Every time I read a sentence that begins with “In a world…”, I spontaneously imagine it told in a stereotypical deep movie-trailer voice.
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Uh, I thought everyone did this? 
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The problems of exec pay being solely dependent on shares prices is not exclusive to airlines, unfortunately
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Yeah, that’s kinda sorta the point I settled on at the end.
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One additional factor that might be important is how much leverage the maintenance crew has if their professional judgement is overruled; and how free they are to pass bad news up the chain.
If the techs say that the plane isn’t ready for use; you want the response to be “OK, how long do you need?” rather than “I’m sure we can find someone who is a better team player than you are.”
Even if otherwise impeccable; outsourced contract minions tend to be eminently replaceable(that’s a major part of the charm, after all); which puts them in a poor position to do any objecting; and provides an incentive to inject as much optimism into progress reports as possible. That isn’t so good for safety-critical applications(or for project management in general; but yet another ERP dumpster fire is unlikely to get anyone killed).
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True.
Now, if they would also spend a miniscule fraction of their tax-proof profits on better work conditions at, say, Foxconn…
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That’s because airline pricing works like a slot machine and there’s a chance that one more click will find one that’s $300 cheaper, but eventually we give up and cut our losses. How much of the blame should we share for the fact that the industry prices things all over the board and to the consumer it’s entirely opaque why tickets for the same seat on the same flight might range from $120 to $1200 depending on when you click the button, whether Mercury is aligned with Saturn, or which Queen song is currently playing on a jukebox in Abilene?
It’s set up like gambling because the house always wins. Unlike a casino, the gambler is just trying to make a purchase but has to play the game if they want that ticket.
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Correct. Source - me. Have been working in corporate America for closing in on 33 years. I’ve been through so many mergers and buy outs and CEO’s with only 4 months on their mind, I can’t even remember them all.
I know it’s simplistic, but IMO, one of the biggest issues are when public companies are no longer being run by anyone even remotely connected to the origin of the business. Which, for ones of a certain age, it’s bound to happen. But the further the connection is to the business, there is less connection to the original core values tied to customers, employees and the product/service.
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I had an opportunity to pick up a small mis-managed firm at a good price some years back. One of my younger relatives was a newly-minted Stanford MBA and I thought I’d get his take on what was needed for a turn-around. The first thing he did was look at the payroll figures and declare quite confidently that we needed to axe the highest-earning engineers. Had I actually taken his advice we would have lost 90% of the customer-base and folded within months!
It always struck me how even after I explained why it was a bad idea he remained absolutely adamant that the business needed to be cash-flow positive within one quarter!
Ironically, just a few years later, at the age of 30 was living with his wife and kid in his parents house. Fucking idiot…
Now I understand why they say an MBA means you have your “MasturBAting papers”!
(In fairness most Stanford MBAs I’ve met were quite sharp, he just didn’t happen to be one of them!)
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MBA’s from anywhere but the top schools mean nothing in the job market. I have told a few friends this (who did not listen, figuring the could demand more money at their company). Shocker, they are not making more money, but are deeper in debt. It is so well known it has made it into pop culture:
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Funny how so few people run the numbers.
I did a long time ago and it was obvious even then that short of being rather lucky in the MBA job market, the same amount of money invested conservatively would give a much higher rate of return in the long run.
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Agreed. The real problem is that schools that offer an MBA price it for executives–not executive wanna be’s.
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maybe my initiative to base it on evil will improve things!
Since money is the root of all evil, my brothers in Jesus, it follows that evil is less bad than money.
In fact if you will follow this progression: money -> evil -> sex -> babies you can see that it only takes two steps from evil to produce something good, but it takes 3 steps from money to do it. This shows how by basing your pay (money) on evil, as opposed to your evil on money that you are that much closer to a good outcome.
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The kind of scenario you describe also happens in a more formal way with many distressed companies. Very often the board of such a company will hire a management consulting firm like McKinsey to fix the company. McKinsey immediately sends in its baby MBAs, quarterly-numbers obsession firmly cemented in B-school, who proceed to make exactly the kind of short-sighted decision you describe.
If someone I know tells me that his employer is struggling but that they just hired a high-priced management consulting firm to set things right I advise him to start sending out his CV immediately. Any company that feels it must pay premium prices ($300+/hour) to hear the opinion of a recent B-school graduate is already in serious trouble.
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Of course being a native English speaker did nothing to prevent this maintenance mistake. https://en.wikipedia.org/wiki/British_Airways_Flight_5390
I’d like CEOs in all industries to be offered stock options with significant delays (10 years?) as their major incentive. It’s good for the companies and good for our long term future that they build for that future instead of the short term.
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Here’s what happens in that scenario, or in one that’s similar:
I worked for a major medical device company that had gone through a buy out and a spin off. Very profitable, etc…
The old CEO retired and they brought in another guy from somewhere else. This fella left his previous company prior to being able to get his retention bonus. He negotiated to get that sum in his FIRST YEAR from my company above and beyond what was his regular negotiated compensation and stock options, etc…
In his first year, he made more than the CEO of JP Morgan Chase… : |
*Edit - he then proceeded to massage our company to make it look very attractive for a buy out. I got the fuck out of there and it was bought within a year of when I left.
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What the heck does imersation mean?
I can’t find this word defined anywhere.
Any system can be abused. But right now lots of CEOs tear apart their companies for short term profits. This at least makes it harder.
Is the solution then to pay those mechanics in El Salvador the same salary as union mechanics in St. Louis, or is it to bring the work back to the USA? Or does it make a difference??
And is there any difference between outsourcing airplane maintenance and outsourcing the manufacture of iPhones?
