Tuesday, September 2, 2008

Reputation Is Too Valuable To Risk

Both the management of Qantas and the officials at the Civil Aviation Safety Authority are taking great care to repeatedly tell us that it is still safe to fly Qantas. While the full report from the safety body has not been made public, the announcement that Qantas has been found to be failing to meet its own benchmarks is both alarming, and oddly reassuring. Alarming for the obvious reason that it seems to validate the concerns expressed by many that cost cutting has undermined standards, but reassuring because so far the process of checks and balances seems to be intercepting problems before they become disasters.

The agency has announced that it will follow up this review with a full scale audit of three individual aircraft representing the major aircraft classes in the Qantas fleet. At the same time, CASA has indicated that there are structural issues in the company which hamper internal communications and therefore fall short of best practice. The authorities have carefully avoided referring to cost-cutting, but the message is clear. There are elements within the Qantas corporate culture which have already resulted in a question mark hanging over standards, and could conceivably lead to more serious problems over time.

Clearly, both the Safety Authority and the Airline have a strong interest in not alarming the general public, but the measured tones of the announcement made on Monday should be enough to send a shiver down the spine of the beancounters who have spent years putting profit before all else. Now, even beancounters know that profits will suffer if safety issues destroy the airline’s reputation, but the problem is that beancounters have come to believe that they are better placed to make judgements about operational matters than the people who actually do the work.

That observation doesn’t only apply to Qantas. It is the cancer which has invaded the entire corporate world, and which is evident in such diverse circumstances as the newspaper company that thinks it can publish papers without the unnecessary expense of journalists, right through to the New South Wales government which believes that teachers only deserve a payrise if they can show a productivity gain. It explains why we all have to pay fees to use what should be public infrastructure in order to pay the interest on loans taken out by so called Private Equity Investors, when the reality is that if they actually had equity to invest they wouldn’t need a loan.

The dilemma confronting Qantas of course is that no matter how much the management of the company wants to preserve their safety record, they are competing in a topsy turvy world where other operators are cutting their own costs, and thus lowering the bar. The only solution to that is to recognize the true value of the company’s reputation, which is priceless, and invest accordingly.

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