It should not take a customer upheaval for boards to refresh themselves and identify their knowledge blind spots.
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The December holidays are supposed to be filled with joyfulness, respite, family get-togethers, and even a long-planned vacation. But this was not to be for the thousands booked on the 16,700 flights Southwest Airlines canceled between December 21st and December 29th.
It is hard to fathom the immensity of the chaos caused by this debacle. It is now being reported that it will cost Southwest in the neighborhood of $1 billion and cause them to report a loss instead of a profit for their fourth quarter. This, of course, does not take into account the decimation of reputation, trust, and goodwill, which is harder to measure and more challenging to recoup.
Nevertheless, as Southwest seeks to recover, companies everywhere and the boards of directors that govern them should pay attention and be forewarned. Every company is a technology company. This does not mean that they sell software or servers, but rather in 2023, all companies are heavily reliant on the soundness and resourcefulness of their technology. It can be argued that the strength of a company's technological infrastructure and systems will directly impact its success or the lack thereof.
Typically, the news is filled with stories about cybersecurity problems and data breaches. For Southwest, the problem was more pervasive. Experts said the primary reason for Southwest's mess was its outdated optimization technology, which the airline had outgrown. This software is core to the operations in that it assigns crews to flights and allows crews to make their whereabouts known. It seems that in the current system, crews actually have to call a scheduler on the phone to provide this information. One reports said it took 10 hours to get through on a call.
Southwest has long had a history of underinvesting in technology. It is an analog airline in a hyper-digital world, which begs the question: How can this happen? There are many stories being reported about various departments and unions asking management to improve technology. They pleaded and implored and predicted problems.
Perhaps, however, a different strategy would have been to have technology be a core part of the board of directors’ purview and agenda. As they say, "a fish rots from the head." And it is at the top of the organization that such a strategic focus needs to be. To do this, it would be helpful to have at least one director with a strong background and experience in technology. This director could ask the tough questions, understand the value of the potential investments in technology and urge his or her fellow board members on the critical importance of becoming more digital and keeping up with the developments and opportunities offered by technology.
The Southwest board has 13 members, and according to the 2022 proxy. Only one director has some technology expertise. This is CEO Robert Jordan who was an Executive Vice President of Strategy & Technology from 2006 to 2008. Fifteen years have passed since he held the role, which is many lifetimes in the evolution of technology.
The limitations of Southwest’s board may also be due to the fact that there are numerous long-tenured directors. Two directors have served more than 20 years, and three others have served more than fifteen years. Long tenure is the antithesis of good governance and can engender some complacency and lack of independence. Some age diversity on the Southwest board could also be beneficial. The average age of the board members is 72, and there is only one director younger than 60. Perhaps a digital native or two would provide a differing understanding and perspective about all things technology related?
All the above is not to say the Southwest board members are not accomplished and qualified in their own right. Rather it is to emphasize the importance of technology expertise on all boards. It is also to be pointed out that board refreshment is essential to creativity and transformation. Boards should appreciate the insights and values of their directors and learn from them, but after a decade or so, why not avail themselves of new thinking and fresh perspective? Yes, institutional knowledge and wisdom is important and must be respected, but this should be counterbalanced by a need to be ever-evolving as an organization.
Sure, Southwest will now invest in their technology, but will that be enough to recover their reputation? It should not take an upheaval for boards to refresh themselves and make sure that around that table is at least one technology expert (if not more!).
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