Career Advice, Leadership, Risk Management

Learning from Bad Decision-Making at United Airlines

11 Apr , 2017  

By now, you have probably heard about the doctor that was dragged off a United flight from Chicago to Louisville. The video, taken by passengers, tells all.

How do companies make such bad decisions? How can we learn to make better decisions and stay away from such self-infected and unnecessary damage?

  1. Identify Conflicts before Critical Decisions: In this case, United oversold the flight and wanted to then place 4 employees on the flight to get to Louisville for a Monday departure. The gate agent should have recognized that a conflict was at work BEFORE boarding the aircraft.
  2. Seek Market Information: Of course, United offered compensation for people being bumped, but it was based on a set of rules and the passengers wanted more. Well, some markets have higher prices. Here is a family that received $11,000 from Delta for not flying to Florida last weekend. Market prices are not revealed in manuals and procedures. This would have been a great opportunity for a silent auction or a text auction. Name your price to get off the flight. Write your price (or other ask) on a piece of paper and drop it in a hat.
  3. Understand All Outcomes Before Taking Action: Here is where United really failed in its decision-making. It was focused on a crew getting to Louisville and the cost of a canceled flight Monday morning in Louisville. Probably that cost is many tens of thousands or more. It justified, in their minds, booting people of the flight. But knowing costs, means knowing what you can afford to pay when there is a conflict of interest. United, should have offered more compensation to passengers, but it did not. Here’s an idea: want to be 1K this year, give up your seat and join our club. The costs to the airlines are even less than dollars spent. Instead they will pay the bloodied doctor some large amount of money, pay a PR firm and legal firm millions, too. This episode can easily cost United $10-20 million in direct costs, not to mention the negative publicity and infinite recall of the video on the Internet. Yes, it is possible to overspend in a mistake. United just did. Better decision-making should have prevailed.
  4. Think Outside of the Box and Look for Alternatives: When market prices are unacceptable, calling in the brutes to bloody-up a paying customer is generally not the best option. The crew of 4 that needed to get to Louisville could have been driven there via a car or transportation service for $1000-$2000. The cost is just a bit more than the $800 that United offered passengers but did not result in takers. Alternatives are important in decision-making. I suspect United could have bought a new car and driven the crew to Louisville for less than the amount of damages and fees they will end up paying. Look for better alternatives in decision-making. Consider the goal. Look for alternatives and satisfy all or most constituents.
  5. Examine if You Can Live with the Consequences Before Taking Action: When making decisions, ask yourself, is the outcome acceptable? When the gate crew called Chicago’s hit squad to take out the passenger, they must have anticipated a scene meant for social media. If they thought about the outcome of a police team physically removing a passenger, would they have even called the police? Probably not. In such situations, avoid steps that take you towards an unacceptable decision. The outcome can be very expensive. Decisions that do long-term harm are worth thinking through. The United crew did not think through these.

United has a public relations problem of its own-making. It is self-inflicted. Nobody did this to them. Bad decision-making impacts firms all the time. Consider critical decisions opportunities to avoid unforced errors and inflicted damage. It pays to get it right. The alternative is often much, much more expensive. United just learned that (in the hardest and most expensive way) and is just getting the bill now.

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By  -      
Russell Walker helps companies develop strategies to manage Risk and harness value through Analytics and Big Data. As Clinical Professor at the Kellogg School of Management of Northwestern University, Russell Walker has developed and taught leading executive programs on Big Data and Analytics, Strategic Data-Driven Marketing, Enterprise Risk, Operational Risk, and Global Leadership. He founded and teaches the popular Analytical Consulting Lab and Risk Lab, experiential classes, which bring Kellogg MBAs together with real-world projects in Analytics and risk evaluation. His is the author of the book From Big Data to Big Profits: Success with Data and Analytics (Oxford University Press, 2015) which examines data monetization strategies and the development of data-centric business models in the new digital economy. He is also the author of the award-winning text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management as a competitive advantage. Dr. Walker consults with firms on the topics of Big Data and Analytics, Risk Management, and International Business Strategy. Russell Walker can be reached at: russell-walker@kellogg.northwestern.edu @RussWalker1492 russellwalkerphd.com



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