Woes? Executive, Blame Thyself.

With so much chaos in the economy, it's tempting for managers to throw up their hands and blame the world for their woes. But that's exactly the wrong move.

How do I know this? Just look at where this attitude has gotten airline executives after years of blaming outside forces for their troubles.

To listen to them, you'd think that all the problems in this beleaguered industry came from high fuel bills and a bad air traffic control system. But you'd be wrong. In fact, most airline executives are their own worst enemies. They seem to insist on doing things that are completely inconsistent with the evidence on what works.

Start with who and what they blame for their problems. It's quite typical to blame external, seemingly uncontrollable factors for poor business results, but this is a bad move. Research done by Fiona Lee at the University of Michigan and my Stanford business school colleague Lara Tiedens shows that companies that blamed poor results on internal, controllable factors enjoyed greater subsequent stock price appreciation than those who did the typical thing and blamed their problems on the "world."

About Jeffrey Pfeffer

Jeffrey Pfeffer is a professor of organizational behavior at Stanford's Graduate School of Business and is the author or co-author of 12 books including "What Were They Thinking?: Unconventional Wisdom About Management."

The logic is simple. If you think you can control your problems, you will actually be motivated to fix them. If you think your problems are outside of your control, you will do like the airline leaders -- throw up your hands and hope for better times. First rule of management: Don't act like a victim. There are always things you can do to make things better. So stop whining and take responsibility.

Next, figure out what the real problem is. Yes, there's no doubt that higher fuel prices have driven up costs. But in case you forgot your accounting, there are two components to profits -- costs and revenues. Airlines have driven their best customers away through a service experience that typically leaves the industry at the bottom of the American Customer Satisfaction Index ratings. Between 2000 and 2007, the number of premium domestic airline trips -- trips that garnered full-fare coach, business class, or first class fares -- fell by 47%.

Customers have done several things when confronted with continually worsening airline service. First, they take fewer trips. According to a survey by the Travel Industry Association, just in the last year airlines missed out on almost $10 billion in revenue from some 41 million trips people didn't fly. And second, some of the premium passengers found an alternative: flying privately. By 2007, business aircraft trips equaled 41% of the number of premium commercial airline trips. By the way, the people who have left the system or who aren't flying as frequently aren't very likely to come back. So the airlines, by making flying about as pleasurable as some extremely uncomfortable medical diagnostic procedures, have lost customers and revenue forever. Good work, people.

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And let's think about that air traffic control issue. Airlines blame the FAA for the interminable delays. But guess what? It is the airlines who schedule their planes.  Most airports are dominated by a single carrier. So, if there are too many flights for the airport's capacity, maybe the airlines should adjust their schedules. Another big reason for delays is that U.S. carriers are flying old aircraft which have lots of maintenance issues. Whose fault is that? Think about trying to keep a 25 year-old car on the road, and you will have some sense of what the U.S. airlines are doing.

Airlines' responses have been the wrong ones. First, they cut their people and their wages. The evidence on layoffs is consistent and clear: Downsizing seldom if ever increases productivity, boosts the stock price, or enhances innovation. And cutting back flights guarantees a smaller market share. As Procter & Gamble CEO A.G. Lafley has noted, it is easier to gain on your competitors during tough times.

And then there's my favorite: pricing. Unbundled pricing may be good in theory but it irritates people and makes things seem more expensive. That's because what is focal and salient to the customer is that every time you want something, like to talk to a human being on a reservations line, check a bag, drink some juice, go to the bathroom -- alright, they haven't done that yet, but who knows what's coming -- the companies are in your pocket.

Toyota understood this phenomenon long ago. They would price the Camry like the one I drive with virtually everything you might want included in the price. First of all, you thought it was a bargain that you got all these things. And second, they didn't need to make an infinite variety of cars for the infinite variety of "unbundled" features -- thereby, in the case of Toyota, saving enough money to about pay for all the things they were throwing in.

The airlines' answer to their problems: mergers! Now there's an idea. Studies by several consulting firms and a variety of academics show that most mergers fail &ndash; estimates range from 70-85%. As management writer Gary Hamel has commented, zero plus zero still equals zero.  Putting one airline that can't deliver adequate service or fly on time together with another equally challenged carrier just makes a small catastrophe into a big one.

So, the next time you hear an airline executive complain about their problems, ask two questions. How much is that person actually getting paid? It ought to be relatively inexpensive to find someone to blame others for his company's difficulties -- how hard can that be? And then ask if the airline is making any, maybe even one, decision consistent with the evidence on what works.

