The Malta Independent
Risk in English language phonetically sounds quite like Maltese language `risq`.` The meaning is almost diametrically different.` Yet the transformation of risks into risq (blessings; good returns; well-being) is the challenge facing us, as we seem lost and overcome by the structural risks which are bedevilling the economy.
Party talk these days is about how bad the business situation is and how, export sector apart (this depends on foreign demand and our competitiveness), there is little comfort to believe that anyone is doing anything about it.` The general feeling is that the situation is beyond repair and that only a crisis can galvanise the parties to do what needs to be done, painful as it may be, rather continue shadow boxing each other whilst defensively guarding their patch expecting the others to give ground.
History is replete with examples of how successful change is generally undertaken when crisis hits. Crisis is a great catalyst for change.` The rapid build up in national debt has financed temporary but expensive solutions averting unpleasant crisis, but it has not exactly done us any lasting good. It has complicated the definition of true lasting solutions and has not allowed crisis to melt down the inbuilt resistance to change.
Now that the national debt allows no room for buying more fudged solutions should we resign ourselves to the need to let crisis force change or can we overcome ourselves and embrace change to avert the crisis`
Let me relate current experiences of some well known international business brands in handling crisis.` The 9/11 terrorist attacks spelt disaster to the fortunes of most international airlines. Not only they saw their revenues fall as travellers shied away air travel but the political instability has raised the cost of energy, one of the principal operating costs of any airline.
British Airways and Lufthansa understood the need to undergo immediate restructuring, involving re-inventing a whole new way of doing business generating efficiency through reduced headcounts with various rounds of layoffs.` Costs were brought down to the level of available business until confidence returned to rebuild to the market.` After the initial shock both BA and LH soon returned to profitability and are now well poised to capture market share as air travel volumes get back to normal growth trends.
Compare this to Alitalia. Resistance to change and management lack of determination to manage, together with dirty political compromises for which the Italian system is well-renown, has rendered Alitalia an unbearable financial burden on the State. Furthermore the State has limited ability to continue bailing out Alitalia given the objectives of fair trading in the EU single market which makes operational state aid illegal. Companies like British Airways are eagerly awaiting Alitalia`s collapse to capture their market share.` They have recently rebuffed and fought back measures by Italian aviation authorities meant to compel them to raise their prices on routes to Italy in order to give a chance for inefficient Alitalia to compete with its more efficient and agile competitors.
How does Air Malta compare` My impression is that it lies somewhere in between the BA and Alitalia experience but much closer to the Alitalia pole. Restructuring came in late when many millions had already been lost and it is doubtful whether the restructuring is enough.` I am always very wary of re-structuring which excludes redundancies as a matter of principle. If a job can be done with less why should it be done with more rendering the organisation uncompetitive and threatening the sustainability for employment for all, both the needed and the not needed`
Redundancies are unpleasant and hurtful and should be adopted as a last resort. But redundancies should never be excluded if change is to be successfully delivered. It is then up to the government to build social systems to cushion the frictional pain as people pass from one productive job to another and this has to include both social payments and re-training inputs.
Another current case study of how crisis could lead to successful change is the case of Samsung, the Korean global champion.` In the late 1990`s it was the struggling producer of cheap consumer electronics. The 1997 Asian financial crisis had forced Korea to accept a US$58 billion IMF bailout. It exposed for Samsung the fragility of its corporate philosophy. Samsung responded by slashing one third of its workforce, sold-off unviable businesses including plans to enter the auto sector, slashed its debts and re-focussed on new technology with high level of profitability. Their executive Vice-President was quoted as saying `Left to our own devices we would not have made such a fundamental shift but the IMF crisis forced our hand`
Today the company sits near the top-end of every market sector it competes in with reputation for innovation and creative design.` It overtook competitor Sony in new technologies like flat screen and digital video mobile telephony sets. It is certainly no longer looked down as the producer of cheap consumer electronics but has become a competitor to be reckoned with a brand competing with that of Sony.
Should we await the crisis to force change on us or can we embrace change to avert the crisis`
Risk in English language phonetically sounds quite like Maltese language `risq`.` The meaning is almost diametrically different.` Yet the transformation of risks into risq (blessings; good returns; well-being) is the challenge facing us, as we seem lost and overcome by the structural risks which are bedevilling the economy. Party talk these days is about how bad the business situation is and how, export sector apart (this depends on foreign demand and our competitiveness), there is little comfort to believe that anyone is doing anything about it.` The general feeling is that the situation is beyond repair and that only a crisis can galvanise the parties to do what needs to be done, painful as it may be, rather continue shadow boxing each other whilst defensively guarding their patch expecting the others to give ground.
History is replete with examples of how successful change is generally undertaken when crisis hits. Crisis is a great catalyst for change.` The rapid build up in national debt has financed temporary but expensive solutions averting unpleasant crisis, but it has not exactly done us any lasting good. It has complicated the definition of true lasting solutions and has not allowed crisis to melt down the inbuilt resistance to change.
Now that the national debt allows no room for buying more fudged solutions should we resign ourselves to the need to let crisis force change or can we overcome ourselves and embrace change to avert the crisis`
Let me relate current experiences of some well known international business brands in handling crisis.` The 9/11 terrorist attacks spelt disaster to the fortunes of most international airlines. Not only they saw their revenues fall as travellers shied away air travel but the political instability has raised the cost of energy, one of the principal operating costs of any airline.
British Airways and Lufthansa understood the need to undergo immediate restructuring, involving re-inventing a whole new way of doing business generating efficiency through reduced headcounts with various rounds of layoffs.` Costs were brought down to the level of available business until confidence returned to rebuild to the market.` After the initial shock both BA and LH soon returned to profitability and are now well poised to capture market share as air travel volumes get back to normal growth trends.
Compare this to Alitalia. Resistance to change and management lack of determination to manage, together with dirty political compromises for which the Italian system is well-renown, has rendered Alitalia an unbearable financial burden on the State. Furthermore the State has limited ability to continue bailing out Alitalia given the objectives of fair trading in the EU single market which makes operational state aid illegal. Companies like British Airways are eagerly awaiting Alitalia`s collapse to capture their market share.` They have recently rebuffed and fought back measures by Italian aviation authorities meant to compel them to raise their prices on routes to Italy in order to give a chance for inefficient Alitalia to compete with its more efficient and agile competitors.
How does Air Malta compare` My impression is that it lies somewhere in between the BA and Alitalia experience but much closer to the Alitalia pole. Restructuring came in late when many millions had already been lost and it is doubtful whether the restructuring is enough.` I am always very wary of re-structuring which excludes redundancies as a matter of principle. If a job can be done with less why should it be done with more rendering the organisation uncompetitive and threatening the sustainability for employment for all, both the needed and the not needed`
Redundancies are unpleasant and hurtful and should be adopted as a last resort. But redundancies should never be excluded if change is to be successfully delivered. It is then up to the government to build social systems to cushion the frictional pain as people pass from one productive job to another and this has to include both social payments and re-training inputs.
Another current case study of how crisis could lead to successful change is the case of Samsung, the Korean global champion.` In the late 1990`s it was the struggling producer of cheap consumer electronics. The 1997 Asian financial crisis had forced Korea to accept a US$58 billion IMF bailout. It exposed for Samsung the fragility of its corporate philosophy. Samsung responded by slashing one third of its workforce, sold-off unviable businesses including plans to enter the auto sector, slashed its debts and re-focussed on new technology with high level of profitability. Their executive Vice-President was quoted as saying `Left to our own devices we would not have made such a fundamental shift but the IMF crisis forced our hand`
Today the company sits near the top-end of every market sector it competes in with reputation for innovation and creative design.` It overtook competitor Sony in new technologies like flat screen and digital video mobile telephony sets. It is certainly no longer looked down as the producer of cheap consumer electronics but has become a competitor to be reckoned with a brand competing with that of Sony.
Should we await the crisis to force change on us or can we embrace change to avert the crisis`
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