The CEO of Scandanavian Airlines stresses strong communication within his organization.
The man who's built one of the most successful airlines in the world has some surprising notions about how to run a business
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The demise of People Express Airlines has left us with few heroes in the airline industry. In place of Don Burr, we find ourselves with the likes of Frank Lorenzo -- tough guys with little imagination, hard as nails, treating their people like so many interchangeable parts on a 747. The Europeans are more fortunate. They have Jan Carlzon, president and CEO of Scandinavian Airlines System Group, and Sweden's answer to Lee Iacocca. He is certainly tough enough: he had to be in order to turn around a major international airline in an era of brutal competition. Yet his management style has much more in common with Burr's than Lorenzo's -- or even Iacocca's.
Scandinavian Airlines System (SAS) was flying into a headwind when Carlzon took command of it in 1981. The company was in the midst of compiling a loss of $20 million, its second straight losing year. Morale was low. Employees were being laid off. Service was being slashed. The market for passenger and freight services was stagnant. Carlzon immediately set out to make SAS "the best airline in the world for the frequent business traveler." Toward that end, he invested $45 million to upgrade every detail of service for the business traveler, while cutting nearly as much from programs directed at tourists.
The most important change, though, came in the way he treated SAS employees. To be market driven, he believed, the company had to be successful in its 50,000 "moments of truth" every day -- those brief moments that occur whenever an SAS employee delivers a service to one of its customers. That meant turning the organizational chart upside down. No longer were middle managers to spend their time making sure instructions were followed. Now, they were to support the frontline people who have direct contact with customers, enabling them to make decisions and solve problems on the spot.
And the results? SAS returned to profitability the year after Carlzon took over. Two years later, in 1983, SAS won Air Transport World's Airline of the Year award, and in 1986 it received that magazine's Passenger Service award. As Europe looks toward deregulation in 1992, SAS ap-pears to be one of the strongest competitors in the field. Meanwhile, Frank Lorenzo has his work cut out for him.
Inc. editors George Gendron and Stephen D. Solomon visited with Carlzon in his office in New York City.
INC.: You don't seem to fit the image of the modern airline president.
CARLZON: I agree. I think there's an expectation that the president of an organization such as mine should be tough, ruthless, driving people to do their best. Of course, I think my way gets people to really do their best.
INC.: How's that?
CARLZON: In my experience, there are two great motivators in life. One is fear. The other is love. You can manage an organization by fear, but if you do you will ensure that people don't perform up to their real capabilities. A person who is afraid doesn't dare perform to the limits of his or her capabilities.
INC.: Why not?
CARLZON: Because people are not willing to take risks when they feel afraid or threatened. But if you manage people by love -- that is, if you show them respect and trust -- they start to perform up to their real capabilities. Because, in that kind of atmosphere, they dare to take risks. They can even make mistakes. Nothing can hurt.
INC.: Now wait a minute. Those are wonderful sentiments, but we're talking about running a business here. What do you mean, employees "dare to take risks'? Are you sure you want them to?
CARLZON: Absolutely. Let me give you an example from my own company. It's a story about a flight that was delayed because of heavy snowfall in Stockholm. Normally, we sell coffee, cookies, and sandwiches on domestic flights. But because of the delay and the weather, the purser on this flight decided to give the snacks away. Since they would be free, she figured she'd need enough for 80% to 90% of the passengers. So she called SAS Service Partner, our catering company, and asked for that amount. But the man in charge said she couldn't have it because it was out of our routine. She said she'd take responsibility. He still refused.
What could she do? Well, she realized that Finnair, which is one of our competitors, is also a strong customer of Service Partner. So she took the cash she had and went to the purser on the Finnair flight standing next to hers and asked him to order 60 coffees and cookies. She said, "I will pay for it if you can put it on the Finnair account." So he called Service Partner, and the man there couldn't refuse because Finnair is an extraordinary customer. The snacks were delivered, and she carried them in her hands to the SAS flight. To me, this is an extremely good example of a person daring to grab responsibility.
INC.: OK, but let's be realistic. That sort of individual initiative can go too far. Employees can just as easily spend too much money rectifying a problem or give away what they shouldn't.
CARLZON: Yes, I suppose that has happened, but such mistakes aren't important. What's the danger of giving away too much? Are you worried about having an oversatisfied customer? That's not much of a worry. You can forget about an oversatisfied customer, but an unsatisfied customer is one of the most expensive problems you can have.
