1994) specifies that a company’s theory of business must be known and understood throughout the organisation. Brenneman and Bethune actualised understanding by communicating through bulletins, newsletters, company magazines and videos (Brenneman, 1998).
Drucker (1994) also specifies that the theory of business must be tested constantly, and this was also evident in Brenneman and Bethune’s approach to turning Continental Airlines around. Brenneman and Bethune implemented routinely tracked measures and applied lessons learned (Brenneman, 1998). In doing so, Continental Airlines exhibited the preventative care Drucker (1994) discusses, and the importance of adapting a company’s behaviour according to new realities in its environment.
3.2 Fletcher Jones
In contrast to Brenneman and Bethune’s approach to new realities in their environment, Fletcher Jones and Staff did not rethink their theory of business when its external environment started changing. According to Drucker (1994), it is quite common for large organisations that have been successful for a long period of time to find themselves stagnating and not knowing how to move forward. When the Australian government opened the doors to tariff-free imports, Fletcher Jones and Staff found itself in this very position.
Fletcher Jones and Staff was built on protecting the garment manufacturing labour force in Australia and this is an example of the type of assumption Drucker (1994) describes in his paper as eventually no longer fitting reality and proved disastrous to the business (SBS, 2009). Fletcher Jones and Staff, in hindsight, considers that a more effective strategy would have been to sell the factories and maintain a staff co-operative in China or to have started importing, rather than hold onto the original theory of business which, although proved successful for many years, was no longer relevant (SBS, 2099))
During its successful years, when the Fletcher Jones and Staff theory of business was relevant, the company demonstrated strength in communicating it throughout the organisation as Drucker (1994) highlights is effective. For example, to communicate his mission of equality in the workforce, Fletcher Jones always included staff in decision-making that involved them, and managers shared the same dining areas and stood in the same queues as factory workers, with no additional privileges (SBS, 2009).
In his paper, Drucker (1994) discusses the importance of organisations to test their theory of business regularly to remain adaptable. He also deems early detection and diagnosis in environmental changes as necessary to avoid unmanageable crises. Both these discourses of Drucker (1994) proved compromising in the Fletcher Jones organisation, which did not diagnose the reality of changes in its environment quickly enough, in order to avoid its eventual doom.
In summary, by asking the right questions in the internal and external environment, subsequently working on a strategy that was clear and focused and, communicating this strategy continuously throughout the organisation, Continental Airlines’ theory of business was effective as Drucker (1994) predicts. As Drucker (1994) suggests is inevitable, when Fletcher Jones and Staff’s theory of business was no longer relevant due to significant changes in the external environment, the company faced gradual dissolve.
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