MAS: Mueller’ s successor should have vision, experience and expertise.


April 29, 2016

MAS: Mueller’ s successor should have vision, experience and expertise.

by Scott Ng

http://www.freemalaysiatoday.com

http://www.freemalaysiatoday.com/category/opinion/2016/04/29/dont-make-an-issue-of-mab-chiefs-nationality/

At the end of the day, MAS is a business, and in a business you either prove yourself capable or you don’t deserve the job. This is our national carrier, and it should be a source of national pride, but we should not let national pride in and of itself be the sole determinant of whom we choose to lead it. That person should be someone with vision, experience and expertise.–Scott Ng

 

If there was any doubt about Christoph Mueller’s abilities as a business manager, this was dispelled last February when MAS, in its new incarnation as Malaysia Airlines Berhad, made its first monthly profit in years. His turnaround of our national carrier is indeed nothing short of phenomenal. So it was quite surprising to hear him announce his resignation as CEO, coming as it did less than a year after he assumed the position.

Some people are speculating that it was political pressure that forced the industry-renowned airline revival specialist to depart, though Mueller has denied this. He claims that personal reasons forced his hand, and he would be taking a huge financial hit with his departure.

While no Malaysian would be surprised to hear that rent seekers may have showed up the instant MAS turned a profit, what lies behind Mueller’s departure is his own business. But as conversation turns toward appointing a new head for the national carrier, there is some unsavoury talk about his status as a foreigner, with some saying the company should be run by a Malaysian, meritocracy be damned. Even PKR’s Tian Chua reminded the public that his party had warned about bringing in a foreigner to run MAS, saying, “It is unfair to bring in a foreigner at a critical time and ask him to turn around the national airline. How can he turn around the company if he does not understand Malaysian work politics?”

We do detect a touch of irony in Tian Chua’s remark, particularly where he refers to “Malaysian work politics”. Nevertheless, his complaint about the “unfairness” of hiring a foreigner instead of a Malaysian expresses a sentiment shared by a number of politicians on both sides of the divide.

Certainly, a foreigner would not be expected to be intimately acquainted with our politics, and MAS, like all national arms, is heavily linked to the ruling party. However, it seems rather a trite reason to protest against Mueller’s appointment. It appears that we Malaysians are indeed capable of extending our racism to include hostility to the idea of having someone from outside our ken coming in and telling us how to do our jobs.

The fact is that Mueller (above) was the most competent person willing to come in to help an airline that had lost two aircraft to tragedy in the span of a few months. He was chosen because he merited the role and the challenge, and no amount of hemming and hawing and subtle racism can take that away from him. Even if the announcement of MAS’ February profits seemed like one timed to save his face, he can still take pride in his achievement, considering the sordid state that the company was in after decades of national stewardship.

Look, it’s not about where someone comes from. At the end of the day, MAS is a business, and in a business you either prove yourself capable or you don’t deserve the job. This is our national carrier, and it should be a source of national pride, but we should not let national pride in and of itself be the sole determinant of whom we choose to lead it. That person should be someone with vision, experience and expertise.

 

More on the MAS-Mueller Story


April 29, 2016

More on the MAS-Mueller Story

by Mariam Mokhtar

http://www.freemalaysiatoday.com

MAS in its Glory Days under Saw Huat Lye and Abdul Aziz Rahman

Last February, Malaysian Airlines Berhad (MAB) finally made a profit after years of being in the red. Two months later, Christoph Mueller, the company’s first non- Malaysian CEO, announced that he would leave in September 2016, well before the end of his contract.

What prompted his decision? Why leave after making such brilliant progress? Did anyone believe him when he said he was leaving because of “changing personal circumstances”? Let’s see if we can find a reason for Mueller’s decision.

MAS Today

In 1994, former PM Mahathir Mohamad gave control of the successful national carrier, then known as MAS, to his crony, Tajuddin Ramli. But instead of taking good care of the golden goose, Tajuddin and successive chairmen strangled the company.

Making Tajuddin MAS’ executive chairman and selling the company to him was part of Mahathir’s bumiputera corporate advancement project.

Mahathir should have instead adopted his Singapore counterpart Lee Kuan Yew’s approach to running an airline. In 1972, seven years after Malaysia and Singapore split, the Malaysia-Singapore Airlines had to be disbanded. On the eve of the formation of Singapore Airlines, Lee told the workers’ union that his government would have no compunction in closing the company down if it did not return a profit.

 Mahathir, Najib and MAS Advisor Badawi

Now that MAB is back in the black, we fear that the government and its cronies will start to bleed it again until, perhaps, it’s time for another foreigner to come to its rescue. There are Malaysians capable of doing the job, but only a foreigner can wield the stick without inviting too much scrutiny. After all, MAB has political appointees on its board.

Mueller’s role is to act as a foreign advisor. He also gives the MAB board a semblance of respectability.When Mueller first arrived at MAS, he allegedly asked Khazanah how many middle managers the airline had. Apparently, no one knew. It is alleged too that middle managers were running their own firms and bleeding MAS dry by providing services at inflated prices.

When the first cull was made in MAS, the cronies were the first to go. You might think this was a good move, but a MAS insider alleges that it was actually a plan calculated to give a golden parachute to faithful cronies. The cronies and middle managers received handsome retrenchment terms calculated from the time they were first employed. Some had been there for three decades. They received huge amounts in compensation.

Christoph Mueller, and Ahmad Jauhari Yahya

Aware that MAS could not afford to continue giving away these vast sums of money, the management announced that over the next few years, more people would be sacked or asked to retire early but would not be given the same generous compensation terms. In effect, it was a way of getting rid of workers cheaply.

When MAS changed its name to MAB, the employees who were thankful they had been retained had to accept new terms in their contract, which included the prospect of having their services terminated with only two months’ notice. That was why MAS workers were unhappy. Cronies were rewarded. Genuine, hard-working employees were treated shabbily.

So, did Mueller decide to leave because he has a conscience? Or was he concerned about his reputation? He once turned around the ailing Aer Lingus, but with all that is happening in Malaysia now, he probably realises that the longer he waits, the more he risks messing up his CV.

In the 1960s and 1970s, many proud Malaysians were happy to serve MAS. It was a respected and successful airline. If we were to remove political interference, MAB could soar in the skies once again.

Remembering Lee Kuan Yew: A life devoted entirely to Singapore

Mariam Mokhtar is an FMT columnist.

MAS and the Mueller Story


April 28, 2015

MAS  and the Mueller Story

by P Gunasegaram

http://www.malaysiakini.com

QUESTION TIME | Malaysia Airlines Bhd’s first non-Malaysian CEO Christoph Mueller announced he is stepping down last week barely one year at the top seat for “personal” reasons. Why? And, was he good for Malaysia Airlines?

Khazanah Nasional is now pumping in some RM6 billion into the airline for its recovery plan and in addition to the RM17.4 billion pumped in over the last 14 years, the total spent is soon likely to hit a massive RM23.4 billion. Will it be worth it?

Unfortunately statistics from Malaysia Airlines are insufficient to say how good a job Mueller has done. Where there is a paucity of information there are usually problems – why would anyone hide good news?

Mueller, appointed in March last year, will step down in six months as he serves his notice out – one and a half years before his contract ends. He will be a non-executive director after that. That Mueller can stay on for another six months is clear indication that his “personal circumstances” are not urgent, indicating other reasons why he is stepping down.

There are two sides to turnaround – cutting costs and increasing revenue. It is not only about turning to a profit – it is about sustaining a profit which the airline is capable of given its previous track record.

The easy way to turnaround is to shut down unprofitable operations, sell related assets and keep only profitable ones. That mean smaller profits but forever destroying the ability to rake in larger profits. If you want to turn around the entire operations, it’s a lot more work.

Mueller has overseen the cost-cutting quite well, much of the groundwork having already been laid by Khazanah Nasional before he came aboard. Some 6,000, or about 30 percent of workforce, have already been laid off. Routes have been cut drastically – and Malaysia Airlines is now just a regional airline with Emirates providing international connectivity. That may be a major problem.

At the heart of all airline operations is revenue management – the fine-tuning of ticket prices to ensure  the plane is sufficiently filled at a price which will maximise revenue. This is done for every single route.

If this is done right, the yield or amount received per revenue passenger km (RPK – no of paid seats multiplied by km flown) increases while the load factor (the amount by which seats are filled) are optimised to give maximum revenue.

This excellent article titled ‘What’s wrong with Malaysia Airlines’ gives a full explanation of how yields work for those who want a fuller explanation. The bottom line is if your fares are too low, you can have a serious problem.

From the chart, yields at Malaysia Airlines grew sharply after Idris Jala became CEO. By 2006 MAS’ yields were in tandem with some of its regional peers like Cathay Pacific and Thai Airways. The impact of the increasing yields on MAS’ bottom line was quick, and in 2006 losses were reduced to RM100 million from RM1.3 billion previously.

By the end of 2007, Malaysia Airlines’ yields were the highest among the regional airlines, and its net profit among the highest ever historically with some RM900 million. The onset of the global financial crisis resulted in yields tumbling across the board but Malaysia Airlines’ yield was the slowest to recover in the subsequent years and tumbled sharply post 2012, showing a wide gap with the yields of other airlines – the underlying problem for the airline.

Malaysia Airlines actually had a cost advantage over the other regional airlines in terms of costs per available seat kilometre (ASK – available seats multiplied by kilometres flown, a measure of capacity). Thus yield, not costs, was Malaysia Airlines’ core problem.

Khazanah Nasional figures show that Malaysia Airlines yield, measured this time in terms of revenue per available seat km, or Rask, at 20 sen, has a yield gap of 2.7 sen compared to the average of four other regional airlines – Cathay Pacific with a Rask of 24 sen, SIA (22.9) Garuda (22.5), and Thai (21.5). This means among the five, Malaysia Airlines charges the lowest fares relative to its capacity.

This is important – former CEO Ahmad Jauhari Yahya estimated that one sen in Rask accounts for RM500 million in revenue. That implies that 2.7 sen accounts for RM1,350 million. If Malaysia Airlines’ yield improved to industry average, the airline will be easily profitable. Also, Khazanah Nasional figures show that Malaysia Airlines has costs per ASK or Cask of 21.4 sen, below the peer average of 22.2 sen.

A battle Malaysia Airlines will lose

The problem becomes clear – Malaysia Airlines has the lowest unit cost which is good, but it also has the lowest unit revenue which is bad. All it has to do is to increase the unit revenue and its safe home. That however is a complex process undertaken with complex computer simulations and trial and error.

Has Mueller managed to do that? Unfortunately we don’t know because Malaysia Airlines does not provide the necessary figures. All he has said recently is that the airline turned to profit in February and even then did not say how much and how. What he should have shown is the progression of unit costs and revenues relatives to its peers. Then we would have known exactly what he has achieved and what he has not.

The paucity of information means that Mueller probably has things to hide. Anecdotally, there is evidence to indicate yield management is poor. I checked return ticket prices to Bali from Kuala Lumpur three months out for Malaysia Airlines and AirAsia. Guess what, it is about the same price of around RM850.

If a full-service airline is charging low-cost airline prices there really must be something wrong over its pricing especially for Malaysia Airlines, which has been on Skytrax’s list of 5-star airlines many times but recently seems to have dropped out though.

On top of that, there is the silly decision from this year to suspend serving of alcohol on short flights of three hours and less, even on business class and first class, a short-sighted decision that puts it severely at a disadvantage relative to its peers. Even all the major Middle Eastern airlines serve alcohol with no restrictions.

The way Malaysia Airlines is going, it is becoming a ticketing agent for Emirates internationally with the code-share arrangement it signed while it is shrinking its operations to become a regional airline taking on the likes of successful low-cost AirAsia – a battle it will lose. A full service airline cannot compete on cost with a low-cost airline – Khanazah Nasional figures show a huge 6.3 sen cost gap between AirAsia (14.8 sen Cask) and Malaysia Airlines (21.1 sen).

If Malaysia Airlines’ intention is to give up the international routes in favour of Emirates, to which it effectively becomes a ticketing agent, and fight an unwinnable battle regionally on cost with AirAsia – it might as well close shop and save the country billions of ringgit.

The true test of turnaround is not an indiscriminate lopping of loss makers but a carefully considered attempt to turn into profit a substantial portion of an enterprise’s entire operations. Otherwise, we might as well appoint liquidators.


P GUNASEGARAM laments terribly the extreme erosion of the Malaysia Airlines brand name, a reasonably competent and efficient airline whose service is still among the best in the industry, over the last few years. Contact: t.p.guna@gmail.com.


 

Malaysia Airlines:What Mueller could not do


April 28, 2016

Malaysia Airlines:What Mueller could not do

by Marion Tharsis

http://www.freemalaysiatoday.com

Khazanah Nasional Berhad probably expected too much from Christoph Mueller when it hired him to work his charm on MAS. Despite his glorious past, the turnaround expert probably didn’t count on the work culture and ethics and, most of all, the political environment in a government-linked company.

Mueller made all the obvious moves. He trimmed the work force, removed unwanted suppliers and closed unprofitable routes. What he could not do was remove political control. He probably learned soon enough that it would be futile to continue with his work, with so many hands pulling him from all sides to do their bidding.

Another person may try his or her hand at making MAS profitable again, but the same pressures will reduce the CEO’s position to that of a puppet to be manipulated.

So our once glorious airline is back to square one. The competition is overwhelming. Other carriers, including our very own AirAsia, are always looking into ways to make their companies more profitable through innovation.

We should not expect too much from the incoming CEO. He or she may be prevented from cleaning up certain kinds of mess. For example, he or she might not get a free hand to select a management team that would be capable of taking MAS on the path of good and solid governance.

An airline cannot run effectively merely on superficial changes. It needs an operating system that is smooth, unhampered, cohesive, innovative, customer focused, and competitive. Only then can it stay afloat in a tight and narrow market and play on a field that keeps re-inventing itself.

An airline that is subject to too much political control will keep failing and continue to be an embarrassment.

Marion Tharsis is a  FMT reader.

 

 

MAS Chief Executive Meuller Quits


April 20, 2016

COMMENT: Well, what is surprising about MAS? How many bailouts, restructurings and senior management changes do we need? It is time to say enough is enough with the problems of our national airline.

It is clear that Khazanah with all the financial geniuses and whiz top managers in it cannot get it out of trouble of one sort or another. Even our top investment bankers have  not been able to help. MAS proves the point that if we cannot run a proper taxi and bus service around Kuala Lumpur, operating a national airline is beyond us. It is time close MAS as a GLC and handover the business to the private sector airline. I suggest that Tony Fernandes at Air Asia and his colleagues should be considered.–Din Merican

MAS Chief Executive Meuller  Quits

by Reuters

Malaysia Airlines Berhad (MAB) said today that its Chief Executive Officer and Managing Director Christoph Mueller will leave in September, well before the end of his three-year contract.

The airline said in a statement Mueller was leaving because of “his changing personal circumstances”.

Mueller will serve a six-month notice period to September 2016. He has expressed his intention to the MAB board to remain with the airline as a non-executive director, the carrier said.

“We are very disappointed to lose Christoph as CEO but we fully understand his reasons and respect his need to do this,” MAB chairperson Md Nor Yusof said. MAB has begun a search for a new CEO and is considering both internal and external candidates, it said.

Mueller formally took charge in May last year to lead restructuring efforts at the airline formerly known as Malaysia Airlines Systems (MAS).

Malaysia state investor Khazanah took MAS private in 2014 as part of a RM6 billion restructuring aimed at returning the carrier to profit within three years.

MAS suffered twin disasters in 2014 after flight MH370, which was carrying 239 passengers and crew, disappeared in March.In July 2014 another flight, MH17, was shot down over eastern Ukraine, killing all 298 people on board.- Reuters


Innovation, high performance and diversity


February 23, 2016

Innovation, high performance and diversity :Putting the puzzle pieces together

by Juliet Bourke*

*Ms. Bourke is a Partner in Human Capital at Deloitte. She brings over 20 years’ experience in human capital, management, and law to her work and is an internationally recognised author and speaker on the workplace, cultural change, leadership, and diversity. Ms. Bourke has received a number of awards for her leadership, is a member of Deloitte Australia’s Diversity Council, sits on the Australian School of Business’ HR Advisory Board, and has been listed in the Who’s Who of Australian Women since 2007. Juliet holds Bachelor of Arts, Bachelor of Laws, and Master of Laws degrees. You can follow her @JulietBourke.

 

Juliet Bourke previews insights from her new book “Which two heads are better than one? How diverse teams create breakthrough ideas and make smarter decisions.”

The discovery of DNA, the breaking of the German Enigma Code, the development of the Black-Scholes Options Pricing and Charles Darwin’s theory of natural selection. Seemingly disparate moments in science, war and economics – but there’s a unifying theme.

The DNA scientists came from the diverse disciplines of chemistry, biology and physics. The Enigma Code breakers comprised linguists, mathematicians and scientists. The Black-Scholes model blended economics, mathematics and heat transfer physics. Darwin, a geologist, relied heavily on Gould, an ornithologist, to understand the significance of the birds he had collected from the Galapagos Islands.

These all exemplify the insight Frans Johansson explored in his best- selling book, The Medici Effect: Breakthrough insights at the intersection of ideas, concepts and cultures. Each of these innovations sits at one, or more, of Johansson’s intersections and created a step change in our modern world. Applying the picture puzzle metaphor to Johansson’s insights,  diversity and team performance, the picture’s central image emerges. But the boundaries and background need to be filled in.

We can complete the picture if we can incorporate more of what we now know about the effects of gender and racial diversity on team dynamics, and the value of integrating individual’s different thinking models.

And if we can see the diversity picture more clearly, we can more confidently answer leadership questions such as: What mix of people enhances the performance of boards and executive teams, once capability has been established?

Smart teams: What makes them smart?

Consider this: In one corner, a small team easily completes a set of simple cognitive tasks set by researchers from Carnegie Mellon University and Massachusetts Institute of Technology. The tasks involve “visual puzzles, brainstorming, making collective judgements and negotiating over limited resources”. As soon as the simple tasks are completed the teams move onto solving other more complex tasks. In another corner, a different small team is still struggling with the same simple cognitive tasks. The researchers repeatedly saw this scenario confirmed during their observations of 699 people working in groups of two to five people.

What differentiated the groups? Why was one group ‘smarter’ than another? It wasn’t so much the individual intelligence of each of the group members, although that was important. Professor Woolley and her colleagues found that the smarter teams possessed collective intelligence, and it could be predicted by three factors.  The first factor was, the degree to which team members were socially sensitive, i.e their ability to read social cues such as when someone was perplexed.  The second factor was the degree to which the group practiced speaking in turns or was dominated by a few loud voices. Lastly the third factor was whether the group included women. The inclusion of women was important not because the women were extra smart, or had access to gender specific knowledge, but because women scored slightly better on the social sensitivity test.

This is an intriguing result, and one which helps to complete the picture by putting into place another of the diversity puzzle pieces.

Gender diversity makes a difference to team performance, but not simply because it ensures a team is accessing a broad pool of talent. Woolley’s research alludes to a more subtle value: gender diversity helps improves team dynamics.  This conclusion is supported by the work of other academics.

London Business School Professor Gratton and her colleagues found that feelings of psychological safety and experimentation were optimal in a group with 50:50 gender ratios. They found that the self-confidence of team members was optimal when the gender ratio was 60% women to 40% men. University of Illinois Professor Fairburn found that small groups of men and women were 9% more likely to transfer smiles between each other than all male groups. This is significant because mutual smiling promotes feelings of social bonding. And quite obviously, positive feelings of social connectedness are conducive to people sharing information, which in turn enables more thoughtful decision making.

Racial diversity: another piece of the puzzle

In small clusters of six, stock market traders in Singapore and Texas are deciding whether to buy or sell shares. Their task is to “calculate accurate prices for simulated stocks”  over ten trading periods that each last two minutes. After 2,022 market transactions, Columbia University Professor Levine and his colleagues  observed that some of the clusters only made a few pricing errors and traded accurately about 65% of the time. However, other clusters regularly overpriced, created pricing bubbles and traded accurately only 40% of the time.

What was the difference between the clusters of traders? Once again there’s a diversity connection: the successful Singaporean and Texan traders featured multi-ethnic/racial groups, not homogenous ones. With this the researchers concluded that visible racial diversity triggered stimulated uncertainty, bringing “cognitive friction that enhanced deliberation”.

With this yet another part of the puzzle falls into place, this one relating to racial diversity.

Other researchers support this connection between racial diversity and behaviours such as curiosity and listening. Conversely, those studies also show that visible similarity stimulates feelings of comfort, confidence and assumptions of like-mindedness. Feelings which lead to faster, but ultimately sub-optimal, decision making.

Mental Models

Our own leadership and diversity research reveals a final puzzle piece: Namely individuals tend to over-emphasise one or two ways of solving problems, and to under-weight other relevant approaches. More disturbingly, we found that collectively 75% of senior leaders tend to spend much more time defining the outcomes they want to achieve and debating options (classified as the two dimensions of “outcomes” and “options”), and comparatively less time discussing risks, the implications for staff and customers, the process of implementation, and the evidence to justify and measure a solution (classified as the four dimensions of “risk”, “people”, “process” and “evidence”). Why? Because as individuals they were more likely to think that those two approaches were more important than the other four. And when the group was dominated by leaders with that bias, they formed a voting block which quietened the voices of leaders who approached problem solving in a different way.

Why does it matter? University of Michigan Professors Hong and Page calculated a 30% error rate when problems are solved via the application of one dominant approach – and conversely a 100% accuracy rate when five different approaches are applied.  This is not to suggest that collecting a widely diverse set of approaches is optimal; there is a ceiling. Too many approaches and a group will lose productivity as they spend time understanding another team member’s point of view.  Indeed, Hong and Page calculated that when nine approaches are considered, value starts to erode and the accuracy rating drops to 90%. In sum, Hong and Page defined the optimal number of problem solving approaches as between five and eight.

Our research confirms that of Hong and Page. When we have worked with leadership teams to deliberately attend to six more balanced approaches to problem solving (outcomes, options, people, process, risk and evidence), groups report that by reducing blind spots they were able to develop more robust solutions. Moreover, followers report greater faith in the ultimate solution.

The final word

So where do these puzzle pieces leave us in relation to the bigger picture? Johansson had already given us clarity about the importance of disciplined diversity to team performance. A central image. With these other studies we can lock in more of the indistinct background of racial and gender diversity, and even some of the smaller pieces about individual mental models. Together they form an interesting and realistic picture of how diverse teams deliver superior performance. A picture that is more nuanced than much of what is said about the nature of diversity and the inter-relationship between various elements.

Armed with this knowledge, diversity is no longer a puzzle. It is something leaders can pursue with great clarity, assurance and vigour. And with that, the likelihood that boards and executives will make smart and innovative decisions more consistently. Of course there’s more to be said about how inclusive leaders lead diverse groups to maximise their potential, but getting the who right is foundational.

Juliet Bourke is the author of “Which two heads are better than one? How diverse teams create breakthrough ideas and make smarter decisions” forthcoming February 2016 (Australian Institute of Company Directors).

Footnotes:

[1] Johansson, F., (2004) The Medici Effect: Breakthrough insights at the intersection of ideas, concepts and cultures Harvard Business School Press, Boston.

[2] Woolley, A. W., Chabris, C. F., Pentland, A., Hashmi, N., and Malone, T, W., (2010) Evidence for a collective intelligence factor in the  performance of human groups, Science, Vol 330, pp. 686-688.

[3] Gratton, L., Kelan, E., Voigt, A., and Wolfram H.J., (2007) Innovative potential: Men and women in teams The Lehman Brothers Centre for Women in Business, London Business School. 

[4] Levine, S. S., and Stark, D., (2015) Diversity makes you brighter. Op Ed. New York Times, December 9.

[5] Levine, S. S., Apfelbaum, E. P., Bernard, M., Bartelt, V. L., Zajac, E. J. and Stark, D., (2014) Ethnic diversity deflates price bubbles PNAS Early edition, http://www.pnas.org/content/111/52/18524 retrieved 19 November 2014.

[6] Hong, L, Page, S. E., and Riolo, M., (2012) Incentives, Information and Emergent Collective Accuracy, Managerial and Decision Economics, Vol 33, pp. 323-332.

[7] Bourke, J., and Dillon, B., (2015) Fast forward: Leading in a Brave New World of Diversity (Customers, Ideas and Talent) Future Inc, Chartered Accountants Australia and New Zealand.

http://www2.deloitte.com/au/en/pages/human-capital/articles/creating-high-performing-leadership-teams.html