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Compassionate Leader Behavior, Relationships and Resilience: U.S. Airline Responses to Crisis of 911

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American Airlines ... Southwest Airlines ... Nobody has ever been furloughed at Southwest, and that is unprecedented in the airline industry. ... – PowerPoint PPT presentation

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Title: Compassionate Leader Behavior, Relationships and Resilience: U.S. Airline Responses to Crisis of 911


1
Compassionate Leader Behavior, Relationships and
Resilience U.S. Airline Responses to Crisis of
9/11
  • Jody Hoffer Gittell
  • Brandeis University
  • Kim Cameron
  • University of Michigan
  • Academy of Management Meetings
  • Denver 2002

2
Impact of layoffs
  • Deterioration in performance is common after
    organizations experience trauma
  • Organizational effects
  • destruction of interpersonal relationships,
    shared culture
  • reduced information sharing, increased duplicity
  • increased formalization, rigidity, resistance to
    change
  • increased conflict, anger and vindictiveness
  • increased selfishness, deterioration of teamwork
  • Individual effects
  • deterioration of mental and physical health
  • deterioration of family relationships

3
Coping with stress
  • Coping mechanisms reduce the impact of stress
  • Individual coping mechanisms
  • job control
  • self-efficacy
  • Group coping mechanisms
  • collective self-efficacy
  • group cohesion
  • social support
  • relational coordination
  • Group coping mechanisms could be useful for
    responding to the crisis is organization is
    facing -- but they are weakened by layoffs

4
Typical response to crisis
Short-term performance


Crisis
Layoffs
Longer-term performance
-

Relationships
5
Compassionate response to crisis
Short-term performance


Crisis
Layoffs
Longer-term performance
-

Relationships
-
Compassionate leader behavior

6
Airline responses to crisis of 9/11
  • Airline industry faced devastating losses
  • Decline in passenger traffic
  • If there was ever a stress test for a good
    business, this is it. (Kevin Murphy, analyst)
  • Major airlines cut their flights by 20 percent
  • Laid off 16 percent of their workers
  • But there were differences between airlines

7
USAirways
  • Despite USAirways huge losses, President
    Gangwal said he is optimistic about the airlines
    future. Specifically, he said the 9/11 attacks
    have allowed the airline to restructure and
    downsize in ways that would have been impossible
    otherwise. The attacks allow the airline to
    invoke force majeure clauses in its contracts --
    a legal term for an uncontrollable event that
    releases a party from its contractual
    obligations.
  • Gangwal said he expects the changes to be
    permanent. I dont want to take advantage of
    the situation, … but the events of 9/11 have
    opened certain doors for the company that were
    pretty much closed before.

8
USAirways
  • Weve been saying all along that management has
    been using force majeure not as an opportunity to
    get through a crisis, but to take advantage of a
    crisis.
  • (Head of USAirways pilot union)
  • USAirways leadership was replaced in early 2002
    due in part to its loss of credibility with
    employees throughout the company.

9
American Airlines
  • Attempted to use force majeure clauses in its
    contracts to avoid making severance payments.
  • In the past when weve gone through periods
    where were eliminating jobs, weve tried to do
    it so itll have as minimal impact as possible.
    In this instance, the financial situation is such
    that were just not able to do that. (Carty,
    CEO)
  • Its outrageous that American would ask the
    workers to support them on getting this massive
    federal bailout and then turn around to slap the
    workers in the face by failing to honor its
    commitments. (Union leader)

10
Continental Airlines
  • Laid off 20 percent of workforce, and was one of
    the first to announce layoffs.
  • But CEO Bethune announced that Continental would
    stand behind all severance and furlough pay
    provisions in its labor contracts.
  • Difficult for Continental due to high debt load.
    Some payments to debt holders were delayed.
  • Still, Bethune argued, We believe that employees
    should always be treated with respect and
    dignity, especially when we are forced to make
    these tough decisions.

11
Southwest Airlines
  • Avoided layoffs altogether, saying it was more
    important to take care of our people.
  • Reportedly losing million of dollars per day
    …Clearly we cant continue to do this
    indefinitely …but we are willing to suffer some
    damage, even to our stock price, to protect the
    jobs of our people. (Parker, CEO)
  • Helped to repair relationships that were under
    stress. What may have seemed like really big
    issues a month ago maybe arent quite the big
    issues now..When it gets bad everywhere else,
    its good here. (Union leader)

12
Reasoning behind compassionate leader behavior
  • Nothing kills your companys culture like
    layoffs. Nobody has ever been furloughed at
    Southwest, and that is unprecedented in the
    airline industry. Its been a huge strength of
    ours. Its certainly helped us negotiate our
    union contracts…We could have furloughed at
    various times and been more profitable, but I
    always through that was short-sighted. You want
    to show your people that you value them and
    youre not going to hurt them just to get a
    little more money in the short term. (Kelleher,
    Chairman)

13
Reasoning behind non-compassionate leader behavior
  • The old employment system of secure, lifetime
    jobs with predictable advancement and stable pay
    is dead. What killed it were changes in the way
    firms operate that brought markets inside the
    organization …systematically undermining the
    complex system of human resource practices that
    made long-term careers the staple of corporate
    life.
  • (Cappelli, 1999, The New Deal at Work Managing
    the Market-Driven Workforce)

14
Performance effects of layoffs
Nine US major airlines included in sample.
Spearmans rank correlation coefficients are
shown.
15
The role of financial reserves
  • But compassionate leader behavior is constrained
    by financial factors.
  • To make the decision not to layoff, Southwest had
    to be financially able to sustain short-term
    losses.
  • This ability was not due to accident or good
    fortune. Rather due to long-standing policy of
    maintaining low debt levels.

16
The role of financial reserves
  • Most people think of us as this flamboyant
    airline, but were really very conservative from
    a financial standpoint. We have the best balance
    sheet in the industry. Weve always made sure
    that we never overreached ourselves. We never
    got dangerously in debt, and never let costs get
    out of hand.
  • (Kelleher, Chairman)
  • Without sufficient financial reserves,
    organizations may be forced to break commitments
    in times of crisis.
  • With plentiful reserves, organizations can
    bolster their relationships by demonstrating
    compassion in crisis.

17
Financial reserves and layoffs
Nine US major airlines included in sample.
Spearmans rank correlation coefficients are
shown.
18
Compassionate response to crisis The role of
financial reserves
Short-term performance


Crisis
Layoffs
-

Relational reserves
Longer-term performance
-
Compassionate leader behavior


Financial reserves
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