PEGASUS AIRLINES THE PEER AWARDS FOR EXCELLENCE – MANAGING CHANGE APPLICATION
Pegasus Airlines was found as a joint venture company back in 1990 and entered the business only with two aircrafts. Today, Pegasus is the leading low-cost airline in Turkey with a fleet of 76 aircrafts flying to 36 domestic and 72 international destinations in 40 countries. Holding the belief that everybody has the right to travel by air, Pegasus’s low-cost model has been widely accepted and favored in Turkey. Based on this vision Pegasus became the fastest growing airline in Europe.
Entering the business with less than 10 planes and expanding it up to 70+ planes in a very short while made it difficult to manage the business effectively. Not to mention the fact that business dynamics and customer preferences are changing, volatility and economic uncertainty is increasing and more resilient, flexible, customer centric and innovative organizations are taking the stage lately.
At this point, Pegasus realized that a radical change is essential to create a new strategy for strong, sustainable and profitable growth. With this transformation, Pegasus Airlines aimed to become more resilient and dynamic to keep up with the changing conditions and support the strong growth with their human resource strategy and capabilities.
As a consequence, Integrated Re-design and Uplifting Project was designed as the cornerstone of Pegasus Airlines’ change management efforts and this project consisted of 6 main steps which are organizational re-design, career architecture & job evaluation, talent management & succession planning, cultural shift, training & development and performance management.
First phase of the Integrated Re-design and Uplifting Project was to create the optimum organization structure which will address the changing business dynamics and provide an ideal environment where Pegasus can demonstrate its own potential and performance. This phase was initiated aiming to shift the diamond shaped organization into a leaner structure which shelters more organized, focused and empowered roles. This change will enable an ideal span of control for managerial positions and better decision making and resource management processes in terms of roles and responsibilities.
Next step was to implement an integrated talent management system which includes different processes for differentiating, developing and retaining talent such as career architecture, talent management, succession planning, engagement, performance management and rewards/recognition. Therefore Career Architecture and Job Evaluation phase was actualized to establish the foundation of reward and career framework in order to support the employee life cycle in line with the integrated talent management strategy and reevaluate all positions in consideration of new job sizes after organizational structuring. The vision behind this phase was to provide insights about career and growth opportunities, job clarifications, expectation setting and made it possible to set up a ground for creating a talent pipeline and succession management. Additionally, Pegasus Airlines was aiming to achieve a competitive position in the market in terms of compensation and benefits aligned with the newly clarified job sizes and career paths.
The third phase of the Integrated Re-design and Uplifting Project was Talent & Succession Planning for retaining emerging leaders and to provide knowledge transition between current and emerging talents.
After completing the first three phases, a cultural shift has been initiated which was vital for supporting the major transformations made within the organization. Employee engagement and effectiveness measures were an important input for building up a new culture with the voice of employees which is why a survey had to be conducted to understand if employees are able to keep up with these changes and to clarify the next steps for achieving a better working environment.
Fourth phase of this transformation strategy was to design a new development framework with a segmented approach which will ensure self-awareness and improve their leadership capabilities. Development phase was consciously positioned after the organizational re-design, career mapping, succession management and cultural shift phases since the aim was to design a new framework which will address the main improvement areas.
Final phase of the Integrated Re-design and Uplifting Project was to set up a new performance management structure. The aim was to create a model which will link performance management with the new integrated talent management strategy by providing a criteria on observing the progress of a talent and also provide employees an opportunity to link individual performance with the expected business outcomes and it’s impact on incentives.
After implementing this strategy, span of control for N-1 level which used to be 17 has cut down to 9. Diamond shaped organizational pyramid was restructured and span of control increased from 3 to 5. Also, this project has a direct impact on CASK since it affects headcount and organizational optimization. Having the biggest share among expense items, 23% of CASK non-fuel is based on personnel expenses and it is has decreased to 2,60 E from 2,81 E.
Number of director positions decreased from 16 to 12 and number of manager positions decreased from 67 to 54 by means of role empowerment. This was an enabler for an optimum span of control for the managerial positions and also an opportunity for this roles by means of managerial competence enlargement and variety of duties & responsibilities. After this conversion, individual contributer roles were dissociated from other managerial roles and their career paths were differentiated.
Director position was massive and there was a need for a senior managerial role therefore group manager role was created. Also, this was an important opportunity for the managerial roles by creating a step in their career ladders and providing them an opportunity to lead bigger and more diverse teams to prepare them for the director positions. Number of leader positions increased from 78 to 86 in order to delegate right roles and responsibilities. After the employee effectiveness survey was conducted again, the progress was clearly seen in development opportunities dimension, especially for manager and above positions. Director positions, who are the backbones of the new talent strategy, rated development opportunities dimension 34 points better and managers rated 9 points better than the previous year. Targeting manager and above positions in phase 1 for talent and succession planning and development processes was the main reason of this progress.
Since below managerial positions have been included in phase 2, progress will be measured after conducting the employee effectiveness survey in 2018.
Organization was analyzed on 3 different perspectives to identify key areas of improvement which were internal assessment, benchmarks on international airlines and best practices from other industries. For internal assessment 51 N-1 and N-2 roles were interviewed for 38,5 hours. For external comparisons and benchmarks the group that is most relevant for Pegasus Airlines was identified.
Diagnostic of the current organization showed several areas for improvement. Which were;
- N-1 (CEO Direct report positions) structure needs to become lean with strong functional focus.
- %70 of all managers have 5 or less employees reporting to them and there are managers who are not even managing a team. 80% of top management and 60% of middle management have very low spans of control.
- Excluding operational FTE’s, organization has an ineffective diamond shape rather than a pyramid.
- Organizational capabilities at N-2 level needs to be increased with introduction of new functions and empowering some critical existing ones: While top management structure is simplified, new roles will be introduced and upgraded to N-2 level in order to enable centralization and dissolution of the units.
- After executing a span of control analysis for middle management, roles and responsibilities needs to be clearly defined in order to create an ownership of the processes.
It appeared that roles and responsibilities were not clearly defined, structure is not lean and hidden hierarchies create demotivation within the organization. That’s why Pegasus had to apply some bold decisions.
The following actions were taken to implement the organizational transformation strategy.
- To achieve a lean N-1 organization some functions were closed, merged or moved to N-2 levels while new functions are being introduced.
- While top management structure is simplified, new roles were introduced and upgraded to N-2 level in order to enable centralization and dissolution of the units.
- Key functions at N-3 level were empowered and ownerships has been clearly defined.
Before moving on to the next phase, Pegasus Airlines created role charters for clarifying individual and shared accountabilities for N-1 and N-2 level management roles.
After implementing these changes, span of control for N-1 level which used to be 17 has cut down to 9. Diamond shaped organizational pyramid was restructured and span of control increased from 3 to 5. Also, this project has a direct impact on CASK since it affects headcount and organizational optimization. Having the biggest share among expense items, 23% of CASK non-fuel is based on personnel expenses and it is has decreased to 2,60 E from 2,81 E.
CAREER ARCHITECTURE AND JOB EVALUATION
After completing the organizational re-design phase, next step of the transformation strategy was job architecture and evaluation to create the infrastructure for organizing roles and determining the relative value of roles in the newly designed organization. This framework was designed to provide a clear vision for the following aspects;
- Organizational effectiveness
- Talent management
- Cost management
- Risk management
This phase served as a foundation for the new reward and career framework, and also support the drivers of attraction, retention and engagement. The new job architecture and levelling framework created a consistent structure that supports the changing business, helping employees understand career opportunities and improving operational efficiency.
For this study leadership interviews were conducted from top to bottom N-1 level (17 managerial roles interviewed for 21,5 hours) and N-2 level (42 managerial roles interviewed for 42 hours) were interviewed to understand roles and responsibilities.
638 unique roles were graded to determine the level of their contribution based on the new responsibilities defined after the transformation project and placed in this career matrix.
Targeting a competitive position in the market led Pegasus Airlines to conduct a market research to analyze pay practices and policies for the newly created career map. This step was very critical since it directly affects recruitment, motivation and retention. Therefore, market research regarding pay practices and policies were analyzed as part of the career architecture and job evaluation project.
9 job families were created considering the competencies needed and these job families were divided into different number of levels according to the density of roles fit in that family.
Afterwards, optimal pay matrix and incentive structure for Pegasus was created to attract, recruit and retain talent. Short term incentive system was re-designed in order to compensate employees for achieving Pegasus’s short-term business strategy based on more targeted bonus structure and motivate employees to perform better with little extra incentive cost to company. Long term incentive system was re-designed to create a stretch component to reward our executives for achieving superior performance. Therefore to change the pay-mix structure in order to make well-balanced remuneration.
As a result of this study, it was seen that the size of a Director position was massive and there was a need for a senior managerial role therefore Group Manager role was created. Also, this was an important opportunity for the managerial roles by creating a step in their career ladders and providing them an opportunity to lead bigger and more diverse teams which will prepare them for Director positions.
Another newly introduced role was Support Specialist which was created for more operational groups to increase their level of expertise and provide them an opportunity to become a Specialist as the next step in their career journey.
And finally, some managerial roles were downgraded since their job size and responsibilities have been changed after creating the new career architecture. Number of director positions decreased from 16 to 12 and number of manager positions decreased from 67 to 54 by means of role empowerment. Number of leader positions increased from 78 to 86 in order to delegate right roles and responsibilities.
By courtesy of the career architecture project, employees are aware where they are located on the career map and their vertical and horizontal movement opportunities. Expectations, roles & responsibilities and required leadership capabilities were clearly defined for each job family which enabled employees to see their development opportunities with more clarified job definitions and expectation setting.
This mapping also provides an input for the succession management process since the expectations such as experience, competency set, previous role & responsibility needs are defined and reflected with a career report card clearly. Finally, new career architecture was shared with the organization and trainings were planned to spread the new structure.
TALENT MANAGEMENT & SUCCESSION PLANNING
After transforming the organization and grading structure, next step was to build a strategy for talent management and succession planning. To pinpoint key competencies and skill requirements, Pegasus needed to align the talent and business strategies. Therefore Pegasus re-organized the qualities that lead to success.
Aiming to assess and identify current and future capabilities led Pegasus Airlines to create a new talent management process. This new process was designed to provide an increased insight at all levels of the organization for the following aspects;
- Job clarity and expectation setting
- Career development and career advancement opportunities
- Identification of talent pipeline
- Succession management
First step was to identify competencies and critical roles based on CEO evaluation and the new talent strategy. Required experiences for future transitions were defined, time frame showing their readiness for moving to an upper level was identified and finally new challenges and assignments to be taken as part of the transition process and assessments to be passed has been determined. Assessment approach was designed just after this step to provide a comprehensive line of vision for measuring the leadership potential of the selected talents.
As the next step, talent review process was kicked-off by conducting a leadership potential assessments only for critical positions as a starter. In the scope of these talent reviews, 24 candidates were selected as an initial candidate for critical positions. And these candidates were included in the leadership potential assessment and an online competency test focusing on performance (what you do) and potential (who you are) to assess succession for critical positions.
Leadership potential assessments pointed out the need to define which experiences are critical for success for a specific role and start building individual development plans to develop successful leaders. Each candidate received a comprehensive feedback for 90 minutes to explain what Pegasus expects from talent, main target of the new talent strategy and where their potential and competencies are positioned and their development needs. Creating awareness about their strengths and development needs was the main requirement in this step.
After personal feedbacks, talent management team gathered comments for each individual and kicked-off individual development plan creation process for selected candidates. Candidates and their managers worked on development needs and specific actions to be taken in order to design the individual development plan. This process was also a strong input for designing the contents for GO EXE (GO Executive) / GO MAN (GO Managers) / GO LEAD (Go Leaders) programs.
In an environment where business dynamics are changing, a strong company culture has always been the strongest support. These bold actions had to be backed up by some bold cultural enhancements. That’s why Pegasus Airlines conducted an Employee Effectiveness Survey in cooperation with Korn Ferry to assess how efficient their employees are functioning within the context of 14 different dimensions.
4750 employees in total were included in the survey, with 75% participation rate.
After receiving the results of the survey, development areas emerged. Pegasus Airlines was aware that employees were the key for the solutions. That’s why focus groups with manager and above positions were organized in order to collect their initial proposals regarding the problematic areas. Following these focus groups, workshops were organized with 158 selected below manager employees from different functions to analyze the outputs and create action plans.
These workshops were named “Söz Sende” as a meaning of “Power to You”. 11 workshops were carried out with 158 employees. In these workshops, employees analyzed the dimensions regarding the actions they need to start, stop and continue doing based on the results of employee effectiveness survey and their evaluations.
As an output of “Söz Sende” workshops, action points were identified and project groups were created to start working on several development areas. These project groups were called “Aksiyon Sende” as a meaning of “Action to You”.
4 groups were created with 54 attendees after “Aksiyon Sende” workshops to start working on these projects. These project groups were responsible from head to toe for budget, time and resource planning and also implementation and follow-up phases as well. That’s why a one-day project management training was delivered to 54 people, aiming to help them carry out these projects and create concrete outputs.
Critical positions who are a part of the talent and succession pool were assigned as a sponsor project leader for each project since “Power to You” and “Action to You” projects were very new to the organization and the need was to spread the news and motivate employees to take part in these project groups. And also these project leaders were assigned to a topic which is not their area of specialization since this was an important opportunity for them to experience a new area of responsibility and develop themselves. This was also an opportunity for Pegasus Airlines to gather inputs from talents seen as the backbone of the company.
These project groups created their project plans and presented them to the executive board which was an enabler for talents to be more visible to the executive board and getting their support on the implementation process.
Within the scope of these studies;
Compensation and Benefits group focused on a flexible benefits structure: working hours, private health insurance, meal cards, day care center, ticket rights for employees.
Development Opportunities group focused on career management processes: internal training program, job rotation, mentoring and coaching applications and new performance management system.
Employee Engagement group focused on gathering events: happy hours, social clubs.
Recognition & Appreciation group focused on reward systems, idea generation platforms and other recognition activities.
Suggestions were presented to the Board of Directors with their detailed cost impacts and implementation plans. Some projects were critical for the new talent framework and for those approved projects, implementation plans have been kicked-off.
Such as flexible working hours, home-office application, exceptional ticket rights for single employees and meal card which was supporting the new compensation and benefits structure. Also internal training platform, brief seminars during lunch breaks, alliances with universities for masters degree and language classes and performance management system which was supporting the development perspective and finally coffee time with the leadership team and re-designing the social clubs such as theatre, sailing, football and basketball was supporting the cultural perspective.
Rest of the suggestions will go live in the near future.
TRAINING & DEVELOPMENT
The outcomes of the Survey pointed out that there is still an opportunity remaining uncompleted for future developments and the first step to develop talent was to design a development framework with a segmented approach which will ensure self-awareness and improve their leadership capabilities.
To analyze the need correctly, focus groups with 24 managerial roles and one-to-one meetings with every critical position were conducted.
Phase 1 was to include critical positions in this development program (GO-EXE), phase 2 was to include Manager and Group Manager positions (GO-MAN) and now phase 3 is being designed for Leader positions (GO-LEAD) and phase 4 is being designed for attracting and retaining young talents (GO-TALENT).
Until now, 59 Manager (+) and 36 leader positions went through a 180 degree assessment for this program. Trainings were designed to develop their personal and technical skills.
Each training program consists of several modules that lasts for a year. In between those modules, attendees go through regular check-ins to measure their personal development by different projects and assignments.
6. PERFORMANCE MANAGEMENT
Implementing this new strategy requires a strong follow-up mechanism for sustainability of the processes. Introducing a new performance management system would measure the effects of this transformation and the power of Pegasus Airlines’ new talent strategy.
For designing a new performance management system, 18 high potential employees were selected from different functions and gathered for a focus group study aiming to discuss the need considering the outputs of the employee effectiveness survey. Performance management project was carried out in 3 phases; goal setting, GO: growth opportunity (mid-year evaluation) and year-end evaluation. Along the way, members of this focus group created a very valuable input while designing the new system since they were the target audience in this process. Members were included in the decision making processes, user acceptance testing and also a key player in the deployment phase.
Designing the goal setting and GO: Growth Opportunity phases took 4 months by gathering inputs from 18 members of the focus group and 8 members in the core team.
The aim of this new system was to promote, measure and recognize high performance. This new platform introduced 3 different performance cycles which were designed aiming to transform the performance management process into an interactive platform where employees can focus on their development rather than just a system consisted of numbers.
Fly Up has several control and warning mechanisms to ensure SMART goals are set during the goal setting period which enables employees to focus more on their development during the year. Goal setting screen provides a numeric scale where employees enter their succession measures in the beginning of the year, only with numeric values such as date, percentage, USD etc. and during the year-end evaluation, this scale will automatically calculate the score after entering the succession realization.
With the new integrated talent strategy, Pegasus Airlines aimed to provide a clear vision of how a single goal serves as a foundation of the company goals. That’s why employees had to link each and every goal with a company perspective. Fly Up allows employees to link their goals with manager goals as well. Despite the fact that, linking only one goal with the manager is mandatory, all of them could be linked to see the objective tree of Pegasus Airlines. Reports are also designed with a very user friendly approach, providing every manager to see who has linked their goals with which company goal.
Dashboard on the home page provides a compact view to every user as well, enabling them to see how their personal goal affects the company perspectives, displaying the function goals and also instructive videos about the meanings of the company perspectives. These features serve as an important tool for employees to understand the importance of cascading goals and running for the same overall target.
During GO: Growth Opportunity period, which is from May till September, employees will be able to evaluate their progress on the goals set at the beginning of the year and also focus on their development with two easy steps.
Goals are being evaluated in a very user friendly form, which has 5-stage scale and optional comment areas.
As for the development phase, employees will be answering 4 development questions and afterwards they can gather feedforward from any of their colleagues via an interactive screen designed to introduce an entertaining feedback experience for their development until the end of the year.
This interactive screen is called “Keep in Touch!” meaning that employees will be able to send emoji’s, exclusively designed for Pegasus Airlines, to each other and keep in touch during this development period, not only from the web but also from the mobile application as well. Managers will be able to track who needs support for their goals or who is going on track with these Pegasus emoji’s from the dashboard available on the web and also the mobile application.
Providing comments for every area entered by the employee will be mandatory for the manager, since development is an interrelated process. Also feedbacks received for their teams are available as a report for a managerial position.
For enabling an easier follow-up process for the employees, special calendars designed for Fly Up have been distributed and each month reminds employees the actions to be taken.
Year end evaluation period has also been designed to bring a systematic approach to calibration and it’s effects on compensation.
Pegasus Airlines went through a very radical change, not only a re-design in the organizational structure but also a cultural transformation, for the first time in it’s history.
Since the main players in this transformation journey were the top management, they had to accept the need and lead the change in the first place. In an organization having a strong resistance and also exclusive sectoral dynamics, change was not very easy to comply with. More particularly, implementing an integrated system with short deadlines was also not easy to manage.
Transformed processes are the ones that directly affects the human resource that’s why deployment and communication phase was very critical for acceptance.
Overcoming this though transformation journey was the main enabler in Pegasus Airlines’ strong, sustainable and balanced growth. Implementing this new talent and business strategy made it possible to achieve a lean organization structure where roles are empowered and ownership of the processes are clearly defined. The new talent management strategy made it possible to design more transparent and clear processes in order to attract, recruit and retain talent and also to make sure current employees are aware of their vertical and horizontal movement opportunities. Creating a new succession model and a potential pool was also an output of this transparent career architecture.
On the other hand, establishing a free environment where employees can reflect their needs and suggestions and also lead the change at first hand was an important milestone for cultural transformation. These implementations spread by word of mouth which made it possible to influence a larger group of audience.
Finally, the new strategy – structure and culture had a big impact on the financial results.
This project will be a living project, being developed each and every day with new ideas. But until now, Pegasus Airlines accomplished a radical change considering different perspectives and taking precautions for the effects of the change on both human and the business.
Next step will be identification of;
- What talent does Pegasus need?
- How does Pegasus close the gaps?
- What talent does Pegasus have?
Also, to be able to keep track of digitalization, transferring the new integrated talent strategy to digital channels will be another destination to be reached as a next step. Providing more digitalized solutions will enable Pegasus Airlines to be more in touch with the talents and create new opportunities to develop them.