Former Continental CEO Shares Words of Wisdom
May 23, 2005
WASHINGTON Perhaps the mutual fund industry could borrow a page or two from the playbook of Gordon M. Bethune.
Bethune is best known for his days as chairman and CEO of Continental Airlines, where he orchestrated what is easily the greatest corporate turnaround of the 1990s.
When Bethune left Boeing to become president of Continental in 1994, the carrier was at rock bottom-despised by travelers, shareholders and even its own employees.
But since the company instituted Bethunes four-point, common sense business plan, Go Forward, shortly after his arrival, its stock has risen 1,700%, and the carrier is now consistently rated highest in J.D. Power & Associates quality rankings.
A big reason for that meteoric rise, Bethune told attendees of the Investment Company Institute annual convention here, was the buy-in he got from employees.
Bethune asked the crowd of 1,250 fund industry executives if they knew of a single successful business whose employees dreaded going to work in the morning. There arent any, he said flatly, adding that Continental was the poster child for dysfunction until he implemented a culture where everyone, from executives to baggage handlers, treated each other with dignity and respect.
From there, Bethune, whose colorful remarks provided levity to an otherwise business-as-usual industry conference, offered a cash incentive. Every month that Continental finished No.1 in monthly airline performance ratings, employees received a thank-you check for $65. As evidence of the incentives success, he recalled the August 2003 blackout, when carriers like United Airlines and Delta Airlines cancelled nearly 30 flights each out of New Yorks LaGuardia and JFK airports. In Newark, Continental cancelled just seven, and as a result passengers came streaming across the river.
Thats because our employees wanted to fly, said Bethune, who is both a Harvard Business School graduate and a licensed airframe and power plant mechanic.
And then we only accepted the highest-paid tickets, he added with a laugh, and had one of our best months ever. I wished they would shut the lights out in New York every weekend!
Bethune also recalled the flight attendant who refused to wait for the 15 meals one of Continentals caterers forgot to deliver. To retrieve the meals, it would mean the plane would be 20 minutes late to its destination and its ranking, along with her incentive check, would be jeopardized.
So she shut the cabin door on the caterer and ended up trading the meals of 15 institutional investors for booze, he said, drawing raucous applause. She got what she wanted and the institutional investors got what they wanted!
In conclusion, Bethune warned the industry: Dont let monetary incentives compromise a companys goals.
He then told a popular airline industry joke whereby a pilot told the co-pilot to plot a course that would put them in Los Angeles with the perfect amount of leftover fuel. When just one-third of the way into the flight, the pilot realized the co-pilots course would run them out of fuel mid-way, he began pointing at the nearly-empty fuel gauge and berating his colleague for bad planning.
To solve their dilemma, the co-pilot calmly placed his finger on the fuel gauge needle and rotated it back to full.
Dont put too much pressure on your employees to make it at all costs, or theyll adjust the fuel gauge, he said, alluding to the market-timing and late-trading brouhaha of the past 20 months.
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