What Delta can learn on opening day
Baseball's woes tell us something important about business -- that lack of trust is a genuine impediment to success.
NEW YORK (FORTUNE) - "Opening Day" may just be the happiest words in the language.
But for the last generation, the joy of the first day of the baseball season has come with baggage, in the form of labor disputes, economic imbalances, and, more recently, accusations of steroid abuse. These problems go back 25 years -- the first strike was in 1981 -- and they never seem to get better. Why? Because, fundamentally, of a lack of trust between the players and the owners.
In the early 1980s, management flat out lied about its finances; in the late 1980s, the owners colluded to keep down bidding on free agents -- a sin that ended up costing them $280 million. A lockout in 1990; a strike in 1994; more allegations of collusion (probably not true this time) in the early 2000s -- the history is poisonous.
The owners have their own issues with the players, who have been known to demand to renegotiate contracts (although never after a bad season); to show up out of shape; or to make outrageous demands about when, where and how they will play.
Trust creates common ground to negotiate over. Because there is so little trust in baseball, the common ground is as thin as the third base line. And that makes it all but impossible to deal with things that are self-evidently problems. For example, everyone with eyes could see that players were becoming improbably large and powerful. In 1988, Boston Red Sox fans even chorused "Steroids, steroids" at Jose Canseco. This is known as a clue.
So what did the game do? It began a testing regimen starting in 2002 that told players when the examiners were coming and did not release names of violators. In short, only an idiot could get caught, and if he did there was no penalty.
But it could find a way to do no more. The threat of Congressional action, plus the revelations of the egregious Canseco, has since forced the game to move beyond the symbolic.
Let us concede that way, way too many writers have a tiresome habit of making baseball a metaphor for life, or emblematic of the American way, or whatever. Looked at with steely-eyed rigor, baseball is simply a business whose product is a sport. And looked at as a business (albeit an unusual one in that it is a self-regulating monopoly), baseball's woes tell us something important -- that lack of trust is not just awkward, but a genuine impediment to success.
Or even to survival. Delta pilots have come down to earth to protest against another round of cuts to their wages and benefits, picketing at airports and buying billboard space near the company's Atlanta offices. Delta is trying to come out of bankruptcy, and wants another $300 million+ in concessions.
The pilots union accuses the company of "bankruptcy profiteering," and says the fliers are simply trying "to defend a 65-year-old contractual relationship with their company, while Delta executives seek to destroy it." A strike is threatened.
It wasn't that long ago that Delta had such good labor relations that its employees once bought it a plane; now it has come to this. There was no single event that corroded trust to such a state, but one significant one came in 2003, when then-CEO Leo Mullin took a hefty bonus, just as he was asking for givebacks from the workforce, federal aid and a partridge in a pear tree. Is it any wonder that Delta pilots are balking at accepting further pay cuts?.
The point may sound obvious, but it's worth saying: Trust is a corporate asset that should be tended as carefully as the balance sheet. And it has to start from the top. CEOs making eight-figure salaries, for example, might cut back to a mere seven figures when restructuring comes. (It is possible to live on $5 million a year. Really).
Pension plans should be funded before bonuses or dividends are paid. Without a deposit of good faith from which to draw, making it through the rough patches is that much more difficult.