The airline industry has been in a world of hurt the last several years, basically since 9/11. Terrorism, high fuel prices, global competition, and a topsy-turvy market have made airline management jobs the territory of the egocentric, gutsy, or just plain stupid. Most of the managers… after the next few paragraphs you’ll understand why I don’t call them leaders… have pulled their airlines out of chapter 11 by bashing unions into submission while removing pillows from flights. Not exactly the best way to engender employee support and customer appreciation.
It didn’t have to be that way, and Gerald Grinstein, who just retired as Delta’s CEO, shows us how to turnaround the most difficult of situations by leading, not managing.
Gerald Grinstein managed to cut Delta’s costs deeply while winning unusual loyalty from the company’s largely non-union workforce. A typical gesture for the grandfatherly 75-year-old: Late one night last year, he scrubbed carpets and seats of a 767, joining other senior executives and 400 front-line employees who volunteered to deep-clean planes for no pay.
Going to the gemba. Delta’s employees knew they had a different kind of CEO on their hands from day one.
One of Mr. Grinstein’s first acts as CEO was to go where few Delta executives had ventured: He strolled from his office, across Delta’s sprawling campus of low-slung red brick buildings near Hartsfield-Jackson Atlanta International Airport, to eat lunch in the cafeteria. "You could see he was trying to break down this us-and-them type of barrier," said then chief operating office Jim Whitehurst.
He knew that a successful organization must respect people and treat them right. There would be hard decisions ahead, but being open and honest would pay dividends. And it did. He eventually won more concessions from his pilots, flight attendants, and mechanics than he had even asked for.
In true lean fashion, Grinstein gave his employees a stake in the business, then used visual indicators to keep them continually connected to that stake.
In 2005, he started paying employees bonuses up to $100 in months in which Delta ranked among the top three airlines in on-time arrivals, completed flights and baggage handling. Large digital boards in work areas tracked service improvements. Nearly $50 million in bonuses were paid out over 2005 and 2006.
The employee financial interest in the company went far deeper. They eventually received a 3.5% equity stake, and $400 million in cash, raises, and other pay. Grinstein himself only took a $338,000 salary, and directed the board to use his stock awards to create an emergency assistance fund for the employees. Company officers received no salary raises until wages for frontline workers reached the industry standard.
Contrast that with the compensation packages at competitor airlines, where the managers were focused on beating concessions out of unions. As we’ve said before, we’re no fan of unions, but at the same time unions are often the result of pathetic management. You reap what you sow.
Communication and partnership was critical. The leadership team was making some very difficult and gutsy decisions. By including the employees in those decisions, Grinstein won support and commitment.
Mr. Grinstein granted full access to board meetings for one of five employees elected by Delta’s non-union workers to represent them in high level discussions with management. Starting in early 2005, Chris Muise, a safety and compliance manager, attended as directors discussed some radical plans. "We were almost literally mortgaging the company." Mr. Muise said later. "You couldn’t see that effort, that absolute commitment, from outside the board room."
The employees returned the favor when US Airways Group announced an $8 billion hostile bid for Delta. The employees launched an opposition campaign, and outside investors recognized the power of positive employee morale. Creditors eventually rejected the bid and supported Grinstein.
When Grinstein retired, workers gave him five months of retirement dinners and a $25,000 ad in Delta’s in-flight magazine. His successor, Richard Anderson, is known for contentious labor issues. He would be wise to think long and hard about Grinstein’s example of true leadership. As would most of us.