The science of ‘disaster recovery planning’, together with the related art of ‘crisis PR’, is a core discipline of 21st-century management, both in the corporate world and for agencies of the state. Business schools teach it; consultants sell it; hospitals role play it; the Cabinet Office runs a college in Yorkshire devoted to it; every company board worth its salt has a risk committee demanding bulletproof evidence of it. So a disaster on the scale of the computer breakdown that caused much distress to British Airways passengers last weekend is not just unusual: it is completely bizarre, and nothing said by BA chief executive Alex Cruz has come close to explaining it.
So far we’ve been told that a ‘power surge’ zapped the airline’s data centre near Heathrow, though two local energy supply firms, SSE and UK Power Networks, deny any such surge came from them. BA’s back-up system then failed to activate, though we haven’t been told why or where it is located, or whether (as might be expected in a business so dependent on complex IT) there was a second back-up, in a third location, that also failed. GMB union officials weighed in to accuse the airline of making so many experienced managers redundant — their roles having been outsourced to India — that there was no one at HQ on a bank holiday weekend who knew how to handle the outage. But Cruz dismissed that while also swatting rumours of a cyber attack.
Meanwhile, BA’s ‘crisis PR’ was as unconvincing as its messaging to stranded passengers was incompetent; that aspect of the episode will become a classic business-school case study all of its own. We’ve been reminded that comparable if less comprehensive IT mishaps have befallen Delta and United Airlines in the US, as well as major businesses over here such as RBS and Capita, the outsourcing giant that provides IT services for many UK local authorities. Yes, accidents happen, even accidents upon accidents, but in BA’s case the only conclusion is that we’ve just witnessed a world-scale management cock-up in a business that is a flag-carrier for British brand values around the world. When Cruz says, ‘We will make sure it doesn’t happen again’, why should anyone believe him?
His disaster plan, assuming that he had one, failed from the moment smoke started pouring out of his servers last Saturday morning. He also says it wouldn’t help at this stage for him to step down. Oh really? If I were his boss — that’s Willie Walsh, the tough little Irishman who runs BA’s parent International Airlines Group — I would identify the entire chain of command who were on duty last weekend and demote them to customer service duties in Terminal 5.
No schadenfreude, please
Speaking of tough little Irishmen, Michael O’Leary of Ryanair couldn’t resist a Twitter dig at BA’s plight just ahead of his announcement of record profits of €1.3 billion for the year to March — accompanied by a promise of further reductions in fares. Airline chiefs everywhere would be wise to devote this week to testing their own back-up systems rather than indulging in schadenfreude, and that applies to O’Leary more than most, since he runs 1,800 fast-turnaround short-haul flights every day while never quite shedding the IT cheapskate reputation he acquired long ago when he hired two Dublin students to design Ryanair’s first website.
But I’ll offer this personal observation: I’ve taken half a dozen of his flights this year and couldn’t find fault, whereas the last time I approached a BA check-in desk, the systems were down and they were writing the boarding passes by hand.
Rearguard settlement
The stubborn rump of the RBS Shareholder Action Group took the advice I offered last week, and accepted the bank’s settlement offer of 82p per share to avert a High Court hearing of their case for compensation in respect of the 2008 rights issue — in which they claimed they had been misled by Fred Goodwin and his boardroomcolleagues. Reports before the weekend said several thousand ‘diehard’ investors (including many ex-RBS staff) were holding out for a trial in the hope of seeing Goodwin squirm, but by last Monday the group’s majority threshold had been passed for agreement to the settlement.
So having paid up to 230p for each of their RBS rights share in 2008, they will eventually recoup about 50p after legal costs — slightly more for their troubles than the bulk of investors, who accepted an earlier offer of 43p before costs. The rearguard’s tactic of suing Goodwin and other former directors as well as RBS itself paid off, provoking a higher offer from the bank to avoid the greater reputational damage of a long, expensive, headline-making courtroom drama. As for the bank, the £800 million it set aside to get out of this thicket is small change compared to the $12 billion it’s likely to be fined by the US authorities for mis-selling mortgage-backed securities during the Goodwin era.
And as for mega-pensioned Fred, he was recently spotted, very much the retired bank manager, on an East Lothian golf course. I’m guessing his worst hazard isn’t bunkers but fellow players wanting to give him a piece of their mind — or forgetting to shout ‘Fore!’ when they drive straight at him.
Football scandal
I’ve been reading the annual report of the Football Foundation, which ‘directs £30 million every year into grassroots sport’, funded by the Premier League, the Football Association and the government. Sounds decent, doesn’t it? Except that the 20 Premier League clubs have aggregate wage bills of £2 billion — the average player earns £47,000 a week — and annual revenues of £4 billion, and could surely afford, and ought to feel morally obliged, to give vastly more. The finances of elite football are utterly grotesque: a scandal waiting to break that will one day upstage even Fred and his pension.
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