Imagine flying a plane with no instruments, no detailed flight plan and a crew at odds with each other over what the best course of action should be.
Where are we going?
Up, but we are currently pointed down.
How?
Not sure.
Where are we now?
Don’t really know.
Are there maps?
Only of where we’ve been, not of where we’re going.
Michael Scheeringa was faced with this scenario in 2004 when he took over as CEO of Cleveland-based Flight Options, a $600 million provider of fractional jet ownership — a sort of time-sharing arrangement for private jets. And while he wasn’t actually flying an aircraft, his company was essentially flying blind with poor data and a fragmented culture.
“My first observation was the organization was less healthy than I thought walking in the door,” says Scheeringa. “We had two companies that had essentially been merged two years prior (Flight Options and Raytheon Travel Air), but the operations were never scaled to the merger. The two companies had very different operating philosophies, and those two philosophies still prevailed with individuals in the organization.”
The data used to navigate the direction of the company were mostly based on systems that were developed in the late 1990s when the company was founded. The result was information that was outdated by the time it got to anyone who could act on it.
With multiple cultures pulling in different directions and data that wasn’t doing anything other than telling everyone where the company was weeks ago, it’s not surprising that Flight Options was losing money.
“When everyone walks into a new job, in a perfect world, they would like 90 days to be a sponge and do nothing but observe and digest and put together a massive program and plan about every aspect of the company,” says Scheeringa. “Unfortunately, I think it’s very, very rare that you get that opportunity.”
Scheeringa started looking at what needed to be done to pull the company out of its tailspin.
“The first thing we needed to do inside of Flight Options was stabilize our operations, create reliable data and deliver what people had contracted us to do,” says Scheeringa. “We were a company that was getting smaller, and we had a large number of customers who were not satisfied with the service we were providing them.
“Fixing the problems was a combination of people, processes, systems and infrastructure. We had to attack all four.”
Everyone had to be on the same page, especially the senior managers, and unifying the culture meant unifying the leadership. But change always comes at a price.
“In the last 24 months, we have had a transition with every single senior leader at the company, with the exception of one,” says Scheeringa. “Some were forced, and some left to pursue their own thing.”
Much of the company’s technology also got the boot, with 5-year-old servers being replaced with faster, newer ones to facilitate better data and increase customer service.
“We had high-net-worth individuals on the phone, and it was taking 25 seconds to get a response,” says Scheeringa. “We got that down to seconds, if not tenths of seconds. Our information needed to be live, accurate and consolidated. We didn’t need a report a week later about what happened yesterday, with four different people giving me a report on the exact same thing.
“When I joined the organization, most of the management reporting was looking at the month prior, and we wanted to look at real time. What’s going on in the operation so that people responsible for managing know what’s happening today? We wanted forward-looking information for those who were responsible for planning for the future.”
Scheeringa and his team analyzed where the data was coming from and how it flowed to create the most accurate picture of Flight Options possible.
“How do you make decisions based on information that you don’t know the integrity or accuracy of?” he says. “The first thing you have to do is understand the source data, where it comes from, how does it flow and is it meaningful.
“Fact-based analysis and conclusions based on a fully thought out enterprise plan all need to be part of the foundation, because you don’t want to assume where you are going without having a map. This is one of things I told people: A year from now, we are going to fundamentally be a different organization. We are not going to be an organization of 365 tomorrows. When I came in, the entire organization was worried about tomorrow. I needed to help get the organization looking at where it should be three years from now and work toward that and not worry about tomorrow. We have a road map to do that, and the map needs to be accurate.”
Key metrics were created to measure every aspect of the company, including owner satisfaction, employee satisfaction and on-time performance. Senior managers now review the information every week to see where the company is at relative to the goals.
“The entire management team is now on the same page as to how we are operating, not only in the current environment but how we are setting ourselves up for six months from now,” says Scheeringa.
Gaining altitude
With accurate and relevant data being routed to people who were now all working toward the same goals, Flight Options started to show improvement. But there was still work to be done.
“Once we had stabilized our operating environment and began delivering against our promises, we had a stable network, but now what do you do with it?” says Scheeringa. “We were pleasing customers, but we were still losing money.”
Scheeringa looked at best practices, not just in the fractional-ownership segment but in all of aviation. The result was a new plan unveiled in January 2005, dubbed the Go-Forward Plan. It is based on the pillars of safety, service and profitability.
Scheeringa says turning around a company requires managing multiple tasks and being willing to make tough choices. It also means being very clear about expectations.
“When we first laid out our plan to all of our constituents, we laid out what we were doing to the owners, shareholders and team members,” he says. “We brought in key vendors and laid out where we were taking the business over the next three years. I think we did a decent job managing expectations. We told everyone what to expect in years one, two and three.
“From a shareholder perspective, we told them to expect this financial performance. From the owner perspective, we told them to expect this transformation. With the team members, we laid out how jobs are going to change, how they would be held responsible and how we were going to roll out reporting and go from historical-looking facts to forward-looking projections.”
The conversation always begins with an explanation that the process is an evolving one and that it doesn’t happen overnight. With the framework laid out, Scheeringa now provides monthly and quarterly updates in newsletters so all constituents know how the company is progressing against its goals.
“There is a deliberate path of what’s on the fast track, slow track and priority by area,” says Scheeringa. “You have to balance that across the entire organization.”
The message to everyone also has to be the same, regardless of whether you are speaking to a shareholder or an employee.
“If a pilot was talking to an owner, they are talking about the same thing,” says Scheeringa. “Everyone has the same basic points so all constituents, to the best of our ability, are all on-message.
“This is very important. If you don’t get the message out, people create their own message. So by getting the message out first, you are providing the framework and context so somebody else isn’t doing that for you.”
In the area of safety, the fractional jet ownership industry — Flight Options included — had an excellent safety record, but there’s always room for improvement.
Flight Options increased operational security and performed internal safety audits to identify deficiencies. It focused on workplace safety, injury reduction and increased safety standards for vendors. The company put stronger emergency response procedures in place and refined safety event reporting systems to identify the root of safety issues. More line employees are participating in the safety process through companywide training, and each department has its own safety representative.
Safety practices were standardized and integrated into operational procedures to better define responsibilities and accountability.
In the area of service, Scheeringa saw in other industries that being the best brought a premium price.
“We are in the luxury service business,” he says. “High-net-worth individuals list private jet travel as one of their top five luxury services. We were unable to find a published list where there actually was a provider of luxury jet travel listed. There was a manufacturer, but not a provider.”
This was a niche that Flight Options could fill: Become the best in the industry and command the premium prices — and profits — that go with it.
“Given some of the premiums we’ve been able to see in the cruise and lodging industries for the pre-eminent five-star provider, we embarked on a path that our service would be differentiated,” he says. “We would deliver excellence.”
The way to excellence lies with training, not marketing. Service training is vital to the company’s fortunes because two-thirds of its business comes from direct referrals, and 92 percent of business get a referral before joining the program.
“So even someone that doesn’t have a direct referral before they call us will get one before they sign,” says Scheeringa.
The number of potential fractional jet owners in any city is relatively small, and they all tend to know each other, so it is crucial that every experience is a good one.
“People fly private because it is convenient and hassle free, and that’s what we have to deliver against,” says Scheeringa. “The reputation that preceded us is one that referrals and experience will overcome. No marketing is going to get that done. A bad first experience dies hard.”
Scheeringa brought in outside help to transition the Flight Options’ experience.
“We engaged a five-star hospitality company that works with us on a personal level as well as provides a general curriculum we are using throughout the entire company on how to measure, reward and recognize service delivery,” he says. “The program costs several million a year for three years.”
The program focuses on having a continual level of high service, from the time someone contacts the company inquiring about fractional ownership of a jet, through the sale, booking of travel and billing. It also institutes a similar approach for other employees to ensure a smooth handoff of all issues between employees and departments.
“The first people that went through the service initiative was the leadership team, so the leaders clearly understood the objectives, and every leader went through the exact same curriculum that their subordinates went through,” says Scheeringa.
Once everyone has completed the training, management enters the second phase, which involves feedback from the rank and file to give leadership some idea as to how it is performing.
Is the millions spent worth it?
“Customers are happier, team members are happier and we have record sales,” says Scheeringa. “Yes, we are seeing a significant return, but some people will say, ‘How do you tie that individual behavior back to that investment?’ It’s a leap of faith, but the company’s service delivery is higher, owner satisfaction is higher and a record amount of people are buying into the program.”
Modernizing equipment
The data showed that profitability at Flight Options hinged on upgrading equipment.
“What we learned was that one of the things that made us unprofitable is that almost 50 percent of the companies using our programs were in older aircraft,” says Scheeringa. “The company had sold well, but some segments couldn’t deliver to the demands of a fractional business model.”
The older the plane, the more down time it spends sitting in a hangar rather than flying customers. Valuable time was being lost due to increasing maintenance demands.
“To give an example, a 20-year-old Cessna Citation III last year was only able to fly roughly 50 percent of the days of the year,” says Scheeringa. “A modern replacement aircraft for owners in that program is a new Hawker 800XT. And that Hawker last year flew on average more than 75 percent of the days of the year.”
But Scheeringa would never have realized how much value was locked in a fleet upgrade without the accurate data stream he demanded.
“No one knew that value was there,” he says. “It’s how you look at the data. It’s how you look at something that every employee in the company told you was killing you, but you needed that data to prove that financially, it wasn’t working.”
The solution was clear: Upgrade and standardize the fleet.
Flight Options announced that it would take an aging fleet of 205 planes of 12 types and replace them with four standard types — one for each size segment of the jet-travel market.
“Unlike some of our competitors who wanted to offer an airplane for every different type of experience, we said operational excellence will begin with the standardization of the fleet and having an efficient and consistent fleet experience within each fleet category,” says Scheeringa.
About 50 older aircraft have now been replaced by about 20 new ones, with more transition on the way. The company is smaller, but is also more efficient, effective and has better finances. The financing for this fleet overhaul came from Raytheon Corp., which was already a majority shareholder in Flight Options. Raytheon bought the remaining minority interest in the company, making it a wholly owned subsidiary and ending objections from minority shareholders that were disrupting the business.
The fleet standardization saves money in the maintenance department by reducing the variety of tooling, parts and experience needed for repairs. Maintenance crews can now focus on being experts on four aircraft rather than 12.
The change also made air crews more efficient. With so many older aircraft, not all crews were qualified to fly all the airplanes. If a plane broke down and there wasn’t a similar plane available to replace it, the crew sat until the plane was fixed.
“If I have planes of like types, if this one breaks, the pilots can now fly the other airplane,” says Scheeringa. “Streamlining the fleet improved customer consistencies, maintenance efficiencies and pilot productivity.”
The data also pointed out which customers were more profitable.
“Our systems did allow us to go back and look at every one of our owner profiles for the last three years,” says Scheeringa. “When did they call, where did they fly, when did they fly and what type of airplane did they fly. We could look at the entire demographic and see which owners are profitable and which ones we were losing money on and do it with empirical evidence.”
The result is a refocusing on the profitable customers, and the fleet modernization ties directly to that.
“There ultimately will be a fallout,” says Scheeringa. “Some people will no longer be able to afford to be in our club. If you bought into a 20-year-old Citation II, the equivalent to stay in the program is a light jet that will require an investment of four times their current investment. As we get rid of older airplanes, there is an element of the population that cannot stay with the traditional fractional model.”
Leading change
By creating accurate data and using it to identify what needed fixing at Flight Options, then making the tough choices to implement change, Scheeringa has plotted a new course for the company.
“We believe we have set a course with a viable and sustainable business model within this segment of the aviation industry,” says Scheeringa.
By the end of 2005, costs per hour had declined nine consecutive months, on-time performance was trending upward and owner satisfaction had significantly improved.
None of this would have been possible without driving change across the organization, and that takes more than one person. Finding allies is a critical component to success. Scheeringa says that identifying those allies is fairly easy because they select themselves.
“If you have people that want to be leaders, they will be found,” he says. “It could be at the first manager orientation and it could be the first three people that ask me questions without being prodded. That person wants to make a difference. They ask questions and they care and they are willing to stand up in front of their peers.”
If you are giving out project assignments to six people and two people ask questions and deliver on time, those two should get all of your attention and the other four should be replaced.
“Someone told me early on, don’t spend your time on negative forces, spend it on positive,” he says. “I’ll spend it on the positive because you get more bounce than working with people who don’t want to get a bounce. I use the rule of three: First you ask, then you remind and then you do it yourself. If I have to do it myself, more than likely I’m going to find a new personality for that position.
“To drive change, you have to build a plan and don’t blink. There will always be constituents that want to avoid change for a variety of reasons. There will always be a point in time where it would be easier for you as a leader to pause or reverse course, but you have to say no and keep pushing.
“You have to have a plan based on facts and not hypothesis and get people capable of executing in those managerial roles. Never underestimate the value of having a firm plan and the people capable of executing it.”
How to reach: Flight Options, www.flightoptions.com