The Best Defense is a Good Offense . . .

Since when did bankruptcy become a strategy?

Declaring Chapter 11 bankruptcy in order to solve poor business performance seems to be a growing trend, especially among the US airlines.  The recent news release of the Chapter 11 filing by American Airlines is only the most recent in a long string of such “performance improvement” actions by airlines over the past two decades.

“Reorganization under Chapter 11 of the U.S. Bankruptcy Code is a form of bankruptcy. It isn’t “liquidation”, but it’s not a joke, either — it’s the last legal step before liquidation. If they weren’t in danger of going out of business, they wouldn’t be in bankruptcy. In order to petition the bankruptcy court for protection from its creditors and reorganization under Chapter 11 of the Bankruptcy Code, a company must first certify to the court that it is insolvent: its debts exceed its assets. A bankruptcy filing protects the bankrupt company against its creditors (including people who have paid for tickets for future travel). It doesn’t “protect” passengers or customers.” – source from http://hasbrouck.org/articles/bankruptcy.html

Somehow, I can’t quite get the logic that walking away from your debts and obligations, borrowing more money and filing a “reorganisation plan” with the courts is an effective business strategy.  To my way of thinking is it just postponing the hard decisions that it takes to run a successful business enterprise.

Change is not a destination, just as hope is not a strategy.
-Rudy Giuliani

At one point in the mid-2000’s, 4 of the top 7 US Airlines were under Chapter 11 protection.  US Airways has been through Chapter 11 twice (so far).  Delta, Northwest and United all have used this “strategy” at one point, and now American Airlines.  Aloha Airlines used this technique once between 2004 and 2006, re-emerged, only to file again in 2008 and finally cease operations altogether.

Obviously, this is a technique favoured by the bean-counters and accounting types who tend to run airlines these days.  To the contrary, Continental Airlines, $2.5B in default in 1994 hired a hands-on former mechanic and pilot from Boeing, Gordon Bethune, to lead a stunning turnaround between 1994 and 1995 that put Continental at the top of customer satisfaction pools and miles ahead in industry awards for the next 15 years.

The best defense is a good offense!

Several years ago I read a great little book, Play to Win, published by personal performance guru Larry Wilson and his son, Hersch Wilson.  In essence this book lays out three strategies for success in life, and business:

  • Playing to Win
  • Playing Not to Lose
  • Playing to Lose

Obviously, no one who takes life or business seriously would opt for the Play to Lose strategy.  That’s suicide.  But the differences in mindset and resulting behaviour between Playing to Win and Playing Not to Lose are massive.

The difference really boils down to the courage to make the hard decisions in the face of fear and uncertainty plus the courage to trust in yourself, your staff, your employees and your customers to be able to find a path through adversity to success.  Playing to Win requires the wisdom to understand that while we cannot control all the events that happen in our lives, we have a great deal of choice in how we respond to them.  And choosing to Play to Win delivers a far better outcome than Playing Not to Lose.

Playing Not to Lose is really an approach based on fear and lack of belief in self and others.  Airline leadership tends to routinely believe that their unions aren’t interested in developing win-win relationships with management and customers.  Airline leadership seems to be driven by the fear that without tight controls and punitive rules, employees and customers will take undue advantage of the situation.

In my experience it is nearly impossible to run a sustainable, thriving business without faith and belief in the capabilities and positive intentions of people.  Playing to Win is about choosing the difficult path to growth instead of the safe path of fear.  Without courage, faith and belief, the only sensible strategy is Playing Not to Lose.

I play to win, whether during practice or a real game. And I will not let anything get in the way of me and my competitive enthusiasm to win.   Michael Jordan

Tight Lines . . .

John R Childress

E | john@johnrchildress.com      T | +44 207 584 3774      M | +44 7833 493 999

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
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2 Responses to The Best Defense is a Good Offense . . .

  1. Pingback: Leadership Can’t Be Taught . . . | John R Childress . . . rethinking leadership

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