Jeff Smisek was a partner at a law firm in Houston in the mid-1990s when, during a business lunch, he was offered the opportunity to meet with Gordon Bethune, CEO of Continental Airlines.
He didn't know Bethune, but his sales instincts kicked in.
He figured that a struggling company like Continental, with multiple bankruptcies and a horrible reputation, always needed lawyers, and he could wrangle some business for his firm.
"I thought, 'Man, I can sell a lot of legal services. You bet I want to meet your CEO.' What I hadn't counted on was that Gordon was a better salesman than I will ever be," Smisek said.
"And instead of me selling legal services to him, he sold me on quitting my cushy job and going to work for this broken, almost-bankrupt, near-death airline."
Smisek was hired as part of a turnaround team that transformed Continental from one of the worst airlines in the industry to one of the best. He climbed the ranks and became CEO in 2010, when Continental Airlines was the highest-ranked U.S. airline on Fortune magazine's annual list of World's Most Admired Companies. It was the ninth consecutive year Continental ranked on top.
"It was a spectacular opportunity for me, in retrospect," he said. "Being in the airline business is so much cooler than being a partner in a law firm."
Today, Smisek, 57, has an equally daunting task as CEO of United Continental Holdings, the world's largest airline and one of Chicago's largest private employers, with 14,000 workers. Slightly more than a year into the merger of United and Continental airlines, his focus is on integrating two behemoths with complementary businesses but radically different corporate cultures.
"Ultimately, we've got to merge the two cultures," Smisek said. "I think that will lead to the result we want, which is a profitable enterprise where our co-workers want to work here, our customers want to fly us and our investors want to invest in us. That's the goal. We can do that, but it's a long process bringing two companies together."
Man on the move
Smisek has been around airplanes all his life.
Born in Washington, Smisek was a self-described "Air Force brat," growing up on various military bases, including one in Germany. But he spent most of his school-age years in San Antonio. His father was a career military officer and B-29 bomber pilot in World War II. Perhaps Smisek's ease and entertaining style in talking to large audiences, in evidence at a keynote address this month at a meeting of The Executives' Club of Chicago, comes from a performer gene: His mother was a big-band singer.
Dealing with the family's frequent moves was good training for the constantly changing airline business, Smisek said.
After leaving home, Smisek earned an undergraduate degree in economics at Princeton University.
Then, his path was largely guided by love.
His girlfriend, Diana Strassmann — she's now his wife — was going to school at Harvard University in Cambridge, Mass. He was working in New York for a firm that is now part of JPMorgan Chase. He couldn't afford to fly to visit her, and he grew weary of taking a train back and forth. So, he decided to join her at Harvard, earning a law degree and graduating among the top of his class, as he did at Princeton.
"That was the sole reason I went to law school, to be near my girlfriend," he said.
He worked for a law firm in Boston for a year while Strassmann finished a doctorate degree at Harvard. Then one day she called him and said, "Guess what? I've taken a job with Rice University in Houston, Texas." He laughs as he relays that she delivered the news as a done deal, without any input from him.
So, Smisek was on the move again. He found a job as a lawyer at a Houston law firm, where he worked for 12 years before succumbing to Bethune's offer to join Continental.
Smisek started at Continental as general counsel in 1995.
"The guy was bright, exactly what we needed," Bethune recalls. He would often gather Smisek and other top Continental executives to discuss issues. "It always helped to have Jeff in the room, because he could see ideas or things about transactions or operations that others didn't."
By most accounts, Smisek has a generally easygoing personality. But that can be misleading, hiding inner steel and intensity when faced with business challenges and threats from competition, Bethune said.
"Jeff is a tough, aggressive guy," he said. "His input was usually, 'Let's not sit here and be complacent. Let's go pop somebody in the forehead.'"
Other colleagues at Continental appreciated Smisek's direct communication style.
"He's very open-door," said Nene Foxhall, United's top communications executive, who Smisek hired in his first year at Continental 16 years ago. "You can go in and just talk about an issue. You don't have to go in with a big PowerPoint presentation."
Smisek values input, she said.
"He likes vigorous debate among his team. He doesn't want us to be yes people. But once we've had the debate, then it's, 'Let's join hands and go forward together.' It makes it fun and interesting. One of our mantras is 'open, honest, direct communication,' and he really personifies that."
Smisek concedes that not everybody appreciates his blunt communication style.
"Sometimes I might be a little bit overly direct, and people who don't know me may feel that way. I appreciate and understand that. But I think it's a better way to do business. I like it when people are direct with me."
Zane Rowe, United's chief financial officer who has worked with Smisek at Continental, said he likes it.
"Working for someone like that is terrific," he said. "You always know where you stand. You always know what he's thinking."
Focus is on culture
One word seems to be repeated more than any other around the executive offices at United's headquarters at 77 W. Wacker Drive, overlooking the Chicago River.
Jet fuel prices, government regulation, intense competition and a host of other hard-core business factors are important to airlines, but Smisek talks most about culture.
"I don't talk about culture because I'm a nice guy," Smisek said. "I talk about culture because culture is how you end up with a sustainably profitable company."
He aims to change an atmosphere that has led to internal backbiting, rudeness to customers, apathy and distrust of management.
It's especially important in a service business such as United, he said. If the airline's 80,000 or so employees enjoy coming to work and are proud of what they do, they'll do a better job, he said. And, eventually, that drops to the bottom line.
Really, he's talking about transferring Continental's mostly positive culture to United's mostly toxic one, tainted by years of struggle, including a pilots strike and bankruptcy protection, that left employees embittered. Fundamentally, changing culture is accomplished not only by communicating directly and honestly, but by "doing the things your mommy taught you," he said. Largely, treat other people the way you want to be treated.
Smisek said he spends relatively little time in his office. In his first year, he held about 30 "CEO Exchange" sessions with employees.
"I tend to manage by walking around," he said. "That's how you get to know people. That's how you know what's going on. I'm in front of my co-workers all the time. I talk to them a bit, but I mostly just take questions and listen to them."
That engagement is true in the executive offices, too, said Jim Compton, chief revenue officer of United.
Compton said he often sends emails to the team he manages and copies Smisek, typically a mere courtesy to keep the boss in the loop on routine goings-on. But many are struck by how often Smisek will reply with a comment, Compton said.
"He'll often (write), 'You guys are the experts, but here's my opinion,'" Compton said. "No matter what, he's always showing a great involvement."
Bethune, often credited with changing the culture at Continental, predicts Smisek will succeed because he was among the architects of that culture shift at Continental.
"It was a huge transformation, (but) it didn't occur overnight, and it didn't occur without a lot of thought and effort," he said. "But it did occur. And there's a formulaic approach to it, and he knows it."
Critics have their say
Smisek has his detractors, though.
He gets under the skin of pilots when they hear him publicly saying how well the integration of the airlines is going and how corporate culture is a priority.
"There are a lot of words, and very little action being followed up," said Capt. Wendy Morse, chairwoman of the United Master Executive Council of the Air Line Pilots Association. "The merger is not going well at all."
United's pilots are frustrated with the pace of contract negotiations, largely because they are working under a bankruptcy-era contract from eight years ago that included 40 percent pay cuts. They regularly conduct informational pickets, often where Smisek is making a public appearance. As he spoke to hundreds of business leaders Oct. 12 at the Fairmont Chicago hotel, a few dozen pilots in uniform silently paced the sidewalk while carrying signs.
The union also filed an unsuccessful federal lawsuit, claiming that United pilot retraining, largely to conform with Continental cockpit procedures, was inadequate. A federal judge sided with the company.
"He squandered an opportunity to fix the culture problem. It's us versus them," Morse said. "The rhetoric is great, but the follow-through is absolutely nonexistent."
Smisek contends that the airline is making progress with all its labor contracts.
"We're very committed to getting a deal with the pilots too," he said. "But it has to be fair; fair to them and fair to us.
"I understand the desire of all of our co-workers to get a raise. They deserve a raise, and I want to get them a raise. But it's a cumbersome process. … These are complex agreements. It's not for any desire of management not to get deals done. It just takes time."
While at Continental, Smisek had the reputation for balancing the interests of everybody associated with the airline: shareholders, employees and customers, said Bob Mann, president of R.W. Mann & Co., a New York-based aviation consulting firm.
"It seems to me he wasn't willing to sell out one to benefit any of the others," Mann said. "Employees did very well in this environment."
Overall, Smisek has a good chance to succeed as head of the airline, Mann said.
"Given his background and previous experience, I have no doubt this will come out favorably for both (United) and its employees," he said.
Bethune likens former United Airlines employees to abused children who never knew anything but harsh treatment. They become suspicious of authority.
"It takes a while to build trust. And Jeff has started that long process," Bethune said.
"The good thing is, they finally have a guy they can trust. They just don't know it yet."
Jeff Smisek, CEO, United Continental Holdings
Family: Married to Diana Strassmann, a professor at Rice University. She is founding editor of the journal Feminist Economics. Two grown sons.
Leisure activities: Working out, walking his dog, fishing and reading.
Currently reading: "A Game of Thrones" -- his son recommended the best-selling, epic fantasy novel that became an HBO series -- and "Confidence Men: Wall Street, Washington, and the Education of a President," about the Obama administration's response to the financial crisis.
Favorite music: 1970s tunes, including those by Led Zeppelin.
2010 salary: $4.4 million.
On moving to Chicago from Houston: "I love it in Chicago .... It is a very warm, open, inviting society here. ... I did have some concerns initially with the merger that we would have trouble getting some folks from Houston to come up here. But the way we were successful in doing that was to say, 'We'll pay for you to go up and take a look.' Once they went and saw what was here, it was a pretty easy sell."
On leadership: "Get to know the people you work with; get to know them as humans. They're going to feel much better about coming to work and they're going to do a better job."
On mistakes: "You need to reverse course when you're wrong. ... Don't keep going because you made the decision and now you need to macho it out."
On growth: "Take risk. Not safety risk, personal risk. ... Go outside your comfort area."