PEGASUS AIRLINES THE PEER AWARDS FOR EXCELLENCE - …...Pegasus Airlines was found as a joint venture company back in 1990 and entered the business only with two aircrafts. Today,

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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.

Figure 1: Pegasus Airlines' detoriating performance with slowing traffic and decreasing ticket prices

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.

Figure 2: Pegasus Airlines' company life cycle and the current critical stage

As a consequence, Integrated Re-design and Uplifting Project was designed to serve as an output of

the need 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.


A. OVERVIEW

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.

B. DESIGN AND DEPLOYEMENT


1. ORGANIZATIONAL RE-DESIGN

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.

Figure 3: Selected 7 comparable airlines to benchmark

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.

Figure 4: Current N-1 organizational chart showing the large number of direct reports

• %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.


Figure 5: Span of control analysis for managerial positions

• Excluding operational FTE’s, organization has an ineffective diamond shape rather

than a pyramid.

Figure 6: Current diamond shaped organization

• 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.

Figure 7: New organizational structure proposal

• 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.

Figure 8: New N-2 structure proposal

• 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.

2. 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.

Figure 9: Reward and career architecture

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.

Figure 10: Job families and levelling

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.


Figure 11: Previous & new title structure

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.

Figure 12: Vertival career movement display

Figure 13: Horizontal career movement display

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.

3. 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.

Figure 14: New talent management process

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.

Figure 15: Leadership potential competencies – Korn Ferry Model


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.

Figure 16: Leadership potential assessment – Korn Ferry Model

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.

Figure17: Summary status chart


4. EMPLOYEE EFFECTIVENESS

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.

Figure18: Employee Effectiveness Survey Dimensions – Korn Ferry Model

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.

Figure 19: Power to You workshops


Figure 20: Power to You workshops

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.

Figure 21: Implementation structure


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.

Figure 22: Company-wide announcement of meal card benefit. Employees had to click on the visual and select if they want to use the meal card or continue using the cafeteria.


Figure 23: Company-wide announcement of flexible working hours and home-office application. Employees are able to use home-office once a month and they are able to start their working hours between 07:30 – 09:00 and

finish at 16:30 – 18:00.

Figure 24: Announcement of re-launching social clubs.


Figure 25: Announcement of a happy hour.

5. 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.

Figure 26: Home page

Notifications: Points out

if an actions needs to be

taken by the employee.

Visualized

Menu

Visualized timeline

showing the

performance

management cycle

for 2018.

Dashboard showing

the distribution of

goals linked with the

company perspectives

and goal setting

completion rates.

Company perspectives

and function goals.


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.

Figure 27: Goal setting screen

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.

Company perspective

and manager goal are

being selected before

entering the

description of a goal.

Evaluation

Scale:

employees

have to fill-in

succession

percentages

during the

goal setting

period. Weight, unit,

evaluation

direction of the

goal and privacy

selection.


Figure 28: GO Screen – Step 1: Target Evaluation

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.

Figure 29: GO Screen – Step 2: Development Questions.

I need

support

Action

planning is

on track.

Actions are

planned but I

still need

time.

On

track!

I’m very close to

success / already

succeeded.

Listed goals

waiting to be

evaluated.

Optional

comment

area.

Questions

regarding the

actions to Stop,

Continue and Start

doing and the need

of support from the

manager. GO meeting

request will be sent

to the manager by

clicking on this

button.


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.

Figure 30: Keep in Touch chat screen.

Figure 31: Emoji’s exclusively designed for Pegasus.

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.

Start conversation

and search for

names.

Good luck! Emoji

Let’s Check

Together!

Emoji

I trust in you!

Emoji


B. CONCLUSION

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 an important milestone in Pegasus Airlines’ strong,

sustainable and balanced growth.

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.

Employee effectiveness survey was conducted again 1 year later and 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, 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.

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?

Besides answering these questions, Pegasus Airlines has been measuring the distance of the

critical roles to the CEO position, they will be focusing on 2 main competencies.

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.

PEGASUS AIRLINES THE PEER AWARDS FOR EXCELLENCE - …...Pegasus Airlines was found as a joint venture company back in 1990 and entered the business only with two aircrafts. Today,

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