NATS Case Study – Transforming from Public to Private 2004-2010

Date: 1st Jul '14

In 2001, National Air Traffic Services (NATS), the largest air traffic services organisation in the United Kingdom, was effectively bankrupt in the wake of the September 11th attacks on the United States....

The lucrative transatlantic flights temporarily came to a halt and the formerly public company had to be refinanced and geared (the rate of debt to company value) at a devastating 112%.  NATS had also received a great deal of negative media coverage following the very late and over budget Swanwick control centre, which suffered computer failures shortly after opening, causing public concern and reputational damage, on the back of criticism that the company had never made a profit or returned a dividend.

 

The Challenge

 

In 2004, Paul Barron was appointed as the new NATS CEO, tasked with transforming both the financial performance and the civil service culture. On his first day he delivered a live webcast to the employees to explain his remit and the style of leadership they could expect from him. Within a week of his arrival he embarked on an ambitious road show around every site and addressing every shift that took him 12 weeks to complete. During this time he dealt with the rumors surrounding his appointment and listened to what the workforce were saying about the challenges and life in NATS.

 

His next task was to employ JMW, a specialist management consultancy, to work with his senior management team to help create, in his words, “clear ways of working and a united management code of conduct that he hoped would generate a greater sense of camaraderie, purpose and direction.” Among other things, it was critical that the collective mindset at NATS was shifted from one of “civil service” and “business as usual” to one of possibility and high performance team working.

 

The Journey

 

During the next six years Paul built a strong and impressively rock solid senior management team that worked as one. They created a strong vision of the future, which was encapsulated in a programme labeled “21 Destinations”, an ambitious set of targets under Safety, Service, Financial Performance and Culture with a commitment to deliver them all by 31st March 2007.

By inviting the workforce to get involved by leading a project, joining a delivery team or just following progress on the intranet and positively supporting the programme, they created a sense of movement and a buzz that things were changing and that the senior management team were serious about change.

 

The next step was to transform the leadership capability down from the senior team to the front line supervision. By creating a management code, which spelt out what was expected of anyone who led people, they were able to assess what was missing and train the managers accordingly. The top 60 managers were trained in advanced management tools and communications techniques and the remaining 120 supervisors were given training in basic front line skills. All 180 were brought together 3 times a year for 2 days off site where they interacted together and worked with the senior team to discuss the vision, plans, management code and issues to be overcome.

 

The development of a modern and interactive intranet site allowed news stories and events to be factually presented and employees could comment (attributable and with simple governance rules) without the intervention of management, other than to correct factual inaccuracies. This became a powerful tool to observe what the workforce was thinking or concerned about and when Paul announced that they were looking at reforming the final salary pension scheme the story attracted over 700 comments, mostly negative.

 

Every year during Paul’s six years at NATS he embarked on his annual road show with the same format of presenting and listening and as these road shows developed, he started to introduce a daily blog which was a mixture of conversations with the workforce and a lighthearted report on his travels, meals, football matches on TV as well as personal and usually funny conversations with friends and family as he spent so much time away. The intranet also had all of the questions and answers from his Bar-stool communication sessions posted on the same day so that the employees could see what was being discussed and continue the dialogue at their session.

 

During his last road show in 2010, Paul attracted 110,000 hits on his blog with 77% of the workforce logging in on average 18 times each during the 12-week tour. By now he was personally messaging the workforce with his style of straight talking, good listening no nonsense approach, which the trade unions could not compete with.

 

By 2010, the leadership team was performing at the highest level and the management engagement score on the annual employee opinion survey was at a record high, despite closing the pension scheme to new entrants and reforming the existing one.  Employees were listened to and management was visible, approachable, authentic and on the same message. At the start of the journey the company had a challenge of delivering £1bn of new infrastructure projects including the closure of two centre’s and the opening of a new one in Prestwick Scotland. In 2004 the project capability was measured as 1 (out of 1 to 5) on a CMM modeling scale that measures capability.  A measurement of 1 suggests that projects can only be delivered on time and to budget through luck and heroism.  By 2010 the score was over 4, which is world class and was reflected in the opening of Swanwick on time and under budget, with no negative press, no computer issues and no delays.

 

 

The Results

 

As executives took on roles as facilitators and coaches for extraordinary achievement, meeting commitments, setting and beating stretch goals and delivering performance through people became the norm.

 

Within three years, the organisation had delivered on 16 of the destinations, and in another year’s time, they had completed 20.  Managers continued to be trained and assessed against delivering performance and engaging their people and the latter was seen as equally important. The closure of the final salary pension scheme was perhaps the greatest achievement as the scheme dwarfed the size of the company and was in danger of bringing the company down, as the company cost burden increased (the employee contribution was fixed in legislation).

 

There was a number of key “firsts.” At the end of the first year of the initiative, the company turned its first-ever profit. And in a stunning financial recovery, company shareholders received the first-ever return on their investment, and would see a 700% increase in share price over the course of the next five years.

 

Between 2004 and 2009, the organisation delivered 340 projects worth £1 billion on time, and on budget. NATS had succeeded in dramatically and sustainably improving on every aspect of its performance. The same troubled organisation that had been the subject of public criticism was now the recipient of well-publicised praise, receiving accolades both as an employer and as the World’s leading navigation provider, as voted by their peers.

 

Barron describes the achievements as “unimaginable, not only in the financial results but also in leadership and management capability.”

 

In addition and more specifically, during that five years, NATS:

 

  • Was voted the Best Air Navigation Provider in the world by an independent panel of peers
  • Delivered profit before tax of £530 million (none before)
  • Paid dividends of £202 million (none before)
  • Dramatically decreased delay per flight, from 40 seconds to four seconds
  • Reduced gearing from 112% to 57%
  • Increased turnover by 30%
  • Increased turnover of unregulated business by 100%
  • Reduced the number of Control centers from four to two, realising unprecedented efficiencies
  • Reduced manpower by 500 staff
  • Was voted one of 100 Best Companies to Work For by The Sunday Times magazine
  • Not a single days industrial action.

 

In closing, Barron would later reflect:

 

“There are very few occasions in one’s career that you can look back and reflect on a simply amazing team, but this was one. We believe that anything was possible, and we had our managers inspiring their employees to set the bar at unimaginable heights, and then clearing it time after time.