Should a bankrupt air carrier accommodate its crew in the fanciest hotel in town? At a time when the airline industry is bleeding red ink, that might seem like a waste of money. It did to one of my colleagues, who recently took a Chapter 11 airline to task for squandering its resources on deluxe digs for its pilots and flight attendants.
"After seeing workers laid off by the thousands," he wrote, "after seeing hard-earned pensions slashed with the stroke of a judge's pen, after seeing friends' investments in the airlines reduced to rubble, after a seemingly endless series of pay cuts -- after all the misery this bankruptcy has caused -- hearing the cheerful banter of pilots and flight attendants over breakfast at a luxury hotel was jolting to say the least."
The column blasted airline workers and airline executives for clinging to their "perks," even as they publicly decry the cuts their industry has had to make. "I think they would rather see their best friend lose his job than lose their own favorite hotel or preferred flight schedule," the columnist said.
But like so much else in the airline industry, looks can be deceiving. In these difficult times for the airline industry, I think we need to take an evenhanded look at management practices that affect employees, executives, customers and investors.
Take that flight crew, for example. The crew might have been staying in a posh hotel for any number of reasons. The airline could have a discounted price with the hotel, perhaps because so many flight crews stay there. Or the airline might be bound by a negotiated hotel or union contract that has yet to expire. Perhaps the hotel is particularly safe and secure, or perhaps it maintains a flexible schedule that can accommodate the crews' erratic arrival and departure times.
These are all good reasons to put up a flight crew in an especially good hotel. But the most compelling reason is this: employee satisfaction.
This is a subject I know something about. I have my Ph.D. in industrial organizational psychology, which is the study of psychology in the workplace. I know from extensive research that satisfied employees deliver better customer service. Moreover, better customer service increases customer loyalty, which in turn drives profitability. Keeping employees happy is particularly important when a company is going through internal strife, such as bankruptcy or major layoffs.
One shining example of this principle in action is Harrah's Casino Hotels, which arguably has the best loyalty program in the travel sector. CEO Gary Loveman stated in an interview with the McKinsey Quarterly (2003, Number 2) that the secret to getting the hotels' employees to really care about their customers was to treat the employees well; the ensuing loyalty pays off big time, resulting in what Loveman calls a "massively more profitable" operation. Even though Harrah's Las Vegas hotel has only half the rooms of the MGM Grand Hotel and Casino -- and no fountains or battleship shows going off every hour -- they have the highest take per slot machine. Why? Because people go there for the service, which starts with happy employees.
Turmoil in a company always causes uncertainty among employees, but especially among employees who remain after a layoff. The tendency is for the employees to feel anxiety about their jobs, which may be in jeopardy, as well as "survivor guilt" that they have held on to their livelihoods while their coworkers have been cut loose. The most effective way for a company to deal with these situations is to treat the remaining employees with care and dignity, being especially careful to provide fair compensation.
A few weeks ago, I had an opportunity to visit the Park Hyatt Hotel in Mendoza, Argentina. Not only did I receive heartwarming service, but I also had the fortunate experience of speaking with the hotel's general manager. When I inquired how he was able to coordinate all his staff members to offer such exceptional service, he replied simply, "I treat everyone with respect and dignity."
And it showed. As I was sitting with him, a number of employees came into our contact; the GM knew every one by name and could tell me about each person's background. The key to his good management was caring about his employees.
This much is clear: When your employees deal directly with customers, it is especially important that they have high job satisfaction. Airline flight crews, especially, are key employee-contact personnel. One disgruntled airline employee can result in the loss of more than 100 passengers. So, is it worth treating these employees well? Logic and past research say yes. The airline my colleague thinks is squandering resources is in fact investing wisely in those employees who are most accountable for customer service.
Think about it. When you fly, don't you like to be treated well? Now think of what those flight crews do to serve you. Not only do they work hard, they work many miles away from their homes and families. Can't we give them a perk or two? Even my colleague confesses his yearning for privileged service: "Hey, I'm entitled to some perks once in a while," he says.
The way I see it, airline ticket prices are still at an all-time low and, in my experience, service has been fine. (And my experience isn't paltry: Last year I flew 200,000 miles, and this year I've already racked up 75,000 miles.) So if fares aren't rising and service is acceptable, I'm all for giving airline employees a perk or two.
I assume that the airline has a smart industrial organizational psychologist on staff advising the simplicity and value of the following principle: To maintain good customer relationships, keep your employees happy -- especially during traumatic times.
I appreciate the risk I take when I sound like an apostle for the airlines. Going against conventional wisdom is not always popular, but in this case, it is certainly the right thing to do.

Joel Widzer