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BARRIERS TO ADOPTING HIGH COMMITMENT CULTURES:

AIRLINE ATTEMPTS TO IMITATE SOUTHWEST
Andrew von Nordenflycht
Simon Fraser University
June 2011
Abstract
This research project proposes to develop insights regarding the barriers to adopting a high
commitment culture via in-depth comparisons of attempts (or lack thereof) of incumbent airlines to
change their cultures. It compares the pre-eminent high-commitment airline, Southwest, with two
incumbents: Continental, which successfully transformed its culture, and American, which launched an
effort to transform its culture whose success has yet to be determined. The research reveals that a core
element of a high commitment culture is an involvement-based exercising of authority. Preliminary
insights into the barriers to and facilitors of adopting a high commitment culture are discussed.

1. Introduction
In a number of case studies beloved by the Strategy field, such as Toyota, Nucor (Ghemawat &
Stander, 1992) and Southwest Airlines(O'Reilly & Pfeffer, 1994; Porter, 1996), a core component of the
focal firms sustained advantage appears to be the underlying corporate culture. These cultures might be
called high-commitment cultures, in that they foster greater employee commitment to the firm, which
in turn induces employees to exert greater discretionary effortto deliver consummate performance
rather than just perfunctory compliance (Adler, 1992).
These high-commitment cultures are often used to illustrate the type of resource that can be a
source of sustainable advantage, since they seem to fit Barneys (1986; 1991) criteria for hard-to-imitate
resources: causal ambiguity, social complexity, and historical contingency. This perspective is reinforced
by the tendency of the cases to provide an ad hoc laundry list of organizational practices that create and
support the high commitment culture. Ultimately, however, this perspective is analytically and

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managerially frustrating, since focusing on the complexity and ineffability of such cultures offers little in
the way of actionable advice.
However, organizational researchers outside of Strategy, particularly those in Human Resource
Management, have developed a substantial literature on the practices that tend to yield high
commitment cultures. In particular, research has shown that a bundle of specific organizational
practices, often labeled a high commitment work system, is associated with higher productivity in a number
of different industries (Bailey, 1996; Berg, Appelbaum, Bailey, & Kalleberg, 1996; Huselid, 1995;
Ichniowski, Kochan, Levine, Olson, & Strauss, 1996; Kochan, Katz, & McKersie, 1986; Pfeffer, 1998),
including the contexts for Toyota (autos) (MacDuffie, 1995) and Nucor (steel) (Ichniowski & Shaw,
2003; Ichniowski, Shaw, & Prennushi, 1997). Thus a high commitment culture may not be so causally
ambiguous. And there may be much more actionable advice to offer managers regarding creating and
sustaining a high commitment culture. This perspective shifts the main research question from how to
specify and deal with inarticulable resources to what are the barriers to adopting reasonably wellspecified practices that yield such resourcese.g., given the benefits of a high commitment culture as
well as substantial knowledge about the ingredients for building and sustaining one, why do some firms
still not adopt those ingredients?
Yet even in the HR literature on high commitment systems, much less is known about this
question. It may be that despite being well-specified, the practices are nonetheless difficult to adopt for
reasons that are less well-established. A handful of empirical studies has not consistently identified
predictors of which incumbent firms will adopt these practices (Ichniowski & Shaw 1995, Pil &
MacDuffie 1996). For this reason, more detailed observation and analysis of the barriers to adoption of
high commitment practices seems a valuable research direction, not just for the HR field, but for the
Strategy field as well.

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This research project strives for such insights by comparing one of these classic firms
Southwest Airlineswith a number of its major rivals and their attempts (or lack thereof) to achieve
the high commitment culture that Southwest enjoys. The studys objectives are two-fold: (1) to identify
more specifically the practices that seem to distinguish airlines with some degree of a high commitment
culture from those that do not; and (2) to identify the specific barriers to (and facilitators of) adopting
the practices that underpin high commitment cultures.
The study is based on in-depth research into the attempts of two major airlines to restructure
their employment relationships to become more competitive. Both were long-time incumbents
characterized by a traditional, hierarchical, compliance-based (Walton 1985) employment relationship
and culture. One of these airlines, Continental Airlines, successfully transformed to a high commitment
culture. The second, American Airlines, explicitly initiated such an attempt but with disappointing
results as yet.
On the basis of these in-depth comparisons, the paper develops two arguments. First it
contends that a high commitment culture stems not just from a bundle of HR-related practices, but
alsoand perhaps more fundamentallyfrom a more singular and pervasive practice: namely, an
alternative way of exercising authority by managers throughout the firm. This alternative authority is
involvement-based, rather than a command-based (or unilateral). Second, the paper discusses preliminary
conclusions regarding barriers to and facilitators of adopting involvement-based authority. In particular,
I suggest that some practices may be simple in concept, yet still hard to imitate because they require
effort and investment that seems to be avoidable in the short-term. In other words, some competences
might be hard not because they are like rocket science or brain surgery, but because they are like
diet and exercise.

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2. High Commitment Culture: Barriers to Adoption
While the resource-based view of the firm is based on a fundamental and reasonably
uncontroversial premisethat unique, inimitable resources or competencies are an important source of
advantage and a key source of persistent differences in performance across firms (Barney, 1991;
Penrose, 1959; Wernerfelt, 1984)it is also somewhat frustrating as a framework for analysis and
action. The very properties that make a resource or competence a source of sustainable advantage
causal ambiguity, historical contingency, social complexity (Barney, 1991)also make them hard to
identify and measure, much less to manage actively and coherently.
To make the resource-based perspective more tractable and actionable, there are two critical
research fronts. One is to specify the nature of capabilities in much more detail and nuance and to
identify common patterns and characteristics across a range of seemingly idiosyncratic competences in
diverse settings. Most of the progress on the first front has been made in the specific realm of innovative
competencies (such as R&D and product development). Characteristics of highly innovative firms
across various settings have been identified, such as architectural competence (Henderson & Clark,
1990; Henderson & Cockburn, 1994), absorptive capacity (Cohen & Levinthal, 1990), and crossfunctional integration (Clark & Fujimoto, 1991; Henderson & Cockburn, 1994). However, the
conceptual conundrum here is that if a competence is easy to specify and understand, it may no longer
be a source of competitive advantage since it will be easy to imitate.
A second and important research front, then, is to identify reasons why even specifiable
organizational practices that seem to underlie important categories of competence might still be hard to
adopt or imitate. Richer development of our theories of imitation barrierselaborating on social
complexity and historical contingencyshould offer more useful, actionable precepts to managers.
There has also been some (but not nearly enough) work on the second front, with empirical studies

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testing theories about which firms will be more likely to adopt the identified practices, based on
theories about the barriers to adoption (Cockburn, Henderson, & Stern, 2000).
Another dimension on which we may be able to make considerable progress on these two
fronts is corporate culturein particular, a high-commitment culture (as distinct from the general
notion of a set of focal points (Kreps 1991), idiosyncratic to a given firm), which yields discretionary
effort by employees in the service of the firm. Culture has been identified as the type of resource that is
well-suited to being a sustainable source of advantage because it is hard to trade and hard to imitate
(Leonard-Barton 1992, Peters & Waterman 81, Barney 86), being deeply embedded in the
organizations routines and in the minds of each of its members.
Fortunately, organizational scholars outside of the Strategy field have made progress on this
dimension, in terms of identifying practices that tend to build and support high commitment cultures.
Specifically, there is a substantial literature on what have been termed high commitment work
systems (or high involvement or high performance) (Bailey, 1996; Berg et al., 1996; Huselid, 1995;
Ichniowski et al., 1996; Ichniowski & Shaw, 2003; Ichniowski et al., 1997; Kochan et al., 1986;
MacDuffie, 1995; Pfeffer, 1998). This system comprises a set or bundle of complementary practices
around employment and work organization that are often found to be associated with higher
productivity via greater employee commitment and thus greater levels of discretionary effort. While
there is on-going debate about just which specific practices are essential to the bundle, there is growing
evidence that (a) these practices only improve productivity in combination, not independently; and (b)
these practices improve productivity in a wide range of industries and are not necessarily dependent on
a firms product market strategy (Pfeffer 1998). Pfeffer (1998) identifies seven elements that are usually
considered part of a high commitment system: (1) employment security; (2) selective hiring of new
personnel; (3) self-managed teams and decentralization of decision-making; (4) comparatively high

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compensation contingent on organizational performance; (5) extensive training; (6) reduced status
distinctions; and (7) extensive sharing of financial and performance information.
But this literature, too, has made much less progress on the second front: understanding why
many incumbent firms have not adopted these high commitment practices in the face of the superior
performance of their rivals that have. The most consistent finding seems to be that diffusion of high
commitment work systems has occurred primarily through new entry rather than through adoption by
incumbents with traditional employment models (Ichniowski et al., 1996; Ichniowski & Shaw, 1995a,
2003).
This raises the question of whether existing firms without high-commitment systems are simply
unable to adopt them. However, exceptions do exist, both in the aforementioned empirical research
and in the case of Continental Airlines, as will be reported below. Thus, the question of why some
incumbents have adopted a high commitment approach while many have not is still relevant. A number
of barriers to adopting a high-commitment system have been theorized in the management literature.

High Commitment Adoption Barriers

Contingent on Strategy. It is sometimes argued that a high commitment approach is best suited to
specific market positions, namely a high quality and/or high product variety strategy that benefits from
skilled workers and/or organizational flexibility (Ichniowski & Shaw, 2003; Kochan et al., 1986). Firms
that do not adopt the HCWS may anticipate little benefit given their strategic position. However,
research in other industries has tended to show that the benefits of the HCWS are not conditional on
strategy (Pfeffer, 1998). Is a high-commitment culture valuable only to some airlines (e.g., low-cost
airlines like Southwest) and not others (network-based, full-service incumbents)?
Satisficing. A company may not bother trying a risky change like adopting a high commitment culture
if it is relatively successful even without it (e.g., Cyert & March 1963). Is the failure to imitate

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Southwests high commitment culture explained by relatively successful performance on the part of
other airlines?
Limited Awareness. Even if a high-commitment culture is not causally ambiguous (Barney, 1991) per
se, it may be so to managers of firms without such a culture. In other words, managers may not be
aware of the sources of a rivals advantage in general or misunderstand the nature of a highcommitment culture. Imitation may be limited to easily observable formal practices, such as
compensation practices. In a study of the adoption of innovative employment practices in shipping,
Walton (1987) identifies vision as one of the key inputs to a successful transition, where vision
refers to the comprehensiveness and accuracy of managements understanding of the system they are
trying to adopt.
Managerial Interests. Even if managers are aware of the possibility of a high-commitment culture and
its key ingredients, they may hesitate to adopt it because they find it too costly personally. This
costliness could stem from their skills or their preferences. In terms of skills, they may perceive that the
high commitment approach requires skills that they do not have or are not their forte (Ichniowski &
Shaw, 1995a; Pils & MacDuffie, 1996). In terms of preferences, managers may resist a high
commitment approach because they just dont buy into the idea of a more committed culture and less
autocratic management style. It is distasteful or weak or soft (Pfeffer, 1998). For example, airline
managers sometimes dismiss the culture at Southwest as an example of irrational enthusiasm and blind
devotion: a cult or a bunch of Moonies (personal interviews). There are also behavioral arguments
that suggest that managers tend to develop psychological preferences for more authority and thus resist
the power-sharing required of more decentralized practices (Mintzberg, 1979; Pfeffer, 1998).
This resistance may also come from employees and in particular union representatives. The new
practices may require that unions give up some of their own sources of authority and control. They too

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may fear the obsolescence of their existing skills or may have normative biases against the new practices
and in particular the yielding of control and contractual protections that old practices provides.
Equilibrium of Expectations / Trust. Even if a senior management team is aware of and interested
in high commitment practices, a significant barrier may be that changing to the new approach requires
most all of the firms participants to change their behavior and to do so relatively simultaneously. An
existing employment system engenders a set of expectationssometimes explicit, often implicit
among organizational members regarding each others intentions and likely behaviors. Individual
deviation, i.e., playing by different rules, is not profitable. This is a specific instantiation of Barneys
(1991) social complexity barrier.
Adopting a high commitment culture is particularly difficult given that the new practices require
more cooperation and trust from each actor, while the old practices are based on and engender a fair
degree of mistrust. If people expect others to be mistrustful, it does not pay to be trusting. For
example, employeesparticularly unionized employeesmay resist performance-based compensation
because they expect that management will cook the books and not report high performance so that
the bonuses can be avoided. More broadly, employeesespecially unionized employeesare likely
accustomed to management playing nice when they want to get concessions from employees and so
will be cynical about management pronouncements of new practices, a new philosophy, and an interest
in cooperation. Thus they will not exert the discretionary effort needed to make the firm more
productive.
This is especially the case because employees experience of management includes not just their
view of senior management, but also their interactions with front-line and middle management. So new
behavior needs to be demonstrated throughout the ranks of management. However, managers will also
be mistrustful or cynical about the credibility of the new practices. They, too, may be put at risk by
adopting the new behaviors. They may fear that employees will exploit the discretion they are given,

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rather than being more productive. More importantly, they may fear that if they take the time to be
more communicative, to listen and be responsive, to allow employees discretion, they will lose
promotions to other managers who do not adopt the new practices and generate better short-term
results. A common barrier, then, to the new employment practices is the implicit criteria used to
promote managers (Pfeffer, 1998). If making the numbers is all that matters, regardless of the process
and how colleagues and subordinates are treated, managers have no incentive to abandon the command
practices. If the new practices and its underlying philosophy are not enforcedi.e. violators are not
detected (or worse, detected but not punished)it is unlikely to get established.
The relevance, magnitude and surmountability of these barriers are important questions.
However, quantitative studies of the adoption of high commitment systems that do include brownfield
adopters have not identified a consistent set of predictors (Ichniowski & Shaw, 1995b; Pil &
MacDuffie, 1996). This likely results from the fact that a number of the constructs in theories regarding
adoption barrierssuch as managerial preferences, firm-specific investments, and the specific actions
taken to try to adoptare hard to measure in large samples with rough proxies like average tenure and
number of layoffs.
So progress on this front seems also to require more in-depth studies which compare firms
successfully using high commitment practices with both rivals that have not made any attempt to adopt
such practices as well as those that have tried but been unsuccessful. To make such progress, this
research project looks more closely at Southwest Airlines and a number of its major rivals in order to
(a) identify more specifically the practices that seem to distinguish those with some degree of a high
commitment culture from those that do not, and (b) to identify the specific barriers to (and facilitators
of) adopting the practices that might lead to a high commitment culture.

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3. Setting and Method
This study is based on both primary and secondary sources. The primary evidence consists of
interviews with managers and employees at a number of major US airlines and airline unions. In
particular, at Continental Airlines and American Airlines, twenty to thirty interviews were conducted
with senior managers, line and staff managers, union officers and frontline employees from 2003 to
2005. Most of the interviews lasted one hour and were guided by a set of pre-defined questions, but
responses were open-ended and additional questions were prompted by respondents answers. In
addition, the analysis draws on existing case studies of organizational and employment practices at these
and other airlines around the world, as well as a large volume of academic literature and trade press on
the industry.
(Note 1: the evidence about these airlines comes largely from primary and secondary data
collected up to 2008. The status of employment relations at each of the airlines discussed since 2008 is
unclear to the author and not discussed. For example, both Southwest and Continental made major
acquisitions in 2010 (of AirTran and United, respectively), which may result in significant changes to
their employment relationships. For the most part, this paper discusses these three airlines in the past
tense, to indicate a situation that once existed but may no longer. Where present tense is used, it should
be interpreted to refer to the airline up to 2008 at the latest.)
(Note 2: where quotations from field interviews are used as evidence in the descriptions of
Continental and American, they are included in footnotes, rather than in the main text.)

4. High Commitment Culture and Involvement- vs. Command-based Authority

This section identifies common inputs to the high commitment culture, at least in the context
of the airline industry, by looking in detail not only at Southwest, but also several other airlines, some of
whom have high-commitment cultures and some of whom do not.

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The employment systems at large airlines can generally be characterized as traditional industrial
relations (Johnson, 2001). A large percentage of employees are unionized and thus wages and working
conditions are governed by collectively bargained labor contracts. The relationship between the airlines
and their employees is fairly arms-length, heavily regulated by the labor contracts, and the companies
are generally regarded as very hierarchical in nature (Bamber et al, 2009). The employment relationship
is generally a compliance-based relationship, in which the goal is to monitor close adherence to
explicitly and narrowly defined tasks, rather than a commitment-based one (Walton, 1985; Walton,
Cutcher-Gershenfeld, & McKersie, 1994), in which managers and employees feel and display more
commitment to each other and to the firm. The pre-eminent exception to this paradigm is Southwest
Airlines.

Southwest Airlines
By almost any measure, Southwest has been the highest-performing firm in the US airline
industry. Its profit margins have consistently topped the industry and Southwest has not had an
unprofitable year since 1973, two years after it began operations. Even since 2001, while its rivals have
lost billions annually, Southwest has remained profitable. Underpinning this financial performance is
Southwests low cost position, relative to most incumbent airlines (Bamber et al, 2009).
Southwests low cost position results from a number of strategic and operational choices that
distinguish it from traditional airlines: focusing on leisure travelers on short-haul flights, which allows
Southwest to forego many amenitiesfrom in-flight meals to seat assignments to hub-based flight
connections to using travel agents to using primary airportsand to use a single type of aircraft (Porter,
1996, Gittell, 2003, O'Reilly & Pfeffer, 1994). In fact, many of the recent low-cost entrants to the
industry around the world have imitated many of these operational aspects (Alamdari & Fagan, 2005,
Bamber et al, 2009) and a number of large incumbents have also imitated some of these characteristics

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when launching low-cost subsidiaries for certain routes (e.g., Continental Lite, Shuttle-by-United, Ted
[United], Song [Delta]).
One specific and central component of Southwests advantage is a high commitment culture,
which has been harder to imitate than many of the operational characteristics (Gittell, 2003; O'Reilly &
Pfeffer, 1994). Founder and former CEO Herb Kelleher noted: Our esprit de corps is the core of our
success. Thats most difficult for a competitor to imitate. They can [buy] all the physical things. The
thing you cant buy is dedication, devotion, loyalty feeling you are participating in a cause or a
crusade (Booker, 2000). In 1998, Southwest topped Fortunes list of the Best Companies to Work For,
and has routinely been in the top 5 since.
In an in-depth comparison of Southwest with several other airlines, Gittell (2003) argues that
this high commitment is key to Southwests ability to turn planes around at the gate much faster than
its rivals, hence achieving much higher capacity utilization of aircraft. In addition, the high commitment
culture seems to facilitate more cooperative and productive negotiations with its unions.1 For example,
from 1985 to 2000, the average duration of a labor contract negotiation at Southwest was 8 months,
where the other major airlines averaged 16 months (von Nordenflycht & Kochan, 2003). And they have
occasionally been able to sign long contractsthe pilots signed a 10-year contract in 1995 and the
dispatchers a 12-year contract in 1998 (Labor Relations 1999)thus reducing the frequency of
contract negotiations.
Gittell (2003) and OReilly & Pfeffer (1994) provide substantial detail on the organizational
practices that sustain Southwests high commitment culture. These practices include many of the
features of the standard high commitment bundle: highly selective recruiting, extensive training,
decentralized decision-making, status reductions, and no layoffs in the companys 40 year history.

One of the most persistent misconceptions regarding Southwest is that its low cost position, and hence its superior
financial performance, stems partly from an absence of unions. In fact, Southwest is the most highly unionized airline in the
industry, with about 85% of its employees represented by unions.

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Gittell argues that Southwests practices comprise a core competence in building relationships (with
and among employees and with unions, in particular). But another essential ingredient, in addition to
the formal practices, is an underlying commitment by managers to the constant effort and discipline
required to make these practices credible and effective. Southwest recognizes that you have to work at
the culture. It doesnt just happen (OReilly and Pfeffer 1994: 12).
Southwests high commitment culture has been imitated, to varying degrees of success, by a
number of low cost new entrants around the world, including WestJet and JetBlue in North America,
based on more participative exercise of authority and performance-based compensation (Bamber et al
2009). This indicates that the high commitment culture that long seemed unique to Southwest (in the
airline industry) is replicable by other airlines. But these imitators were start-ups, unfettered by an
existing organization, with a different operational model and a different employment model. Thus, they
sheds less light on whether and how incumbent airlineswith adversarial command-based approaches
and different strategic positionsmight be able to transition to a high-commitment culture. A more
relevant and instructive example is Continental Airlines.

Continental Airlines
Continental Airlines achieved a remarkable turnaround in both performance and culture in the
mid-1990s. In 1994 Continental had been profitable in two of the previous sixteen years, had gone
through two bankruptcies, and was on the brink of a third. Its service quality was equally poor,
routinely ranking last among large US airlines in on-time performance and first in customer complaints.
By the end of 1995, however, Continental posted its largest profit ever. It had above-average
profitability for the remainder of the decade and was the least unprofitable legacy airline (i.e., excluding
Southwest and other low-fare airlines) from 2001 to 2005. Continentals service quality has improved
markedly as well, routinely posting above-average on-time performance and below-average complaint

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rates. In 2003, Fortune ranked Continental as the second-most-admired airline in the U.S. and globally,
second only to Southwest in the United States and to Singapore Airlines globally.
At the same time, Continental experienced a transformation in the commitment of its
workforce. From 1981 to 1990, Continental had been a battlefield for Frank Lorenzos notoriously
adversarial approach to labor relations (Petzinger, 1994; Bamber et al, 2009). By 1994, absenteeism was
rampant and employees recalled being embarrassed to admit they worked for Continental (Bethune &
Huler, 1998). But by the late 1990s, Continentals relationship with employees and unions ranked near
the top of the industry, as several pieces of evidence indicated. In interviews, employees uniformly
admitted to high morale and pride in the airline. Labor contracts were negotiated in about one third the
time of the industry average (even faster than Southwest) (von Nordenflycht & Kochan, 2003). Even in
the post-9/11 round of restructurings and employee concessions, Continental reached negotiated
concessions with its unions outside of bankruptcy and in much shorter time than its rivals. The
company claims that absentee rates are significantly lower since 1994. The airline has been ranked in
Fortunes 100 Best Companies to Work For each year since 1999. In other words, Continental seemed
to build a high commitment culture, despite years of a more dysfunctional, low-commitment culture.
Continental insiders tie the financial and operational turnaround to this cultural turnaround (Bethune &
Huler, 1998; Brenneman, 1998).
The high commitment culture may have provided Continental with several productivity and
service quality advantages that drove its superior performance. For one, it seems to generate higher
levels of employee motivation and effort, as employees feel that they are valuable members of a team,
rather than cogs in someone elses machine. Managers and employees frequently told stories illustrating
team spirit and discretionary effort, particularly in contrast to rival airlines.2 In addition, the culture

[A friend at United] was telling me they finished working on an airplane, and they were playing dominoes. And the
supervisor went to send them to another bay to go help them do some work. And my friend [said] so we showed him, we
just shut down. I said What do you mean, shut down? Well we just started generating non-routines, and we showed

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seems to contribute to more efficient and less destructive collective bargaining.. Quick negotiations are
facilitated by the trust and respect that spill over from the day-to-day interactions of employees and
managers. In particular, the trust inherent in the culture makes communications at the bargaining table
far more credible and reduces the need to prolong bargaining simply to generate legitimacy with
constituents.3 Additionally, employees commitment and team spirit seem manifested in the pride that
Continental employees took in being more productive and working longer hours than those at rival
airlines, and this tempered demands for the same levels of restrictive job-protecting workrules.
Interviews with managers, union leaders, and employees at Continental revealed a remarkably
consistent description about the differences between the new vs. the old Continental. Three
characteristics in particular seem to distinguish Continental post-1994 from its own past and from rival
airlines: (1) the exercise of authority; (2) the underlying management philosophy; and (3) performancebased compensation.
The Exercise of Authority: Communication and Discretion. The relationship between supervisor
and subordinate is marked by extensive, two-way communication and by significant discretion accorded
to subordinates in the execution of their work. By contrast, the traditional authority system at
incumbent airlines, including Continental prior to 1995, is marked by more centralized, hierarchical, and
rule-driven decision-making and by communication channeled primarily down the hierarchy.
Extensive communication was far and away the most frequently cited feature of Continentals
organization, often the first thing mentioned by both managers and employees.4 Three aspects of this

him youre not gonna screw with us. And Im like You gotta be kidding me? And that would never ever in a million
years happen here at Continental. Our mechanicsa guy finishes, more often than not he doesnt have to be told to go
help someone The behavior is hey, were not done til were all done. Because were in it together. (HR Manager, exMechanic)
Weve achieved a level of trust that sometimes is hard at other companies. We agree to disagree. But I feel they are very
fair. In the way they do business they try to be very fair. I mean, like I say, I dont always agree with them at all. But they
give us respect by sharing with us the rationale for decision-making. (Flight Attendants Union Executive)
4 All the other airlines Ive worked at, theyve talked about oh, communications is important, but here it really is
important. Other CEOs Ive worked with dont feel comfortable with people and so its a lot bigger of a challenge to
3

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communication are noteworthy. For one, communication from management is frequent and comes
through a variety of channels. Two, management spends time explaining the rationale for decisions,
both in general announcements as well as in individual superior-subordinate relations. This was referred
to as the heres why approach, often contrasted to pre-1995 practice, where managers would simply
issue a terse command with no explanation: It was I said do it, so do it, according to one
frontline employee. Three, the communication is more bi-directional as employees feel like they have
more voice. Not only did employees cite avenues for expressing opinions, frustrations, and ideas but
that they key difference was feeling that these inputs were acknowledged and responded to.5
Furthermore, supervisors were more approachable and willing to engage in discussioninvoking
comparisons to the coaching role of supervisors at Southwest (Gittell 2003)--rather than the old
regime where communication from managers consisted of either orders or reprimands.
The second aspect of authority at Continental is that employees felt greater discretion in how
they accomplished their functions. Employees felt trusted to make decisions and take actions in
response to local situations, as managers were less prone to blame and reprimand and more prone to
listen and coach.6
Management Philosophy. The exercise of authority seems supported by a management philosophy
different than that which infuses traditional command-based airlines. This philosophy entails
demonstrable commitment by managers to two key principles regarding how people should be treated:
dignity and respect and consistency, words used frequently by managers.

get them out to do employee meetings and stuff like that. But this place, they really actually follow through on what they
say. (PR Manager)
I dont have any gripes that I feel I cant take to management, at any level, and it wouldnt be addressed. Management
wants to hear how can we make this better? They listen. (Customer Service Representative)
6 There is, in my position, flexibility in what I do, if I need to do something. Theres not necessarily this is the way you do
it Its treating you as an adult, as a responsible adult Theres no micromanagement. (PR Manager)
5

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Dignity and respect implies taking each employee seriously as a valuable team member. This
entails that management listen to, trust the judgment of, give the benefit of the doubt to, care about, and
show appreciation to employees.7 Continental employees most commonly located feeling cared about and
appreciated directly in the actions of the CEO (until 2005), Gordon Bethune, who was highly visible
throughout the organization and seemed to know everyones name.8 Dignity and respect is also
meant to counteract functional silos, conditioning how employees interact with each other, and is
fostered by policies that encourage employees to identify with the firm as a whole.
Continentals personnel also pointed to consistency in the application of rules and policies.
First, policies are applied, as much as possible, to all functions equally. This is particularly true of
benefits programs and performance-based compensation (discussed below). Second, the firm strives to
enforce policies consistently across individuals, making sure that some people are not exempted from
following the rules, so as to sustain the morale of those who do. Consistency seems particularly
important in managerial performance evaluation, to demonstrate commitment to the overal philosophy.
Employees seemed to feel that managers that violated involvement-based principles, whatever their
performance results, were not rewarded with promotion: Those people [who] were its my way or the
highway kind of thing. Those people are gone. And they have been replaced with kinder, gentler
souls, said a frontline worker.
Saying that Continentals management strives to be respectful, caring, and consistent, does not
necessarily imply that Continentals previous managers strove (or managers at other carriers strive) to
be dis-respectful, un-caring, or in-consistent. Rather, the difference is the extent to which managers
commit to the effort and discipline required to behave in accordance with those principles. Actually

We care about how employees are treated, materially and emotionally. We recognize that employee outcomes arent just
about money but also about feeling cared about, about being respected and treated fairly. (HR Director)
8 Every time you would listen to a voicemail from Gordon, it would always be about how proud he was of all of us for the
job that we were doing. And you know when youre in the trenches all the time, it really makes a difference to have someone
thats at the helm of your company tell you that you are important. (Ramp Agent)
7

DRAFT
being respectful, caring and consistentrather than just paying lip-service to those conceptsentails
costs, mostly in terms of management time and attention. That seems to be the essential message of
many of the anecdotes that employees and managers at Continental tell: they are demonstrations of
managements commitment to treating everyone as a valued team member through costly actions
actions that other management teams might be expected to forego. In other words, the management
philosophy is manifested in the extent to which management prioritizes the allocation of effort towards
involvement, care, and consistency.
Performance-based Compensation. A third element of Continentals employment system, more
visible to outside observers, is a set of performance-based compensation programs for employees. The
most well-known is the monthly on-time bonus, whereby each month in which Continental achieves
certain absolute and/or relative targets of on-time performance (as measured by the Department of
Transportation), all employees receive a bonus. The original bonus was $65 if Continental finished in
the top five among major carriers (Bethune & Huler, 1998), and subsequently the amount has risen to
$100 while the threshold has also increased.
A perfect-attendance program enters all employees who record six months of perfect
attendance into a lottery to win an SUV (and non-winners receive a $50 prize). The third program, and
potentially the largest variable component of pay, is profit sharing. Fifteen percent of quarterly pre-tax
profits above a certain threshold are paid out to employees in proportion to base compensation.9
Some outside observers have focused on these bonus programs as the essence of Continentals
distinctive employment practice (Knez & Simester, 2001). But this seems to overweight their role.
While Continental personnel did mention the bonus programs as noteworthy and valuable, almost all
first mentioned the day-to-day style of the employment relationshipcommunication and discretion
as the distinguishing feature of the airline. The bonuses seem to function as one more manifestation of
Continental altered this plan in early 2005, in conjunction with wage cuts. From 2005-2009, the firm shared 30% of the
first $250 million in pre-tax profits, 25% of the next $250 million, and 20% of any remaining profits.

DRAFT
the underlying management philosophy, fostering the feeling that each employee is a valued team
member.
The example of Continental Airlines indicates that a high commitment culture is a possibility
even for incumbent airlines starting from a compliance-based or command-based employment
relationship. The distinct contrast between the pre-1995 and post-1995 culture helps clarify some of the
essential ingredients to a high commitment culture as well as the differences between involvementbased vs. command-based authority. These points are further illuminated by the case of American
Airlines, which in 2003 launched an effort to accomplish a similar transformation towards involvementbased authority.

American Airlines
Since deregulation in 1978, American was either the largest or second largest airline in the US
until 2010 (after the 2008 Delta-Northwest merger and 2010 Continental-United merger). Since at least
the 1970s, American has also been one of the most innovative airlines, initiating several of the
industrys major competitive developments, including on-line reservations systems, frequent flyer
loyalty programs, revenue management practices, and two-tier wage scales (Reed 1993).
In terms of its employment model, insiders (and outside observers) generally characterized
American as typical of a traditional legacy carrier. The relationship between management and unions
was characterized by arms length interactions and a fairly adversarial attitude. In terms of its
organizational culture and structure, several respondents described American as being very
hierarchical and siloed, with little input from or discretion extended to subordinates and little

DRAFT
cross-departmental coordination. Thus, the relationship between management and employees was very
unilateralcommand-based, rather than involvement-basedand low commitment.10
In April 2003, as part of its post-9/11 restructuring, American and its unions agreed on
concessionsat the brink of bankruptcythat cut labor costs approximately 21% (WSJ 28Apr03:A1),
via wage cuts of 16-23%, benefits cuts, changes to workrules and layoffs. However, unlike the airlines
that have restructured in bankruptcy, pensions were largely untouched.
On the heels of this restructuring, American launched an effort to improve its relationship with
unions and employees, an effort which might be considered an attempt to create a high-commitment
culture. Managements explicit goal was to build and sustain a more cooperative, collaborative
relationship between managers on the one hand and employees and unions on the other.11
The essential ingredient for this improved relationship is listening to employees and involving
them more in decision-making. While the managers did not all use the same phrases (which is a little
different from the homogeneity of language heard at Continental), they frequently used words like:
active engagement, listening, collaboration, employee involvement, employee participation,
and employee engagement.12 Ultimately, Americans management sought to train their managers in a
fundamentally different method of exercising authority, less unilateral and more consultative. The
desired principles are neatly summed up on laminated business cards that the CEO distributed to his
senior executives, which read:
Unless youre really in trouble or you need something, you dont really communicate with your flight service manager.
Flight Attendant
There was a general kind of approach that said come to work, do your job, go home, we dont want to hear from you.
SVP HR
11 There is something very different happening today. When we did the restructuring agreements we used that
experience to change the relationships with our unions and immediately following that, we have undertaken a
collaborative approach with respect to the unions, and I think that is changing a lot of things. VP Employee Relations
12 There is a lot of work going on with both the independent employees and the union-represented employees to find ways
to involve people in decision making. I think the other focus that we have to come to is we have to push that decision
making down as far as we can in the organization.. SVP HR
Its kind of a simple model change what people see in the workplace. Behave differently, treat them differently, involve
them more, educate them more than [we] ever have in the past. Theyll feel part of it and part of the decision making
process, which will improve overall results. MD Employee Relations
10

DRAFT
Involve before Deciding
Discuss before Implementing
Share before Announcing
American intended for this improved relationship to be a source of competitive advantage.13
The advantage of an improved relationship was to result from more employee input and buy-in.
Employee input was expected to yield more cost-saving, productivity-enhancing or customer serviceimproving suggestions. In terms of buy-in, the new approach was also expected to foster more
employee cooperation with and commitment to desired operational changes.14 Such changes included a
desire to increase the proportion of compensation that is performance-based rather than fixed.
Relatedly, the labor contracts negotiated in 2003 also included three mechanisms for sharing the upside
of future financial and operational improvements with employees. These included 19.5% of Americans
equity issued as stock options grants to all employees; a profit-sharing program in which 15% of all pretax operating income over $500 million is distributed to employees as a bonus, in proportion to base
salary; and an Annual Incentive Program (AIP) that pays bonuses for achieving operational
performance and profitability targets.
Thus, Americans attempt to improve its employment culture also involves transforming from
command-based to involvement-based authority and is complemented by various performance-based
compensation programs. American therefore offers another opportunity to observe an attemped
imitation of one of Southwests supposedly inimitable aspects via an attempt to instill a more highcommitment culture.
Comparisons between the changes at American and Continental, particularly as Americans
efforts unfold, might offer useful insights into the barriers to and facilitators of such a transformation

It is fueled by a belief that the only way we are going to be competitive in the future with low cost carriers and with
legacy carriers, is by creating a competitive advantage through our employees. And the way to do that is through
involvement. VP Employee Relations
14 You go a little slower and create the ideas and you get the buy in, but you produce a better product and hopefully you
have greater support when you roll the thing out. SVP HR
13

DRAFT
of authority. The next section discusses factors that may have facilitated Continentals change as well as
the barriers and facilitators evident so far in Americans efforts.

5. From Command to Involvement: Comparing Transformation Attempts

Continental Airlines, part 2

What facilitated Continentals transformation from command to involvement? While a single
case cannot determine which factors were necessary to the transformation, it can identify factors that may
have played important roles and propose them as hypotheses to be explored in future research. First, I
highlight some of the key actions taken by the new management team that took over in late 1994.
Second, I describe how the conditions that the new management team inherited may have facilitated the
transformation.
Extensive Communication. Most notably, extensive communication was adopted from the outset.
Bethune and Brenneman were highly visible around the organization.15 The strategic plans for turning
the company around were communicated in detail (Bethune & Huler, 1998; Brenneman, 1998). Bad
news, usually involving layoffs, was delivered in face-to-face meetings and with extensive explanations
and opportunities for feedback. This extensive communication likely contributed to employees sense
of being team members and the in-person nature of it may have signaled a higher level of caring by
management.

I just felt it immediately, about a confidence in our leadership. [Gordon] was very visible. He would walk down on the
ramp, which we were not used to having the President come down and talk to you. there was always somebody from
upper management that would be down and talk to us. That was very unprecedented as far as from the Lorenzo era.
(Ramp Agent)

15

DRAFT
On-time Bonus. One of the better known actions associated with the turnaround is the on-time bonus
described earlier. Knez and Simester (2001) argue that Continentals bonus program can be credited
with improved on-time performance, independent of any schedule restructuring, by showing that after
the bonus plan was implemented, Continentals on-time performance at airports staffed by Continental
employees was higher than that at airports where Continental contracted for outside staff (who were
ineligible for the bonus).
Knez & Simester allow that the on-time bonus was accompanied by a host of other
management actions targeted at employees, but they interpret these additional actions as increasing
employees expectations that they might actually receive the bonus; i.e., as elements designed to make
the bonus plan work. I would suggest a reverse interpretation: that the bonus plan was one of a number
of actions that functioned to establish the new involvement-based system and a broader level of
improved effort in general. Several features of the bonus plan were notable in this regard.
As noted earlier, the bonus applied to all employees, not just those responsible for the
departure process, to foster identification with the firm as a whole. Second, performance was measured
by a third party (DOT), to mitigate employee mistrust regarding whether the performance numbers
were credible. Thus, the program was designed not only to induce effort but to build trust and team
spirit. This may explain why the program was effective, despite the small amount of money at stake for
any given employee and the huge free-rider potential. In other words, it is not that employees calculated
that $65 was worth some marginal exertion of effort to get planes out on time, but rather that the
bonus plan signaled something larger about the new management team, which led employees to feel it
was worth it to exert effort along any and all dimensions. As a mechanics union executive said about
the $65 bonus: It was enough to get your attention. It signaled a change in philosophy. In fact,
even Knez and Simester report a similar comment: one employee stated that the bonus plan proved
that management was serious.

DRAFT
Management Purge. The new senior team also significantly pruned the management ranks shortly
after they took over, including replacing fifty of the top sixty officers (Brenneman, 1998). A primary
goal was to reduce the number of managers, but they also used the process to encourage involvementbased behavior. Managers were evaluated by superiors and subordinates for both their functional
competence and their team play, and those earning low marks, after given opportunities to improve,
were let go (Bethune & Huler, 1998).
This pruning was important in several ways. It was another dramatic signal that the new team
was serious about change. Second, the emphasis on team skills demonstrated that the new principles
would be enforced at the top levels. Third, the pruning helped raise employee trust not only in the
intentions of management but in its competence as well, as suggested by several interviewees.16
Simple and Hard. At one level, what the new management team did was simple: they adopted the new
behavior; they walked the talk. From the outset and across a range of actions, they behaved
differently than previous regimes and their behavior was consistent with the new style of authority and
the new principles. At another level, it was also difficult, in that displaying and enforcing the new
behavior required considerable investments of personal effort and attention which could well have been
allocated instead to restructuring routes, finances, etc.
Structural Conditions: a Clean Slate. While the Bethune/Brenneman regime implemented a number
of actions that helped establish the new employment system, their efforts were likely aided by the
condition of the employment system already in place by 1994. The fact that Lorenzo had busted the
unions back in 1983 left Continental with lower wages and fewer workrules than its rivals. So the new
management did not have to seek significant economic concessions to regain competitiveness. They
They got rid of lots of deadweight yes men. (Pilot)
A huge difference between this place and other places Ive worked at is I have a tremendous amount of respect for all our
senior people. Theres no one here that has been on the payroll for years and he works in a corner office but no one really
knows what hes doing. I dont know of deadweight at the top. And thats another huge difference from what Ive seen
at previous companies. (PR Manager).

16

DRAFT
only had to ask for extra effort at the workplace (e.g., in turning planes around on-time) and patience in
collective bargaining to restore wages to industry averages over several negotiations. Management also
had more room for unilateral action in adopting aspects of the new employment system, such as new
compensation programs.
In addition, several interviewees also suggested that the turmoil and strife that plagued
Continental from 1981 through 1994 left employees (and managers) with low expectations for wages
and working conditions, relative to employees at rival airlines. Thus, they had already hit rock bottom
and were ready to change:17
It is important to note, however, that the breaking down of the old employment system at
Continental was not a sufficient condition for the subsequent turnaround and the establishment of a wellfunctioning involvement-based system. Such conditions existed from the mid-1980s through 1994 yet
the airline struggled. A concerted investment of effort by the new management team was critical to
exploiting those conditions. However, those conditions may have been a necessary condition or at least
an important facilitator.

American Airlines, part 2

By mid-2008, the success of Americans transformation effort was very much in doubt, as
momentum was stalled at best and some observers already considered the effort dead. On the one
hand, there had been promising early signs through 2005, such as the strength of managements
support for the effort, initial reactions from union leaders, and early productivity improvements. On
the other hand, since early 2006, a conflict over executive pay and a new round of labor contract

A lot of these guys were here when Lorenzo came in and said this is what were gonna pay you, take it or leave it. And it
was 10 years at least, if not 15, of what a terrible place to work. And now weve got a good place to work. ... They know
what its like going through bankruptcies. And this is nice to get paid a decent wage and not be absurd about it. (VP
Maintenance)

17

DRAFT
negotiations soured relations considerably and put the effort at risk, particularly with pilots and flight
attendants.
Promising Plans. Several aspects of Americans transformation plan seemed promising. First,
the vision of what they were hoping to achieve and what it would require seemed well-developed,
comprehensive, and consistent with themes observed at airlines with high-commitment cultures. In
particular, management recognized that the core aspect is a change to how authority is exercised, rather
than a set of formal HR policies, and that this may be difficult for many existing managers.
Second, the change was initiated from the top. The CEO, Gerard Arpey, was the efforts
foremost champion, with strong support by the SVP of Human Resources. Additionally, the unions
agreed to explore the effort and jointly picked the facilitating consulting firm.
Third, one of the first steps to initiate the change was to continue the unfettered sharing of
financial and strategic information with the unions even after the restructuring agreements were signed.
The unions were half-expecting it to stop. Instead, there was an unprecedented amount of
information shared with the unions on a monthly basis and regular consultations regarding strategic
plans and operational decisions. 18
In contrast to Continental, however, this extensive communication occurred primarily between
senior executives and union representatives. In fact, union leaders signed confidentiality agreements so
much of the information could not be shared with employees generally. The effort started at the senior
level, focusing on the relationship between senior managers and union leaders. The plan was to diffuse
the new approach gradually down the layers through the organization. Interestingly, they explicitly

In the wake of the restructuring deals, they [unions] were wanting to continue to get that kind of information. And we
said, not only will we continue to provide that kind of information for you but well go one better and were in the process
now of moving from just information sharing to actual participation in the pre-decision making process. Management still
makes decisions but we are getting a lot of input from the unions in this collaborative effort prior to decisions being made.
VP Employee Relations

18

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opted not to broadcast the initiative to the organization as a whole, seeking instead to introduce
individuals to the initiative via direct experience with one of the processes described below.
A fourth positive aspect was the desire to build structure around the new culture: to establish
organizational processes that would institutionalize the actions required to maintain the involvementbased relationship, rather than depending on the personalities and inter-personal relationships of
specific managers and union leaders. One type of process involved joint teams of management and
union personnel, at various hierarchical levels, each of which brought management and union
personnel together on a regular basis to share information and plan and oversee productivity
improvement ideas. In addition to fostering dialogue between management and unions, the teams also
span different functional departments so as to encourage more cross-functional camaraderie and
coordination.
A second important structural change involved integrating the new approach into the
managerial evaluation process. The plan was to make the people side of the business of equal weight
to the financial (or numbers) side of the business in evaluating managers performance.19 Americans
management seemed aware that this change would require re-training, evaluating and ultimately pruning
the management ranks.20 However, the extent to which this happened and whether it approached the
magnitude at Continental is as yet unclear.

There [is] essentially an equal degree of emphasis on the people side of the business as well as the business side of the
business, the financial side of business. So there is a structure there as opposed to an ad hoc , Well, Joe does a great job,
he made his numbers for the last three quarters, lets promote Joe. Well, Joe may have made his numbers for the last three
quarters, but his department is a disaster. They dont make their objectives and they dont do the people stuff, and so Joe
may not be the right guy for that area. So we are building that into the formal performance management structure.
SVP HR
20 My theory is that the type of manager in the company will change because we will have a very different expectation as to
what success means as a manager. Its not someone who simply makes their numbers. Its someone who has an engaged
workforce. Its going to create over time some difficult divisions, because not everybody who manages at American is
prepared to work that way. And you give them a little training And then I think the last piece is: there are people who
just -- even having been given the opportunity to experience, to learn, have a clear set of expectations -- just can't get it.
They're not bad people. In fact, there are a lot of companies where they would be much happier. My answer is if we
have properly given them the right direction, the right opportunity, the right learning experience and somebody still doesnt
get it, then they should work someplace else. SVP HR
19

DRAFT
Promising Early Outcomes. Through 2005, there were also observable positive outcomes.
One year into the process, union representatives were clearly aware of and supportive of the
relationship improvement effort and they agreed that the atmosphere at the airline was different than
prior to the restructuring. They were pleased with the unprecedented sharing of information and felt
they were being involved in anc consulted on important decisions, in contrast to the old norm of
unilateral management decisions, made without much input, and announced to unions after the fact.21
In addition, there was evidence that the effort was yielding visible outcomes on the ground. For
instance, in 2004 there was an article in the local newspaper describing instances of cooperation and
joint productivity improvements among frontline maintenance personnel as well as comments from
employees acknowledging a profound cultural shift at American.22 Furthermore, in late 2005, the
pilots union, after commissioning a study of the airlines pilot productivity vis--vis competitors,
voluntarily initiated negotiations with American on changes to work rules that would allow pilots to fly
more hours (per day and per month), thus increasing pilot productivity.
Serious (Mortal?) Setbacks. Despite the positive inputs and early outcomes, the
transformation effort seemed to suffer a serious setback in 2006 over management bonuses. In January,
American informed employees that because of a substantial increase in Americans stock price, about
1,000 managers would be paid bonuses in April totaling over $75 million, based on a compensation
plan agreed to in 2003. (At the same time, American also informed the employees that employees stock
options, which would vest in April, were worth a collective $500 million). Unions and employees
objected vehemently to the idea of management bonuses when the airline was still losing substantial

We are far more involved [as] part of the process. Our access now to information and to sharing is unlike any
exposure Ive ever seen. In my view we are more involved now in almost every aspect of the managing of the company.
TWU Rep
22 Fort Worth Star-Telegram, 26 April 2004. The reporter of this article expressed amazement to American HR executives
that he didnt get criticized for a story that seemed favorable to the company: He said its the first time in history in writing
in DFW about American that I got almost exclusively positive emails from your employees saying, we are seeing this change
occur. SVP HR
21

DRAFT
money each quarter. The unions jointly filed a grievance claiming that the bonus plan violated a clause
in their own contracts which prohibited cash bonuses that did not also apply to union employees.
In addition, and perhaps more alarmingly, the pilot and flight attendant unions announced they
were halting any cooperation in joint productivity-saving programs, including the negotiations over
pilot productivity improvements mentioned above. However, they did not pull out of the basic
collaborative structures. In late March 2006, American agreed to revise the bonus plan to pay out
largely in stock, rather than cash. This resolved the issue in terms of a formal grievance. However,
public signals from the two unions in 2007 indicated that the issue was not at all resolved emotionally
or politically. Relations with the pilots provide a glaring example. In 2006, American applied to the
government for a new route to China, in competition with most of its rivals. But the pilot union
refused to agree to relax contractual restrictions on maximum length of a flight, unless American agreed
to discuss a wage increase. So the company submitted an application for a one-stop trip, in contrast to
the non-stops proposed by all the other airlines, essentially killing Americans chances.
In 2007, though, the company continued to tout the ability to rely on collaborative processes to
resolve the conflict and maintained that the new relationship was still working.23 Furthermore,
collaborative efforts continued with the mechanics union (TWU), which had facilitated not only the
retention of heavy maintenance activity in-house, but also its growth through the provision of services
to other airlines. Thus, it may be too early to decide that the transformation effort is abandoned or
dead.
In 2008, the concessionary labor contracts agreed to in 2003 became amendable. Contract
negotiations since then have made little progress and revealed signficant discrepancies between
employees and managements post-concession expectations. Already in 2004, during our field research,
Americans employees appeared to be expecting to reclaim much of their concessions at the next
23

Dallas Business Journal, 14 April 2006; and Dallas Morning News, 27 April 2006.

DRAFT
contract negotiations,24 while management spoke of a desire to rely more heavily on variable
compensation as the mechanism by which to share any future profitability. Furthermore, since
American did not reduce its legacy costs (pensions and retiree health benefits) nearly as much as did its
rivals that went through bankruptcy, its unit labor costs were higher than all but one competitor by
2005. Thus, American has been in no position to meet employee wages and benefits expectations.
Continuing contentious contract negotiations seems only likely to keep the transformation effort
paralyzed at best.
Why not earlier? An interesting question is why this effort at American did not happen earlier
and what made it happen in 2003? A few managers said that efforts to improve the relationship with
unions and to instill better collaborative skills among managers had been tried at various times in the
past. However, these were guerilla efforts initiated in specific areas inside the organization which
lacked any visible, sustained commitment from senior management. As such, they did not get very far
or have much staying power. In contrast, the 2003 effort had the full and eager support of the CEO.25
Most managers and union officers cited the unprecedented magnitude of the airlines financial
crisisspecifically, the very real possibility of bankruptcyas the primary facilitator of the new
relationship initiative. Union leaders indicated that it was the first time that they realized that all the jobs
they were protecting were tied to the existence of the airline, which was gravely threatened. It seemed
that the threat of bankruptcy unfroze (Walton et al 1994) attitudes on both sides.26

Because thats what our pilots are thinking: we made it a year, weve only have four more years to go before our
contracts up. I can come back for [industry leading] pay rates. I get to come back to the golden goose. APA
President
25 But in this regard, it is interesting to note that the previous CEO also signaled an interest in a new approach to labor
relations and building more trust when he ascended to CEO in 1998. Yet no one (except the SVP of HR) mentioned this in
2004. In fact, the previous CEOs legacy seemed to be somewhat anti-employee, defined primarly by botched labor
negotiations that led to his resignation the year before. Thus, promising beginnings are of course no promise of success.
26 As part of [restructuring] process, I think there was a new level of awareness that all of the job protection and all the
traditional structural stuff we did in our negotiations to meet some of those needs of the unions really wasnt worth much
when the company decided it was going to fail and go into bankruptcy. I think we at least opened up among the union
leaderships minds and the managements mind -- equally tough challenges -- that there is an area here where we have a lot
of mutual interests. SVP HR
24

DRAFT
Furthermore, Americans relative success over the prior decadesearned on the basis of other
advantages and innovations and despite its low-commitment culturemeant that neither side had any
great incentive to focus significant resources (e.g., leaders time and political capital) on major change to
the labor-management relationship.27

6. Preliminary Conclusions
The airline cases provide illustrations of the barriers of satisficing, managerial interests, and
equilibrium expectations. Less apparent are the barriers of strategic position and limited awareness. In
terms of strategic position, while Southwest and WestJet have a very different position than the major
incumbents, Continentals experience suggests that a high commitment culture may be relevant to these
incumbents as well. Furthermore, it is the major incumbents that would more appropriately fit the high
quality position often associated with high commitment cultures, as opposed to the low cost Southwest
and WestJet.
Limited awareness seemed not to play a large role in the American case. Americans
management had a well-formulated picture of where they wanted to go and how to get there.
The American example does illustrate the satisficing barrier. For many years, American was one
of the leading US airlines, not only in revenue but also in profitability and growth. The employment
relationship worked sufficiently, if not optimally, to allow American to prosper. Management attention
was directed to other aspects of the business, until the post-9/11 environment made the airlines cost
position untenable. While the satisficing explanation might help explain Americans long disinterest in
In the mid 90s, things were going so well, we were making money hand over fist we were arguing with the employees,
but there was a sort of general assumption, that thats just the way life is and we probably cant do anything about it.
In the late 1980s when we were on a growth spurt, again it was everythings great why do we need to do anything? and
nobody would have thought to do anything different. So I think that what happened is that out of this crucible came an
opportunity to do some things that were different. VP Employee Relations
In the past I think our success may have gotten in the way of being willing to try different things. MD Employee
Relations

27

DRAFT
adopting high commitment practices as well as some other large incumbent airlines, it does not explain
non-adoption by laggard airlines, who long experienced below-average performance and thus had much
greater incentive to attempt a significant organizational change. In fact, several large airlines have gone
bankrupt and ceased to exist without attempting such a change. So while poor performance may be a
necessary condition, it is certainly not sufficient.
At Continental and American there is, implicitly, evidence that some managers are opposed to
or reluctant to embrace the high commitment practices. At Continental, the transformation was
accompanied by a major purging of the management ranks. At American, there was an expectation that
managers would need to manage differently, that this would require training and coaching and would be
uncomfortable for many managers, and that some would need to leave. Personnel at Continental also
noted that the management practices underpinning their culture, including the seemingly simple
practice of extensive communication, are not easy for managers at other airlines. Additionally, managers
at other airlines sometimes express distaste for the culture at Southwest and Continental, seeing them as
touchy feely and overly indulgent to employees. For example, in regards to Continentals perfect
attendance lottery, a manager at another airline is reported to have said Ill be damned if Ill give a
truck to a flight attendant just for showing up to work! (AFA interview).
American offers a great illustration of the trust or social equilibrium barrier. In the end, a high
commitment culture is a bilateral decision (multilateral, really). Commitment is ultimately employees
decision. Employees at American are giving some indications that they do not really trust management
or quite believe that managements actions are fair.
One key difference between Continental and American, of course, is the strength of the existing
employment paradigm and employees expectations about what is fair. At Continental, union strength
had been vastly reduced and wages and workrules had been reduced quite a few years before the new
management team in 1994 launched its transformation effort. It may be that at American, the strength

DRAFT
of the unions and employee expectations will prevent a similar transition or at least require larger, more
sustained signals from management regarding the credibility of its intentions.
Continentals transformation seems to have been greatly facilitated by the unrestrained
forcing (Walton et al., 1994) of the Lorenzo era, which greatly reduced union bargaining power and
over time conditioned employee expectations regarding wages and employment security. Whether the
opposition of unions and employees to the establishment of a new system can be accomplished via
persuasion and negotiation, rather than aggressive, unilateral forcing is an outstanding question. The
concomitant need to ask for major economic concessions likely makes the task much more difficult.
Overall, similar transformations of the employment system at command-based major airlines may first
entail more pain and strife for both managers and employees.
The comparison also suggests that one of the critical processes in adopting and sustaining a
high-commitment culture is the managerial evaluation and promotion system: who gets promoted and
for what? For employeesand other managersto believe that team play and investing in
involvement-based authority is credible or worthwhile, they need to see that managers who make those
investments get promoted as opposed to those that do not and simply make their numbers.
Finally, it is interesting to note that managers at both Continental and American noted that the
principles behind their culture (or desired culture in Americans case) are not complicated but rather
quite simple. In fact, it was repeatedly claimed that their principles were not rocket science or not
brain surgery. So the princples are not hard in terms of complicated or complex. Rather they are hard
like diet and exercise. Involvement-based authority requires upfront investments in managerial time
and effortin gathering input, listening, responding, discussing, coaching, etc. Like diet and exercise,
these investments seem like they can be foregone in the short-run without any negative results. Their
payoff comes more long-term. Thus, while it may be that some competences that provide sustained
advantage are in the brain surgery or rocket science categoryinvolving complex and tacit bodies of

DRAFT
knowledgeperhaps another category of imperfectly imitable capabilities are of these diet and exercise
type: easy to understand and available to all but yet still not universally adopted because they require
investments that are just too easy to forego.

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