Step 1: Anger Employees, Step 2: Mollify Them

Northwest Air, Out of Chapter 11, Aims to Mollify Customers, Labor – WSJ.com

Mollify (v): to soften in feeling or temper, as a person; pacify; appease.

I don't understand airline management at all. Airlines, in general, seem to be one of the worst (as an industry) at treating employees as a “cost” instead of treating them as people with ideas and feelings (Southwest may be a noted exception, and there may be others). Northwest Airlines has made employees very angry, now they want to pacify them. I read “mollify” as “shut them up,” not exactly the Lean path of employee engagement and maybe that explains why so many airlines are in so much trouble.

It's a common script: Northwest is just out of bankruptcy. Employees have been asked/forced to sacrifice pay. Northwest executives reward themselves with huge bonuses. Wouldn't you grumble, as an employee? This isn't a matter of jealousy, but a matter of fairness. I know, life isn't fair, but that's not my point. Is Northwest purposely trying to piss off their employees, the ones who actually interact with the passengers/customers? That doesn't seem like good business. The same thing has happened at American Airlines, minus the bankruptcy.

[CEO] Mr. Steenland said Northwest was determined “to fix it and fix it once” in bankruptcy. That led to a $2.2 billion reduction in annual expenses, with $1.3 billion coming from workers in the form of lower pay, costlier benefits, relaxed work rules and job losses, which has led to outrage or apathy among some of its 30,000 employees. “You don't go through that magnitude of change without it having an effect,” he said. “One of our challenges is looking to address that and repair those relations.”

Steenland is a lawyer. Maybe having a lawyer running an airline is just as dysfunctional as the finance people who traditionally run the Detroit Three? What Northwest did was legal, but was it smart leadership? Now that they've damaged relationships, let's fix them. The only way to get out of bankruptcy was on the backs of the workers? That's not very creative management, cutting salaries. Steenland sounds like he is dismissing the employee anger as “Yeah, that will happen.”

Improving those relations will be tough. Yesterday unions representing Northwest pilots and flight attendants held a rally at the Minnesota state capitol to protest Northwest's executive compensation plan, which they called “excessive.” In a statement before the event, Capt. Dave Stevens, chairman of the group representing pilots, said his members are “angry that their 40% pay cuts are being turned into compensation increases for Northwest's senior executives.”

Steenland received stock grants and options worth $20 million over the next four years. Granted, that's different than cash, and the employees also have a profit sharing plan, but bonuses like these send a message that the executives are much more critical to the airline than the actual value adding employees, such as pilots and flight attendants.

Part of the plan includes some “employee involvement teams,” like we read about at Southwest. But why are “bitter and angry” employees (as they referred to themselves in another article) going to trust management to work together on improvements?

Now it is organizing employee involvement teams to let workers have a stronger voice in business decisions. About 50 have been formed so far, looking at everything from improving luggage performance to saving fuel and choosing new uniforms for customer-contact workers.

These improvement activities might be good for the company, but are they also good for the employees? It seems like Northwest management has furthered the “us vs. them” battle between upper management and employees, now they're asking for cooperation? It seems like management will have to do much more to build trust with their employees.

Maybe instead of relying just on employee pay cuts, Northwest could have partnered with employees much earlier? It would have been nice if labor and management could have worked together to find cost savings, service improvements, and operational savings BEFORE relying on cost cuts. Shouldn't they have done this BEFORE bankruptcy? As John Hunter wrote about today, management has a responsibility to manage the company in a way that prevents problems like this from ever happening.

It makes me long for the day (1949) when Toyota executives took responsibility for their business failings and resigned, rather than staying and collecting huge bonuses later. You can read about that history here.

In the meantime, discussions between labor and management finally focused on whether to admit failure, declare bankruptcy, and dissolve the company, or to agree on the dismissal of some employees and embark upon a rebuilding program. In the end management and labor agreed to reduce the total workforce from 8,000 to 6,000 employees, primarily by asking for voluntary resignations. At the management level, President Kiichiro Toyoda and all of his executive staff resigned.

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