Harvard Case - People Express (A)
"People Express (A)" Harvard business case study is written by Leonard A. Schlesinger, Debra Whitestone. It deals with the challenges in the field of Human Resource Management. The case study is 25 page(s) long and it was first published on : Apr 17, 1983
At Fern Fort University, we recommend People Express implement a strategic shift towards a more structured and sustainable model, focusing on employee development, talent retention, and a clear, unified organizational culture. This will involve addressing key issues in hiring, training, leadership, and communication to create a more robust and resilient organization capable of handling future growth and challenges.
2. Background
The case study focuses on People Express, a low-cost airline founded in 1981 by Donald Burr. The airline rapidly gained popularity by offering low fares and innovative customer service. However, its rapid growth led to challenges in managing its workforce, maintaining operational efficiency, and adapting to changing market conditions. The case study highlights the company's struggles with employee morale, turnover, and financial instability, ultimately leading to its merger with Continental Airlines in 1987.
The main protagonists of the case are Donald Burr, the founder and CEO, and the People Express employees who were instrumental in the company's initial success but faced challenges as the company grew.
3. Analysis of the Case Study
Organizational Culture and Leadership: People Express's initial success was largely attributed to its strong, entrepreneurial culture built on employee empowerment and a shared sense of purpose. However, this 'family' atmosphere became unsustainable as the company grew. The lack of formal structure and clear leadership roles led to confusion, inconsistency, and a decline in employee morale.
Human Resource Management: The company's hiring practices, while initially effective in attracting motivated individuals, lacked a structured approach to talent acquisition and development. This resulted in a lack of standardized training, inconsistent performance management, and high employee turnover.
Strategic Planning and Operations: The rapid growth of People Express outpaced its ability to develop a robust strategic plan and implement efficient operational processes. This led to inefficiencies, cost overruns, and a decline in service quality.
Financial Performance: The company's focus on low fares and high volume led to a thin profit margin, making it vulnerable to economic downturns and competition. The lack of a sustainable financial model contributed to its financial instability.
Change Management: The company struggled to manage the rapid changes it faced due to its growth and the evolving airline industry. The lack of a structured approach to change management led to resistance from employees and a decline in organizational effectiveness.
4. Recommendations
1. Redefine and Reinforce Organizational Culture:
- Develop a clear mission statement and set of core values that emphasize teamwork, customer service, and employee development.
- Implement leadership training programs to develop managers who can effectively lead and motivate employees.
- Foster a culture of open communication and feedback to address employee concerns and promote collaboration.
2. Implement a Robust Human Resource Management System:
- Establish a structured hiring process that emphasizes talent acquisition, skills assessment, and cultural fit.
- Develop a comprehensive employee training program that provides both technical and soft skills development.
- Implement a performance management system that provides regular feedback, performance goals, and opportunities for career advancement.
3. Develop a Strategic Plan and Operational Efficiency:
- Conduct a thorough market analysis to identify competitive advantages and potential threats.
- Develop a long-term strategic plan that outlines the company's goals, growth strategies, and financial projections.
- Implement lean management principles to optimize operational processes, reduce costs, and improve efficiency.
4. Enhance Financial Stability:
- Develop a sustainable pricing strategy that balances low fares with profitability.
- Diversify revenue streams by exploring ancillary services and partnerships.
- Implement robust financial controls and reporting systems to monitor performance and manage risk.
5. Foster a Culture of Continuous Improvement:
- Encourage innovation and employee suggestions to improve processes and customer service.
- Implement a system for tracking and measuring key performance indicators (KPIs) to monitor progress and identify areas for improvement.
- Regularly assess the effectiveness of implemented strategies and make adjustments as needed.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations focus on building a strong organizational culture, developing talent, and improving operational efficiency, all of which are essential for achieving the company's mission of providing affordable air travel.
- External customers and internal clients: The recommendations aim to improve customer service and employee satisfaction, which are critical for long-term success.
- Competitors: The recommendations emphasize developing a sustainable business model and operational efficiency, which are crucial in the competitive airline industry.
- Attractiveness - quantitative measures: The recommendations are expected to improve financial performance, increase market share, and enhance the company's long-term viability.
- Assumptions: The recommendations assume that People Express can successfully implement the proposed changes and that the airline industry will continue to grow.
6. Conclusion
People Express's initial success was built on its unique and innovative culture. However, its rapid growth outpaced its ability to adapt and evolve. By implementing a structured approach to organizational culture, human resource management, strategic planning, and financial stability, People Express can overcome its challenges and achieve sustainable growth.
7. Discussion
Alternative options include:
- Maintaining the existing culture: This would likely lead to continued instability and employee turnover.
- Merging with another airline: This could provide financial stability but may result in the loss of People Express's unique culture.
The key assumptions of the recommendations are that People Express can successfully implement the proposed changes and that the airline industry will continue to grow. Risks include resistance to change, inadequate funding, and unforeseen market fluctuations.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline the specific steps, timelines, and resources required to implement the recommendations.
- Communicate the changes to employees: Open communication and transparency are crucial to gain employee buy-in and minimize resistance.
- Monitor progress and make adjustments: Regular monitoring and evaluation are necessary to ensure that the recommendations are effectively implemented and achieving the desired results.
By taking these steps, People Express can transform itself from a rapidly growing, but unsustainable, organization into a robust and resilient company capable of achieving long-term success in the competitive airline industry.
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Case Description
Describes the start up, strategy, organizational design, and operations over the first eighteen months of the airline. Focuses on the creative use of human resources as an integral part of the business strategy.
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