I wonder when a bigger investor is going to call BS! On the entire Qantas strategy?
Two of the abiding principles of business (and warfare) are selection and maintenance of a single aim and concentration of force.
Qantas has spread itself very thinly - Jet Connect, Jetstar New Zealand, Jetstar Asia, Jetstar Vietnam, Jetstar Japan, Jetstar domestic, Qantas link (regional), Qantas (WA mining Charter), Qantas Domestic, Qantas International and the new alleged premium Asian venture, have I left anything out?
To support those segments we have an organisational structure with at least one, and probably Two, additional layers of management - Executive General Managers and Group General Managers.
Apart from the obvious cost of such a structure, there are penalties in terms of corporate agility. Perhaps not so obvious would be the cost penalties associated with sub optimisation as each segment manager tries to maximise their own performance and competes for Board and senior management attention, not to mention scarce corporate investment dollars.
The McKinsey boyz taught me around 1986 that such structures are recipes for disaster because ultimately it is the quality of Board decisions that counts, and it becomes impossible for Boards to quickly switch focus between the needs and strategies of the various business segments. The classic case of course was BHP - which made a disastrous purchase of Magma Copper in the USA, before the consultants were called in to chop it up into more manageable bits by selling off the steel division and hiving off BHP Oil and Gas.
To put that another way, the whole is much less than the sum of its parts. To put that yet another way; anyone who tells you that the structure allows you to "leverage corporate synergies" or equivalent management speak is talking bullshyte.
Of course there are winners in such a structure - middle management has to proliferate in order to keep the various parts of the organisation flying roughly in formation. Qantas legal and supply Departments must be a managers paradise.
For example, how many different aircraft models does the Qantas group employ? How many operations and training staff are required to cater to each? Does Qantas employ type specialists to keep track of the minutiae of getting the best out of each model and plan the maintenance and replacement strategy? Such people are the "connecting tissue" of an airline as well as the repository of corporate knowledge and experience. They are very vulnerable to cost cutters. It was the destruction of these folk at Ansett that consigned that airline to history.
The problems of such structures are also amplified if the Board has certain agendas - such as breaking unions. How is the Group going to discriminate between "good" unions and "bad" unions? How will the organisation deal with a surplus of say, pilots and engineers in one part of the business and a sudden need for the same type of people in another segment? What happens when you are bashing engineers who service the International fleet and you discover that the performance of your mining charter operations is critically dependent on the good offices of half a dozen engineers in W.A? It is often infuriating for managers and staff alike to be saddled with a company wide "corporate policy" that is totally at variance with the needs of an individual operation....then add some corporate "group think" about "legacy airlines" that creates "winners" and "losers" among the staff and watch morale implode.
Anyway, these types of organisations always run in cycles. Consultants love building them up, then coming along Ten years later and dismantling them. One day its "leveraging corporate wide economies through centralisation" then the next its "Agility through decentralized decision making".
Last edited by Sunfish; 12th Sep 2011 at 16:13.