Much Obliged

“Much obliged” is a term that historically refers to a statement made by someone receiving a favor from someone else. It infers that the first person is now obliged to return the favor at some future point in time.

I’m going to bend that phrase a bit by interpreting the “obliged” as an obligation (or promise) made by one person (or entity) to another. And the more numerous the obligations the more appropriate to use the word “much”.

The public and private sectors alike have made promises to those they employ to ensure an uninterrupted effort in providing a particular service. You know the drill: pay, benefits, and so on. And a big part of the benefits package was the pension that all the worker bees could plan on receiving after dedicating a career to the Golden Goose.

It has now become almost ordinary to read that some company or municipality has chosen to abrogate those pension promises through the bankruptcy courts or, at least, the threat of such legal action. And you know this drill, too: “We can no longer guarantee lifetime payments to an ever expanding number of retirees when our workforce has remained stagnant or decreased.”

Economically, it makes sense. But an obligation is an obligation, isn’t it? Apparently not and the biggest source of angst is the fact that both sides (labor and management/politico) knew that it was unsustainable when they signed it! And they also knew that they would both be lounging on a beach somewhere when the house of cards came crashing down. And, in an effort to make up the shortfall, those charged with keeping the pension funds reasonably secure chose to invest in riskier opportunities that resulted in even greater losses when the bubble burst.

“Well, it serves labor right, you know. I’m not a union person, anyway.” Yet another opinion voiced all too often today. But our system is rife with similar obligations: how about Social Security? Or Medicare? These, too, are unsustainable as more retirees look to a shrinking workforce to fund the promises made in the past.

No, we all have a seat on this boat regardless of our age, income, or social standing. But what to do about it? Well, the popular thing is the aforementioned bankruptcy option for corporate America while city, state, and federal legislators seek to redefine and readjust obligations that they no longer care to honor. Bankruptcy, too, is in their bag of options and we have seen cities waltz down the aisle to that tune, too. And that’s bad for a number of reasons.

First of all, many folks have planned their lives around the promise of a set amount of dollars coming in every month. They’re not greedy nor selfish. They simply operated in good faith and expect that the quid will appear for their quo. Now, at the last possible moment, that revenue stream may be curtailed if not eliminated altogether.

In addition, and perhaps more important, a message is sent that past promises can be ignored when times change. “Kings X...and my fingers were crossed, to boot!” How can we expect the next generation to have any grasp of integrity or ethics when they watch their elders routinely disregard pacts that were made in good faith, but ignored when it became expedient? And we wonder why the kids today seem to have no respect for established institutions or figures of authority.

While pension obligations and such should still be adhered to, the fact remains that the systems under which they exist must be altered. Forward thinking leaders in the private sector (both labor and management) have recognized this and adopted new agreements that provide for limits on pensions while offering self-funding options. Different? Yes. Not as lucrative? Perhaps. But, if given enough advance notice, manageable. So we grandfather everyone within, say, 10 years of retirement and then slowly reduce the guarantees available to the younger workers. Graduated through the ranks of the workforce, significant cost reductions can be achieved without cutting the legs out from underneath anyone.

The public sector, unfortunately, relies on political will (i.e. leadership) for such changes to the various pension provisions and social programs. Such leadership has been in short supply of late and the political polarization we currently see gives little hope for progress.

Answer this for me: in any given stalemate with your spouse or your kids or your boss has a mutually agreeable solution ever been found in one of the extreme views held by one participant? I doubt it. No, the answer generally lies somewhere in the middle. No one can declare outright victory, but no one is left holding only shitty end of the stick, either. Compromise, in other words.

Maybe instead of voting for far left or far right candidates, we should seek out those residing more to the middle of the road. They are the ones most prone to find a reasonably amicable solution to the financial challenges faced by every citizen. We’ve all got a dog in this fight, folks. Let’s remember the myriad of obligations while finding ways to adapt to tomorrow’s reality. Unless, of course, you’re not interested in progress. Then just stand in your corner, holding your breath, and giving the guy in the opposite corner the finger. That should solve our problems now, shouldn’t it?

A Corporate Christmas Newsletter

I’ve made no secret of my aversion to Christmas newsletters that invariably show up within perfectly acceptable holiday cards. I’ve wondered of late, though, why corporate Christmas newsletters are rare, if not entirely unheard of. Perhaps it is due to the current state of corporate mentality and, as evidence, I submit an entirely fictitious holiday newsletter from American Airlines to its employees. Why American? Well, I’m quite familiar with the corporation and its recent foray into bankruptcy makes for a logical candidate. Unfortunately, I can’t help but think that most, if not all, corporate executives have similar viewpoints.

Dear Fellow Employees,

It’s that time of year again and there is much to cover as 2011 proved to be quite eventful. We started off with a new greeting (We’re Glad You’re Here) and couldn’t help but think that this new verbiage would make a big difference in our bottom line. 

And, boy, did we grow! Not in the traditional way by hiring and expanding from within: that would take too long. So, just like adoptive parents, we entered into agreements with Japan Air Lines, WestJet, Qantas, AirBerlin, and Cathay Pacific while expanding our ongoing relationships with British Airways, Iberia, and, of course, our friends at American Eagle. And Presto! We’ve grown by leaps and bounds without adding one single employee to our close-knit family here at AA.

We also handed out awards for improved customer service like they were going out of style. It’s hard to imagine how stations could improve what with a well paid, highly motivated group of employees ever confident in the course we’ve chosen to guarantee continued success. Nevertheless, many found a way to “do more with less” and that’s what family is all about. We look forward to the day when they’ll be able to do everything with nothing.

There were some challenges, too: bad weather and resulting cancellations, lawsuits with Sabre and other online ticket agencies looking for ways to poison the special, lucrative association we enjoy with would-be passengers and, of course, continued quarterly losses. Jeez, you’d think that we were trying to lose money! It’s not our fault, you know. High fuel prices, competition, and other unforeseen events conspired against our tried and true formula for profitability (maintained over the past decade or so).

No family is without black sheep and there is always a relative or two that seems to upset the apple cart whenever possible. And some of our pilots filled that role nicely when many chose to retire in September and October. We can’t think of any good reason why they would choose to leave the AA family behind, but leave they did. And they asked for their retirement in one large lump sum as if we couldn’t be trusted to dole out their pensions in a monthly annuity. Such mistrust threatens the core of any family and we are no different.

So, with only a paltry sum $4.5 billion in our account, we sought the help of a family counselor. Yes, some would call him a bankruptcy judge, but what good is served with such harsh words? We can now turn this challenge into an opportunity as we realize that we can all share good times with fellow employees much longer than ever envisioned. And we’re happy to announce that some of our family will be able to spend more time with their families as we readjust our workforce.

Better yet, just last week we gained FAA approval to use iPads in the cockpit! This will allow our pilots to remove much weight from their kit bags and ease the stress and strain on their backs. This will come in quite handy as medical benefits are reduced. We’re also looking at removing transportation from employee parking lots to the terminals. What better way to stay in shape than a brisk walk before settling in for a rewarding day’s work? And who doesn’t enjoy a stroll at the end of a day?

Much like every corporate family, we lost several of our top executives just as the holiday season got under way. We wish them luck as they’ve chosen to pursue other opportunities. Now some may say that is fancy talk for axed, canned, fired, or ousted but these leaders deserve much better than such negative words after giving their all. Heck, had we not paid them handsomely and lavished them with benefits and perks we would have been unable to retain them for this long. Who knows what perils we would have faced without their stewardship. Their replacements have been chosen from within the AA family because we feel that no one knows us better than those raised from within. Kind of like inbreeding, if you will, but who better to trust?

As you can see, we’ve come far this year and look forward to another year with everyone in the AA family. Some family members from the Senior Executive branch will be enjoying the holiday at our London “getaway apartment”. Alas, it may be our final Christmas there as some claim it is an unaffordable luxury. We hope, though, that we can convince our creditors that such environs lead to creative solutions that we regularly employ in our day-to-day decisions to maximize success. After all, where would you be without us?

Happy Holidays!

Rewarding Failure

This past week my previous long-time employer, American Airlines, filed for Chapter 11 bankruptcy. My decision to retire four months early now seems extremely propitious as I am in receipt of a lump sum representing 100% of what was expected. My colleagues still on the property will not be so fortunate. Time will tell, but it is safe to assume that a good portion will be passed off to the PBGC which will then dilute it further. Pay rates and work rules will also be “adjusted” to the detriment of the employees. I’m not going to take up your time lamenting about the unfairness of it all. Rather, I’m asking that you take a moment with me in an attempt to identify the true miscreants and the punishment for their deeds.

Every business venture has two competing forces: management and labor. Management’s task is to create a business plan that will reward all parties and labor’s role is to implement that plan. Needless to say, management wants to control every last penny of profit while labor seeks to raise the pay and benefits of the workforce. The means to this end, labor-wise, is sometimes through organizing under the banner of a particular labor union. Other businesses find less confrontational ways to handle the dichotomy of expectations. Neither is perfect and either scenario fits into our exploration.

No employee is interested in seeking to derail an employer and have them go out of business. Where is the sense in that? Corporate policies may erode morale to the point where customer satisfaction suffers and impacts the bottom line, but such cases usually result from short-sighted management techniques. So why, then, do businesses fail?

Well, some do because they run out of cash. Both sides suffer when the company dissolves and all are in search of a new position. Others, though, such as AMR (American’s parent) are still in possession of large sums of ready cash. They apparently grow tired of negotiating with seemingly recalcitrant employee groups and paying off loans they’ve received. And they find it easier to take the bankruptcy path that offers much less resistance.

In the courts, contracts can be set aside, pensions reduced or eliminated altogether, and outstanding bills can be renegotiated to the tune of something less than 100 cents on the dollar. Pretty neat, huh? Well, not if you’re a worker bee. But if you’re on the management team, all is well. Your pay and benefits remain largely untouched while you “re-organize” your floundering enterprise.

But who put the business in jeopardy in the first place? If the employees are charged with carrying out a battle plan that fails, does it not fall to the field generals when looking for someone to blame? I’d say so, yet day after day, in filing after filing, executive teams remain whole while shifting draconian measures to the backs of those least responsible for the train leaving the tracks.

Gerard Arpey, American’s CEO until one day before the filing, was heralded as saint-like because he took no severance package as he retired. I guess it’s easier to claim the moral high ground when you take a position with an investment group (headed up by a Continental ex-exec) the following day. And the rest of the nabobs from the Board of Directors on down remain in place despite the fact that they were unable to preserve the viability of what was once the largest airline in the country. Is there any reason to believe that they will suddenly discover the error of their previous ways and succeed where they’ve just failed? I doubt it and so should you.

Does that mean AA is headed for extinction? Not by a long shot. Many companies succeed not because of their leadership, but in spite of it. My only suggestion is that in these cases, the blame should start at the top and trickle down rather than the other way around. Where is the incentive to succeed when failure carries no penalty and, in many cases, its own rewards in future compensation?

It’s safe to say that another bankruptcy will occur in the not-to-distant future. And it’s equally safe to say that those surrendering a larger share will be the ones least responsible for the failure. And that, folks, just ain’t right.