Time for a New Deal

In moving to shut down its entire fleet indefinitely, the Qantas board broke one of the cardinal rules in big business – never bet the business. Never. Ever. This rule reflects the fact that large businesses are a very valuable collection of brands and capabilities typically built up over generations – in the case of Qantas, over four generations.

Qantas is Australia’s only global business brand and has become a symbol of our culture.

The organisation that represents it has very deep and valuable aviation expertise.

In combination, these two things – the brand and the capability – represent the franchise and are a major source of value for shareholders and the Australian community at large. It is completely unacceptable for a board or a CEO to put this franchise at risk by a single act, or series of acts.

The grounding of the fleet also says a great deal about how Qantas management views its staff, who were all forced to be part of a massive admission of failure, notwithstanding their efforts on the company’s behalf over many years.

Qantas may be flying again, but the company’s recent actions, and its approach generally to industrial relations, have caused immeasurable damage to the Qantas franchise and to its culture. One must ask what sort of fractured logic is driving this approach? It is an approach that involves a very narrow view of what constitutes ‘the company’ – a view that apparently encompasses the board and CEO, perhaps the top management team, the financial assets of the business represented by the balance sheet and probably the shareholders.

The other key elements of the business – the staff, suppliers, the community generally, and perhaps even the Qantas and Jetstar brands themselves, seem to be viewed as resources that are outside the ‘system’, to be acquired, used and disposed of as appropriate in the pursuit of objectives.

There are two views on Qantas that mirror the position of the combatants and represent what author John Ralston Saul would call ‘competing certainties’. One certainty, espoused by the company, is that its survival in an increasingly competitive arena depends on major labour cost reductions that can only be achieved through imposed structural change. This has become a blunt ‘crash or crash through’ strategy.

The other certainty, espoused by the unions and staff, is that these changes will destroy the business. This is a classic dilemma with the ‘facts’ supporting both sides of the argument.

It is true that the labour costs of Qantas’s competitors in Asia, such as Singapore Airlines, are lower. It is also true that the structural changes proposed, involving the transfer of activities to Asia and the use of international pilots, will alter the very nature of the airline, perhaps to the detriment of its engineering and pilot culture, and safety record.

Such dilemmas are not typically resolved through ‘either/or’ approaches and they will certainly not be resolved by a company view that its customers and staff are essen-a bureaucratic umpire resolve the issues in a durable way. The parties need to find a third way based on a ‘both/and’ approach. We need a genuine attempt at reconciliation – a new deal – not competing certainties. To date, neither party has been committed to this, although the obligation to find a solution lies primarily with the company, not the staff and their unions.

The starting point for a new deal might be a high level working group comprising representatives from management and staff, with a mandate to find constructive solutions based on recognition of nine principles.

Principles for a New Deal at Qantas

Commitment by the company: 1. Qantas accepts that the primary responsibility for finding a workable solution rests with the management and board, not with the staff or their unions. This principle acknowledges the reality that the business is owned and controlled by shareholders, represented by a board and an executive.

The buck stops with them. This principle, if internalised, should help to address the embattled mentality of the executive and stop the finger pointing and blaming.

2. Qantas accepts that a workable solution requires the active goodwill of employees who are not viewed merely as expendable resources. This principle reflects the simple reality that the success of an airline is largely dependent on its people – hardware and systems are essentially commodities that any airline can acquire. Employee goodwill leads to positive attitudes and positive attitudes create good service and happy customers.

Funny, that.

3. Qantas will be completely transparent with staff in discussing strategies for a viable future, including strategies for all the group brands, and is willing to consider constructive input from staff. This might be a break from tradition but, if your people really are the key to long term success, you have to bring them with you – you cannot have engagement in common cause unless the cause is known and shared.

4. Qantas has a genuine desire to maintain the character of the airline and translate this character into meaningful points of difference in the market. This principle needs to be articulated because the company’s current actions suggest that its brand priorities may be elsewhere – with Jetstar or RedQ.

5. Qantas acknowledges that the primary objective is to enhance productivity and revenue, not cut jobs or reduce remuneration.

These are very different strategies. One is essentially about growing the revenue base with existing, or perhaps additional, resources, the other is about cutting and squeezing. They are not mutually exclusive but the latter, if necessary, is more palatable if it is part of a longer term strategy that involves growth.

Commitment by the staff: 1. Qantas staff, and their unions, recognise the need for significant change that may ultimately result in fewer jobs and changes to pay and conditions. The operative word here, of course, is ‘significant’, and what it might imply. In the context of the above commitments by the company, however, the staff and their representatives must be commercial and realistic in their expectations. The company will need ‘fighting room’ if it is to be successful in the growing Asian markets.

Commitment by both parties: 1. Agreement that head to head conflict is not the solution. This sounds trite, but a genuine admission by both the company and staff that a new type of relationship is needed is an essential starting point.

2. Agreement that the goal is ‘engagement in common cause’ – a genuine partnership between the company and its people to both achieve commercial objectives and meet reasonable employee needs. What a wonderful conversation to have! A conversation which is genuinely wanting to articulate needs on both sides and to reconcile them through discussion and negotiation.

3. Agreement to work together harmoniously and in good faith while the solutions are being developed.

With These In Mind. . .

So, nine suggested principles that would form the starting point for a process to hammer out a new deal. If you think they are unrealistic, think again. So-called ‘realism’ has produced the current mess. New deals are not founded on conventional wisdom, as the renaissance at Air New Zealand is showing us.

I would give the working group three months to come up with an initial set of recommendations. Its deliberations would be coordinated and led by a skilled external facilitator who both sides respected.

The first step in the process might be some deliberate role reversals to help all group members gain an understanding of the ‘other’ position. Nothing produces understanding and compassion (a sharing of suffering) quicker than walking in someone else’s shoes.

Then the process would probably involve the preparation of a series of discussion papers on key topics. The group would obviously need a budget and some good analytical resources to draw on. All quite straightforward really.

In his famous ‘New Deal’ speech in July 1932, President Roosevelt uttered some words that could have been written for the task at Qantas. He spoke of the need “to be honest and to avoid all hypocrisy or sham, to avoid all silly shutting of the eyes to the truth” and went on to say, “Let us all here assembled constitute ourselves prophets of a new order of competence and of courage. ” Competence and courage – they are what is needed now rather than all the adversarial nonsense, along with a good dose of imagination and a sprinkle of common sense.

Christopher Tipler is a Melbourne based management advisor and author of Corpus RIOS – The how and what of business strategy. His website corpusrios. com contains more material on this and related topics.