Continental stays on course

Workforce, June, 2002 by Todd Raphael

If Continental Airlines wanted to cut back on its pay-for-performance program, the end of 2001 and the beginning of 2002 would have been the time to do it. After all, the airline was dealing with the impact of a terrorist attack, a recession, increasing oil prices, rising labor costs, falling stock values, and declining revenue.

Under its pay-for-performance plan, Continental spends about $44 million annually to give employees bonuses when planes arrive at destinations on time. If the company is the number-one airline for on-time arrivals during a month, each employee gets a $100 check. If it's number two or three, employees get $65 checks.

Continental, a former recipient of the Workforce Optimas Award and one of Fortune's "Most Admired Companies" and "Best Companies to Work For," didn't scale back on the program during the recession.

Staying the course paid off. Despite a few tough months with millions of dollars of losses brought about by "overcapacity"--planes without passengers--the plan prevailed. The company reached profitability in March, when air travel picked up and the company earned $25 million, and beat analysts' expectations for the first quarter of 2002. During the first few months of the year, the company had the best on-time record of any major airline in the country. It also had a very low rate of canceled flights.

Mike Campbell, senior vice president of HR and labor relations, says the secret of Continental's continued success isn't just the pay-for-performance program, but also the fact that the company never forgets to remind employees that they'll get an extra check if passengers arrive at their destinations on time. Employees receive a daily update of the company's on-time arrival record, and when they are traveling, they can access the update on a recorded voice system, or via e-mail. CEO Gordon Bethune also updates employees on how the company is doing with a weekly voice-mail message. Last year, Continental was Air Transport World's airline of the year.

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