A Culture You Can't Leave

After the 9/11 terrorist attacks, a tourism company was forced into a painful restructure. The result has been a stronger, more profitable business that staff love working for.

Managing Director: Glenyce Johnson Company: Peregrine Adventures Business type: Adventure travel Founded: 1977 Employees: 100 full-time; more than 1000 tour leaders, guides, porters and transfer staff in destination countries Turnover: (2005 - 2006) About $70M Head office: Melbourne Contact details: +61 3 8601 4444 The Peregrine Story

Key learning points: Don't panic! - If your business faces a severe challenge, look for opportunities to change and grow stronger. Cost cutting - Cut fast and cut hard - and share the cuts across all levels - no matter how painful it is personally.

The terrorist attacks of September 11, 2001 killed thousands of people in New York and horrified people worldwide. Many people simply stopped travelling and tourism businesses worldwide were severely affected, including Peregrine Adventures in Melbourne.

Peregrine was founded in 1977 and began running guided treks to Nepal in 1978 for travellers who wanted to avoid mass tourism and reach exotic destinations. By 2001, the business had grown to a turnover of $35 million with 65 full-time employees.

After 9/11, Peregrine's then financial controller and now managing director, Glenyce Johnson, faced difficult questions: how to survive? How to retrench people but maintain morale, expertise and Peregrine's unique culture? One thing was certain: change had to happen. Fast.

The Challenge

To rapidly restructure a business during a severe downturn while maintaining skills and morale.

The Solution

Glenyce was immediately confronted with the need to change on September 11. She says: "As I arrived at work that morning, the phones were ringing off the hook so we had to service those people first. We minimised damage by asking customers to leave their deposits and reschedule when they were ready to travel again." Fortunately, many were willing to do so and Peregrine kept their business in the long-term.

But costs still had to be slashed. Salaries were Peregrine's largest overhead and the painful task of firing people could not be avoided. Redundancies were kept to a minimum - about 15% of staff had to go - by offering fewer working hours and cutting executive salaries by 10%. Some staff  left voluntarily to travel; others changed careers. In the end, ten staff had to go. Glenyce says that retrenching staff was the hardest part of the enforced change. "In this industry, people make friends quickly because they are always talking about travel ... It was very hard to watch people saying goodbye to their friends." 

Peregrine had to renegotiate costs with overseas hotels, tour and transfer operators, and local guides and porters. Less money for them, meant being able to keep more valued staff. Some guides were put on retainers but others had to be let go. This was a particularly painful decision for Glenyce, who knew that many local staff at destinations depended on their Peregrine income to support their families.

Marketing costs were cut. But Peregrine later hired Jane Reed, an experienced marketing manager who had worked for Saatchi and Saatchi and Jenny Craig. She restructured the marketing department by appointing two brand managers, one for Peregrine and one for the less luxurious Gecko's Grassroots Adventures. Glenyce says: "Focusing on growth by brand makes much more sense rather than having one person's skill set spread across two different brands." 

The company also employed a new operations manager who had expertise in leading trips, managing risk and marketing. Glenyce says that he has improved margins by reducing costs.  

Having an open-door policy allows staff to talk about personal matters as well as work. Glenyce also has a monthly forum with each department. "I update them on what's going on in my world and they tell me what's happening in theirs, including gripes and where we can improve. If staff feel that you believe in them, they will have the confidence to do their jobs well."

Incentives are now an important part of the business. There are annual awards for one person in every department to go overseas and work on a responsible tourism project. There is also a managing director's award for the most outstanding employee - a business-class trip for two anywhere in the world with free access to Peregrine tours. Glenyce says, "We foster a culture where people can't leave."

The Result

In the past five years, Peregrine has averaged 25% year-on-year growth. Leaner operations have lead to higher margins per trip, which means more money for marketing and growing the business. 

The company has high staff-retention rates and has maintained an inclusive culture while implementing a more rigorous management structure.

In 2006, Glenyce was named as one of the Telstra Business Women's Awards winners.

Case study by Performing Words www.performingwords.com.au
First published: 19 February 2007.
Last updated: 19 February 2007.