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So yes, the trade unions are now giving management the chance to reposition their cost structure and try to put the airline on a much sounder footing. Though I think that many have underestimated the brand damage that is occurring to BA from these strikes. I suspect that the trust in the marketplace for British Airways is low, and I also suspect that for many European, regional or international travelers, British Airways must now be on the bottom of their lists. Seat for seat, ticket for ticket, BA is expensive. You’re likely to find that the Eastern airlines (Thai, Cathay Pacific) and Gulf regional airlines (Emirates, Etihad) have a much better service, have nicer flight attendants, more up-to-date seats and beds in business class and first class, all at a much cheaper price.

So yes, Willie Walsh at BA is now being given an opportunity to restructure. Whether he can reclaim the same brand position that BA had in the mid-to-late 90s and early 2000s, I doubt. The ongoing issues with volcanic ash from Iceland don’t help matters. How have all the canceled flights affected airlines? Well, they’ve lost a lot of money in terms of passenger receipts (though presumably they would have had some savings on fuel). The volcano hasn’t led to British Airways’s union or management loosening their position. I can’t see how the union will in any way give up, because should they do so, there is no way back for them, and British Airways will cut costs. I actually think that cost cutting will be inevitable, and the union is trying to do the best it can to preserve jobs.

The shame of all this is that there isn’t a partnership arrangement between the management of British Airways and the trade union, because that’s the only way that things are going to move forward. The airlines, like many other businesses, are in a mature market. Under those circumstances, costs constantly have to be under review. The more partnership arrangements we have, the more forward-looking both management and the trade union can be. Neither the strike nor the ash cloud have done anything to improve the relationship.

Another question to ponder is why flights were grounded for so long. I think there are two answers — one is that there wasn’t the body of knowledge to understand how planes would perform and behave while flying through volcanic ash. The only case studies that existed before were when aircrafts flew over a volcano but not through dispersed ash. I suspect now that the various authorities have learned quite a bit.

However, that doesn’t explain why that learning couldn’t have taken place in less than six days. There were airlines trying to experiment with what it means to fly through volcanic ash, but European authorities wouldn’t allow passenger flights for six long days.

I’m left with an interesting question–what did we learn as a nation about people being stranded and about how people move should there be some sort of crisis when planes can’t fly? On Sky News, there was constant repetition of the prime intelligence committee of the UK, COBRA, meeting periodically during the day. I have to ask the question whether this was just safety concerns for aircraft and their passengers, or was there another concern that if there was a war in the future, we have now learned something else about how to move masses of people in one direction, how to hold masses of people in a particular location, and how to use the armed forces for social purposes. I don’t think that’s the way it started, but I do feel that there was learning about trauma conditions that have nothing to do with this ash cloud.

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Thanks very much.

The Walker report is a lowest common denominator response to addressing corporate governance at UK banks. We need a deep overhaul of the financial system: much better regulation, longer-term thinking, and a break up of the investment banking mindsets which led to the financial crisis.

Giving non-executive directors more powers, scrutinising how they are appointed, or increasing regulation alone will make absolutely no difference.  Non-executive directors already have the powers; it’s the culture of investment banking globally which must change.

Non-executive directors must spend more time understanding the bank on whose board they sit.  They have to understand the culture, get to know the key managers in the bank, and spend more time in the bank appreciating the way business is done there.  Banks also need to spend the resources to ensure their non-executives become familiar with how they operate.

We also need to split retail banking from investment banking.  Retail banks must task themselves to make the funds available to generate wealth in our society but not to become so wealthy themselves.  Investment banking should become a small niche operation, not such a global operation.

Best practice suggests that non-executive directors limit themselves to three to four appointments in their portfolios.  This tends to be the practice in Australia, but it is not the case in the UK or the US, where some of the weakest boards exist.

Banks and other companies knew that the financial crisis would happen even before 2007.  All but three of the over 600 risk managers, bankers, and audit and control officers which we interviewed in our recent Global Risk Survey (to be released 9 Dec) acknowledged this fact. Many reported their misgivings to top managers and board members, yet nothing happened.

Banks must reconsider their approach to risk and adjust their portfolio allocations accordingly.  A longer-term approach to wealth creation and a fundamental change in banking culture must occur.

If others like Gordon Brown or the Walker report blame the global financial system, it is simply a way of absolving themselves of responsibility for what happened.

The first is brand—a strong brand reputation makes people believe that a Mercedes is better than a Ford, and can help a company even if this belief proves not to be true (e.g. if Mercedes outsourced some faulty components and their quality did decline below the perceived quality of Ford).

The other differentiating factor is people. Better led teams will be more motivated; when there’s a single company mentality, especially among middle and senior management, decisions can be made more quickly, and better products can make it to market more quickly and efficiently.

These two critical differentiators, brand and people, can have a huge impact on a company’s bottom line. Because an organisation’s personnel can be controlled more directly than its brand, human resources has become increasingly important in mature markets, particularly during our current recession. In fact I believe that HR has become the most important function in the corporate hierarchy.

There’s a tremendous need for the HR function to influence leadership and the board. They need to decide what sort of philosophy a corporation should have, and how to create a company strategy that solves problems and gets the most out of its people.

Thus it’s quite disappointing that many companies do not consider the HR function to be important, and the HR function’s contraction has accelerated during the recession. Why is HR not rising to the challenge? In many companies, HR became (or always was) too transactional. HR became too focused on getting HR systems (like payroll) and procedures (like training programmes) right, instead of getting involved in a company’s strategic debate and influencing that debate.

It wasn’t a lack of respect for the HR position that lead to its diminished standing, it was more that executives were questioning of real value that HR can provide. They didn’t understand how HR improves the way an organisation can function, and how much the right people are critical to a company’s success.

So what can be done? For one thing, HR professional bodies don’t understand markets well enough, and don’t have confidence to state to top executives that HR is important. The HR profession needs to take a step back and analyze itself, and make sure it fully understands the business it’s a part of, and then it’s up to HR directors to lead the HR function into a more prominent place in the corporation. This won’t be easy. HR people need to be trained as strategic analysts who hold the HR function as their job, not just personnel managers. This has to change.

Sarkozy is the one leader in Europe who has said that if NATO is international, it needs to have international leadership—it can’t solely have a headquarters in the US, and there needs to be a separate headquarters for a European defence force.

Sarkozy has raised an issue that other leaders thus far have been too frightened to raise, and I think he will eventually push for European independence. He has clearly said that Europe’s agenda can’t be driven by the US’s.

Will this lead to more European leaders speaking out against the US’s financial hegemony? And could this mark the rift between the US and Europe gradually growing into a new War of Independence like the Americans had with the British 230 years ago?

It could eventually become a political movement with Europeans forced to take sides, but it would take time to build broad support. Before the War of Independence began in 1775, the whole American leadership didn’t one day decide to break from the British (in fact initially George Washington was forced to leave New York where British support was still strong). It took individual leaders to break from Britain and gain a groundswell of support from the common citizen upward.

If Sarkozy continues to denigrate other nations and leaders, there’s no way he’ll be able to build a willing coalition. Let’s have a closer look at his comments. He said that Germany’s economy is clinging on to France’s. Actually, Germany is exporting more per capita than any other country in the world, followed by China and the US. Further down the list is France, and even further behind them is Britain. Germany is keeping Europe afloat—it wasn’t smart for France to criticize everyone else.

Sarkozy also made a comment about Obama being indecisive. Particularly in light of the most recent British budget and the public reaction it elicited, Obama’s apparent indecisiveness might actually just be the result of the fact that he’s caught between conflicting agendas.

For one thing, he doesn’t have the support of the same constituents as Bush, namely the energy lobby, resources and commodities lobby, and military lobby. These groups do a lot to dictate the shape of the US economy. While Obama has a broad sweep constituent base and popularity among the general public, he needs to be careful about how he deals with these and similar lobbies, and he may just be acting politically and waiting for the right moment to make some important decisions.

Europe needs to have a positive relationship with the US; the relationship needs to be repositioned so that it actually is a relationship of equals (and it might take a united Europe for this to be the case). Creating an equal relationship will be difficult enough to do without Sarkozy calling the US president indecisive.

Sarkozy was brave in going out on a limb saying that Europe needs to be united and needs to make sure its defence capacity is under its own control. In fact, before the War of Independence George Washington was saying the same thing—though he wasn’t upsetting and berating allies, he was building relationships. Sarkozy needs to do the same thing.

The relationship between the US and Europe needs to be readjusted. Sarkzoy’s comments about Europe were clever and courageous, but his ego will need to remain in check and he’ll have to stop maligning potential allies if he wants to start building any serious political backing for this type of movement.

Business schools should clearly promote accountability, responsibility, and ethics—these things are important, and students will need them to be successful. Many schools are already teaching these types of courses, which are often oversubscribed.

However, this is a side issue compared to the real sin of contemporary business schools: their curriculums aren’t keeping up to date.

A business school can’t function unless it is meeting the demands of its market. The focus and offerings of many business schools fundamentally need to change. Schools are offering skills made popular in the 60s and 70s—specific skills rather than business thinking—that create a mentality conducive to producing middle managers. They’re not doing things that would actually be useful to students, like teaching policy design and the differences between government strategy and corporate strategy, or reproducing the types of leadership challenges that students will inevitably face in the marketplace.

In fact, it is possible for business schools to train people to become leaders – in our study of over 2000 boards and 12,500 top teams, Nada and I found that leaders are entirely made. There wasn’t a specific character trait that marked a leader; they just needed to be smart on their feet and aware of the context (and culture) in which they operated (particularly when taking over another company).

We don’t know what fosters a real desire in people to become leaders, whether people are born with it or whether it’s the product of an unhappy childhood or something else. Not everyone wants to become a leader. But we do know that the most important trait of a good leader is that she never stops learning. This was clear from our research.

Business schools can help train people to learn in better, more efficient ways. People process more information today in their daily lives than ever before. Information isn’t as carefully packaged as before, and the ratio of signal to noise is much lower than it was in the past. Yet rather than teaching people how to better interpret information, business schools continue to feed students isolated packed of information, such as marketing, accounting and sales modules. They continue to focus on rote knowledge and business functions, not on training and developing leaders. This is their main problem; their treatment of ethics is a different (and over-hyped) issue entirely.

[Maccoby] makes a distinction between leaders with narcissistic traits and those who have full-blown NPD. He says narcissists can be charismatic forces for change—because of their drive, vision, risk-taking, and even ruthlessness, many corporations turn to narcissists for salvation. But such people can become dangerous because their success fuels their already ample grandiosity and feeds the sense they got there by disdaining the normal rules.

I agree that drive, vision, risk-taking and ruthlessness can be beneficial traits in a leader. As Nada and I noted about constructive narcissists in Essence of Leadership:

Overall, narcissistic leaders take responsibility for their actions and are ready to help others when events do not proceed as planned. The constructive narcissistic leader, as Bill Gates, has a positive impact, as he/she radiates a contagious self-confidence and purposefulness. They balance being flexible with being focused. Their social adeptness helps them promote strong, workable relationships.

Of course it isn’t all positive — narcissists tend to react badly to critical comment on the basis that they can see little wrong in themselves and find it distressing that others do not view them as one of the ‘good guys’. Still, we shouldn’t forget that some character traits related to narcissism can be beneficial for leaders.

He describes the 3 Ws: a leader should describe what performance or behavior she wants the team member to change in non-judgmental language, explain why the behavior is worth discussing and what happens as a result of it, and then leader should wait for the team member’s response–the leader could have been misinformed.

These Ws establish the tone of the conversation and I believe are good advice. They reminded me of a similar positive psychological policy that Linda Lee Davies, Nada and I wrote about in Leading for Success. We said a good leader should practice EASE when dealing with burnt out or stressed employees:

Empathy and Evaluation — Take the time to talk about and tackle the issues and really understand them. This sounds very obvious but many ignore the symptoms thinking that they will just go away.

Approachability, Access and Achievement — Being approachable and helping staff break down issues into more manageable pieces can help them achieve more and boost their confidence.

Structure, Security and Safety — A good support structure with regular meetings and reviews can reinforce employees’ sense of worth and help help them feel secure in admitting their own limitations and stretch them with the safety of a helping hand.

Education – Further training may be helpful in strengthening the employee to face their issues. Designing their development will give them extra ammunition against inevitable pressing and changing circumstances.

A great leader will keep EASE in mind when helping employees facing performance issues.