Talent Management Models and Best Practices at Continental Airlines

Introduction: Continental Airlines and Human Resource Management

"Continental prides itself on a company culture that treats employees with dignity and respect and rewards employees when the airline achieves its goals." — CO Facts, 2010

The past decade was a tough one for the global airline industry. Many airlines that were already struggling, or operating at only marginal profits, failed to survive the downturn in travel that followed the terrorist attacks of September 11, 2001. A few airlines, however, not only managed to survive during the years that followed — they grew their business models into additional markets while continuing to practice sound human resource management (HRM). Among these, Continental Airlines stands out as an excellent example of how informed and thoughtful HRM practices can contribute to organizational growth even in the worst of times.

The purpose of this paper is to analyze talent management at Continental Airlines and, based on that analysis, to develop a talent management best practices model that the company can use for employee hiring and retention in order to drive high-performance productivity. The talent management model for Continental is then evaluated for its potential effectiveness in achieving successful organizational outcomes, followed by a summary of key research findings in the conclusion.

Review and Analysis of Continental's HR Strategies

Today, as the world's fifth largest airline and a Fortune 500 member (Ladd, 2005), Continental Airlines — referred to hereinafter as "Continental" or "the company" — is modeling the way for other airlines struggling to survive during a period of economic downturn. It does so through a commitment to using its human resource management function to achieve organizational goals. Continental, together with Continental Express and Continental Connection (both partner airlines), operates more than 3,200 daily departures throughout the Americas, Europe, and Asia, serving 154 domestic and 138 international destinations. More than 1,000 additional points are served via the SkyTeam alliance, a consortium of 27 member airlines offering more than 19,000 flights each day to more than 725 destinations in 149 countries (Datol, 2006; CO Facts, 2010). The company consistently earns awards and critical acclaim for both its operations and its corporate culture. While non-market factors make the extinction of legacy airlines unlikely, Continental remains focused on maintaining its ability to outpace its competitors through strategic selection and development of its leaders.

Companies of all types and sizes are trying to design career plans that improve employee morale and create and sustain excellence in their organizations (Moore, 2007). To achieve this objective, human resource managers must identify effective methods to assess, plan, and develop high-value talent in order to accomplish current and future organizational goals (Berger & Berger, 2003). These considerations are especially pronounced in highly competitive environments such as the airline industry. The industry was rocked to its foundation following the September 11 attacks, and some observers wondered whether it could even survive. Indeed, many airlines succumbed to the overall downturn in global travel in the wake of those attacks (Flouris & Walker, 2005), but a few managed to weather the storm long enough to emerge as key players — Continental being among the most prominent examples.

An analysis of Continental by Raphael (2002) emphasized that, "If Continental Airlines wanted to cut back on its pay-for-performance program, the end of 2001 and the beginning of 2002 would have been the time to do it. After all, the airline was dealing with the impact of a terrorist attack, a recession, increasing oil prices, rising labor costs, falling stock values, and declining revenue" (p. 16). Rather than discontinue the practice, Continental continued to spend around $44 million each year as a reward for superior employee performance — and the results proved the company's leadership right. According to Raphael, "Staying the course paid off. Despite a few tough months with millions of dollars of losses brought about by 'overcapacity' — planes without passengers — the plan prevailed" (p. 16). By March 2002, Continental was once again in the black as air travel approached normal levels and employee performance remained high. During the first few months of that year, the company recorded the best on-time record of any major airline in the country and maintained a very low rate of canceled flights (Raphael, 2002).

The company's insightful leadership earned Continental a number of awards and widespread industry recognition, including three consecutive years as "Most Admired Global Airline" by Fortune magazine and the number one ranking on Fortune's 2006 Most Admired Airline industry list (Datol, 2006). Many of these awards were based in part on the company's efforts to recruit and retain minority employees. According to Burke and Cooper (2005), Continental developed alliances with a number of minority associations — including the Organization of Black Airline Pilots, Black Flight Attendants of America, and the Hispanic MBA Association — that were important in attracting minority candidates. "To retain recruits, Continental instituted pay bonuses linked to teamwork, implemented diversity goals for each business division, and began training to address and prevent potential conflicts based on differences in the workplace. Continental has made Fortune's 100 list of Best Companies to Work for and the Hispanic Business list of Best Places to Work for Latinos" (Burke & Cooper, 2005, p. 37).

Continental has succeeded where others have failed because of its commitment to all of its stakeholders, especially its employees. Three of the stated goals of the company are to:

1. Help well-trained employees build careers they enjoy every day;
2. Achieve profit sharing for co-workers; and
3. Complete discussions with workgroups to reach agreements that are fair to co-workers and to the company (CO Facts, 2010, p. 3).

This commitment to human resources has become more challenging as Continental expanded its operations into far-flung regions of the world through its SkyTeam alliance. Like other highly successful organizations that have managed to grow despite industry headwinds by entering additional international markets, Continental has proceeded judiciously in identifying target markets (Mohrman, 2007). In the post-9/11 environment, the airline tended to experience slower growth due to a combination of fundamental market and cost-structure conditions inextricably linked to its business model. It achieved slow but steady growth by "carefully finding expansion routes where its business model is a clear competitive advantage" (Mohrman, 2007, p. 35).

Because it is grounded in a commitment to its stakeholders, Continental's business model is especially well suited for a strategic partnership with its human resource function. Mohrman (2007) emphasizes that, given its multinational scope of operations, Continental relies on its HRM services to help employees find career paths that suit them and to provide growth opportunities that simultaneously contribute to organizational goals. "This is an important focus for HR, because talent management is inextricably linked to organization and work systems design, in a way that each constrains the other. By expanding its focus to include organization and work design, HR multiplies its influence on both people and business performance" (Mohrman, 2007, p. 35).

These issues came to the forefront in 2004 when, despite modest post-9/11 performance, Continental's senior leadership announced that the company would expand into international markets in an effort to survive and grow (Hansen, 2006). The effects of this announcement on the company's demand for new leaders were profound, given the urgency and scope of the expansion envisioned. According to Hansen, "Continental launched 10 new international destinations in 2005 and used new technology to recruit 3,200 new hires for locations ranging from Argentina to India" (2006, p. 2). Taken together, these requirements demand a talent management model applicable to a wide range of cross-cultural settings and to the wide range of positions that comprise Continental's workforce.

Talent Management Best Practices Model for Continental

A talent management best practices model for Continental should begin with recruitment and extend through the steps needed for retention. According to Williams (2005), research to date and empirical observation confirm that a successful talent management process for developing leaders must address four major imperatives, as outlined in the table below.

Table 1: Major Imperatives That Define Talent Management Best Practices

Imperative 1 — Create a winning environment within which to work
Steps: Make the company one that people will want to join and remain with. Build a strong achievement ethic throughout the business. Create exciting, challenging jobs in which people can excel. Select and develop outstanding leaders.
Potential Outcomes: A culture of high performance and strong employee commitment.

Imperative 2 — Make talent management a critical corporate priority
Steps: Foster a talent management mindset. Develop managers who can coach, mentor, empower, and sponsor talent — and deploy it to best advantage. Develop the necessary skills to lead and manage talent. Make managers accountable for managing talent.
Potential Outcomes: A management cadre actively invested in developing those below them.

Imperative 3 — Create the means to identify and select outstanding talent
Steps: Be clear about what talent is needed for the business. Recognize that the ability to recognize ability is scarcer than ability itself. Be able to identify talent when it is demonstrated. Be aggressive in securing the services of identified talent.
Potential Outcomes: A reliable pipeline of high-potential employees aligned with business needs.

Imperative 4 — Engage talent fully: manage it and continue to develop it
Steps: Promote talented people early and often. Value and fully involve today's high-performers. Give feedback, coach, and mentor. Confront and deal with retention issues.
Potential Outcomes: Sustained employee engagement and reduced attrition of top talent.

Source: Based on Williams, 2005, p. 97

Notwithstanding the fact that Continental operates in approximately 75% of the world's roughly 200 countries, these best practices appear capable of overcoming cross-cultural constraints to talent management because of their focus on identifying and grooming leadership talent that will fuel the company's growth into the future. As Williams notes, "The above four imperatives are the cornerstones of talent management. They are therefore fundamental to close-quarter leadership and especially the leader's responsibility for identifying and developing those who will lead the business tomorrow" (2005, p. 98).

Conclusion

An evaluation of this best practices model suggests that many of these imperatives are already in place at Continental Airlines, even if they are not specifically codified in this fashion. Based on its proven track record, it is also reasonable to conclude that Continental has succeeded in recruiting, identifying, and retaining top-quality leaders where other airlines have failed — owing to its commitment to using its human resource management process strategically to achieve organizational goals. In the final analysis, the research consistently shows that the time, effort, and resources devoted to helping people grow within an organization pay major dividends. Those companies that remain focused on this commitment, even during periods of economic downturn, will reap substantial benefits over the long term.

References

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Hansen, F. (2006, February 27). Paperless route for recruiting. Workforce Management, 85(4), 1–2.

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Raphael, T. (2002, June). Continental stays on course. Workforce, 81(6), 16.

Williams, M. (2005). Leadership for leaders. London: Thorogood.