The next few weeks at British Airways will not be pleasant, the leadership team and departmental managers have been negotiating hard with unions to meet the challenges of the downturn. The truth of the predicament has not been lost on those in Flight Operations where a clear understanding seems to exist of the problem. Our hope is that the same clarity is evident elsewhere.
Trust is always a tough thing to establish after it has been lost in any industry and these are times that test it to breaking point. I still cannot get over the response that one US carrier’s pilots had to a particularly gloom laden meeting. The carriers leadership team confronted the pilots union just after 9/11 with a demand to chop salaries and benefits by significant percentage points. The guys took the news to their members and they responded positively. If this was going to save the airline from certain death then a sacrifice had to be made.
They took the deal as bad as it was on the chin. Shortly afterwards the airline’s leadership team awarded themselves a $340M bonus for the productivity they had negotiated – the pilots were predictably furious but the deal had been done.
Trust is pivotal and by telling the story above I do not suggest for one minute that our Leadership Team have such moves in mind, but I wonder if that particular US carrier is ever in the brown stuff again, will its pilots respond to the clarion call to help out? What will they do when times improve and the bottom line swells?
Either way the chances are that the LT in place at the time will be long gone with their money and the smiling faces across the table will point towards their predecessors and say, “Hey guys, that was history, you have a new team now” as the sun glints off an immaculate set of pearly white teeth.
Let us all hope that with our new reality in the world we can see a day coming where we are told the truth and dealt with fairly. Who wants to return to the ’70s industrial scene – not me!
Lufthansa have developed a novel way of dealing with the problem of cyclic demand and soft trading environments.
Companies get creative to cut costs – not jobs
By Richard Milne
The Financial Times UKPublished: June 10 2009 16:18 | Last updated: June 10 2009 22:49
Bankers enjoying a five-year siesta, pilots moonlighting as baggage handlers and accountants being paid not to work: the economic crisis is forcing companies to be more creative in cutting costs but not jobs. The most extreme example so far has been BBVA, the Spanish bank that is offering its staff the chance to take five years’ leave at a third of their salary and have a guaranteed job when they get back. It is not alone.
Skadden Arps, the largest law firm in the US, offered its lawyers the chance to have a year off at a third of pay while accountants at KPMG were able to sign up 85 per cent of its UK staff – including their chief executive and senior management – to the possibility of a 12-week sabbatical or a four-day working week.
Pilots at KLM could take on more menial tasks over the summer, normally left to temps working as ground staff. But are these innovative schemes making a difference or are most companies still being unsophisticated in cutting jobs and costs?
Chief executives and labour experts are united in underlining the importance of attracting and retaining the right people in a global battle for talent. “Competition in the corporate sector is more and more driven by getting hold of the right people,” says Idar Kreutzer, chief executive of Storebrand, Norway’s largest insurer.
But consultants are sceptical about how innovative companies are really being. They say that most human resources departments are focusing purely on cutting costs and ignoring longer-term issues such as having the right staff to deal with the recovery when it comes. Rainer Strack, a partner at Boston Consulting Group, says: “Ninety per cent of the HR agenda at the moment is about reducing costs. I think companies sometimes make the same mistakes as in the last recession.”
One change is that professional firms such as lawyers and accountants are putting in place the kind of flexibility measures long used by manufacturers such as reduced working weeks. Lufthansa – in an example cited by BCG and the European Association for People Management – is able to reduce hours and wages of its crew without negotiation when demand weakens. It even has a “crisis clause” that enables it, when demand drops by more than 10 per cent, to cut wages and hours by a proportional amount.
Professional firms are now trying to correct errors from the previous downturn when they cut too much. Sally Ollet, a workforce planning specialist at consultants Mercer, says that such companies are trying voluntary schemes first to cut wage bills in the hope that the economy will recover soon. But some mistakes are hard to correct. Many companies cut graduate schemes in previous recessions and lived to regret it. Some of the UK’s law firms have forced graduates to defer their starting dates by a year or two and closed their schemes for those years to new applicants.
But much will depend on the depth of the crisis. Companies that have come up with creative initiatives could find themselves facing tough choices if a recovery fails. Mr Strack says: “I don’t know whether it will save them from headcount reductions but it will give them space to breathe.”
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