Archive for the 'Governance' Category
Thursday, February 18th, 2010
Hoots No. 14 – 18 February 2010: Advocacy: Grasp the Political
Downsizing: another silly idea promoted by advocates for small government and “New Public Management” and should be resisted.
(The next hoot will deal with global climate change and the fact that evidence for change includes evidence for increasing instability, not only warming: museum scientists should be actively promoting the evidence and not leave it to others.)
Twenty years ago Daniel Thomas, then Director of the Art Gallery of South Australia and President of the Art Museums Association of Australia, wrote an article entitled “Grasp the Political” (Adelaide Review March 1990)
He wrote, “What art museums most need in the 1990s is to become politically and economically conscious. They must not only equip themselves with arguments as to why they should exist, but also with hard statistical data about their costs and their benefits.
“At the same time they must be very cautious about positioning themselves within the entertainment industry. There the user-pay principal reigns; the showbiz needs of popular exhibitions can displace special-interest exhibitions, such as scholarly art-history exhibitions or difficult, adventurous contemporary art exhibitions.”
I just wonder how many people took any notice of these important statements.
This hoot comes from sunny San Francisco – well it was when I started to write this – with its many museums including the wonderfully redeveloped green California Academy of Sciences and De Young Museum of Art, currently showing the truly astounding exhibition of Tutankhamun (see recent articles on the ABC Science site on this Egyptian Pharaoh who died mysteriously when 19 – younger even than John Keats and Giovanni Battista Pergolesi who both died aged 25) and the always marvellous San Francisco Museum of Contemporary Art.
It is also time to again recommend the Global Museum site managed by Roger Smith, now Director – Online Operations (East Asia) at the British Council. Like the Arts Journal Global Museum gathers together interesting articles focusing on museums all over the world; the site also has sections on travel, jobs, resources and links to various documents as well as links to podcasts, which can be downloaded, from many museums.
I have argued for years if not decades that museum people need to do a number of things to advance the goals of their museum:
- find how the benefits of their activities link with the benefits of other similar organisations and enterprises and seek to make common cause with them: it is relatively easy for the enemy to undermine the strategies of people or organisation acting alone, it is quite a different matter with many people pursuing a common goal;
- recognise that there are many lessons to be learned from other organisations, indeed from some which do not immediately seem relevant: leadership in a museum can benefit from understanding leadership practice in a hospital or even an airline; and
- understand that the goals of museums are not simply to put knowledge out “in the ether” but to have that knowledge make a difference for the common good; as Steve Weil said, museums are for somebody, not about something.
There are a few museums where staff have taken the argument up to the frontlines and tried to convince those in government and the community that a certain approach to a situation is appropriate and that some others are not.
“Layoff the Layoffs” is the title of an article in Newsweek for Februrary 5, 2010
Pfeffer’s recent article is a good summary of why the downsizing of organisations, which has been quite a fad for some decades and has been popular in the last couple of years as a device for coping with the GFC, is anything but economically positive quite apart from its often devastating effects on the people involved. Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications!
Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business, Stanford University where he has taught since 1979. He is the author or co-author of thirteen books including The Human Equation: Building Profits by Putting People First, Managing with Power: Politics and Influence in Organizations, and Unconventional Wisdom About Management, a collection of 27 essays about management topics, as well as more than 120 articles and book chapters. Pfeffer’s latest book, tentatively entitled Power: An Organizational Survival Guide is to be published early 2010 by HarperCollins.
These quotes give a sense of where Pfeffer is coming from:
Power centres around scarce and critical resources and in times of uncertainty those with established credibility tend to be favoured as the enlightened. Those in power tend to define problems in ways which institutionalise their power. The more institutionalised the power is the more likely it is that the organization will be out of phase with its environment (from a 1977 paper with Gerald R. Salancik)
Organizational success comes more from managing people effectively than from attaining large size, operating in a high-growth industry, or becoming lean and mean through downsizing – which, after all, puts many of your most important assets on the street for the competition to employ.
Pfeffer opens his Newsweek article by pointing out that when the tragedy of September 12 2001 struck there was vast uncertainty about the future of airline flights. Almost all US airlines, and many other corporations, immediately laid off staff. Southwest Airlines did not. (I have written about this company before in “Lessons from Southwest Airlines” and “A chat with Herb Kelleher“) Southwest, which in fact has never laid off staff in its entire history, is now the biggest domestic carrier with a market capitalisation bigger than all other domestic carriers combined. Southwest’s former head of human resources once told Pfeffer: “If people are your most important assets, why would you get rid of them?”
Layoffs, Pfeffer observes, have become an increasingly common part of corporate life, some firms seemingly in permanent downsizing mode. If an industry is declining downsizing would seem inevitable. But in industries where demand is fluctuating? When a company lays off staff in a downturn, staff Â have to be when the upturn comes and demand increases. In the process considerable costs have been incurred!
Here is a quote that will surprise some and anger others even more: “A recent study of 20 Organization for Economic Cooperation and Development economies over a 20-year period by two Dutch economists found that labor-productivity growth was higher in economies having more highly regulated industrial-relations systems – meaning they had more formal prohibitions against the letting go of workers.” So much for the notion of employment flexibility leading to economic growth!
Here are myths dispelled by studies of the effects of downsizing:
- Companies that announce layoffs enjoy higher stock prices than peers
- Layoffs increase individual company productivity
- Layoffs cut costs
The negative consequences of downsizing are particularly evident in R&D-intensive industries and in companies that experienced growth in sales.
Layoffs lead to lower morale leading to employees looking for another job at the first sign of better times, greater distrust of management and greater likelihood of stealing from the firm.
Layoffs also have a significant negative effect on the economy since laid off workers spend less, may demand social services payments from government, their houses may end up having to sold because of mortgage default and so on. The consequences to employees themselves can be devastating! Pfeffer says, “Layoffs literally kill people”.
(In the US those who lose their jobs also often lose their medical insurance which, as well as expected outcomes, can also lead to violent behaviour. Reviewing Michael Moore’s latest film “Capitalism: A Love Story ” Chris McGreal (The Guardian, 30 January 2010) writes, “Early on, Moore sets out the meaning of “Dead Peasants” insurance. It turns out that Wal-Mart, a company with revenue larger than any other in the world, bets on its workers dying, taking out life insurance policies on its 350,000 shop-floor workers without their knowledge or approval. When one of them dies, Wal-Mart claims on the policy. Not a cent of the payout, which sometimes runs to a $1m (£620,000) or more, goes to the family of the dead worker, often struggling with expensive funeral bills. Wal-Mart keeps the lot. If a worker dies, the company profits.)
Governments around the world have adopted the strategy of downsizing claiming this will lead to working smarter. The consequences of such downsizing have often led, as in business, to poorer service. At the same time as downsizing, outsourcing has also been promoted as allowing the organisation to fous on its core business. But as with downsizing it is now realised this seldom works to benefit the organisation as tasks and skills critical to the enterprise are realised as having to be in-house where they can be influenced appropriately by the culture and the staff involved interact with staff in the “business core”. One of the problems is that the downsized organisation seldom has the skills to develop an appropriate brief and project management regime for the outsourced contractor.
Most importantly, a downsizing operation seldom is accompanied by a clearly explained strategy for the future which will lead to a better company which is clearly explained to employees, those affected and those who are to remain. One of the critical jobs of leadership is not done!
For instance, Right Associates (“Lessons Learned: Dispelling the Myth of Downsizing”, Philadelphia, 1992) found that in 66% to 75% of companies which had downsized neither profitability or [productivity] had increased. They argued that companies must investigate alternatives, define the new organisation, plan the downsizing, develop a communication plan and nurture the survivors. Observing that outplacement assistance fosters positive career growth they emphasised that change has to be embraced: no person or organisation can escape the consequences of downsizing.
In the study of museums around the world it was found that the museum organisations that were perceived by staff to have achieved successful change outcomes, were also perceived to have managed the change process through a strategically linked vision of the future state and communicated in ways which enabled participants to know what would happen and how they would be affected by the change, provided appropriate financial, human resource and training in support of the change the change; executives were prepared to devote the time to meeting with people and created the energy to get the change initiated and sustained by leadership action which emphasised patience and support and leading by example through modelling the appropriate change behaviours. (See Morris Abraham, Des Griffin & John Crawford, “Organisation change and management decision in museums”, Management Decision 37/10, 736-751, 1999.)
Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications! (Note that the responsibility of boards and executives is in the first place to the future of the organisation.)
Monday, June 22nd, 2009
OWL’S HOOTS NO. 10 – June 20th, 2009
The new Acropolis Museum opens in Athens, the British Museum should change its name and appoint a board representing the nations whose ancestors created the collections it holds; the education system is anaethsitizing children and stifling creativity, according to Sir Ken Robinson, educator and expert on creativity. And in New South Wales, more pointless reorganisation of the public service.
The tenth “Hoot” gives me the opportunity to talk about two issues of the greatest interest to me, cultural property and its contribution to our past and our view of ourselves, and education and learning and creativity.
Parthenon sculptures and the new Acropolis Museum in Athens: The new Acropolis Museum, designed by Bernard Tschumi, looking out on the Acropolis and the Parthenon, opened 20 June. The third floor features a reconstruction of the entire Parthenon frieze, the plaster casts of the sculptures (removed by Lord Elgin) held in the British Museum’s Duveen Gallery differentiated from the genuine sculptures by their white colour.
In “Majestic in Exile” in the New York Times of June 18, 2009 Nikos Konstandaras (managing editor of the Greek daily Kathimerini and editor of the English-language weekly Athens Plus) writes, “I have no doubt that one day all the Parthenon Marbles will be reunited in the New Acropolis Museum….
“Meanwhile, if the British Museum wants to be true to its self-appointed task of serving as curator of the world’s civilizations, and if it really does not recognize the geographic, national or ethnic origins of its masterpieces, then it should have the grace to acknowledge this in practice. It should drop the possessive adjective from its name and call itself simply “The Museum.” And its board of government-appointed trustees should be replaced by representatives of the nations whose ancestors created the works that it displays.
“This would mark the end of colonial and imperial provenance of acquisitions and open a new era of exchange and cooperation between the world’s museums. Questions of ownership would be secondary in this new dialogue of free and equal nations. The Parthenon’s sculptures have the power to transform those who gaze on them.”
In a report on the opening on ABC Radio’s Correspondents Report on 21 June Helena Smith reported on the opening. Introducing the report Elizabeht Jackson observed, “Activists, including David Hill, the former managing director of the ABC who heads the Sydney-based Association for the Reunification of the Parthenon Sculptures, hope the new museum will reinvigorate the campaign to bring back the Elgin marbles – the artworks that have been displayed in the British Museum since Lord Elgin removed them from the Acropolis over 200 years ago.”
Creativity and Education: Sir Ken Robinson, former professor at Warwick University and speaker on creativity and education, has just published a book (authored with Lou Aronica and published by Allen Lane) entitled “The Element: How Finding Your Passion Changes Everything”, stories of people who found passion in areas of life that were not the focus in traditional schools. In 1998 Robinson chaired a Committee which produced the report, “All Our Futures: Creativity, Culture and Education (the Robinson Report)”. The Times said: â€˜This report raises some of the most important issues facing business in the 21st century. It should have every CEO and human resources director thumping the table and demanding action’.
Robinson argues that current education practices stifle creativity and are a “turn off” for thousands of young people very much because they don’t give enough attention to subjects in the arts. Education is founded on two premises, the enlightenment idea of (rational) economic man and the need for cultural identity. It’s value is seen in how well it prepares people for work.
Robinson was in Australia in the last couple of weeks and was interviewed extensively on the ABC (730 Report on TV1 on 16 June and 17 June , Margaret Throsby’s Interview on ABC Classic FMÂ and “Life Matters” on Radio National) ; several other interesting people with innovative approaches to education were also interviewed on “Life Matters” in the week starting 15 June.
In one of Robinson’s celebrated lectures, available on the web at TED, he makes a number of points common to all his talks.
“What’s it for, public education? I think you’d have to conclude — if you look at the output, who really succeeds by this … who are the winners — I think you’d have to conclude the whole purpose of public education throughout the world is to produce university professors. Isn’t it?”
“Children starting school this year will be retiring in 2065. Nobody has a clue .. what the world will look like in five years’ time. And yet we’re meant to be educating them for it.
“Every person’s intelligence is distinct.”
Referring to Al Gore’s “Inconvenient Truth” and the environmental crisis, Robinson talks of an education crisis. “Our education system has mined our minds in the way that we strip-mine the earth: for a particular commodity. And for the future, it won’t serve us. We have to rethink the fundamental principles on which we’re educating our children. There was a wonderful quote by Jonas Salk, who said, â€˜If all the insects were to disappear from the earth, within 50 years all life on Earth would end. If all human beings disappeared from the earth, within 50 years all forms of life would flourish.’”
In a more recent talk (at the Royal Society of Arts) Robinson quoted anthropologist Robert Ardrey, “But we were born of risen apes, not fallen angels, and the apes were armed killers besides. And so what shall we wonder at? Our murders and massacres and missiles, and our irreconcilable regiments? Or our treaties whatever they may be worth; our symphonies however seldom they may be played; our peaceful acres, however frequently they may be converted into battlefields; our dreams however rarely they may be accomplished. The miracle of man is not how far he has sunk but how magnificently he has risen. We are known among the stars by our poems, not our corpses.”
In the second part of the interview with ABC TV1′s presenter Kery O’Brien, Robinson said the following: “What I find is that head teachers are critical in schools, like college presidents are essential in universities and in political systems. Leadership is really important from every point of view. I mean, look what’s happening in America at the moment: that shift from the last presidency to the current one. There’s been a total change of mood because people take their cue from the tone of the leadership. And it’s true in every system I know. If you find a school where a head teacher gets it, anything is possible, and I mean that literally.”
In New South Wales, Premier Nathan Rees has announced that the departments of government will be amalgamated into eight “super departments” with the aim of delivering better services for the people of NSW. dollars.
“I am determined to have the best structure to deliver better services for the people of NSW,” Mr Rees said. “These changes are designed to ensure a greater focus on our clients, better integration of public services and to cut internal Government red tape.”
The reforms will, according to Premier Rees, “Improve service delivery, better align a sprawling bureaucracy; and ensure the best value for taxpayers”.
All this ignores the evidence that restructuring achieves little benefit unless a lot of effort is put into explaining t he benefits and justifying them and providing resources to see thought the adjustments which will have to be made. It remains true that what makes the difference is how decisions get made and how leadership is practised. Coordination and â€˜alignment’ require oversighting which carries with it al the problems of restricting innovation and suppressing dissent.
In 30 years governments almost everywhere have failed to understand best practice as seen in the most successful organisations and have merely created an unsustainable level of inaction and confusion.
Numerous articles on this site deal with this.
Remember this quotation, usually (but wrongly) attributed to Petronius: “We trained hard … but every time we were beginning to form up into teams we would be reorganised.Â I was to learn later in life that we tend to meet any new situation by reorganising … and a wonderful method it can be for creating the illusion of progress while producing inefficiency and demoralisation.” (1)
More quotations are to be found here.
(1) According to Wikipedia, the actual author of this piece of wisdom was the American writer Charlton Ogburn Jr. (1911-1998), in an article published in Harper’s Magazine in 1957 which recounted his experiences as a junior officer in the famous WW2 US Army unit known as ‘Merrill’s Marauders’, and the quoted passage referred to his somewhat chaotic early training.
Monday, March 9th, 2009
â€œI think we live in difficult and dangerous times. We’re faced with problems that are both unprecedented and serious caused by human numbers and associated impacts exceeding the globe’s sustainable limits. The problems are not yet insuperable. But to solve them we require a paradoxical mixture; not only the questioning fact-based spirit of the Enlightenment to acknowledge the problems and seek solutions to them, but also people and institutions showing high levels of cooperative behaviour, the evolutionary origins of which may well be associated with inflexible and authoritarian beliefs and structures which are antithetic to such a questioning spirit.â€
(Lord Robert May speaking at the Lowy Institute, 19 November 2007; excerpt from transcript, ABC Science Show, 1 December 2007)
Asked what he thought was the biggest challenge museums faced these days, Thomas P. Campbell, 46, appointed September 9 to be Director and CEO of the Metropolitan Museum of Art in New York to succeed Philippe de Montebello at the beginning of 2009, said without hesitation, â€œA crisis of confidence.â€ In his view museums are often cowed by an audience that they donâ€™t fully understand.
â€œThere is a fear that the collections themselves are not sufficient, that one has to somehow gussy them up with presentations and dumb them down to two-syllable labels that can be read by a 6-year-old,â€ he said. â€œAnd of course you should never underestimate your audience.
â€œIn this age of communication and the Internet our local and international audiences are actually very sophisticated. So the big challenge is how to deliver different levels of information to different audiences.â€
Carol Vogel, â€œFrom Tapestries to Top Job, Ready for Metâ€™s Challengesâ€ New York Times September 11, 2008
There is no inherent reason why we should always trust those in positions of authority.
There are five main points to make about museums in Australia in mid-2008, and the future, where they should be and how they might get there. Five because, as I learned many years ago, most people manage to keep seven, plus or minus two, things in their head at any one time. And if we want to move together it is a good idea if we can do so without having to look up the book all the time to find the right lines to speak.
1, Get the social processes right
2, Be engaged
3, Believe in our own goals
4, Celebrate achievement
5, Form alliances.
And we need to laugh more!
None of these justify the existence of museums or distinguish them as special. Rather they recognise that museums are social organisations, groups of people. That is reflected especially in the first point. Professionalism will flourish in an environment conducive to that flourishing!
â€œMuseums are coalitions of like-minded people in search of a constituency, one that will value the product more than they pay to gain access to it. Like clever politicians, the successful museum person knows the utility of the common agenda, vocabulary and shared values. But they know also that the logic of the market is imperfect and that trusted allies are essential. The real experience will give a competitive advantage but the collections and associated scholarship will secure the future only when influential constituencies value the past and its lessons.â€
Museums are caught up in the financial meltdown like everyone else. However, letâ€™s not forget that over the last several decades a lot of things have gotten in the way of clearly seeing a viable future. I am not talking about museums having lost their way and don’t know whether they are Disneyland or academies.
In times like these â€“ the present financial crisis â€“ the tendency is to see that the main game is ensuring the health of the budget. Unfortunately, that has often been the focus over the last several decades as neoliberal and market-driven philosophies have held sway. Accountability and transparency have been demanded but seldom exercised by those making the most strident demands for it. A fundamental of this philosophy is its inherent short run focus. But most organisations, particularly museums, have to have a long term vision.
The principal contributions of board and executive, indeed of everyone in the organisation, are those which provide an environment conducive to the ongoing goal to acquire, conserve and research material evidence of people and their environment so as to make a difference to public understanding. Excitement and understanding!
The whole point of all this is not to pursue management as an end in itself but to get things working so that the really important stuff, doing what the show is set up to achieve, can be done and done well!
Continue to essay
Sunday, September 14th, 2008
Thomas P. Campbell was named 9 September to succeed Philippe de Montebello as Director and Chief Executive of the Metropolitan Museum of Art in New York. The Met is considered by most people to be the most prestigious art museum in the USA and by some as the most prestigious in the World. Campbell, 46, was born in England and holds a doctorate in art history from the Courtauld Institute in London. He is currently a curator in the Department of European Sculpture and Decorative Arts and has worked at the Met since 1995. A specialist in European tapestry, Thomas Campbell organized “Tapestry in the Renaissance: Art and Magnificence” in 2002 and a sequel last year, “Tapestry in the Baroque: Threads of Splendor.” Campbell will be the ninth director in the Museumâ€™s 138 year history. (Some museums I know have had as many directors in the last 40 years!)
De Montebello announced this last January his intention to retire at the end of 2008.
The numerous reports on this important appointment are of considerable significance in several respects.
Campbell is a distinguished scholar noted for his outstanding exhibitions and wonderful accompanying catalogues, not because he has demonstrated a capacity to raise funds, appoint celebrated architects or because he has a business or management degree.
Campbell was already on the staff of the Museum, as were two of the other contenders for the position. He is relatively young which is also significant: he was appointed because the board wanted someone who would serve for â€œan extended periodâ€.
Campbell represents a field of art scholarship in which the Museum is a world leader, not a field such as modern art which some claim is needed to make the Met â€˜more relevantâ€™.
One report said, â€œThe Met’s trustees clearly see the art museum as an institution that society relies on to preserve, present and interpret its cultural patrimonyâ€¦â€
Reporting on the appointment, New York Times reporter Carol Vogel (â€œCurator at Met Named Director of the Museumâ€, September 9, 2008), says, â€œFor years the museum has been faulted for its spotty 20th- and 21st-century holdings and its halfhearted presentation of younger, contemporary artists. While supporting important acquisitions over the years like Jasper Johnsâ€™s 1955 â€œWhite Flag,â€ Mr. de Montebello made no secret of his lack of interest in cutting-edge art.
â€œIn a phone interview, Mr. de Montebello praised Mr. Campbellâ€™s appointment. â€˜Heâ€™s the most modern of us all,â€™ he said, invoking Met directors. â€˜Weâ€™ve had a Romanist, a medievalist, but he goes up through the Baroque. This is the right choiceâ€™ he added. â€˜Tom is a very distinguished scholar. I would have been surprised had they brought in someone from the outside.â€™ â€
Boards and governments take note!
For further extracts from the reports on Campbellâ€™s appointment in the Wall Street Journal and the New York Times go here.
I have to say I found the photos accompanying several of these articles to speak volumes about this decision and its reception.
Here are two further articles on this important announcement:
Heir Looms by Jed Perl The New Republic September 10, 2008: “The Met’s fresh, daring, and unconventional choice for a new director this week demonstrates that the old guard can still be the avant-garde.”
This article concludes, “I believe there is a real possibility that September 9, 2008, when the Board of Trustees of the Metropolitan Museum of Art chose Thomas Campbell as its next director, will turn out to have been a great day in the history of American museums.”
From Tapestries to Top Job, Ready for Metâ€™s Challenges by Carol Vogel, New York Times September 11, 2008: “For most of his career Thomas P. Campbell has presided over a tiny corner of art history that few people know or care much about: those grand European tapestries that were the obsession of kings and queens, popes and noblemen.”
You can watch a three part curatorial talk “Tapestry in the Baroque: A Curatorial Talk” by Thomas Campbell (on youtube) commencing here.
Monday, September 1st, 2008
Successful organisations support and develop their staff. That is one of the principal roles of executive leadership. Museum executives contemplating reorganisations might contemplate this seriously. So might media companies such as Fairfax (in Australia) and governments offering small wage increases to which the response is negative industrial action.
In much of what I have written over the last several years â€“ indeed since 1986 – I have banged on about how important it is that leaders at executive level focus on developing staff. I have promoted this as one of the principal requirements for success. Many others do the same. But many executives in their day to day work do not! Of course being clear about the goals and rationale of the organisation is another of the half dozen most significant contributors to success. Not efficiency though inefficiency is not appropriate, not rules and regulations though some rules are essential or we would end up in chaos. Not technology though technology allows considerable advances in many areas.
Numerous examples of success flowing from attention to staff are given in the pages of this web site, examples from hospitals to airlines to grocery stores to public broadcasters. And yes, there are examples from museums, though few museum executives or board members pay attention to them. Like other organisations many firms have become besotted with the mantra of market economics and its attendant managerialism.
Many organisations respond to perceived bad times by pulling back, by reducing staff numbers, by looking for ways to trim costs. Instead they should never let up on the important work of creating a climate for innovation and making a difference. One of the fundamentals of managing any entity, from nation states to the local grocery store or local museum is that in bad times some of the money saved during the good times should be used to reduce fluctuations in basic practices like marketing, training and development, product improvement and research and development. Once staff are let go in bad times, rehiring and retraining staff when good times return costs so much that making gains becomes much harder. Most of all, large scale layoffs means loss of corporate memory, of how things get done in the organisation.
The fact is that executives seldom look at other organisations to see why they are succeeding; they seldom accept that it is the way staff are treated that makes a great difference, that gives a competitive advantage. With the increasing number of museum and arts organisations putting people from the business world on their boards, the tendency to cut back in times of financial stress would seem to be increasing.
One of the things that worries me about the financial stresses of the last 12 months is that many firms, including nonprofits, are simply applying blanket approaches to problems, adopting blunt instruments. These don’t just include cutting back on staff numbers, often through natural attrition or voluntary redundancies. Some banks are simply cutting back on lending generally, as if they still have not worked out how to evaluate the credit worthiness of clients seeking loans. The result is likely to be that more powerful clients will continue whilst less powerful but perhaps more worthy clients will not. Some governments approach prospective budget overruns in the same way: cancel the contracts for indoor plants, delay filling of vacancies, and restrict travel. It all ends up causing more problems than it is worth. It is disruptive and, in the long term, destructive of managersâ€™ credibility!
To return to the main focus of this intervention. The latest story I have read which shows how good staff policies are linked to high firm performance is a story about Southwest Airlines in the USA. In a report by Joe Nocera entitled â€œA chat with Herb Kelleherâ€ (International Herald Tribune May 24, 2008) we witness the differences in the annual meetings of two of America’s major airlines. (I have previously reviewed a paper on Southwest and American Airlines by Judy Hoffer Gitell (in California Management Review in 2000 ) which compares the different approaches to management structure and behaviour in the two companies. (Southwest is a point to point operator whilst American Airlines is a spoke (or hub) operator and this does influence their approach, a point brought up in commentary on Southwestâ€™s success.)
Nocera begins by telling us â€œThe Dallas-Fort Worth area is home to two of the country’s biggest airlines, American and Southwest, and for years they’ve both held their annual meetings on the same day. This year was no exception: Wednesday was the big day. He goes on to outline the different responses of staff to the event.
Nocera concludes his article comparing the two airlines by quoting the opinions of some consultants to the reasons for Southwestâ€™s success. One of them pointed out â€œevery time the legacy airlines have run into trouble in the last two decades, Southwest has used the opportunity to steal away market share. Even though its own profits are down this year, it still has plenty of financial powder to make investments its competitors won’t be able to match. And as the old-line airlines try to raise prices to keep pace with fuel price increases, Southwest, with its fuel hedges and productivity advantages, will squeeze them all that much harder. One analyst, Ray Neidl of Calyon Securities, has gone so far as to predict in a report that after the dust settles, Southwest will be, as he put it, “the last man standing.”
Nocera observes, â€œThat may be an overstatement, but it’s not much of one.â€