PAUL HOLMES: Blatant employee comms failure is a major contributor to descent of American Airlines

Ever wonder why Southwest Airlines, the most heavily unionized player in a deeply troubled industry, is the most profitable of all the major US carriers? There are many reasons, but one of them is that it's hard to imagine Southwest's management making an error in judgment as monumentally stupid as the one that may now doom rival American Airlines to bankruptcy.

Ever wonder why Southwest Airlines, the most heavily unionized player in a deeply troubled industry, is the most profitable of all the major US carriers? There are many reasons, but one of them is that it's hard to imagine Southwest's management making an error in judgment as monumentally stupid as the one that may now doom rival American Airlines to bankruptcy.

Two weeks ago, American union members voted to accept a plan that called for $1.8 billion of concessions to help the company stave off bankruptcy. It was a triumph for management, but one that was short-lived. Within days of the vote, labor leaders learned that at the same time it was asking their members to make sacrifices, American was putting in place huge retention bonuses - up to twice their base salary - for seven top managers. It was also creating a special trust to protect the pensions of 45 senior executives. Workers were outraged. By the end of last week, John Ward, president of the Association of Professional Flight Attendants, had sent American chairman and CEO Don Carty a letter telling him that the union intended to reballot its membership. Given that the airline's plan was approved by a razor-thin margin, and that staff confidence in Carty and his team must be about zero, it's quite possible the flight attendants will now reject the plan. There's certainly room for debate about whether the retention bonuses were appropriate. They are not unusual in these circumstances, and are often justified on the grounds that key personnel might otherwise be lured away from a troubled company. On the other hand, they are rarely tied to performance, and they undermine the notion that "we are all in this together," which is key to motivating employees. But there's no room for discussion about the company's failure to be up front about the bonuses. Executive compensation is one of those topics on which there ought to be complete transparency, because the lack of it has the potential - as seen here - to totally undermine the relationship between an organization and its staff. If management doesn't believe it can convince employees that its compensation is justified, it likely isn't. (The other possibility is that management doesn't have faith in the ability of its communications people to present its case effectively.) To his credit, Carty quickly announced that he was scrapping the executive compensation plan (though not the pension protection scheme) and admitted that failing to disclose it during the negotiations was a big mistake. Not surprisingly, Ward was unimpressed. "No doubt, this cancellation is only a result of the fact that they were caught with their hands in the cookie jar," he said.
  • Paul Holmes has spent the past 16 years writing about the PR business for publications including PRWeek, Inside PR, and Reputation Management. He is currently president of The Holmes Group and editor of www.holmesreport.com.

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