2.1.4 What Qantas Needs To Do To Get Out Of Trouble
As the industrial turmoil continues at Qantas, one cannot help but compare the Australian flag carrier with its trans-Tasman equivalent - Air New Zealand. Qantas - whose market share of passengers flying out of Australia has slumped to 18% - whilst Air New Zealand enjoys an equivalent is 43%. Qantas should look to Air New Zealand - who in 2002 were facing a surprisingly similar situation - as a guide.
Under Air New Zealand's dynamic and charismatic CEO Rob Fyfe, Air New Zealand is on a roll. Since 2002 when the New Zealand government rescued it from virtual bankruptcy after the Company’s disastrous take-over of Ansett, Air New Zealand has re-invented itself to the extent that it was voted Airline of the Year in 2010 and has the largest market share on every route that it flies with one exception.
My research on the factors that are required for organisations to effectively execute their plans and strategies lead to the conclusion that unless the enterprise can achieve organisational alignment in both planning and implementation, it will be severely handicapped in its ability to introduce change. Moreover, the various employee groups will be far more occupied tending to their own vested interests and employee engagement and morale will sink to even lower levels.
What Qantas need to do to get themselves out of trouble
This can be summarised as follows:
- Everyone understands where the organisation is now
- Everyone understands the destination and the journey
- Everyone understands their role in getting there
Everyone understands where the organisation is now
In a study undertaken by the Business Council of Australia, the four key drivers of organisational change were listed as:
- A fear of imminent death (of the enterprise)
- A new leader took charge
- The enterprise anticipated threats
- A dramatic opportunity appeared
In 2002, it was apparent to everyone in New Zealand that Air New Zealand would fold without government intervention. In the disputes that Qantas has with its pilots, baggage handlers and engineers, it is clearly apparent that the unions have a very different perspective of where Qantas is now compared to that of Qantas management.
The Unions continuously repeat the fact that Qantas has remained profitable, whereas management’s counterpoint is that:
- The profits are nowhere near high enough to fund the investment required to sustain the business
- The international arm of Qantas is losing $200 million per annum
The disagreement over where Qantas is now is not helped by the fact that Qantas management has never acknowledged the major strategic errors that were made under Geoff Dixon, the previous CEO. Qantas were one of the last airlines to install back of seat videos in economy class, they were also one of the last airlines to introduce a premium economy class and they neglected to purchase Boeing 777 - 300ER’s that all their main rivals fly on the Kangaroo route, and which are 30% more efficient than Qantas’ aging fleet of 747’s.
Finally at the same time as Qantas management is crying poor, the Company continues to pay its CEO’s very handsome salaries that are not justified by their performance.
The end-result is an upstairs/downstairs culture with little respect shown by management and employees towards one another. And a gulf between many of Qantas’ employees and its management as to what really is the current reality. Unlike the Air New Zealand situation in 2002, there is no consensus at Qantas on the current reality and that makes the gathering of support for the new strategy virtually impossible to achieve.
Everyone understands the destination and the journey
As with the first requirement, the key word in the second is the same - “everyone”. It would appear that the new strategy for Qantas has two major shortcomings from its employees’ perspective.
- Management would not seem to have consulted with and involved their employees at the front-line of the organisation in its development. Thus the new strategy is owned by management and disowned by those who will be charged with its detailed implementation.
- Many employees feel that Qantas management has basically given up on developing a strategy to restore the Company’s fortunes on their long haul international routes. They see this as an act of surrender and Qantas’ decision to establish an offshore Asian hub as a betrayal of the Company’s employees and everything that the Flying Kangaroo has stood for.
In my experience, whatever the longer term strategy may be, it must also focus on improving what the company currently does.
In total contrast, Air New Zealand did not have the luxury of an off-shore fall-back option. If Air New Zealand was to survive and prosper, it had to do much better what it already did. It had to define its target market, understand that market’s particular needs and then satisfy them in an innovative way that differentiated the airline from its competitors.
Among Air New Zealanders, everyone understands the destination and the journey. There is a sense that “we are all in this together” exemplified by Air New Zealand’s Guiding Principles that include:
- We will work together as a great team committed to the growth and vitality of our company and New Zealand
- Our workplaces will be fun, energising and where everyone can make a difference
Everyone understands their role in getting there
For many years now, Qantas have pursued a policy of cost-cutting that has frequently involved out-sourcing overseas - whether it is IT or engineering services. Thus many employees must even question whether they have a role to play under the new business model.
Organisational alignment underpins everything else
A lack of organisational alignment places in jeopardy all those other factors that are required for the successful execution of a company’s business strategy. Without it, it is extremely difficult to manage change.
It has been estimated that 70% of employees in a particular enterprise will change given a good enough reason for doing so. It would appear that Qantas is having a great deal of difficulty in convincing its workforce of the necessity of the changes that it is proposing.
Without organisational alignment, change is hard to introduce and for leadership to be effective, there must be clear goals to be achieved and the capacity to lead the changes necessary to achieve them.
I am a great believer in Management by Wandering Around (MBWA). So is Rob Fyfe. In a recent interview, he recounted the story of the resolution of the dispute with Air New Zealand’s heavy maintenance engineers. In a scenario familiar to Qantas’ own engineers, Air New Zealand had carried out their own heavy maintenance. However, it was costing Air New Zealand a premium of $NZ30 million per annum that the airline simply could not afford. There were two alternatives.
- Close the heavy maintenance operation and move this function offshore, or
- Reduce costs by 20% across the board
Negotiations went on for two years with the Union resisting both options. Shortly after taking over as CEO, Fyfe, himself a trained aircraft engineer, decided to visit the heavy maintenance hanger and talk with the engineers directly. By all accounts the exchange of views was pretty fiery but after about 30 minutes, one engineer who had been most aggressive said to Fyfe. “I don’t respect the decision you have made but I do respect you coming down here”.
Today, all heavy maintenance is carried out by Air New Zealand’s engineers and in addition to being cost competitive with overseas operations, the use of the Company’s own engineers offers Air New Zealand greater flexibility. Somehow, I cannot see Alan Joyce or other members of Qantas management acting in a similar fashion.
Communication is the Central Nervous System of any organisation - damage it and paralysis is the result
Fyfe works once a month in a different part of Air New Zealand. When he flies Air New Zealand, he helps serve the meals and talks to both passengers and crew alike. Every Wednesday, Air New Zealand runs “Connections”, a day long program where staff come and spend time hearing from senior management about where the business is heading.
Recently they held a program called CEO for a day when ten high school students spent a day with Fyfe seeing how an airline operates and giving their suggestions as to how Air New Zealand could enhance its appeal to teenagers. “The students chosen had some great suggestions about social media programmes, smart phone applications and ways to enhance the in-flight experience for teenagers,” says Fyfe.
So often with Qantas, one gets the impression that communication between management and unions is largely via the media with the emphasis on playing the blame game and justifying each others’ actions.
It may seem an obvious distinction but whereas planning is all about the analysis of environments, markets, products, IT, functions and processes: implementation is all about people. Air New Zealand understand that - but I don’t think Qantas do.