Virgin Blues phantom board

Multi-tasking staff and an ability to think outside the envelope are just a couple of the aspects of Virgin Blue which impress Selwyn Parker

Sir Richard Branson doesn't run Virgin Blue – but the power of his maverick influence is apparent everywhere. It's in the upstart airline's almost crusading spirit, in its concern for the aura of the Virgin brand, in chief executive Brett Godfrey's flair for publicity and indeed in the fact that he's running the airline at all, in its informality (hardly anybody wears a tie, just like Branson), in its relaxed view of procedure, but above all in its phantom board. The phantom board is pure, left-field Branson. Although Virgin Blue has a board of its own, it doesn't seem to take itself too seriously. It didn't even meet last month -"there was just too much happening", observes the CEO. But then it hardly needs to, at least not formally. Godfrey is in constant touch with the directors and they all know what's going on. Still, he thought they would probably get together shortly. But the phantom board will certainly meet as usual this month. It consists of seven or more business leaders – no names, no pack drill. Their numbers vary but they include accountants, politicians, suppliers, airport executives, lawyers. All of them have a vested interest in seeing the airline survive and flourish. In effect, it's a stakeholders group.

But it's a group that operates in an unusual way. It is not especially concerned with the nuts and bolts of governance and its members do not give normally give advice within their own area of expertise, as you would expect. Instead the members of this quasi-board are encouraged to work outside their particular professional box. "The lawyers might talk about marketing, for instance," explains Godfrey. "The concept is to help give me advice because I'm inexperienced in running companies. We talk about improving relations with Canberra or how to improve sales, anything like that. It's a chance for them to help run an airline." Thus the arrangement helps embed the discount airline into the Australian business culture and gives it a much better shot at surviving in an aviation environment that is certainly testing conventional notions of governance to the limit. And it's a fair bet that it's a two-way street. The quasi-board's members must have learned a lot from Virgin Blue about how to run their own businesses because there probably isn't another company in Australia quite like it.

Let's start at the top. Godfrey is the leader who isn't a leader. "I'm more of a cog in the wheel. My role is advisertorial, to coin a word, rather than dictatorial," he says. He loves to muck in. Godfrey regularly gets out to the airport to throw luggage around, sits in on the call centre ("I'm pretty hopeless"), takes complaints from customers and generally does his best to behave (as he also says) like the conductor of an orchestra. And, yes, he rarely wears a tie. Apart from the fact that he hates spending too long in the office, Godfrey says his forays into the front line helps him pick up complaints before they become problems. For example, he makes a point of getting up to the cockpit to talk with the pilots. That's how he learned about a few quibbles over their meals and their uniforms, and fixed them. Virgin Blue has an unusually rigorous recruitment policy. There's a good reason for this – Godfrey is looking for executives who are willing to work a routine 80 hours a week, whose job description requires them to be available 24 hours a day for anything urgent, and who are

"crusaders more than employees." The hiring of crusaders requires a multi-step process. Cabin staff, for example, work their way through five interviews and roughly half fail on the final hurdle. The bottom-line is trust and autonomy: "We trust individuals to do their job. And we keep out of their face so they can do the job." Trust of the rank and file staff even extends to the outlawing of time sheets and vetting of overtime. If staff say they've worked that long, they're paid for that long. The up-front costs of this commitment to the selection process are high because so many people are typically interviewed for any single job, but Godfrey insists that it pays in the long run. "We have a low absentee rate and a low turnover rate of about 4-5 percent compared with about 20 percent across Australia. We like to get it right first time." Virgin Blue runs a culture of transparency. For example, staff say they knew all about the merger talks with Ansett while they were going on. At Ansett, they didn't know until they read about them in the newspapers.

Virgin Blue's staff relations are built on a highly flexible. Employment Bargaining Agreement (EBA) with the TWU that has practically abolished demarcation issues. For example, call-centre staff double as cabin staff if necessary and can be required to help out elsewhere at short notice. "Give people variety, their work is more interesting, and you lower turnover", argues Godfrey. Incidentally, Virgin Blue's cabin staff are paid about $10,000 more than were Impulse's and are rostered on for fewer hours. And there appears to be a tacit understanding within the company that, although they are expected to pull out all the stops, there will probably be something in it for them besides wages. At Belgium-based Virgin Express where Godfrey was chief financial officer, he persuaded Branson to let him give employees 7 per cent of the company in a deal worth about $US21 million. He says he may do the same here. Virgin Blue is very much a Branson company. Typically for the Virgin founder who makes a virtue of ignoring the standard literature on governance, he has not insisted on formal reporting procedures for Virgin Blue even though it's a $50 million enterprise. Godfrey, who has worked in four Virgin companies and knows Branson well, talks to the Virgin founder every week but not because he is required to, only because it makes sense.

The way Virgin Blue happened in the first place says a lot about Branson's way of doing things. Having helped Virgin Express recover from a damaging strike in Belgium, Godfrey was ready to go back home to Australia and he turned down Branson's offer of another job in Europe. But he began to ponder the idea of launching a Down Under Virgin and one weekend faxed an outline to Branson at his Oxfordshire estate. An enthusiastic Branson came back within two hours, suggesting a feasibility study. Some $50,000 later, a business case was produced and Godfrey was summoned to argue it, not before Branson this time but before Virgin's in-house investment board. "They tried to knock it on the head," says Godfrey approvingly. After all, he was a chief financial officer. But when the numbers came up all right, Branson stepped back in. He insisted that Godfrey sign a note – a sort of personal compact – promising that he wouldn't tarnish the Virgin brand by, in his words, "screwing up". "Virgin is very much like a branded venture capitalist", explains Godfrey. A branded venture capitalist, that is, where the brand is just about as important as the capital.

"Richard is not so motivated by money as by perception. He can't have an unhappy airline which could affect the brand. Whatever else I did, I could not demean the brand." There are 479 reasons for this, which is the number of Virgin companies besides its Down Under airline. It's unwritten Branson lore that Virgin companies must leverage off each other, and the others including cell phones and hotel chains are already arriving in Australia. When your chief executives are motivated by the fear of being the cause of a domino effect, who needs conventional methods of governance?

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