Profit, or loss?

Many threats can be turned into opportunities.  And Emirates certainly has a threat to deal with.  The situation has been deteriorating for some time, but a tipping point was perhaps reached last year.  The company motto, promulgated by the HR department, was simple – ‘If you don’t like it, you can leave’.  In EG-IT this was supplemented by Patrick Naef’s approach of ‘If I don’t like you, you will leave’.  Now people will choose to leave if nothing positive is done.

But this major threat could not come at a better time.  The price of oil has fallen dramatically, averaging around a third below its expected level throughout the second half of the financial year.  Fuel costs represent about 40% of the airline’s operating costs so there should be an additional profit of around 6% this year.  Even without the reduction in fuel price, Emirates would be making a healthy profit, so this is truly a large windfall.  As always, the discussion about what to do with the profits will already be underway and I hope there is a strong focus on the problem of staff morale.

Of course, an obvious answer is to be appropriately generous with the bonus but, though I said earlier that opportunities often evolve from threats, it can also work the other way.  A single and large pay out to staff will be very well received but, unless people genuinely believe that things are going to change, a healthy bonus could be the perfect trigger for people to move on.

Personally, I do not like company profit share schemes.  In principle they make sense, encouraging everyone to share the common goal and benefit from achieving it, but too often corporate results are influenced, even blitzed, by external factors.  This year is a perfect example, as a large slice of the airline’s profit will be a direct result of the unexpected fall in oil price – should staff be rewarded for that?  In other years, when targets were not met (due to a more hostile external environment) and everyone worked their socks off to keep the company’s head above water, staff received no reward.  I agree that you cannot divorce company performance from reward, but remuneration policies have to make sense to day to day activities.  Also, a big pay out usually results in a more challenging target (which is less likely to be achieved) being set for the following year, increasing attrition rates.

Another thing I do not like about profit share schemes, annual bonuses, etc. is that they do not last long in terms of staff motivation.  It’s great hearing about it and even better spending the money, but it doesn’t take long to be forgotten.  And, in truth, expectations are rarely met.  

It has to be remembered that the Emirates approach does not reflect a true profit share scheme.  I would call it ‘a discretionary bonus, paid in the event of the profit target being exceeded and, to some degree, related to the size of the excess profit’.  Understandably, there is a fair degree of cynicism about the scheme.  A true profit share scheme is one that is clearly defined and properly audited.  Of course, companies across the globe have flexibility in how they treat certain aspects of expenditure and income thus allowing them to influence their declared margins, but this is normally exercised with the tax authorities in mind!  However, the traditional and lame ‘fobbing off’ messages – e.g. “bad weather in France”, “unexpected fall in the value of the Rouble”, “the price of fish in Japan”, etc. – are normally reserved for subduing shareholders’ anger about a genuinely poor company performance.

Annual bonuses can also be divisive.  There is a general acceptance that those with larger salaries will receive more cash, but I feel uncomfortable with a system that increases the percentages of bonuses for senior managers.  The argument that the more senior someone is, the more impact s/he can have on the company’s performance, does not wash with me.  That has already been accounted for in the shape of a larger salary and an already larger bonus, without the need for multipliers.     

Low salaries (for some) and high staff turnover has been a strategy that has worked well for Emirates.  One cannot fault the basic principle – if you pay enough below what a job is worth and the cost of recruiting does not fill that gap, you appear to make a saving.  But this approach reflects narrow thinking.  I worked for a company that paid in the upper decile of industry salary ranges and were thus able to recruit and retain the best staff.  The efficiencies realised just from having the best staff more than paid for that policy.  There were many other benefits too, including a much slimmer HR department which could focus on the important task of developing careers to the advantage of individuals and the company, rather than wasting time on endless hiring and firing activities.

You generally get what you pay for in life.  This certainly applies to staff and ‘pay’ is not limited to money, it embraces the whole spectrum of how people are treated.  There are clearly people who ‘want something for nothing’ in this world but there is no need to recruit those, or retain them if their attitudes change.  The vast majority of people want to work hard and make valuable contributions and this mindset is significantly strengthened if they are treated with respect and honestly, and paid what they are worth in the market.

Companies, even large ones, should not treat staff as temporary, unless there is a clear business requirement (e.g. one off event) to do so.  If a company treats its staff as permanent and applies a long term approach to the relationship, that attitude will be returned.  Obviously, many of us may not join an organisation with the intention to stay until retirement, but why shouldn’t a company make that assumption when it recruits people?  What could be the downside?

So what is Emirates going to do?  Attention on a number of issues is long overdue and, with a healthy amount of money to play with, there is now the perfect opportunity to act decisively.

- The staff survey needs to published, messages acknowledged and specific actions identified (and delivered, of course).

- The Group is in need of a major restructure.  A lot of the operational areas may work well, but support functions should be pulled together and thoroughly reviewed.  Opportunities for large efficiency gains will appear endless if a detailed review of activities, including a rigorous assessment of the value they add (or don’t add!), is carried out.  I hear of claims from staff such as “I have nothing to do”, “What I do is pointless”, etc.

- HR itself needs more than a review.  It has to position itself to do the job it was always supposed to do, but rarely did.  At least it appears the problem has been acknowledged, but real action is required.

- Management levels need a careful examination.  There cannot be many people in the group (other than those occupying pointless management jobs) who believe that Emirates does not have too many layers of management.  With fewer levels, reporting will have to be more focused and accountability increased.  I have witnessed an entire team of VP’s decline to make any decisions at a meeting, saying “we will have to wait for the boss” (who had been delayed).  And I know of another VP who is described by his team members as “the world’s most efficient email forwarding system”.  I could go on.

- I should not have to write this – treat everyone (all levels, up or down the organisation) with respect and maintain dignity, openness and honesty in all proceedings.

- Phase out the profit share scheme, but make an immediate and unambiguous commitment to increase the salaries of those in real need.  By ‘in real need’ I mean those who are adding genuine value to the day to day operation and to the bottom line of the business.  This will require a new remuneration policy, one that is much more considered than the ‘as little as we can get away with’ approach used to date and one that has staff retention as its cornerstone.  This ongoing commitment will be easily funded by the savings generated by the restructures described above.  The potential for savings should not be underestimated.

 

I suspect that this update may irritate a few people, but I am only trying to help.  I did write to Sir Tim Clark a while ago offering a few suggestions, even help, but he did not respond.  I gave up writing to Gary Chapman a long time ago because it seems he has no interest in my views.  I do not understand why.  If anyone has a problem with me doing this, I would ask them – “how would you fix the mess?”.

About this blog - 11

I seem to have a wider audience – welcome!  It may be a good time to restate the objectives of this blog.

Primarily, I wanted to inform people why I suddenly disappeared from my role in the Emirates Group.  Not only did my boss, Patrick Naef, lie in order to have me sacked, I was told that he continued to fuel misinformation about me after I was barred from company premises and denied contact with colleagues.  So I needed to put the record straight.

Naturally I wanted to protect my name and this was my prime concern.  I have no problem with anyone criticising me, nor relaying things that I have done or said, but such things must be true.  I also wanted everyone to know my story, so they would know what to expect from the people who are in charge of IT and HR in the Emirates Group.  Then current employees could make their own choices about the level of trust they put in the organisation and prospective candidates could decide if they should to pursue their interest in the company.

I am certainly not seeking revenge on the company or any individuals.  When I was fired, a friend gave me good advice – “be angry, but don’t be bitter”.  I bear no grudge against any of those who threw me out, but I am angry about the way they conducted the exercise.  And I am also angry that the Emirates Group broke its contract with me.

My blog has veered ‘off topic’ at times in response to reader requests and I have done this in the hope that someone will actually do something to improve things for everyone.  I have no interest in how the Emirates Group fares, well or badly, but I do care about my colleagues.  I also care very much about waste and there is far too much of this – money, time and careers – in EG-IT and, it appears, across the group.  So, reflecting recent events and comments, I will stray again for a while.  But my intention remains and that is to complete my own story, then finish.  I had considered that, once complete, I might then make the blog easier for others to find, but I think that has already happened!

My recent comments concerning Mercator Asia were originally written with the EG-IT audience in mind; other readers may not be clear where this debacle fitted in with Mercator itself and, of course EG-IT.  So I will probably provide some further information about this area in a subsequent update.  In ‘No winner, plenty of losers’ I wanted to give a flavour of the wider impact of such a failed initiative.  Because senior managers deal with big numbers on a regular basis, many fall into the trap of underestimating the wider impact when things go wrong.  Of course, I could be described as being somewhat churlish in highlighting a failure, as companies have to take risks in order to grow their businesses and some initiatives are more successful than others.  But I want people to understand that the Mercator Asia debacle was not an isolated incident in terms of waste in EG-IT.  And it was not a simple case of a venture that did not generate the expected benefits, this was an avoidable tragedy.  The project was ill conceived and totally mismanaged.  Those in EG-IT who had the skills and experience to assess the proposal and also those who would be subsequently responsible for making the venture a success, were all excluded from the evaluation.   And the impact has not been limited to a significant financial loss, many individuals’ careers have been negatively impacted too.

Also, given the problems the Emirates Group has at the moment with staff morale, I will offer my thoughts on the options ahead.  On one hand, there is an urgent need for a thorough and well considered response to both the staff survey and the outpouring of discontent but, on the other hand, the company will shortly have a perfect opportunity to do something positive.  Many organisations experience staff morale because business is bad and find themselves constrained in terms of solutions (as money is often required).  But Emirates is not only built on a very sound financial footing, it is currently enjoying a windfall in terms of low oil prices.  This could be the most profitable year that the group has ever seen and the announcement of the resulting profit share will be a perfect opportunity for Emirates to make a tangible statement to staff.  I will publish my thoughts on this matter on 1 April 2015.

Comments on this blog are moderated and I will only publish material if I am certain about the identity of the author and s/he is willing to be identified.  I will not publish any negative comments from readers about anyone, other than about me.  All my statements about people and events come with my assurance that I am both able and willing to defend those comments, if necessary in a court of law.  Anyone mentioned by name in this blog has always had, and continues to have, my guarantee of their right to respond.  No-one mentioned has exercised that right, which is confirmation that everything that I have stated they said, did and didn’t do is true.

If you leave contact details in a comment, I will reply.  If you prefer to email me, I can be reached at tomb80 at hotmail dot co dot uk.

No winner, many losers.

I cannot declare a winner of the recent ‘Ashes to ashes’ quiz.  The first two questions were easy – few could have got those wrong – but the last one (how much money was wasted on the Mercator Asia debacle?) drew various estimates, but I do not know the answer myself.  I doubt if anyone ever will.  But certainly losses on this disastrous adventure make the money spent on Project Phoenix look like a drop in the ocean. 

 

Seeing the many comments on the web about the way staff are treated in the Emirates group, including a focus on salaries, led me to do a rough calculation.  I believe that if the money wasted on Mercator Asia had been diverted to EKAS budgets, all ground staff could have enjoyed a 20% pay increase for every one of the four years of Mercator Asia operation.  And this is only looking at the cost of one failed initiative – try to imagine how much money has been poured into the IT drain over the last nine years!

The most odious of problems facing the Emirates group is the bullying of staff by managers, but perhaps the biggest issue is that front line staff, critical to the business, are overworked and underpaid.  But it would not be difficult to take a broom to the numerous support areas (not just EG-IT) and divert the proceeds to much better use.

 

The various blogs and forums will be giving staff across the group hope for change but, thus far, the company’s response has been typical - fire, gag, penalise, etc. – and totally ineffective.  Recruitment will be impacted and the public may wonder about Emirates’ ability to manage what they perceive as a complex and risky daily operation, if it cannot deal with Dragana’s blog.

Emirates’ approach to people - a macho management style which most companies discarded in the 1980’s, coupled with a lack of legal governance and a seemingly endless supply of staff whose views, interests and welfare appear to be of little concern to the company before, during and after employment – has now been widely exposed.

 

Fundamental changes are essential, but some people are still thrashing around in the depths of the denial stage of the change curve.  At least there has been recognition that there is a major problem, but real progress will not be possible until some time is spent looking in the mirror.  It will take true leadership to get the ball of change rolling and then, when it comes, the really difficult challenges will emerge.

Perhaps the biggest task will be to convince staff that the company is serious about change.  To illustrate this point, what will Patrick Naef need to do to persuade you to trust him?

 

And will anyone know what to do?  Adopting a policy of being open and honest will be a major start.  But, in my experience, the further people rise up the corporate ladder, the greater difficulty they have with the concept of being open and honest.  The line between what staff should be told (i.e. most things) and what they shouldn’t be (i.e. commercially or personally confidential information) is well understood by the majority of staff, but creates paranoia nearer the top.

And who will actually lead this essential change project?  Assuming someone who can be trusted is found, will they have the necessary skills?  Turning a corporate culture around is not a job for a bunch of external consultants, a genuine understanding of the issues is a prerequisite.  And he/she will also need the resolve to stand up to some pretty powerful figures, who I doubt will ever be genuinely convinced that a different way will be the right way.

However, the cause is far from lost because the company is blessed with tens of thousands of loyal, competent and hard working staff.  They want success for the company as much as they want it for themselves and I am sure they will be tolerant during what will be a lengthy process.  And for every bad manager in the company, there are numerous decent and capable managers.  They just need to be given more of a voice.

But delay is counterproductive.  As time moves on more evidence of the way Emirates treats its staff will emerge on the blogs and forums, more staff will resign, more careers will be wasted and more money will be poured down the drains of Dubai.

Letters to the Chairman and Chief Executive Emirates Airline and Group

It is probably an appropriate time to publish a couple of emails I sent to the Chairman of the Emirates Group.  Given recent events, I would not want anyone to think that bullying by management in the Emirates Group is a new problem.    

This one was sent on 2 June 2013 and was copied to others, including the (then) Vice Chairman and also to the President of Emirates Airline.  I have no idea if the email managed to evade the filters put in place by Patrick Naef, but I do know that I did not receive a response.  As I make clear in the email itself, my communication was triggered solely by requests from Emirates Group IT staff.  It is reproduced here as it was sent . . .

Sir

I have been asked by beleaguered staff in your Information Technology department to write to you about their plight.

There have been numerous scandals around the world in recent times.  Interest rate manipulation, whole scale bribery, drug use at the highest levels in sport and telephone hacking are just a few examples.

People are naturally asking how on earth could things like this happen without the knowledge of those at the top.  I understand the question but, having worked in Dnata for over four years, realise that it can happen.  Even in a large, and seemingly highly accountable organisation, it is relatively easy for just a few individuals, perhaps just one, to keep the lid on practices which hundreds of staff feel are not only abhorrent, but also unethical.  The process is simple - mis-information upwards, fear downwards.

I used to believe that Patrick Naef had managed to keep all the horrors of the workings of his department away from Gary Chapman, with the help of the pliant Nigel Hopkins.  But I have since given Gary Chapman enough information (I understand others have too) and I now feel that he should be aware of what has happened and is currently happening.  But are you?

I also feel that, due to Gary Chapman’s actions or inactions, he must be happy with the way staff are treated and how business is conducted (both internally and externally).  I would be surprised if you would be.

I have a folder of messages from your staff complaining about all aspects of life in your Information Technology department. I appreciate that you are very busy, so I will quote (almost) verbatim from just three of them to provide a flavour.

 
“These guys who screw up millions of dollars of projects in the name of IT are poured with undeserved promotions.”

"Bullying by management is part of everyday life."

“We think A and B took kick backs in Mercator Asia along with that C fellow.” 

The only change I have made to these quotations is the removal of names from the last one.  If the allegation is untrue - and one certainly hopes it is - I would not wish to libel those individuals.  But I think you should be aware that A and B are very senior people in the Dnata organisation.  I think it is shocking that staff have such views of their leaders.

I urge you to ask someone (who is totally independent) to take a very close look at this area.  In such a controlled (by fear) environment obtaining the truth is very difficult, but I believe essential.  If there is anything I can do to help I would be happy to do so.  I will not pretend to have much allegiance to the Emirates Group but I do still very much care for my colleagues, both in the department and across the Group.  They all deserve much better.

Patrick Naef is a master at controlling communication and my emails receive a high level of censorship.  I have to use different addresses in an attempt to bypass his controls, but they do not always work.  I have therefore copied this email to other senior members in the Group and I would ask them to ensure that this is properly delivered.  I would therefore respectfully request that you ask someone to acknowledge receipt of this email. 

Please do not allow Gary Chapman to continue to dismiss me as ‘just a disgruntled employee’ - I doubt if he even believes that himself now.  Please be aware that I have written to you because your staff asked me to and I have no doubt that you have their welfare at heart.

Kind regards

This one was sent on 25 December 2010 (the day before the Emirates Group broke its contract with me) and was addressed solely to the Chairman.  Again, it is reproduced as it was sent.  I did not receive a response.

Sir

With all due respect, I would urge you to have a truly independent audit carried out on Emirates Group IT (EG-IT) department.  A focus on how I was forced out of my post without any opportunity to defend myself would reveal some alarming practices.

All companies need the ‘hearts and minds’ of its staff but you do not have this in EG-IT.  Patrick Naef runs EG-IT by fear and my removal has further strengthened his approach.  I was the only member of the EG-IT Executive Team who would challenge Patrick and the result is there for all to see.  This is why an audit must be truly independent, as staff do not trust any internal departments (HR etc.) enough to give them confidence to speak out.

I had four wonderful years with Emirates, I just wish it could have been more.  I am convinced that both the company and my family would have benefited had that been the case.

I wish you and your company well.

Regards