In a candid conversation with Alan Kohler at an AICD Leaders’ Edge Lunch in Melbourne yesterday (14 November 2017), Qantas Chairman Leigh Clifford AO FAICD opened up on the airline’s decision to support same-sex marriage, the long-term benefits of grounding the fleet and the evolution of the Australian icon’s board.
On selecting Alan Joyce as CEO
Alan was the outstanding candidate. He was seven lengths ahead...
When you're looking for a CEO you're wanting someone who's got the intellectual capability which includes – it's quite a numerate sort of business, you have to be strong on numeracy. And what I saw was his understanding of the airline business. It's a complex business. But what I was impressed with was his manner and his leadership capabilities which had been demonstrated in Jetstar.
There were some tough decisions to be taken in Qantas, and I think Alan was up for it... And I could see that sort of characteristic. And those of you who know him, he's a proud person, but he's quite a humble sort of person. He doesn't have tickets on himself. So I was pretty impressed with him to be honest.
On the Qantas decision to support same-sex marriage
The fact that the CEO is gay is a contributing factor. And Alan [Joyce] felt very strongly about this. And we'd talked about it over a period of time. And I said, well, that's fine. You want to progress that from [your] own point of view, and I can understand that. And we would like to support you. What do the customers, the employees, and the shareholders of Qantas think about this?
Now, instead of sort of saying, tell me, Alan, I went in and spent a lot of time talking to our major shareholders. I also had the investor relations talk to them.
One was a bit ambivalent about whether we ought to do this. But not opposed... A couple were strongly supportive of our stance. And most were acquiescent, if not supportive. That was the shareholders. So we had strong shareholder support for it.
I wanted to make sure that our employees were not being pressured. And I satisfied myself of that with discussions with a range of people in Qantas including a lot of discussions with the Head of Human Resources. And we do an employee survey, and we got their views. Most of their views were a bit like the rest of the community: I'm sick of hearing about this as distinct from opposed to it.
Then, so, what would the customers think? And you don't get direct feedback.. our Net Promoter Score, it has never been higher. And they knew our stance... I had a bit of a contretemps with a church leader, and I got a lot of support for it. I got criticism too. But I got a hell of a lot of support too.
So that concluded. We discussed it at the board. And we wanted to support the CEO, and we just had to satisfy ourselves that it was being done fairly.
On the decision to ground the fleet in 2011
What we concluded was that our cost base was just out of whack with our competition, internationally and domestically… If you recall what was happening, some of the employees, led by the unions, were saying we're going to take stop work action on Thursday. So if there’s going to be a stop work action on Thursday, what do you do, you go and book your flights with the competition? So they've got full planes. We're empty.
Then: Now we're [the employees] calling it off in the interest of the commuting public. Well, of course, you're already with the opposition so it was a slow drip ... or slow roast. I can't remember what they called it.
And we said we're not going to tolerate this. We're going to have to bring things to a head. And we're not getting a realisation that we needed to change our cost base.
Now I remember the discussions. We had numerous discussions. And we had a general meeting, and there was threatening of this action continuing.
I've been involved with the board in numerous discussions and with Alan one-on-one, and we decided to take some action. And we did.
And we've not lost one hour since then. And, frankly, what have we got? We've got the best Net Promoter Scores we ever have. That's our customers. We've got happy employees. Admittedly, in the course of this, or subsequently to it, we took 5,000 out of the business.
Our shareholders are happy. I think I've covered the employees, our customers, and our shareholders are happy. And, frankly, I know it was a bit of a shock to the system, and it didn't go unnoticed because airlines are very high fixed cost businesses. And the assumption is if you do something like this, you will go out the back door. The cost is $190 million, but we thought it was absolutely necessary to bring home to people the necessity for getting our costs in control.
On the evolution of the Qantas Board
You’ve got to refresh your board over time. And what we wanted to make sure was if you look at a matrix of the people and the skills you need, what you need in the airline business, you need some people who understand airlines.
So my objective was to get some airline experience, to get some IT experience, to get some experience with dealing with governments because the airline business has a hell of a lot of negotiation with governments and to understand where governments might be coming from.
And I got criticised a bit when we appointed Todd Samson. And I met Todd… I thought this guy has got a strategic brain, and he brings a totally different perspective. From Rio Tinto [where Clifford was CEO], I didn't have a clue about advertising and marketing to the broader public. You knew all your customers. We'd never take an ad. Well, we did once, but I could never find the person who took it out. And we wanted some different perspectives. And I think we've got that.
And we've got three people who have worked in the airline industry. One has run an airline. One has been involved with the airline leasing business. So we've had quite a mix. And overlaying all that, you've got to get some people with strong financial skills because you need that.