May 20, 2002	Monday	Rabi-ul-Awwal 7, 1423

Let us begin with a reference to Kenichi Ohmae who in his book ‘The Mind of a Strategist’ says, ‘Great strategies like great works of art or great scientific discoveries call for technical mastery in the working out but originate from insights that are beyond the reach of conscious analysis’.

Now let us attempt the following multiple-choice question (MCQ). Narrative: Time is April 2001, five months before Nine/Eleven. You have just been appointed the managing director of an ailing organization. Its accumulated losses till 1999 stood at 11 billion. In year 2000 it recorded a deficit of Rs5.14 billion. Currently its operations are incurring a loss of Rs20 million per day. The banks have conveyed their discomfort in no uncertain terms and the organization finds it difficult to meet day to day expenses. The employees seem to be unconcerned and indulge in non co-operation, threats of strikes and go-slows in order to get an extra perk here and avoid a legitimate task there. The owners have indicated their readiness to consider reduction in manpower and even closure of the business if worse comes to worst. You call the Chief Operating Officer (COO) and ask him to give you his reading of the situation and come up with recommendations and a business plan in support of his conclusions.

The COO, an old professional at the company advises against closure and produces a plan that promises break-even within six months and a profit of two and a half billion in the next year. His plan is a simple statement of earnings and expenditures backed by some common-sense corrections in compensations for agency and service inputs. It entails no lay-offs, no sale of assets and no complaints against national or international competition. You are amazed at his pluck and simplicity.

Requirement: How would you deal with the situation? Tick the right answer: 1. Circulate the plan and obtain consensus; 2. Accept the plan and ask the COO to perform, 3. Advertise the post in international press.

End of the MCQ.

In real life, the managing director himself, a man of nerves of steel and a past-master in the strategic management chose to go along with the COO. In the event, the outfit despite Nine/Eleven made a profit of Rs300 million in the first six months and added another Rs1,230 million in the first three months of 2002. This did not happen in America - the land of management

miracles. It happened in the land of much humbler people - Pakistan. The organization that wrote history was no other than its national carrier- the Pakistan International Airlines. But how?

It is no gainsaying that without a vision and leadership to match at the top-level such turnaround would just not be possible. At nuts and bolts level however, Edison’s formula remains in the field, 99 per cent perspiration and 1 per cent inspiration. Perspiration is the easier part but how to manage inspiration?

Let us turn to the author of the ‘The Mind of a Strategist’ once again. ‘Strategists... use analysis to stimulate the creative process, to test the ideas.. to work out strategic implications, or to ensure successful execution of high potential ‘wild’ ideas that otherwise never would be implemented properly.’

Are we now ready to explain the miracle at the PIA? Not quite. Vision, leadership and a business plan drawn from an unremitting truthful analysis of operational and financial situation are undoubtedly the ingredients but mixing these to make a powerful potion that will help the prostrate to stand up is the work of art. Now read on.

Even a cursory look at the operational and financial situation of the airline would show weaknesses in the linkages between tasks, rewards and control mechanisms. Such weaknesses in an environment where techniques of drawing benefits on the slightest pretext had been perfected to the state of the art level could and perhaps did drive the airline to borders of bankruptcy.

Add to it the constraints in a public sector organization on making strategic decisions. Public sector organizations have to strive for consensus and set its decisions in a given legal and organizational framework. This limits options of the management that is actually responsible for business results. Furthermore, public sector has to respond to pressures from public, bureaucracy and politicians and has a much shorter timeframe in which to conceive and implement decisions. All this is not conducive to development of strategic thinking and strategic solutions. What you have is a formula for the status quo where a weakness would forever remain a weakness.

There is yet another limitation that is peculiar to airlines. All airlines fly the same planes, ply on the same routes and take the same amount of time to destinations. Then why is one line called better than the other? Why one goes bankrupt while another flourishes? The answer is simple. The employees make the difference. It is the employees who make their planes safe, who make the journey memorable and it is they who provide succour and comfort during distress. Even in its heyday PIA did not boast of its planes, its punctuality or its menu on board, it bragged about the attitude of its employees towards passengers and proclaimed that they were ‘Great people to fly with’ and challenged any one to prove that it was otherwise.

There is downside to it. Great people come at great cost. But when a high manager thinks of economies to keep the airline in business he is entitled to look critically at such costs. In PIA these costs had stopped having relationship with either the earning capacity of the airline or the quality of service to passengers and more than that with the prevalent compensation rates within the country to people of equivalent qualifications and expertise in other fields.

The problem was compounded by the influx of employees appointed purely on political basis, further made worse by the myopia of trade unions and professional bodies that concentrated on benefits to themselves without a concern for the viability of their organisation. The public that was to ultimately foot the bill was amazed at the abundance of free tickets to the employees and their families, free Haj passage even for parents, company- paid round the world tickets and some indefensible entitlements when operating abroad. Similarly substantial airline revenues were lost to agencies, reservation set-ups, Global Distribution System and the rest due to weakness in the linkages.

When asked to economise, run of the mill managers would recommend cutting corners in passenger comfort and security, increase in fares and protection from government, rather than touch even the most unreasonable employee or agency benefits. But then there is a limit up to which arguments in favour of status quo can be extended specially when the chips are down. Sensible employees and sensitive managers both know it. However they keep their counsel to themselves in the interest of harmony and in the hope that things will not come ahead during their watch.

In May 2001, the day for hard decisions had arrived. Essentially the choice was between closing down and reduction of unjustifiable expenses. When the COO chose to recommend against outright closure and the managing director accepted to go along they both picked a very narrow track for movement forward. Their road to salvation lay between high cliffs of sensitivity to personal advantage and gaping voids of insensitivity to the fate of the organisation. The art part of the leadership’s function lay in driving along on this narrow strip through light and darkness, through rain and sleet while working to increase the width of the operational track employing the tools of sense and sensibility only and never for a moment forgetting that permanent turnarounds are based on people and product and in that order.

The PIA is well on the way. Happy landings. Future students of management will study and compare these strategies to the ones employed in other public sector organizations that resorted to indiscriminate sacking of employees and remained in deep trouble.