This year’s theme was “Organisational Restructuring: People Make the Difference”.
In the words of the organisers themselves, “Malta is currently undergoing extensive and radical restructuring. From the heavily over-burdened and allegedly inefficient Public Sector to the numerous micro-enterprises; from the various government agencies to both local and foreign-owned manufacturing concerns; from banking to hospitality – the key words being thrown about are ‘change’, ‘transformation’, ‘adaptation’, ‘restructuring’. This is one of the most important challenges we now face.
“Restructuring of any kind ultimately affects people. It is not just about putting some new technology in place, or about the implementation of new organisational structures. It is mainly about people.
“So how we all handle the question now is crucial: will the people ultimately be the victims of restructuring or do they stand to gain? Are they to be looked at as liabilities in any restructuring programme or can they indeed be seen as the organisation’s or the nation’s strongest asset that will make the change really happen? Which HR policies, practices and strategies need to be put in place in order to ensure that maximum benefit is reaped by both the organisation and the people?”
Among other items discussed, the conference was presented with two local case-studies of companies in transition – Dhalia Group, a private company specialising in real estate, and Malta’s national carrier Air Malta.
The conference was concluded with an interview given by the Minister for Education, Youth and Employment Louis Galea to journalist Godfrey Grima on “The importance being given on a national level to people in the restructuring of Malta”.
The Dhalia Group success story
Franco Valletta, CEO and chairman of the Dhalia Group, explained that when he took over in December 2000, the company had a network of nine branches in Malta and one in Gozo. Each branch was a separate company, in most cases owned 50 per cent by the respective branch manager and 50 per cent by Chris Grech, the owner and co-founder of the Dhalia Group. The other branches were owned by Mr Grech himself.
There were 70 employees and associates, 39 of whom were property consultants (all self-employed). However there was a fragmented structure where each property consultant owed his loyalty to the branch manager, rather than to the company.
As a result, there was a fragmented corporate identity, a high turnover of property consultants and no coherent and focused strategy.
This was leading Dhalia to lose market share, which affected its bottom line.
The property consultant’s ability to sell property was considered to be the sole measure of his/her success.
There were no identified standards of service and an absence of training to standards, an absence of proper recruitment and selection strategy, and a climate of complacency.
At this point, Mr Grech realised that there was the need for change and, as he could not do it himself he gave him a free hand, Mr Valletta said.
The first thing he did was to introduce a mission statement for the company that stated, among other things, that the company would be “working with passion, integrity, trust, mutual respect, consistency in service delivery and sensitivity to (the) customer”. A three-year strategic plan was then prepared.
In phase one of the restructuring plan from July 2001 to June 2004, the different companies were merged.
The existing staff was assessed, with the key assessment criteria being integrity, positive attitudes and competence in that order. As a result of this, Dhalia parted company with 55 per cent of its sales force, which was whittled down from 39 to 18.
Four offices, including the head office, were closed down. The remaining sales force was rotated among the remaining six offices.
The rules of the game were reviewed, going back to basics and unlearning certain inappropriate or unacceptable practices.
The post of operations director was created. The person employed in this job was a role model, an enforcer, and was engaged on a three-year contract specifically to perform that job.
The recruitment of staff and selection strategy were revised, and the relationship between the employee/associate with the new company was formalised.
A drive to professionalise the estate agent’s job was started as well.
Revenue targets and business planning were introduced at the level of the property consultants, and future managers were identified through the implementation of a management programme.
Monthly, quarterly and annual awards were introduced to give recognition to excellent performance and behaviour. A performance review programme was also introduced.
As for training, the intensive induction programme was revamped and an annual training calendar was introduced. Employees and associates were trained to quality service standards. Dhalia currently invests around Lm30,000 to Lm35,000 a year (two per cent of company revenue) in training.
The company also embarked on a re-branding exercise and launched a new website, as well as creating a targeted, focused and integrated approach to marketing. Moreover, it increased its presence in the press through press releases and interviews.
Now Dhalia has 75 sales people on the road. Three new offices were launched, bringing the total to nine, and an overseas marketing network was developed.
Moreover, it created and consolidated its relationships with local and international partner firms.
In Phase 2 of the restructuring plan, which started in July 2004, six new specialist branches and units were opened – letting, commercial, Valletta, Luxury Living by Dhalia, private investor and overseas retirees.
Moreover, a week ago, they signed an agreement to open an office in Brussels.
The company’s quest to pioneer the regulation of the real estate industry continues. Through their partnership with the Malta College for Arts, Science and Technology, a course called “Introduction to Real Estate” was initiated there.
Moreover, through their partnership with an NGO, a home for the homeless will be opened soon.
As a result of this restructuring plan, Dhalia has increased productivity by 200 per cent, its revenues by 250 per cent and its profits before taxation by 400 per cent, said Mr Valletta.
Air Malta’s difficult
transformation
Ernst Funk, chief executive officer of Air Malta, said that unlike Dhalia, he had no success story to report yet. “I am in the middle of re-inventing Air Malta,” he said.
In the case of Air Malta, the process had to be directly driven by the top management of the company, in this case by the CEO himself.
He said his maxim in HR was “I treat people the way I would like to be treated”.
There was a paradigm shift in the European aviation scenario with the creation of the single market, full liberalisation, the introduction of low-cost carriers and no-frills flights, and more direct Internet booking rather than through a travel agent.
Air Malta no longer benefits from any of the protections it used to enjoy before the application of the single market in Malta, and EU carriers can fly to and from Malta as well as set up base here.
Mr Funk said Air Malta has a limited home market (20 per cent of sales), its market abroad is seasonal, low-yield and tourism-based, has restrictive work practices similar to many other State carriers in Europe, and had a top-heavy management structure, with 24 direct subordinates to the CEO and a total of 70 people in the top two management layers.
Air Malta has to switch from a national to an EU carrier in order to face new forms of competition as well as seek opportunities in the single market.
“With the current cost structure we are not generating enough revenue,” he said.
The new Air Malta strategy is to be a scheduled leisure airline with a diversified customer and market focus.
The primary role of the airline will remain the traditional one, that of providing flights to and from Malta.
Its secondary role will be to develop charter and low-cost flights, strengthening its presence in Stansted.
The third role, defined as “opportunistic”, will seek to develop new opportunities arising out of the liberalisation of EU airports. Air Malta is currently operating two airplanes from Stansted without these ever touching base in Malta.
Malta is the butter, but we also need some jam on it,” explained Mr Funk.
Air Malta will be positioned as a safe and reliable airline that cares individually as the Maltese people do.
“The local revenue is not enough to feed our people. State aid is no longer possible and we cannot rely on it anymore. Air Malta must survive as a regional European airline in a competitive environment,” he said.
In order to do this, a new lean organisational structure is needed. The top management has been whittled down from 70 to 29 – one chief executive officer, one chief operating officer, six chief officers, and 21 general managers.
The chief officers have just been appointed, while the general managers will be appointed by the end of the year, Mr Funk said. The chief officers were chosen following an internal and external call for applications, and have a three-year contract which is performance-based.
What will happen to the people who didn’t make it? They will be offered early retirement if they qualify for it. If not, they can apply for the next level down the chain. If they are not chosen in any of the grades, Mr Funk said he reserved the right to offer them a job with the company at his discretion.
The call for general managers was advertised internally, but some of the positions cannot be filled, therefore an external call for applications is to be issued, he said.
The general managers are also being offered a three-year contract which is also related to performance, but to a lesser degree than that of the chief officers.
After all the management positions have been filled, a full HR audit will be run, with a definition of grades, the skills required for each grade, and the number of people required for each grade, announced Mr Funk.
Parallel to the restructuring plan, a rescue plan was agreed to with all four unions representing the employees at Air Malta.
The plan calls for Lm11 million to be saved in three years – 29 per cent from wage decreases, 39 per cent from reduction of operational and overhead costs, and 32 per cent from increases in revenue.
He said he was confident that the target set for revenue increases and overhead reduction would be reached, but was not so convinced about reaching the target set for wage decreases.
Mr Funk said it was not easy to reach agreement with all the four unions, but if the plan succeeds, there will be no forced redundancies.
“If we manage to turn around without forced redundancies, Air Malta will be the only airline in the world which would have managed to do so,” he said.
Mr Funk said monthly meetings were being held with all four unions to review Air Malta’s performance and progress on the turnaround plan.
He also said that he was holding regular meetings with his staff as well as opening a new website (www.amcstaff.com) to keep staff informed on what is happening in the company.
“The key is for all staff to know what is happening and why it is happening,” explained Mr Funk.
Despite the tough job still facing him, he was positive in his outlook.
“I know Air Malta will be successful again in the future,” said Mr Funk. “I am confident that the turnaround can be achieved in three years. We are on the right track but there is a long and painful road ahead of us.”
Asked whether he would have been able to implement this restructuring plan if he had been Maltese, Mr Funk said: “I think I have more freedom than somebody who is Maltese since I do not have any political affiliations.
“I fight with my board and I fight with the ministry because I do not have any political affiliations. I have a mission to do: to save Air Malta and I will manage to do it,” he insisted.
Government: the “bad” employer?
In his interview with Godfrey Grima, Education, Youth and Employment Minister Louis Galea said the way the government operates, which worked well 50 years ago, is now having an negative impact on its management of human resources.
Asked by Mr Grima about the government’s reputation as being a very bad employer, and how it was going to deliver now that it was being forced to do so, Dr Galea said that the country is living in a paradigm shift.
“We need to seize this moment to create a new structural relationship between the government and the people”, he said.
He admitted that the government does not have a good communications strategy, neither with its employees nor with the general public.
Dr Galea said the practice of employing people with the public sector according to their political allegiances was wrong.
“We have erred. There were instances when people were chosen not because of their competence but because of political and partisan interests,” he said.
Mr Grima asked how the government was going to reduce its expenditure, Dr Galea said the government has been trying to reduce its expenditure for some time. However, he said, that not only cutting down on expenses counted, improving the way how one budgets for expenditure is important.
He said that one must aim for “better-quality” expenditure. “Quality comes not with less investment but with more investment. The challenge is to plan your expenditure in a more effective manner – effectively, every single cent has to go where it is needed.”
And it is in this direction that Prime Minister Lawrence Gonzi is headed, said Dr Galea.
Asked by Mr Grima how he sees the future, Dr Galea said the government was seeing “a clear future with many problems”. Next week, he said, the Prime Minister was going to propose some of the solutions.
As for the ill-fated social pact, Dr Galea said the government tried to make a social pact which would have had the least impact on those who are most vulnerable.
However, the government “will not try to please everybody all the time. It is not expecting applauses. There will be people who will suffer,” he said.
The process for the restructuring of the economy will take till 2010, but certain key reforms such as privatisation, welfare, pensions, health and education will have been concluded in two years’ time, said Dr Galea.
Asked by Mr Grima when the government is going to deliver, he said: “I am not a prophet.”
However, Dr Galea said that “it takes two to tango. If the social pact had been agreed upon, then we would have done it faster. The government has the responsibility to move forward and take the necessary decisions.”
Moreover, political parties have not yet managed to discuss certain things and take them off the political agenda. Sometimes the PN failed in this respect, he said.
Asked by Mr Grima when the government was going to reduce taxation, Dr Galea said: “We want greater economic growth. If this growth is sustained, then direct taxation reduction might be looked at.”
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