It is sad to witness the Emirates Group’s deterioration accelerating. The knee jerk and badly managed actions which I feared (but hoped would be avoided had Herr Mueller managed to get an early and firm grip on the organisation) are well underway, and probably unstoppable. I am sure that many of you would have seen a video of Herr Mueller’s interview whilst he was CEO at Aer Lingus and been impressed by his genuine understanding of the importance of people in any organisation. I certainly was. I felt that if anyone could turn Emirates around, then he could. But it was a big ask. He probably has the support of over 95% of Emirates’ staff – essential for someone wanting to make wholesale changes - but nobody would have underestimated the challenges presented within the remaining few per cent. When I struggled to get Patrick Naef to see (what I was convinced was) common sense, I often felt that I was ‘pissing into the wind’. Herr Mueller has probably been facing a hurricane over the past six months.
Patrick Naef’s communication (at the end of last month) to EG-IT staff is another example of corporate incompetence and duplicity. He trivialises events by suggesting that they are just part of a review “on the way we work” and avoids revealing the true size of yet another one of his crusades against loyal members of his department. He promises openness, yet proceeds in secrecy – some staff had already been forced out before the note was sent. His communication is so amateurish it would be seen as laughable, if the topic was not so serious. But I guess everyone would have allowed themselves a wry smile at Patrick Naef’s heart-warming promise to those leaving of his “support during the transition”. This is like being introduced, just as you are about to enter theatre for major surgery, to someone who will be on hand at all times to give you “every support” and then discovering that it is the Grim Reaper.
Patrick Naef makes a plea to his staff not to “spread rumours”, but what else can anyone do when he is either telling people nothing, or telling lies? He asserts that rumour spreading, along with making assumptions, will only add “to the uncertainty”. If Patrick Naef was doing his job properly, there would be no uncertainty – he would tell everyone the truth about what is happening and why. If the HR department was doing its job properly, they would insist that Patrick Naef should do his job properly. Patrick Naef also forlornly asks that staff should not engage with those outside the company!
Patrick Naef tells his staff to “ask questions” but EG-IT staff are experienced enough to be very cautious here. Staff want to know exactly how the redundancy selection process works, who exactly has input and what steps are taken to ensure objectivity is ensured, but anyone who asks questions like that will soon find out the real answer. I am sure there will be fair minded people involved in the redundancy process, but such voices are increasingly rare in the Group. When I managed the EG-IT redundancy exercise in 2009, I was challenged by not only the volume and ferocity of attempted inappropriate influences, but also the wide range of directions that they came from. I even had to contend with an apparently specific ‘nomination’ from Gary Chapman. Patrick Naef told me that there was one individual in EG-IT who Gary Chapman wanted to see made redundant. Patrick Naef said that he felt Gary Chapman was seeing this individual as some sort of test as to whether we were doing the job properly, with Gary Chapman even asking for updates along the lines of ‘is xxxx still here?’. That was certainly a first for me though, of course, Patrick Naef may well have not been telling the truth again.
I do hope similar scenes are not being played out across the group, though certainly the level of secrecy seems to be a common theme. It seems that the company has a total aversion to telling staff what is really going on. Even the news that the President of the airline will be leaving his post is being slowly drip fed – the first loud hint was dropped recently at an industry conference thousands of miles away from Dubai. Mature staff would feel much more comfortable if they were treated with respect and told the truth, particularly when they already know it. There are few people in the Emirates Group who do not know what the major problems facing the organisation are. The once successful business strategy of the airline is now out of date and inappropriate in the current environment; the Group’s management structure is bloated, inefficient and bereft of the talent necessary to make the changes required for the organisation to survive; the cost base of the Group is way out of line with what can be afforded.
The first problem is easy to address and will be resolved. The only casualty will be a deflated ego, but the airline has many capable people who can put matters right. Indeed, had some of them been listened to in the past (or, one might say, been braver to speak up) the necessary flexibility could have been built into the business strategy.
The second challenge on the list is not just difficult, it may be impossible to solve. Fundamentally, the problem has been caused by the very structure (and its managers, of course) itself, epitomised by the fact that the two incumbent Presidents have continually claimed it to have been the reason for the apparent success of the Group. (I say ‘apparent’ because, although huge profits have been consistently delivered over the years, no company that finds itself in the mess Emirates is now in can claim success.) Normally, badly managed companies are swallowed up by larger ones which are not badly managed. Then all the poorly performing managers are moved out, problem solved. But there aren’t many companies out there large enough to swallow up Emirates. And, while traditional and man management skills are a rarity in the Emirates Group, the functional (technical and industry) skills of the vast majority of managers is very strong indeed. The company would struggle to operate effectively without them. The Group has made the most fundamental error (which was widely learnt a long time ago elsewhere) of generally appointing managers solely on their functional and operational skills/experience, with no regard to true managerial expertise, nor applying any proper focus on developing managerial acumen. Put simply, no-one in their right mind would appoint a highly skilled surgeon to manage a large hospital.
Still on this problem of management, one has to ask how could the necessary skills be brought in anyway? The airline industry is hardly awash with good organisational managers. A DSVP once said to me “The airline industry would be the best one to work in, if only it wasn’t so badly managed”. And who would be tempted to take up an offer? A stint in Dubai, regardless of industry, has never really been seen as a strong ‘career stepping stone’ for senior people, much more a lucrative lifestyle choice or a means to raise cash for a retirement fund or just a wind down to retirement having taken a redundancy payment from elsewhere. Such individuals hardly fit the ‘mover and shaker’ requirement that Emirates so desperately needs today.
There is also an additional and pressing, but more tactical, issue that needs addressing and that is the diminishing resources (both in terms of raw numbers and experience levels) on the flight deck. It appears that Emirates’ reputation in the industry is now a barrier to effective recruitment. This is in addition to the exodus of many long serving and very experienced crew members, so action is becoming urgent. Natural forces inevitably apply – bad companies lose their best staff and fail to attract comparable replacements. But the problem could easily be resolved by properly engaging with those who have not yet resigned, resolving their valid concerns and sending out a message to everyone that the company has got it wrong in the past and has learnt lessons. A simple message, but we all know how difficult the current management will find it to write! ‘Resolving their valid concerns’ will cost money but, as I have said before, there is more than enough money wasted in the support areas that could be diverted.
Addressing the Group’s affordability crisis should have been a relatively straightforward, albeit very painful, process had it been given the correct focus at the right time. Emirates has made the same mistake as many superficially successful companies have. They have allowed corporate confidence to develop into arrogance and been blind to the real challenges in the world around them. Making large profits can sometimes just be the result of luck or, as in Emirates’ case, the result of an extremely well managed airline operation which made enough money to allow the rest of the Group to inflate itself with unearned compliments and rewards. I fully agree with the old adage of ‘if it isn’t broke, don’t try to fix it’ but that does not mean that any part of your business should escape regular reviews in terms of effectiveness and efficiency. I was bored rigid listening to people telling me how well the company dealt with, and survived, the industry crises prompted by SARS and 9/11, to seeing public statements made that ‘we just do things better’, to hearing Gary Chapman say that when a problem emerges “we will deal with it” (when all he meant was that some people would be fired) and being told that “This is Dubai, we can do what we like”. I agree that it takes a brave leader to lean towards austerity when the champagne appears to be constantly flowing, but leaders are supposed to be brave, that’s part of what they are paid for. Without demands for prudence from above, it is unlikely that initiatives will come from those at the next levels – there is always something more interesting and less painful to do. But, in my experience, the only push to sharpen up support areas to come from Gary Chapman was when there was a genuine cost problem in 2009. And guess what happened? We (in EG-IT at least) met his target with ease, and in no time at all. I can tell you that, had his target been double what it was, we would have achieved that as well. And more, if it had been genuinely necessary. The grossly inflated organisation that currently drags Emirates down is the result of decades of a budget setting process where support areas have been allowed to ride on the back of growth figures from the core business. My first experience of budget setting in EG-IT was interesting. We had a continuous flow of managers presenting demands for large percentage increases (often double digits) in staff numbers, based on complex business formulae involving metrics that had little to do with IT. When I had the audacity to ask for some meaningful justification and also to have some efficiency savings identified, I made myself very unpopular. Just imagine that process, rubber stamped, played out across all support areas and compounded over the past twenty years.
So, as a result of repeatedly singing the same words from the same song sheet, Emirates finds itself in the same position as many others before it – failing, and lacking the necessary acumen to properly manage its way back to some sort of profitability. When the cost base is so out of line with affordability then the only solution is to drastically reduce costs and, in a heavily labour intensive operation as in Emirates, that means huge reductions in staff. Ironically, the management team responsible for the mess is the only one available, so the job inevitably gets done badly. Knowing nothing else, the task is carried out by spreadsheet and, broadly, the wrong people are removed from the wrong areas. As always, the outsourcing industry picks up the scent and hovers around the company like a swarm of flies around a pile of horse dung. So, once the dust settles and it is clear that the situation has worsened, rather than improved (because the wrong people were removed from the wrong areas) the company is then easy prey for the outsourcing industry. Their pitch is always the same and, to a senior manager who is new to this situation and is desperate for a solution, is music to the ears – “Just tell us how much you need to save and we will put together a proposal to fully meet your requirements”. Naturally, the key words are then mumbled (if said at all) – “As long as you give us a totally free hand”.
Once the contracts are inevitably signed (there is often no other choice), that’s it, the company is effectively dead. Of course, it still exists but it is nothing like it was. Very few people actually work directly for it, nobody really cares, every activity at every level is driven by the desire for immediate personal gain and profits are scattered far and wild into tax havens. You know these companies well as you contact their call centres regularly, you visit their medical facilities and you may even use them to bury your relatives. This familiar ‘race to the bottom’ seems inevitable for all companies other than the very small, totally independent outfits run by capable and, importantly, decent people. I did everything that I could to stop such mad carnage in previous companies (I am proud to say that I never outsourced any activity in my career, I even brought some activities back in house) but it is pretty well an unstoppable tidal wave. When I joined Emirates I honestly thought that this was one company that could possibly buck the trend, given its unique position and set up. The cynical company boast of “This is Dubai, we can do what we like” should have been replaced with “This is Dubai, we can do what is right”. Instead, the Presidents of the company have blown it and I wonder what their views are of the scale of the mess. A lot of people are now suffering, and will suffer, as a result of the acute and continued mismanagement of the Emirates Group.
But life goes on and many people reading this will sadly be preparing to move on from Dubai. There is little I can do to help I am afraid, but I would say that many people who have left EG-IT (for whatever reason, some even truly voluntarily!) have told me that they are now so much happier and fulfilled career wise. In the past I have given some people feedback on their CV’s, which I hope was of some value to them, and I would be more than happy to do that for anyone now if required.
For those of you who have been in Emirates for some time you will know the rules by now. It is the company that can do what it likes in Dubai, not you. The next few paragraphs will be of varying relevance to readers, depending on your circumstances. But this first reminder is relevant to all - you will not get your end of service benefits unless you follow the company rules to the letter. The disaster (for the company) of the ‘truth about Emirates’ blog is a reflection of the level of intransigence the company will reach to satisfy the obsession to always be in total control. One conciliatory telephone call would have nipped that blog in the bud, but ‘conciliatory’ never fits with ‘control’. You will want to get every dirham that the company owes you and the only way to ensure that is to dance perfectly to the company’s tune. You also need to get the company service certificate (which should be no problem) and don’t forget to obtain a police clearance certificate well before you leave Dubai. Many authorities now demand these and it is much easier to get one while in Dubai than after you have left. If you have to deal with the company’s accommodation department prepare yourself for some challenges. We found them extremely difficult to deal with, they even arranged for our exit to be blocked until a full examination of our accommodation had been carried out. When we moved to Dubai I was impressed by the levels of security around residential areas, only to soon realise that they were actually in place to deny access to un-favoured contractors. As we departed at midnight on our last night, I discovered that the guards are also employed to lock staff in! But, overall, there are plenty of decent and competent people within the HR department who should make leaving the company as painless as possible.
For those of you lucky enough to have escaped this first round of cuts, you will be aware that it will certainly not be the last and, if you work in EG-IT, you will fully appreciate your own level of vulnerability. One assumes that Patrick Naef will have disposed of just about everyone who was in his ‘black book’ by now, but we all know that his book is never put away and his pencil is always kept sharp. And whilst members of the infamous ‘fan club’ within EG-IT may feel secure, they ought to note that joining the club will have been significantly more difficult than being thrown out of it. Also, one of the golden rules of life – ‘make sure you know how to get out’ – should be pushed up your priority list. Someone who fully understood Emirates and Dubai once told me that he had a detailed escape plan for his family “should something ever happen”. That is a perfect example of prudence, not paranoia. When planning around the financial aspects of a future departure from Dubai I would urge you to be clear on what you can count on as certain and what is vulnerable. Any personal contributions into the provident fund are probably the most secure and best protected. Final salary and end of service benefits (as long as you obey the rules, of course) should be safe, but do not forget that any company which is in financial trouble can find itself struggling to meet its commitments. I am not sure how protected the company’s contributions to the provident fund are and whether any of that could ever be at risk, but certainly do not make the same mistake as I did in thinking that I would get a large chunk of it after five years, and all of it after seven. I had not planned on the company breaking its contract with me just a few months short of the five years and not getting one dirham of it. They were in Dubai and they did what they liked.
Regardless of how secure you feel, I think everyone should recognise that the Group is heading downhill pretty rapidly. Obviously, Emirates will survive but I am unsure how many of its loyal employees will. The company has done nothing to demonstrate it has the capability to put things right and I believe that, even if it did have the capability, it could now be too late. Looking at the outside world, it is very difficult to see anything but threats to Emirates on every horizon. Demand, as well as the appetite, for air travel is down as stability in all regions of the world is worsening. Today my daily newspaper has a double page advertisement for holidays to numerous destinations around the world, but the one to Dubai is the only one discounted, and heavily discounted too. In my opinion, a significant hit on global financial markets is overdue. Yes, stock markets may look healthy at the moment, but is this because of genuine confidence, or because there is virtually nowhere else to invest (e.g. negative bond yields) or because companies are borrowing money so cheaply (virtually free, after tax relief) and buying their own shares? More locally, the competition in Qatar (from where, incidentally, I have always had a solid reader base for some reason!) is making significant inroads into Emirates’ business and there are numerous and realistic threats emerging from other carriers around the globe. The antagonistic goading and belittling of US carriers in the past few years may have been fun at the time, but tangible retribution is now underway. Originally, the US attack on the ME3 was never going to really bite when it was coming from a nation which claimed to have free trade and openness as part of its core approach to business. But the recent presidential election has changed all of that and now the ME3 is fully in focus from the US again, but this time with added venom. The different (for Emirates) action taken recently by the US, compared to the UK, in response to an apparent terrorist threat is a clear indication of things to come. Emirates is now feeling the effect of a ‘this is the US, we will do what we like’ approach.
I believe the next few months and years will see an inevitable chain of events in Emirates. A few rounds of wholesale cuts, as well as progressive company mergers, or ‘consolidation’, or however they want to dress them up. First flydubai, then Etihad – it is very difficult to see how all three will be able to afford separate support functions going forward. And of course, outsourcing. As an aside, in EG-IT do not ever let Patrick Naef tell you that he thinks an outsourcing deal is either good for you or good for the company. He does not, he never has. I can only think of a few individuals I ever worked with who were as strongly opposed to the principle of outsourcing as I was (and still am). Patrick Naef was one of them.