5.18.2007

Respect for People at Delta

If respect for people is a fundamental lean principle – and it is – then Delta Air Lines CEO Gerald Grinstein is someone who could be an excellent lean champion.


            The May 21 issue of Forbes profiles how Grinstein has taken Delta out of bankruptcy to a point where, in the words of the article, the company has “clout to challenge industry leaders American and United and beat back low-fare rivals Southwest and JetBlue.”


            A lot of what Grinstein did was painful and decidedly un-lean, including laying off thousands of employees and slashing salaries of those who remained.


            However, the article notes,


 


            But as workers screamed, Grinstein downsized his own salary, from $500,000 to $250,000 (since increased to $338,000). Next he swore off bonuses, cash payouts and gifts of stock, and capped other executive incentives. 'Management shouldn't get a reward while everybody else takes a cut,' Grinstein said.


 


            To further please workers he said he would plow $1 billion back into employees' pockets, including $190 million in cash incentives--provided Delta met financial goals once it emerged from bankruptcy. The cloud cover began to lift. Delta's pilots, receiving a 1.5% pay increase and a 401(k) in return for giving up defined-benefit pensions, jumped onboard. So did 39,000 noncontract workers. The employees garnered $350 million in new stock, $130 million cash, a 4% raise and $250 million toward retirement postbankruptcy. 'Has it been ugly for employees? Absolutely. But Delta has a good business plan,' says Donald Lee Moak, chairman of the Delta Air Lines Pilots Association. 'The employees are working together here.'


 


            Other paragraphs sum up Grinstein’s insight:


 


            Grinstein needed happy workers if he wanted to pull off his business plan: winning over business travelers who typically generate 10% of an airline's revenue and 40% of its profit. 'He simply realized you can't run an airline with pissed-off workers,' said Richard Gritta, a finance professor at the University of Portland (Ore.) who follows the airline industry.


 


            'People say 'You changed the culture at Delta,'' Grinstein says. 'I tell them I didn't change anything. What I tried to do is restore what we had before--an ability of employees to work together and solve problems.'


 


            I said earlier that Grinstein “could be” a lean champion. I used that qualification because, as far as I know, Delta is not on a lean journey. I’ve seen no evidence that Delta is currently committed to lean principles, lean training or even use of lean tools. (I did find the phrase “continuous improvement” in one presentation on the Delta website, but no supporting detail.)


            I wrote an article in our newsletter, Lean Manufacturing Advisor, about how Delta was using a lean approach to increase its capacity to overhaul and repair engines. However, that was published three and a half years ago, before the current bankruptcy and before Grinstein become CEO. I suspect whatever lean effort existed was not sustained.


            But respect for people can be valuable to any organization, even if it isn’t truly lean. And since Grinstein seems to be a person who understands that, perhaps he is also open-minded enough to appreciate the value of lean if he is made aware of it. I hope someone will see that he is.


 

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