Fierce competition is making it all the more important for airlines to get the best out of their top recruits by grooming them for stardom
This year has been a good time to be job hunting in the airline industry. A plethora of start-ups, traditional carriers in change-management mode, all underpinned by strong traffic growth, mean that talented airline managers are a valuable commodity.
"Over the past 12-18 months it has become a candidate-led market," says Richard Lewis, managing director of Belgium-based aviation executive search company Marlborough. It is not uncommon for candidates to have five or six job offers in their pockets, he says. "It often comes down to a bit of an auction. The Middle East is particularly hot at the moment, with people jumping from one airline to another."
Airlines are also coming to realise they have to offer an attractive overall package and not just concentrate on the salary. "There was a huge exodus from India in 2006," says Lewis, blaming this on the failure of airlines to take care of the lifestyle needs of staff.
The competition for talent makes it all the more important for airlines to go about getting the best out of their star recruits and coaching them towards top-level positions. Michael Bell, co-leader of executive search agency Spencer Stuart's aviation practice, says some airlines are better at this than others. "Some are excellent, others don't do it at all," he says.
Sophia Panayiotou, senior vice-president HR business support at Emirates, says airlines have become much more savvy over the years. "In the past, people were just promoted due to their technical skills and sometimes they were over-promoted." While technical skills are still important, depending on the job, she says there is far more emphasis on management skills today.
As with many airlines that are growing at breakneck speed, she says Emirates is keen to find people who can manage this expansion. "We want people who are able to drive change, not just talk about it."
Thomas Tomkos, Hamburg-based associate at Russell Reynolds Associates search agency, says that size seems to matter when it comes to developing managers. "It definitely depends on the size of the airline. At Lufthansa, for instance, there is a very systematic approach. They are definitely among the best at developing people."
Michael Christ, head of corporate executive development at Lufthansa, explains: "The airline industry is very process-orientated and we treat human resources in a similar way. Lufthansa has a talent management process in place."
In common with most large airlines, Lufthansa has a vast array of different business units. It has set up a corporate management grading system that is fed into a central database. This allows the airline to assess which "job families", or functions, an employee might be suitable for, as well as whether they should go in at the same level or be promoted. "It allows us to build talent pools," Christ says.
The challenge for airlines begins, however, before the recruits even join. Pointing to those carriers that are most successful when it comes to developing people, Bell comments: "They do a good job on the intake. You've got to have fundamentally the right stuff to start with."
Typically, top recruits will be out of business school with a qualification such as an MBA. When they ran into trouble in the mid-1990s, Continental Airlines under Gordon Bethune set about recruiting young MBA graduates. "It sounds regressive, but it is not," Bell stresses. "Today's management are part of that feedstock. They have been through a turnaround."
Generic qualifications
However, MBA graduates have become something of a victim of their own success. "They are becoming a bit generic," says Lewis, pointing out that with so many candidates having MBAs on their CV, it is becoming increasingly difficult to use them as a distinguishing mark for exceptional candidates.
In any case, an MBA is not the sole route to boardroom success. For instance, Cathay Pacific parent Swire has developed a reputation for picking candidates from the UK's Oxford and Cambridge universities. "They are looking for bright people, even arts graduates," says Bell, noting that in this regard Cathay is competing against the likes of Procter & Gamble and GE as much as much as against other airlines for star recruits.
While different airlines may have different management recruitment strategies, there are certain well-trodden paths when it comes to offering experience. Lufthansa's Christ points out: "The movement of people across different functions is crucial. In the airline industry, you need to know what is happening in other business areas."
Looking at airlines that are good at developing their key staff, Bell says: "Very early on, they figure out who their high potential people are and put them on some critical projects. They also attach them to a mentor." He points to Jacques Lapointe, vice-president finance at Continental, as someone who has gained from this approach. In his case the mentor was chief executive Larry Kellner. "The guy has seen him in action," notes Bell.
When it comes to giving star recruits exposure, "certain functions are used more often than others", says Bell, adding that the main areas where recruits are trained up are:
- Financial planning and analysis
- Investor relations
- Corporate development
- Airline planning
- Revenue management.
In some cases, Bell adds, hub management may also form part of the mix. "The common denominator is that almost all provide excellent visibility on the entire range of airline economic issues," he says.
Investor relations may not seem at first glance like an obvious route to the top, but Bell says it is an excellent way of gaining frontline experience. "Whether it's a labour strike or a regulatory change, you are distilling the message to investors. You have exposure to all the issues that affect the airline, and you have to understand the impact on the airline. For instance, what does a price war on the US west coast mean to the share price?"
Crucially, Bell notes, recruits are also aligned next to the chief executive and the chief financial officer. "You are on conference calls with them and preparing their briefs. And the chief executive cares greatly about the share price."
An example of those taking this path is Robert Sahadevan, managing director investor relations at United Airlines, who is the former managing director of Mileage Plus, the carrier's frequent-flyer programme. Sahadevan has also held positions in marketing and financial analysis at United.
Bell points out that financial planning and analysis provides an opportunity for modelling across the entire airline, from revenue forecasting, to budgeting, to tracking performance. "You see the internal financial levers of the whole company."
Among current high flyers performing this role are 36-year old John Rainey, staff vice-president financial planning and analysis at Continental Airlines. The role of the financial planning function is becoming increasingly important in the search for chief financial officers, Bell says.
Airline planning, meanwhile, offers a view of the "guts" of an airline. "At the end of the day, no airline can operate if it doesn't have any aircraft flying," Bell says. Scheduling, he argues, involves the "total integrity" of all the various airline functions. "It is a cross-functional role. Most chief executive officers care a lot about airline planning." Revenue management also gives vital responsibility, Bell says. "You either create or destroy shareholder value."
The role of regional affiliates in providing a training ground for executives is still there, Bell, says, but in the USA at least it is not as common as it once was because the majors have been putting some distance between their mainline and regional operations. "To make the transition work, the regional needs to be a division of the major," he explains.
There are examples of the low-cost sector providing an alternative breeding ground to regional carriers, however. Tony Davis, chief executive of Tiger Airways, is a notable example, having headed up bmibaby from 2002 until joining Tiger in late 2004.
Prior to bmibaby, Davis was in charge of government and industry affairs at the low-cost carrier's parent bmi. Bell points out that Davis, who was in this role when bmi was pushing for a UK-USA Open Skies deal, received similar exposure to that which can be gained in investor relations.
Another route used by some carriers, but generally not US majors, is country general manager. Cathay, for instance, has a tradition of rotating star recruits between international outstations and corporate staff roles. "They are trying to internationalise their people into true global citizens," says Bell.
The exception to the country manager rule in the US is American Airlines, which has used its European headquarters, based in London, as a training ground for senior managers. In part, Bell says this is a reflection of the relative importance of the European market to American, compared with other US major carriers.
Is cargo a graveyard?
Cargo is considered something of a specialised function by some, but Torbjorn Karlsson, Singapore-based principal at search agency Heidrick & Struggles, argues the importance of cargo to Asian carriers means that it can, in certain parts of the world, be a route to the top. "Cargo is critical to understanding the profitability of Asian carriers," he argues.
Is cargo getting more consideration in other parts of the world? Dave Brooks, president cargo at American Airlines, thinks it is. "It is a great place to develop a manager," he argues. "In air cargo, you are the last thing on the airplane, and so you have to understand everything that happens before they get to you. You are then in a better shape to understand how the airline operates." Brooks states emphatically: "The days of thinking that cargo is a graveyard for managers is over. We recently had a senior manager go over and run a big portion of aircraft maintenance. Another has gone to run a large portion of the safety programme for the airline."
If cargo is becoming more appreciated, it may prove to be a better springboard than some more centralised positions. Bell warns that some roles such as sales and account auditing are not as valuable in terms of development as other functions. "They are very specialised," he says. "You could be an excellent accountant and still not know how an airline works."
Another pitfall is staying too long in one job, he warns, although over-rotation can be just as much of a problem. Bell estimates that three years is the amount of time it takes to make an impact in any one position. "Some people we contact say they don't want to move on until they've finished a body of work, and I fully respect that. You're judged on your legacy."
Candidates are more willing to travel than ever, and airlines are more prepared to look far and wide for the right person. "There is a growing recognition that best practice exists in specific parts of the world," says Karlsson. "For instance, when it comes to low cost, there is a lot of experience in Europe. When it comes to widebodies and cargo, Asia has built up a wealth of knowledge, while the US has expertise in large engineering functions." Even if airlines are reluctant to recruit cross-border, they at least use this as a benchmark, Karlsson says.
As well as looking to other countries, airlines are increasingly looking to other industries for non-aviation discipline roles, including finance, IT and even chief executives. Lewis warns that the shortage of talent on the market means that Marlborough is looking outside the aviation sector more and more.
"It stems from years when there was a lack of development in the industry," Lewis says, adding there has also been a lack of succession planning in some carriers. "When the chairman or chief executive leaves, there is not always an obvious choice of candidate internally to replace him," he says.
He adds that industries allied to the airline sector, such as hotels, tourism and rail transport, are proving fruitful grounds for recruitment.
Christ at Lufthansa says the German carrier has developed close links with business schools to fill any gaps. "We co-operate with them to fit the needs of our job families. We see if we have suitable candidates in-house first, but can use these business schools if not."
Karlsson emphasises that airlines can benefit from more outside recruitment. "You need to be able to adapt and change, and for that, sometimes you need a different perspective. The industry would benefit from best practice in outside sectors." Supply chain management would be one area that could teach the airlines a thing or two, Karlsson says, pointing to the gains achieved in the automotive and IT industries through this particular field of expertise. The marketing and branding skills seen in the fast-moving consumer goods sector could also benefit airlines, he says.
"The challenge is how to make these skills effective in your organisation," he says, pointing to Tiger Airways marketing director Rosalynn Tay as an example of bringing in solid outside expertise. Tay came from marketing specialist Leo Burnett and had previously been marketing director at Kentucky Fried Chicken.
Karlsson warns, however, that airlines have to think about the way they use outside knowledge. "One problem is people will come in and be too quick in wanting to change everything." One solution to this, he says, is to recruit people one level below where you need to change management and give them time to gain industry experience before promoting them.
If these challenges can be met, then there are tangible rewards to be had, Karlsson stresses. "Low-cost airlines have demonstrated that bringing people in to take a fresh look, with no sacred cows, has often worked well. But there have also been a high rate of failures. You need to get the balance right - that's the challenge. You need to build on what you're doing well and also learn from outside industries."
Karlsson argues that airlines also need to get the balance right on outsourcing. "If you outsource an entire department, how do you get people who understand that function?" he asks. "It is something that needs to be considered."
Tomkos adds that airlines also need to consider that the talent pool is likely to shrink due to changing demographics and to combat this, airlines need to not only take a more internationalised approach, but also recruit more women and ethnic minorities in the future.
Source: Airline Business
