Building One Company

In order to weld Thomas Cook UK’s disparate operations into a streamlined, vertically integrated organization that acted like one company, the leadership team brought its three business units together under a single, global brand identity and drove aggressive operating changes in each.

The distribution business led by Andrew Windsor also dramatically shifted its business mix. It increased the proportion of Thomas Cook in- house vacations it sold from 30 to 60 percent of its sales. It also rationalized its channels, rebranding its larger ‘‘high street’’ shops, consolidating call centers, and adding both a new travel TV channel and a direct-toconsumer sales channel. To strengthen its sales focus, it eliminated administrative duties from the shops and created new incentive pay structures to reward associates for selling its own travel packages.

The airline business, renamed Thomas Cook Airlines, eliminated unprofitable routes and freed up six planes to be used in Thomas Cook AG’s new Belgian flying program. Management collaborated with the parent’s other flight operations to get economies on fuel, ground crews, airplane leases, and even foreign-currency hedging. In addition, they found entrepreneurial ways to use excess capacity to boost revenues. Finally, they substantially improved operational reliability and on-time performance, which reduced contingency costs and improved customer satisfaction.

In a market where overcapacity had always been an issue, Manny Fontenla-Novoa, then the managing director of tour operations, took the bold decision to reduce the number of vacation packages it would sell by 18 percent. Fontenla-Novoa said: ‘‘Reducing capacity also gave us an opportunity to take a good hard look at our product portfolio and eliminate many properties that didn’t meet appropriate customer satisfaction levels.’’ He also decided to move all of the tour operations functions based in South London to the Peterborough location. Fontenla-Novoa continued: ‘‘We had a very loyal and experienced team in London, but we knew if we wanted to act as a more vertically integrated business it would make more sense to have these people in Peterborough, together with the distribution business. It is a testament to their loyalty to the company that many of them chose to make the move.’’ Management used an EVA framework to change the unit’s focus from revenue to margin and yield. They consolidated customer contact and service teams, established three solid brands to segment the mass market, and invested in niche brands to increase market penetration. The intense customer focus paid off in increasing customer satisfaction and a return to profitability.

Unlike many large organizational change programs, the management team did not make communications an afterthought. ‘‘We wanted no leakage until the program was ready to go,’’ explained Stewart, ‘‘but it was essential to have our communications director involved in the discussion from the outset.’’ The director of public relations and communications planned a comprehensive campaign to build trust and loyalty through honest and open communications with employees throughout the transformation. She consolidated all the internal publications into a single, bimonthly newsletter that was distributed to all employees. She worked with Stewart to produce regular CEO updates—in print, in video, and face-to-face—so employees would feel informed amid the fast-paced change effort. She insisted that management share both the good news and the bad news with employees before they heard it from the press. She believed that the communications campaign not only improved loyalty among workers but also increased the feedback that management received about how plans were working.