Robert Louis Stevenson wrote that sooner or later, everyone sits down to a banquet of consequences. I recalled this quote when I read about Alan Joyce this week. Qantas has cut his final and expected payout by $9.3 million. This was in response to a McKinsey review, which found that Joyce’s 15-year tenure in Qantas directly contributed to the erosion of the airline’s relationship with its regulators and customers. The review also stated that Joyce and his management team had inflicted considerable harm to its relationships with customers, employees, and other stakeholders.
Did the pay cut go far enough? Joyce still retains $1.8 million in recently paid bonuses and has pocketed millions in various payments and share sales over the course of his employment. The Australian Council of Superannuation Investors questioned how Alan Joyce was entitled to any bonuses. It’s a very good point, but to be fair, Alan Joyce did not wreak all that damage on his own, and the decline at Qantas did not happen overnight. You need a lot of people to look the other way and at the same time, develop a core competence in ignoring those who speak up. You need a Board to forget what it is supposed to do.
McKinsey’s report stated that the Board did not adequately challenge its executives and failed to acknowledge non-financial risks. Further, the desire to anoint Joyce as a supreme ruler, contributed to a top-down culture, which impacted empowerment and a willingness to challenge or speak up on issues or decisions of concern. There must have been some staggering moments of Groupthink within the management team, a team that included Joyce’s successor, current CEO Vanessa Hudson, who served as the group’s finance chief.
Incoming Qantas chair, John Mullen, said it is clear we let Australians down. It is our duty to make sure we always act in the best interest of stakeholders and hold ourselves to the highest level of accountability.
It just worries me that John Mullen also added that the Board needed to understand the cause of Qantas’ problems. I hope I’ve misinterpreted that comment, because it sounds as if the Board is still unclear. It’s been hard to miss the overwhelming anger coming from the public toward Qantas in the last few years. Do Board members live in isolation from the rest of the country?
I lived outside Australia for 16 years. Whenever I stepped on a Qantas flight, I used to experience that feeling other expats describe, of already being at home. That pride has long gone. These days, I pack food, just in case I am not fed (at all) or in case the meal will prove to be inedible. Recently I was advised to download the app and watch a movie on my phone. I once waited in Business class, for over three hours, to see a glass of water. The Purser informed me that they were offering a relaxed service on that flight.
Feedback is one of the most basic business controls and it is sometimes described as a ‘free kick.’ People who take the time to write and complain, are still with you. The majority of cheesed off customers simply go elsewhere if they can. I wrote to Qantas about the relaxed service flight. It was appalling for several reasons, and I (naively) thought they might want to know. The cut-and-paste reply I received was so badly written and produced, that it included a duplicated paragraph.
Save some money on McKinsey fees, Mr Mullen, and force yourself and fellow Board members to read a stack of customer feedback letters. And while you’re there, pick up a sample of the replies that have been sent in the last few years. This would be a start in understanding the breakdown of basic systems, if you are sincere.
The truth is that they all knew what was happening to the brand but kept lining Alan Joyce’s pockets anyway. Bonuses need to be a reward for increasing the sustainable competitive advantage of a business. Anyone can cut their way to making the numbers look good. When the Board was patting Mr Joyce’s back, they were signalling one value: shareholder return.
I would love to see Qantas return to being something fabulous. There is some hope, given that such a report was commissioned and published. There may even be a genuine commitment to putting things right. Time will tell. But I hope that the Board and leadership team is purged. Anyone who sat there for the last five years and nodded like a toy dog on a dashboard – needs to go. They, like Alan Joyce, also need to sit down to a banquet of consequences, or worse, to sit in an economy seat with Qantas inflight catering.