Författare: Akhil Bhardwaj Associate Professor Strategy and Organisation

All of the 72 deaths caused by the fire at Grenfell Tower in 2017 were avoidable. The same could be said of the 346 people who died in two separate Boeing 737 MAX crashes in 2018 and 2019. And the the 47 people killed in 2013 by a train derailment in Canada, or the 116 children and 28 adults killed in the Aberfan mine disaster in 1966.

These were not unforeseeable events. In all of these cases, and many many more, people knew that things could go wrong, but nothing, or too little, was done.

With Grenfell Tower, for example, it was no secret that the building’s cladding material was a fire hazard. At Boeing, at least some managers and engineers knew that the landing system was a cause for concern. Residents of Aberfan has also expressed concerns to the authorities.

So given that some peope had an inkling that things might go wrong, why did no one take preventative action?

In some instances it may be that people did not fully understand the implications of their decisions. In the case of Boeing, aeroplane technology is complex, and regulatory standards rest on assumptions that are discussed and debated (albeit not in public).

Reasonable people can disagree on whether a particular safety measure is adequate or not. Understanding the link between those standards and potential future events can be difficult, and questions about technology are not easily settled.

As far as the Grenfell Tower fire is concerned, there have been accusations of deceit and a lack of due diligence from various groups.

It is also possible that corporations (in any industry) can fall into a “confidence trap” – a mental bias which means that companies become overly confident if they have avoided disasters in the past after risk-taking. If those risks have not led to any serious issues, the reasoning goes, why change?

Each instance of successful risk-taking causes them to discount new information suggesting they might be wrong. For example, Boeing saved money by eliminating hundreds of quality control inspections, and the company may have just believed it was “too big to fail”.

Accountability

Meanwhile, the public regulators tasked with keeping a check on things, are starved of resources and do not possess the expertise to unpack the implications of every decision that private contractors take.

Some are even expected to raise funds from the industry they regulate, while others have to reduce staff levels.

So what can be done to prevent similar tragedies happening again? Certainly, we cannot rely on self-policing and honesty on the part of private contractors.

Nor can we realistically expect government agencies to monitor everything that private contractors do, or keep up with every industrial and technological development.

Perhaps part of the solution lies in injecting real accountability by introducing executive skin in to the game. Pinning down blame tends to be a notoriously difficult activity.

A Grenfell protest in 2018.
Ajit Wick/Shutterstock

For even when blame is apportioned after disaster strikes, companies rather than executives tend to be held responsible. Boeing is paying hundreds of millions of dollars in fines while the CEO is leaving with tens of millions of dollars in remuneration. The Grenfell inquiry revealed various contractors trying to pass the buck.

As a result, CEOs and senior executives tend not to experience any downsides to poor decision making when it comes to improving safety. But they may have all the upsides of improved financial performance as a consequence of undermining it, whether that’s by using cheap materials or cutting jobs in quality control.

Read more:
Grenfell report: the risk of holding everyone to account is no one actually gets the blame

It seems strange then, that leaders are often severely punished for transgressions in their personal lives, even when the consequences of those actions are far less damaging than plane crashes or burning buildings. Former US president Bill Clinton’s affair which led to his impeachment is perhaps the most famous case.

Closer to home, BP clawed back £1.8 million from sacked CEO Bernard Looney, who left after failing to disclose personal relationships with a colleague to the company’s board after a tip-off from a whistleblower.

Apparently, while such personal “failings” can lead to harsh penalties, the same is not true when the failure leads to the loss of lives. But if financial clawbacks can be imposed for a CEO’s love life, surely a similar consequence could be introduced when it comes to disasters.

Holding executives accountable in this way might just make them reconsider their approach to decision-making, and encourage them to pay more attention to safety instead of just profit. And perhaps that could prevent another tragedy from unfolding. Läs mer…

Australia’s largest airline, Qantas, recently put a deal on its website offering heavily discounted first-class tickets for return flights between Australia and the US. Customers alert and lucky enough to capitalise found themselves paying 85% less than the usual first-class fare, which is upwards of A$20,000 (£10,300).

The problem? The offer was a mistake due to a coding error. The airline soon realised this and took it down. It then decided to switch the roughly 300 customers who had made the purchase to business class at no additional cost (the discounted fare was a fraction of the usual business class prices as well).

Did Qantas make the right decision? It’s important to keep in mind the terms and conditions of the contract would have allowed the airline to cancel these tickets with full impunity). But I think the key question from the perspective of airline decision-makers who want repeat business is: what is a good decision in terms of recompense for their customers?

Consider the comparison with a similar mistake by Cathay Pacific in 2018. When it accidentally sold US$16,000 (£12,100) business-class seats for just US$675, the airline honoured the sales. Singapore Airlines had previously also honoured tickets sold for less than half the correct price.

In contrast, British Airways refused to honour tickets from Dubai to Tel Aviv sold for £1 instead of £200 in 2018 – after United Airlines had cancelled transatlantic tickets sold for less than £50.

These decisions range from being uncompromising in their commitment to a sale, to reneging with no compensation.

In contrast, Qantas seems to have adopted a middle, more pragmatic way. On the one hand, it did renege on the original mistaken offer – customers who bought the tickets will not be flying first class. On the other, these passengers will still fly business class for a fraction of the usual price.

Here’s what you could have won: what first-class passengers can expect on a Qantas plane.

This middle way seems to recognise that an honest mistake was made, with neither party trying to take undue advantage.

As a result, Qantas is better off not having to accommodate 300 passengers in first class. These “premier passengers” are always costly for airlines – business and premium economy tickets are both more profitable.

The lucky passengers are better off too – had Qantas applied the strict terms of the sale contract and cancelled the ticket (with a full refund), they would have lost all advantages of the purchase.

Finally, first-class passengers who have paid the full price are also better off, in as much as the value of their ticket has not been discounted for other first-class travellers. Business-class passengers would be hard pressed to make the same argument, as these tickets are sometimes cheaper than economy fares. Indeed, it is not unusual for a passenger flying economy to be upgraded to business class – but the same cannot be said about first class.

Protecting its reputation

Viewed in this way, Qantas’s decision seems perfectly reasonable and should leave everyone happier – which can translate into repeat business. Moreover, the reasonableness of the decision protects its reputation – and that matters a lot, because repeat customers are very important for airlines (or any business).

Barring a few select routes, air passengers almost always have options which can often include low-cost carriers. So, a very common way airlines try to retain their customers is to use loyalty programmes. The idea is to make it more attractive for passengers to choose that airline because they are rewarded for it – although there has been a recent decline in interest in such schemes from customers.

In theory, the more rewards accrued, the more likely it is that passengers will choose that airline again, because it becomes more expensive for them to go with an alternative. Airline miles, credit card loyalty points and VIP status with the airline can all be redeemed for preferential treatment, including priority boarding, access to lounges and other “goodies”.

Passengers have been offered a business-class seat instead.
First Class Photography/Shutterstock

Typically, such rewards have only been available for non-budget airlines – but recently, low-cost carrier Wizz Air took a leaf out of this playbook by offering its own version via a discount club. These discounts are tiered based on frequency of travel – the programme seeks to foster loyalty by making it more costly to fly with a different airline.

An economist might say that airlines are trying to get passengers to make “asset-specific investments” that make it costly for them to transact elsewhere.

Interestingly, airlines are facing the challenge of engendering loyalty and repeat business at a time when overbooking remains common. This practice, whereby airlines mitigate against no-show passengers by selling up to 50% more tickets than they have seats, most certainly has the opposite effect and puts customers off. Data about the worst-offending airlines is freely available.

The public has also been snubbing low-cost airlines that are notorious for poor customer service. Indeed, the future of some of these airlines is in the balance.

Many years ago, legal scholars such as Stewart Macaulay and economists including Paul Rubin highlighted the importance of relationships for businesses. Understandably, airlines have been trying to buy these relationships by providing rewards that make it more “expensive” for consumers to take their business elsewhere. But Qantas’s decision reminds us there is a different “middle” way, using a combination of fair play and commercial logic. Läs mer…