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Scandinavian Airlines System   Term Paper ID:27346 Click to get this paper

Essay Subject: Reviews the current state of Scandinavian Airlines. Develops short & long term goals for the company.... More...

5 Pages / 1125 Words 2 sources, 3 Citations, APA Format $20.00 Return to List of Papers

Paper Abstract: Reviews the current state of Scandinavian Airlines. Develops short & long term goals for the company. Paper Introduction: Scandinavian Airlines System Summary The story of Scandinavian Airlines System during the early 1980s is one characterized by a remarkable turnaround. For a number of years, SAS had been in decline, with a focus on technical proficiency and safety, but a deemphasis on customer service and "frills." In a competitive environment, the result was a loss of business and a loss in dollars of $17 million in 1979-1980. By 1982-1983, however, that loss had been reversed and there was an operating profit of $48.9 million. This is largely attributed to the new corporate philosophy of president and CEO Jan Carlzon. Carlzon was a service-oriented businessman who reversed the focus on technology and cost-cutting, reorganized the company, replaced 13 or 14 senior managers, and Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Hagrup was focused on technicalproficiency and cost-cutting, while Munkberg was particularly concernedwith cost-cutting and profit-oriented management. The human resources function, in general,is not performing as well as the rest of the company. The role ofmiddle managers needs to be redefined and strengthened. This is what Hammer (199 )indicated was more appropriate to modern conditions in which workers arebetter educated and more interested in autonomy and customers have manychoices. Instead, it means that businessesbreak with their own past and utilize discontinuous thinking in order torethink the organization's performance. He began the changeovertoward an organization which delegated more responsibility and authority,but did not succeed rapidly enough and was replaced by Carlzon. Clearly, when Carlzon was hired the company had proven to beunsuccessful in adapting to the new regulatory and competitive climate. Carlzonand others sought to rethink employee training and envision how to includemiddle managers and front-line employees in establishing the vision andreinforcing the focus on innovation. Leaders need tocontinue communicating the vision through the press and through both wordsand actions within the company. There may be some need for decreasing thelabor cost; outsourcing inefficient functions may be one possibility. Ithad tried the old ways, and a slow evolutionary process under Munkberg.What it had not tried was a complete reengineering of the company, which iswhat Carlzon instituted. His corporate structure was decentralized, emphasizingthe development of entrepreneurial profit centers that operated moreindependently. It seems as though the main problems involve the development of long-term and short-term goals and attention to the human resources component ofthe organization. Again, it is necessary to involve employees in developingthis vision, so that they reinforce the company's effort at the locallevel. This is an example of what Hammer (199 ) calls reengineering. Scandinavian Airlines SystemSummary The story of Scandinavian Airlines System during the early 198 s isone characterized by a remarkable turnaround. Instead, it isa revolutionary process, an all-or-nothing attempt to recreate the company. For a number of years, SAShad been in decline, with a focus on technical proficiency and safety, buta deemphasis on customer service and "frills." In a competitiveenvironment, the result was a loss of business and a loss in dollars of $17million in 1979-198 . Reengineering is designed to help companies recognize the currentcorporate culture, including written and unwritten rules of doing businessand then more intentionally working with structure and culture to createnew processes that support success. In particular,wage and career problems increased, profitability led to increasedliability, the middle manager role was problematic, and there was a needfor continuing innovation, goal establishment, and sharing of the vision.Recommendations In the Second Wave effort at SAS, there were new emphases. (199 ). Many of these have already been established. Technologicaladvances need to be absorbed and new planes purchased. Hammernoted that the problem of most companies is that they try to take advantageof new technologies while maintaining the same old management processes.They stick with the old ways of doing business, when what is required isradically new ways of organizing work. However, even with the rapid and powerful turnover that SASexperienced, problems remained, and new problems developed. Reengineering work: Don't automate, obliterate.Harvard Business Review, July-August, 1 4-112. Entrepreneurship, creativity, and organization.Englewood Cliffs, NJ: Prentice Hall. In terms of human resources, the rewards and benefits system mightneed to be rethought, and promotions, or career tracks reenvisioned.Although employees appreciate the new emphasis on autonomy and creativity,they are likely to demand other rewards if the company remains profitable.Action Plan Long-term and short-term goals might include the following: Long-term. It needs to addressroles, training, reward systems, and career development. The long-term goal is that SAS be the market leader by 1995. Kao (1989) noted that Munkberg sought evolution within theorganization, while Carlzon incited revolution internally. Carlzon was a service-oriented businessmanwho reversed the focus on technology and cost-cutting, reorganized thecompany, replaced 13 or 14 senior managers, and emphasized the importanceof front-line staff who dealt with customers. Kao, J. For performance goals, SAS needs to improve punctuality and servicelevels, while aiming at 25 percent greater efficiency. The first two men attempted to follow traditional businesspractices, but did not succeed. Hammer (199 ) also noted that it doesnot work as an evolutionary process, which Munkberg tried. He eliminated the detailed manuals, and emphasized a fewsimple principles in his "Little Red Books."Analysis The contrast between Hagrup and Munkberg's tenures and that of Carlzonis instructive. Long-term goals might involve both technological andservice development, while short-term goals can focus on the looming threatof deregulation. He did notsimply try what had always been tried, nor just tinker with the company.Instead, he overturned long-term ways of doing things and created anentirely new process for the company. This is largely attributed to the new corporate philosophy ofpresident and CEO Jan Carlzon. (1989). Expand service to other areas, including Asia and SouthAmerica, while creating affiliations with domestic airlines. The company seemed to be reunitingunder threat of deregulation throughout Europe, with the goal of reducingcosts in the organization and increasing efficiency and service evenfurther. Training needs tobe redesigned for all employees. Reengineering does not mean that every company changes in the sameway, or does business in the same way. Short-term. He focused on the frequent-flyer businessperson as the linchpin of his growth plan, and encouragedemployees to innovate and respond creatively to customer needs. By 1982-1983, however, that loss had been reversedand there was an operating profit of $48.9 million. References Hammer, M. SAS could alsoprovide a frequent flyer miles program for business travelers. He alsoreduced administrative costs and encouraged employees to reduce costs thatwere unimportant, while providing excellent services in areas that thecustomers desired. For Carlzon and SAS, this meantthat the highly-ordered, efficient, structured and controlled environmentwas replaced with a decentralized, simpler, and more innovative structure.In addition, SAS began to emphasize quality, innovation, and service,rather than cost, growth, and control. It is designed to leave behind those methods and processes that haveproven to be unsuccessful in one way or another. 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