Jan Carlzon - Challenges at SAS

Challenges At SAS

At the time when Jan Carlzon took over the at the helm of SAS the company was facing large financial difficulties and losing $17 million per annum and had an international reputation for always being late. A 1981 survey showed that SAS was ranked no. 14 of 17 airlines in Europe when it came to punctuality. Furthermore, the company had a reputation for being a very centralized organization, where decisions were hard to come by to the detriment of the customers, the shareholders and the staff. He revolutionized the airline industry through an unrelenting focus on customer service quality.

One of the first things Jan Carlzon did at SAS was to introduce the world's first separate cabin for Business Class while at the same time doing away with First Class on its European routes.

Within one year of taking over, SAS had become the most punctual airline in Europe and had started an on-going training program called Putting People First developed by Claus Møller of Time Manager International ('TMI'). The program was focused on delegating responsibility away from management and allowing customer-facing staff to make decisions to resolve any issues on the spot. Jan Carlzon said at the time: "Problems are solved on the spot, as soon as they arise. No front-line employee has to wait for a supervisor's permission.". These changes soon impacted the bottom-line as well and the company made a profit of $54 million in 1982. Several case studies about the turn-around are available and it has been referenced widely in management literature

This decentralisation of the organization led to both a large boost in company morale and the formalization of the training methodology of the program in a joint venture in 1982 with TMI called Scandinavian Service School. Scandinavian Service School since went on to establish offices in all three of the Scandinavian countries as well as Finland and the training program was exported to other hospitality organizations including British Airways and Japan Airlines. The flat organizational structure, delegation processes and empowerment of employees adopted at SAS also led to Carlzon writing a book, Riv Pyramiderna (Swe., which translates into Tear the Pyramids Down), published by Bonnier in Stockholm in 1985 and translated into English in 1987 by Harper Perennial under the title Moments of Truth. The American Management Association, in their 75th anniversary issue of their magazine in 1998 called this one of the most important developments in management of the 20th century.

The changes at SAS led to Air Transport World naming SAS Airline of the Year for 1983 in early 1984.

Carlzon also oversaw a complete corporate identity re-design, a process which was marred when a journalist gained unlawful access to a hangar with a plane painted in a proposed livery was photographed and widely published in Scandinavian newspapers. Unfortunately, either the brief to the agency, Landor Associates, was not good enough or they had misunderstood it and painted the plane with 5 crowns to symbolize the 5 Nordic countries. This caused a huge public furore as SAS only contains the airlines of the three monarchies Denmark, Norway and Sweden. Incidentally, the other two Nordic countries Finland and Iceland are both republics and would therefore not be represented by crowns. The task of re-developing the corporate identity was later given to another firm.

In the latter years of Carlzon's tenure at SAS he was coming under increased pressure from shareholders as competitors had caught up with the lead established by SAS in the business market in the early 1980s. At the same time increasing oil prices and a less than profitable first class operation led to SAS scrapping First Class on its intercontinental routes and retiring its Boeing 747s in 1989 . SAS has never since flown aircraft with as large a capacity as it does not believe the flights would be profitable.