Delta Airlines - Management and Organizational Issues

Delta Airlines

Management and Organizational Issues

Introduction

The airline industry is volatile!  In most recent years, airlines have had to overcome the traumatic effects of the September 11, 2001 terrorist attacks and the fluctuating prices of fuel.  A key player in the industry, Delta Airlines, Inc. (Delta) was founded in 1924 as a crop-dusting service and has evolved into one of the U.S.’s largest airlines based on revenue (Marketline, 2015, p. 6).  Along with providing air service throughout the U.S. and six other continents, they operate additional businesses including: aircraft maintenance, airline repair, staffing services, private jet operations, vacation wholesale operations, and operation of a newly accumulated oil refinery (Marketline, 2015, p. 5).

        What strengths does a power company such as Delta exemplify?  Delta’s organizational behavior has led the company to profit an industry record $2.7 billion in 2013 (Tully, S., 2014).  In the following sections an in depth study of Delta’s key organizational behaviors (motivation, training, and ethics) will be discussed and analyzed.  

Motivation

How does an eighty thousand-employee business motivate its workers? Why did the employees feel such a strong commitment to the company that prompted them to collect thirty million dollars for the purchase of a new Delta plane?  Although the company has evolved since the 1980s, Delta has maintained a committed relationship with its employees (Kaufman, 2003, p. 176).  

Reflecting their commitment in the late 1990s, the Board of Directors forced then CEO, R. Allen, to resign due to his unpopularity with employees, even though the bottom line was improving.  During Allen’s time as CEO employee morale was low and quality suffered. Allen’s predecessor, L. Mullin was also forced to resign in part due to low employee morale and decreased quality service during his reign even though he increased employee wages throughout the company.  It was during Mullin’s term as CEO that Delta established its Employee Involvement (EI) program (Kaufman, 2013, p. 358).

The EI program is the foundation of Delta’s high-level employee commitment and motivation. The program is most closely related to the McGregor’s motivational Theory Y.  Theory Y places the behavior patterns of employees on their desire to meet higher- order needs.  Under Theory Y, managers are responsible for equipping employees with the tools necessary to meet their needs.  With the correct tools, employees will work towards organizational objectives while simultaneously meeting their personal higher-order needs.  High performance is a result of employee satisfaction and commitment.  Economic performance results from employee performance (Nelson, & Quick, 2013, pp. 166-167).  

The EI program is composed of employees from all levels of the organization, and has changed over time, depending on the needs of the company and the employees.  The Delta Board Council (DBC) is the top level of a three-tiered pyramid.  The amount of interaction with executives distinguishes each level of the program.  The DBC members encounter a strict interviewing process to ensure they are qualified for the position. DBC members must be able to communicate with top executives and understand business plans.  Members of DBC represent ninety percent of employment positions at Delta (Kaufman, 2003, p. 179).  There are currently six major functions of the DBC: to communicate front line feelings towards the business to executives, to communicate business plans from executives to the front line, to represent employee perspectives to the board and executives, consulting management, participating in special projects, and conducting site visits to Delta facilities (Kaufman, 2013, p. 361).  Underneath the DBC is the level containing five divisional level forums.

The five divisional forums for Delta are: Flight Attendant Forum, Technical Operations Employee Council, Airport Customer service Employee Forum, Cargo Partnership Council, and Reservations sales Voice in Partnership (Kaufman, 2013, p. 362).  Kaufman stated, “the mission of the groups was to identify problems and issues that could be jointly worked out to increase business effectiveness and employee satisfaction,” (Kaufman, 2013, p. 361).  This level did not allow for control of wages, but was influential in other significant decisions such as maximum flying hours (Kaufman, 2013, pp. 361-362).  

Around one hundred continuous improvement teams (CIT) institute the bottom level of the cascading pyramid.  CITs exist in all parts of the company and work to solve a specific issue.  The CITs are much like quality circles.  The teams are built from employee volunteers that work on special projects dealing with work-related issues (Nelson & Quick, 2013, p. 330).  Solutions are recommended to management (Kaufman, 2013, p. 362).  The EI program has survived through several CEOs as well as financial crises.

The EI program at Delta has proven effective in improving performance, however, it does come with some implications.  Delta’s highly formalized model is complex and complicated and will not work for every company.  The cost of EI is high because more money is spent on employees in comparison to other programs. EI is time consuming and requires a high level of involvement from managers.  Finally, the payoff of improved performance takes years to establish (Kaufman, 2003).  Practicing a high level commitment under EI does not mean employees will always be happy and satisfied.

        Delta’s commitment to its employees has been tested during times of financial turmoil.  The organization was forced to make cost cutting decisions, such as employee layoffs after they filed for bankruptcy in 2005 (Kaufman, 2013, p. 362).  Understanding that employees were the lifeblood of customer service and profitability, Delta re-committed their loyalty to employees once they recovered from bankruptcy.  They increased wages, implemented profit sharing, and gave workers a three and a half percent equity stake in the company (Kaufman, 2013, p. 365).  Northwest Airlines recovered from bankruptcy several weeks after Delta.  

In comparison to Delta, Northwest treated their bankruptcy recovery quite differently.  The lack of commitment Northwest displayed to their employees was evident as the CEO received a twenty-six million dollar bonus.  The employees received no equity sharing and a less-generous profit sharing plan (Kaufman, 2013, p. 365).  Unlike Northwest’s organizational culture, the relationship between Delta and their employees is mutually beneficial beyond the performance rewards.

 Employee’s motivation and commitment to Delta has been evident in other instances of struggle in the organization. In 2007 U.S. Air tried to take over Delta, which inspired the DBC to put up a fight by testifying before regulatory agencies.  Delta believes U.S. Air withdrew its bid in part because of the DBC’s commitment to the organization (Kaufman, 2013, p. 368).  Employees have further demonstrated their commitment to Delta by declining to unionize.  In 2008, when Delta merged with Northwest, it acquired twenty-five thousand unionized workers. In 2010 fifty thousand Delta workers voted against unionization (Kaufman, 2013, p. 374). Recent research confirmed that the higher commitment to Delta by employees was a predictor in the failed attempt of unionization (Eaton, Roger, Chang, & Voos, , 2014, p. 183).