Leading Through Change with a Change Champion from Travelocity, GE, and American Airlines

DS: Al, our organizations are likely to see a lot of change given the times we’re in right now. You set out to study change more than two decades ago. What got you interested in the topic of change in the first place?

AC: I became interested when I realized that change is an inflection point. Our organizations win or lose by how well we’re able to change. In my years as an executive, I saw lots of failed change around me, and I wanted to understand why companies change, why organizations fail at change, and why they won’t change.

I was involved in leading a change early in my career that was very poorly led by the most senior executive in the organization. I was as gung-ho as I could be to get the change going and to communicate the change, but our leader was not as sold on his own change idea as we needed him to be. And so after spending two years working on this change and failing at it, I set out to understand, why is it that changes sometimes fail? And why is it that, other times, people succeed at them? I learned three things.

• Change doesn’t happen if the leader doesn’t change. The leader has to show change and share the change with everyone.
• People aren’t being straight with our leaders when they aren’t changing. Leaders know intrinsically that they’re going to have to have a role in this change, but many of them think it’s a communications role. Well, the best communicators in the world will tell you that communication is 90% action and only 10% words. And so, leaders must understand the importance of having skin in the change and the need to show action.
• All of the people who were so focused on change and had written books about change were all academics or consultants. Most often they were not people who had been inside an organization and who had seen what actually drove people to change. That led me to say, “Well, okay, those who are talking about change are missing an aspect. I can bring a perspective that perhaps people who haven’t been inside an organization during a change, but certainly have studied it, won’t have.”

DS: It’s interesting, Al — I think it’s generally been said that people don’t like change. There are exceptions to that, people who thrive on change but in general, it’s understood that people don’t like change. 

But then you have to say, “Well if they don’t like change, why do they get married? Why do they have kids? Why do they go to college?” Those are all big changes that we look forward to. One of my fundamental beliefs is we’re on the face of this Earth to create value for other people. And that a lot of the great moments in our lives, the times of satisfaction, reward, and enjoyment, are all in the context of creating value for other people.

As businesses, I think our goal should be that every year we create more value for our customers than we created last year. Otherwise, why would they spend more with us? How are we going to grow if we’re not growing the value we create? So then, we have to say, “Okay, if we don’t change anything next year compared to this year, how are we going to create more value?” When I start to connect change back to the idea of increasing value for people, I get more excited about change. 

The reason most people don’t like to change, I believe, is it feels like a loss to them. I’ve got my comfort zone. I’m comfortable with the way things are, and now if we change it, I might lose in the process. We need to frame change so that it feels like progress, not a loss, to get people more excited about it.

AC: You’ve brought up two things that I think are interesting.

One is the need to provide more value. I’ve got a story in my book from my days at Travelocity that exemplifies that. We grew from the 33,000^th largest travel agency in the country to the 5^th largest travel agency in the country in five years.

But we got to a point where we realized that we weren’t providing enough value for our customers, that we were becoming a place where people came and price-checked and then three seconds later were checking with another company. So, all of this growth had been great, but we now needed to provide more value.

I was in a communications role there and one day a journalist called us and said, “Did you know that you have a $1 fare to Fiji on your website? And by the way, there are bunch of people in a chat room who are talking about it. They’ve told their brother-in-law about it, they got their mother-in-law a fare, and everybody’s going to Fiji for a dollar.”

Well, this wasn’t what we meant when we said we wanted to provide “more value” to our customers! We owed a lot of money to the airline at this point, because this was our mistake. And of course we had to fix this glitch. The question was, what do we do with all the customers who bought the fare?

About 18 months earlier, we had decided that the way to offer more value was with a customer guarantee. A customer guarantee is not an ad campaign? It’s actually a really hard thing to pull off. It means that you have to get everything right in your organization, because you’re now guaranteeing your service. This is especially hard for a provider like Travelocity, which didn’t actually fly the plane or own the hotel. But we wanted to be our customers’ champions. There were some companies that were worried about focusing on the supplier, but we were going to focus on the customer.

But for the people in our call centers, this was going to be a big change for them — we were taking away the normal. So when we announced the change, they were not coming with us.

We told the training team, before they went to the call centers, “Hey, when you get there, you need to help convince them that we really are going to be focused on the customer here. We really are putting our money where our mouth is.” But the training folks came back and said, “It’s a coin toss as to whether they’re going to come with us.” You can’t have a change if you don’t have your people changing with you.

So we were nervous about this given how much investment we had made. And then in the middle of all this, we have this $1 fare to Fiji that shows up. What to do?

Michelle Peluso is a very, very smart person. She was our CEO at the time and is now the CMO at IBM. Michelle was brand new in the role, and she had Wall Street, she had a boss at our parent company, she had a quarter to make, but she knew that the whole company was watching her. You can imagine the people in the call centers were going to say, “Yeah, they’re going to figure out how to rationalize away this $1 fare to Fiji. They’re not going to put the customer first, you watch.”

But Michelle went out to that message board and she said, “If you bought a $1 fare to Fiji, have a great trip. And by the way, here’s some great hotel deals in Fiji. Here’s some great things to do in Fiji.” Because in the 24 hours that she had between the time that we learned about this snafu and the time she felt she needed to get an answer to people, she had gone out and done a massive deal with the Fijian hotel association and the Fijian tourism authority, making up all the money that it was going to cost to fly people to Fiji.

Michelle knew that she had to model the change if we were ever going to provide value to our customers through a guarantee. So she came up with a business solution that allowed her to model the change. Her follow through set the tone for the entire company.

That leads me to another question this conversation provokes: why don’t people like to change and what might we do to get them to want to change? You’re right. Focusing on giving more value to others is definitely a way to engage people. Unfortunately, not every company lives up to that ideal, even though they should. And so, when they tell their people to change, there’s this thing called cognitive dissonance. Millions of people every night avoid Fox News if they’re liberal, and millions of people every night avoid MSNBC if they’re conservative. We don’t like the values or beliefs that we hold to be challenged. It gives us psychological discomfort. And what is the biggest value or belief that we hold as employees? I’ve worked in 30 countries and I’ve seen it in every kind of industry that I’ve been in. At every level in the organization, the value that we all hold is the way we’ve always done it.

The way we’ve always done it is tried and true. The way we’ve always done it is what got us here, it’s what made us successful. When we tell our people that the way we’ve always done it is not the way we’re going to do it… well, they may smile and act like they’re happy and they’re willing to go with you. But inside, they’ve got psychological discomfort. So, instead of telling our people that the way we’ve always done it is not the way we’re going to do it, what we have to do is to share the problem with them, and have them come with us to identify the solution together. An example that I give is Pixar. Pixar needed to cut its costs by about 15%. But they didn’t simply tell their people how they were going to cut their cost. They told their people they had this problem. And then they listened.

Listening is key to getting people to want to change because two things happen:

• We get a better solution set. The reality is, as senior leaders in an organization, we don’t know what actually goes on day-to-day in our organizations. We have some idea, but we don’t see all the hand-offs, all the interdisciplinary interchanges that go on. We don’t have all of that information. Our people do. So, when we listen, we get a more grounded solution set.
• If we sincerely listen, people feel heard. And when they feel heard, they will do extraordinary things.

Back to Pixar: they went to their people and they said, “What can we do?” People then went online to submit their ideas and vote on their favorites. They closed down the company for a day and hosted discussion sessions for each of the topics that were voted for. One topic was so popular, they had to hold seven sessions for it. And what was the topic? Well, they wanted to discuss how Pixar could lower its unit costs by 40%…not 15%…40%. People were so into the change because their ideas were coming to light and they felt ownership in the company.

So, we want to listen because we get a better solution set, but also because it helps our people feel heard. And when people feel heard, they’ll do extraordinary things. 

DS: Al, I talk with a lot of leaders about great cultures and great companies, and they say, “Yeah, but I’ve inherited an organization with a culture that’s far from what you describe.” Is it possible for them to get from A to B, to really transform their organizations?

AC: It’s absolutely possible. But it’s going to mean that we have to get our hands dirty as leaders. We want to change our culture, but a culture doesn’t change without people seeing the behaviors demonstrated that we want to perpetuate. As an example, there was a financial services company that I learned about in my research. Around 2008, this financial services company became very risk-averse. About two or three years later, they realized that no one was growing in the organization, no one was taking any chances. This was well after the recession yet there still wasn’t any innovation going on.

The leaders realized they needed to do something radical, a major change, to the organization. They decided to launch a new core value, and this new core value was continuous learning. Putting a new sign on the wall that has the new value on it, communicating about it through the intranet, all of those things are important, but they’re only 10% of the equation.

These leaders knew that if they were going to bring about a culture that was focused on continuous learning, they were going to have to get their hands dirty. They were going to have to model the new value to show people what it meant. Each quarter at their town halls, a single member of the leadership team would get up on stage and talk about a failure of theirs. They talked about how they had to either pull the plug, or how they found a way to right the ship. But most importantly, they talked about how their career was so much better because they had had this failure, how this idea or that idea might have never happened if they hadn’t failed earlier. They exalted failure as a way to teach people that it was okay to take risks again. And they showed their people through their own humility, that this was the behavior that we want here in this organization.

These weren’t risks that were going to ruin the company. These were risks that needed to be taken because they were going generate curiosity, new ideas. As a result, the organization is doing well today, and now has a culture that is curious.

DS: I mentioned at the beginning that we’re living in times that will almost certainly bring about a lot of change. What do you think will be some of the biggest changes we need to be ready for?

AC: There are a lot of people trying to predict the future right now, and you can’t predict the future. But I’m going to predict the future anyway. My prediction is this: There will be change. And the question is, are our organizations going to be able to tackle it? The answer to that question comes in this question: Are we going to be the right kinds of leaders to bring about the change that’s needed?

If there’s a final encouragement I would give your audience it’s this: the losers at change say, “We have to get our people to change.” The winners at change, say, “We have to get our people to want to change — we have to get their hearts into it.” And that’s not easy, but it is possible, and it’s more essential than ever.

DS: That’s fantastic. Yes, there’s never been a time in my lifetime where it’s more obvious that you can predict the future in that regard. There is going to be change, and we’re all living through it right now! Al, thanks so much for helping us as leaders prepare to lead that change.