Reference no: EM133019490
Topic:
Minor Hamblin had a humanistic dream: to find a company in which every employee would be an owner/manager, a company in which people really would work together. Hamblin started the revolutionary low-fare, no-frills Economy Airlines. Within a few years, Economy was the fifth-largest U.S. passenger carrier. The company had no unions. New employees had to buy and hold 100 shares of Economy common stock, offered at a 70% discount. Profit sharing regularly added substantial amounts to their paychecks. Hamblin believed that participatory management was the style that best suited contemporary employees. One university professor wrote that Economy Airlines was "the most comprehensive and self-conscious effort to fit a business to the capabilities and attitudes of today's workforce. Economy Airlines is doing everything right."
Economy had a flat structure with only three management levels. In terms of the organization chart, pilots and flight attendants were on the same level and had the same clout. The company had no secretaries; managers did their own typing and answered their own phones.
The company rapidly expanded its routes and schedules. Unfortunately, traffic growth failed to keep up with expansion. Other airlines adopted the low-fare, no-frills approach and even attacked Economy directly in their advertising campaigns. Economy's stock plunged from over 100 to 8. One employee observed, "When stock prices were high, profit sharing and stock ownership were great. Now they aren't so great." The Air Line Pilots Association began a drive to unionize Economy's pilots. New government regulations made Minor Hamblin wonder if he could even keep Economy's flying certificate.
Hamblin had a renewed realization that a company can't always control its own destiny. "That professor said I was doing everything right. Now I'm in danger of going belly-up." He wondered if he should convert Economy over to a more traditional structure, with more management layers, a clearly defined chain of command, and specialized employee tasks. Or perhaps he should sell out.
In 500 words, answer the following questions:
- What caused Economy's problems?
- Do you see any way that Economy could have avoided those problems?
- What steps should Economy Airlines take now?