Changing the Culture at

XYZ Airlines

ANORA.BARIUAN.GABATO.MALIBIRAN

Opening Prayer

Together, let us pray our Lasallian prayer:

(All) I will continue, O my God, to do all my actions for the love of You.

St. John Baptist de La Salle,

(All) Pray for us

Live Jesus in our hearts.

(All) Forever!

Leader: Let us be aware that we are in the holy presence of God.

(All) In the name of the Father….

JAMES SANCHEZ

AIRLINES

GROUP MEMBERS

CONSULTANT THREE

CONSULTANT ONE

CONSULTANT TWO

SYNTHESIS

Least Punctual Airline in Europe

38% long-haul flight left within 15 min.

SYNTHESISPerformance:

Below 60%

Low Labor Cost

SYNTHESISLACK MONEY

€415 million present fiscal year

€1,000 million in two years

LOSSES

SYNTHESIS

Passenger Volume

Passenger Volume

8%-10%

4%-5%

SYNTHESIS

Short Haul Long Haul

SYNTHESISOVERSTAFFING

INEFFICIENCY

AIR FORCE DOMINANCE

SYNTHESIS

Volunteers: +7000 more of needed lay-offs

SYNTHESIS

Embarrassing Service Levels

TERRIBLE IMAGE

Airline to be avoided at all cost

AIRLINES

SYNTHESIS

SYNTHESISCut costs sharply and fast €750

per minute

Time is RUNNING OUT

SYNTHESIS

SYNTHESIS

Transportation Service

CULTURE CHANGE

POINT OF VIEW

James SanchezCEO of XYZ Airlines

POINT OF VIEW TO CONSIDER

PROBLEMTerrible Image

Poor Service Levels Inefficiencies

Increasing Costs

FACED WITH

Divided Corporate Culture

How should Sanchez change the culture of XYZ towards a “service culture” to return to

profitability?

OBJECTIVES

To unify the corporate culture of XYZ from a

“transportation culture” towards a “service culture”.

To decrease cost, improve image and service levels, and return XYZ to profitability immediately.

Short-Term Objective

Long-Term Objective

AREAS OF CONSIDERATION

ClanRetail

PharmaceuticalsHealthcare

AdhocracyPrinting/Publishing

EducationComputer Hardware &

Software

HierarchyTransportation

BankGovernment

MarketService

Food and BeverageGeneral ManufacturingProperty Development

Organic Process

Mechanistic Process

Inte

rnal

Mai

nten

ance

External Positioning

Deshpandé, Farley and Webster Model of Organizational Culture Types (*Webster’s Model)

Teamwork,Sense of Family,

Developing human

resources

Creativity, Adaptability,

Entrepreneurship, Innovativeness

Order, Rules, Regulations,

Stability

Competitive advantage, Goal

achievement, Market

superiority

AREAS OF CONSIDERATIONFour Step Organizational Change Framework

Recognize the need

for Change

Unfreeze Change Refreeze

ALTERNATIVE COURSE OF ACTION• Freezing pay increases• Employing advertising to improve its image• Reengineering its process to improve efficiency• Engaging senior management to foster change

ACA 1: Execute Incremental Changes

• Reduce senior management and staff• Remove detrimental and hierarchical traditions• Gain the support of young managers to foster change• Adopt the resourceful, high frequency, and quick turnaround

culture of the Short-Haul Group for all its flights• Maintain the cosmopolitan feel for its long-haul flights• Establish a marketing and after-sales support team.

ACA 2: Implement Sweeping Reforms

within XYZ

• Retain senior management and reduce staff• Freeze pay increases for a year• Sell assets such as properties and surplus aircraft and closing routes to

reduce cost• Gain the support of both young and senior managers to foster culture

change and remove detrimental hierarchical traditions.

ACA 3

ALTERNATIVE COURSE OF ACTION• Freezing pay increases• Employing advertising to improve its image• Reengineering its process to improve efficiency• Engaging senior management to foster change

ACA 1: Execute Incremental Changes

• This may achieve objectives without laying off staff, at the same time encountering the least resistance both from XYZ’s senior management and employees.PROS

• The employees of XYZ may not be satisfied in the long run without pay increases, especially considering the strength in employee demand and liberalization of the labor market.

• About 30% of senior management are not going to be able to adapt to the new “service culture”, which would make implementing changes in organizational culture quite difficult.

• May take much time, which XYZ currently does not have since it is losing money at a rate of €750 per minute. By the end of the year, XYZ may become insolvent.

CONS

ALTERNATIVE COURSE OF ACTION

• Will be able to achieve his short-term objective of decreasing cost, improving image and service levels, returning XYZ to profitability

• Will be able to achieve long-term objective of unifying the corporate culture of XYZ towards a “service culture”

PROS

• The changes to be implemented by Sanchez might encounter stiff resistance from XYZ’s employees.CONS

• Reduce senior management and staff• Remove detrimental and hierarchical traditions• Gain the support of young managers to foster change• Sell assets such as properties and surplus aircraft and closing

routes to reduce cost• Adopt the resourceful, high frequency, and quick turnaround

culture of the Short-Haul Group for all its flights• Maintain the cosmopolitan feel for its long-haul flights• Establish a marketing and after-sales support team.

ACA 2: Implement Sweeping Reforms

within XYZ

ALTERNATIVE COURSE OF ACTION

• May achieve short-term objective without laying off senior management at the same time encountering the least resistance from XYZ’s employees.

• No drastic movement on upper management only on mid-level management.

PROS

• Culture change might take a longer time to implement since senior management who oppose to change are still retained. CONS

• Retain senior management and reduce staff• Freeze pay increases for a year• Sell assets such as properties and surplus aircraft and closing routes to

reduce cost• Gain the support of both young and senior managers to foster culture

change and remove detrimental hierarchical traditions.

ACA 3

RECOMMENDATION

Decision Criteria Weight ACA 1 ACA 2 ACA 3Decrease cost immediately

30% 10% 20% 15%

Improve image 15% 10% 20% 10% Improve service levels 15% 10% 20% 15% Unify the culture of XYZ towards a service culture

40% 15% 30% 15%

Total 100% 45% 90% 55%

RECOMMENDATIONACA 2: Implement Sweeping Reforms within XYZ

1• Eliminate overstaffing in XYZ, beginning with top management dominated by the Air Force

officers down to the bottom

2• Capitalize on young managers who would support initiatives for change and who are

presumed to be more dynamic than their Air Force counterparts.

3• Eliminate the barrier between the Short-Haul Group in Terminal A, and the Long-Haul

Group in Terminal C, in the process obtaining the best-practices from each group.

4• Develop its marketing, sales, and after-sales service to become a more customer focused,

service-oriented company.

IMPLEMENTATION PLANAction Plan Responsible

PartiesTimeline

1Conduct focused group discussions to draft a new mission-vision statement.

CEO, HR, young managers, senior managers and all employees

1 month (1st month)

Plan cost reduction efforts.

CEO, all managers 2 months (1st to 2nd month)2

3

Formulate change management and communication plan

CEO, young managers, Corporate Communications, H.R.

2 months (1st to 2nd month)

Communicate to employees changes to be made including movement of positions within the company (promotions), and foster consensus

CEO, remaining senior managers, young managers

1 month (3rd month)

4

IMPLEMENTATION PLANAction Plan Responsible

PartiesTimeline

5

Retire current senior management and reduce staff by offering retirement and/or severance packages; promote younger managers to vacated positions.

CEO, HR 3 months (4th to 6th month)

Engage outsourcing services, Transition period for outsourced services.

CEO, HR, Managers, Outsourcing Company

3 months (4th to 6th month)6

7

Adopt best practices from the Short-Haul and Long-Haul Groups to attain low delays in flight departures and excellent customer service

All employees 3 months (4th to 6th month)

IMPLEMENTATION PLANAction Plan Responsible

PartiesTimeline

8

Retire current senior management and reduce staff by offering retirement and/or severance packages; promote younger managers to vacated positions.

CEO, Finance, Legal

3 months (4th to 6th month)

Implement cultural changes, such as removal of hierarchical traditions, establishment of goal oriented and market superiority philosophies, encouragement of participation in implementing new mission vision statement.

All employees 4 months (4th to 7th month)

9

10

Establish a marketing, and after-sales support team; and implement marketing strategies.

CEO, new VP for Marketing, Marketing Team

3 months (4th to 6th month)

IMPLEMENTATION PLAN

Action Plan Responsible Parties

Timeline

11

Consolidate and rationalize routes, enter into code-sharing agreements, open profitable routes

CEO, Finance, Strategy, Marketing, Legal

2 months (7th to 8th month)

Refreeze and engage in continuous improvement

All employees ongoing (8th month and up)12

LEARNING POINTSThere are many different types of organizational cultures, which vary from one corporation to another or from one industry to another. These organizational cultures are dictated by different factors, including external factors such as government regulation, and kind of customers, as well as internal factors such as philosophies of the founder, influence from management, and adherence to these cultures.

LEARNING POINTS

Organizational culture may be difficult to change, especially if these cultures have been entrenched into an organization. Nevertheless, it is possible to implement changes to organizational culture, whether transformational or incremental, so long as proper and well-crafted plans and measures are implemented.

LEARNING POINTS

It is entirely permissible for organizations to adopt varying cultures, including cultures that are counter-intuitive or deviant from industry norm. A transportation culture (internal-mechanistic), for instance, can transition to a service culture (external-mechanistic), which may allow the transportation company to service its customers better.