Virgin Australia CEO John Borghetti shares 10 lessons in business

One of Australia's most fascinating, enigmatic and undoubtedly driven business leaders, John Borghetti shaped both Qantas and Virgin Australia.

In this extract from Game Changer – a new biography which charts Borghetti's path from mailboy to CEO – Borghetti shares ten business lessons he's learned from the extraordinary transformation of the low-cost Virgin Blue into Virgin Australia.

1. Don’t be put off when people laugh at you for what you believe in

People didn’t believe what we said at the beginning. It can be pretty demoralising going into a discussion and articulating a particular view or strategy, and the guy on the other side of the table is almost literally laughing at you. You walk out feeling kind of bruised.

If there’s one lesson I’ve learned really early in the piece, in my first six months here, it was just get used to people laughing at you. Just be convinced of what you’re saying. And if you are convinced, let them laugh all they like, because time will prove you right.

You’ve got to have a thick skin. I don’t know that I’ve got a particularly thick skin. I do take things to heart a little bit. I try not to, and I don’t show it, but I do. I think you’ve got to brush it off. You hear people say that politicians have got to have a thick skin. It’s so true, because otherwise it will distract you.

There’s a famous quote from Condeleezza Rice, which I must frame up one day because I really like it: “Today’s headlines and History’s judgement are rarely the same. If you are too attentive to the former, you will most certainly not do the hard work of securing the latter.”

2. Don’t trust people whom you don’t know very well

Don’t fall into that trap, because nine times out of ten you’ll be wrong if you do. You can only trust if you have a long history of proof.

People like Roger [Lindeman], Christine [Lewis] and others who I know I can trust. Absolutely. I would trust them with my life, wouldn’t even blink. But I’ve worked with them for a bloody long time. And I’ve hopefully shown them that they can trust me. So that’s different. But you meet somebody today, and you think that you’re in sync, but when times get tough, people back away. ‘Self-interest, instead of team interest, gets in the way.

Don’t jump in too early in trusting people. And I’ve done it so many times, made so many mistakes …

I still do, and I get angry with myself about it. But if you become so cynical that you trust nobody, then what’s the point? I think if you trust someone and they let you down once, that happens. If they let you down a second time, you’re a bit of a slow learner. But if you do it again and they let you down a third time, you’re stupid.

The more senior you go in business, the more people only have self-interest at heart. That’s a harsh statement to make, but generally speaking the higher up you get in business, the more it’s true.

Now, you might say, that’s the business world, right? Yes, but it’s unfortunate that it’s like that. I do believe that some kind of moral obligation should grow as you go higher, not diminish. Everybody starts off as a kid, being taught by their parents what’s right and wrong, and hopefully that gives them a good grounding. I’d like to think I have a set of business principles. I always say to myself: if my mum wouldn’t like me doing this, then I shouldn’t be doing it.

3. Relationships are crucial

The biggest thing I think is the value of relationships, particularly as it relates to customers or suppliers, people you deal with outside the company. Of not burning people, because it has a habit of coming back to haunt you.

I’ve always been a relationship type of guy rather than a transactional type. I don’t want to do a deal with a company based on the best price at the time, and then next year move to another supplier because they’re cheaper. You try and build a relationship so that you get the benefit of both.

Loyalty is important and without it we wouldn’t have been able to do some of the things we did do [at Virgin]. Without the loyalty of some of the people who came across, not just to work here, but the suppliers, the designers, et cetera. They didn’t come across because Virgin was three times bigger than Qantas or because we paid them more. We paid them less and we were smaller, but they came across because of relationships.

And that’s what people often forget in business, that relationships are really what business is about. Everything else falls below that.

Apart from the in-house team, there are those special individuals out there who have been a big part of our success: Hans Hulsbosch, Luke Mangan, Andrew Demetriou, Les Goch, Marco Rossi, Robert Morgan, Mark Rudder and others.

When you have nothing to show these people other than your ideas and arguably your reputation, and you ask them to trust you, to come along for the ride … These are people who did it without question. Some gave up very lucrative contracts with Qantas to come and work for what at the time was a bit of an unknown.

I owe those people an enormous amount. You never forget them. One day they’ll need something, want something, and I’ll be crawling over broken glass to help them. That’s how it works.

4. Move on poor performers quickly

When it comes to people, you’ve got to push hard but at the same time you’ve got to be fair.

If they haven’t got a high degree of drive then they won’t be here long, so that’s easy, but how do you keep them like that? I do it by pushing hard on things.

We had a meeting yesterday and I got really cranky at one of them. I said, “You’ve been analysing this for about six months. I don’t want any more analysis, I want action. If this hasn’t been done within seven days, I’ll find someone who will. It’s that simple. You’ve had six months. Make a decision. I don’t care if it’s wrong: make a decision.”

I was particularly hard because this person is one of my best people and I want them to be the best they can be.

I think you can get to a point where you have to push like that. But then you have to put your arm around them, because it isn’t personal, it’s all about an outcome and developing them.

If you’ve got any doubt, if you know that you’ve got the wrong person in the job, just move on them. Not in a harsh way, but you’re doing them a disservice, your colleagues a disservice and your business a disservice if you carry them too long. But remember, a company is judged by the way they treat people on their way out, not by the way they treat people on their way in.

In my career there have been times I’ve carried people too long. But it’s easy to say that with hindsight, I suppose... I’ve often said that I’m now in a privileged position because without exception I have exceptional people reporting to me, possibly among the best in aviation.

5. Don’t try and gild the lily

If it smells like a rat, moves like a rat, just call it a rat and don’t try to say, “Well, actually it’s a little marsupial that could be really cute if we dressed it up.”

In all our dealings with the market, with journalists, whoever, we have been, I think, very upfront. Within the confines of the law, because there are some things you can’t say. But I think we’ve been pretty transparent. I don’t think we have ever deliberately dressed something up just because we’ve thought, “Oh shoot, if they see that, it’s going to be bad.”

If it’s bad, it’s bad. Tell the world that it’s bad. And I think that’s the right way to go. I see a lot of companies lipsticking the pig and ultimately they get undone. Not always: I think that in about 50 per cent of cases, they get away with it. But that doesn’t mean they should get away with it.

6. Don’t do things by the book

If we did things by the book here, we’d be out of business by now. If we said to ourselves, “OK, we’re going to transform the company. Let’s get the proper computer system in place. Let’s get the right processes in place. Then let’s start the project management and so on. And then let’s now do the marketing,” we’d be out of business.

Why? Because while you are doing all of that, the other guy can see what you’re doing and they’ll just jump on you.

So you’ve almost got to start at the end and work backwards and say, “Let’s go in hard first because they won’t be expecting it.” Relaunch. Do this, do that. Right, now, behind the scenes, start putting the Band-Aids on to make it all work.

Doing it that way is probably counterintuitive to any MBA model that ever existed, but in our case it worked. When people don’t believe you, you can move much quicker.

7. Don’t lose contact with the coal face

Maintaining contact with the people out there doing the real work is so important for management, but it gets harder as the company grows. The trick is to find some way to make it happen.

As a management team, we must not distance ourselves from our employees. We’ve got to stay conscious of that and make sure we are visible. But unfortunately that can happen if you are not careful. It can be inevitable, but you don’t want it to be inevitable. You want to try to minimise [the impact] as much as possible...

Travelling is the most taxing part of the job, not the hours. The long hours I don’t mind. I work seven days a week. It’s the constant moving around, the living out of an overnight bag. If I operated differently I could change all that. I could stay in my Sydney office and tell the exco to get out there and travel. I’d be the guy in head office, like so many CEOs are. But that’s a management style I couldn’t do.

If you are not a very accessible CEO, or are not perceived to be accessible, you miss out on opportunities. There’s some stuff that we’ve done that only happened because I saw somebody – or heard something or saw something – that I would have missed if I had not moved around.

Are we good at it? We are OK at it... we must keep improving.

8. Keep the pressure on

This is a hard business. This is not a business where you can can say, “Well, that’s OK, we can take our time because it will all be OK.” It won’t be OK.

I remember saying to people at one stage, “In three months’ time, Qantas will have regrouped and we will have missed an opportunity. We will look back and say how stupid we were. Do we want to die wondering?”

So I think putting pressure on people doesn’t hurt. But putting your arm around them when they need it is equally important. I am a little bit of a believer in “What doesn’t kill you makes you stronger.”

That’s unfashionable these days, but that’s the trouble. People don’t think they have to take responsibility for their actions any more. There’s always an excuse. There’s too much tree hugging going on. Now, I don’t want to turn it into a dog eats dog culture, but I think the world has generally swung too much the other way.

9. The best incentives are surprises

I think what works best as an incentive is giving something away, i.e when people aren’t expecting it. That’s a better incentive than giving it to people who are expecting it.

I remember there was an account we were going for. It was relatively big, north of five million. And I bumped into that particular rep and I said to him, “You get that account, you’ve got yourself tickets to Los Angeles for your holiday.”

He just laughed because it had never been done before. So we got the account, and I rang his boss and said, “Right, give him tickets to Los Angeles. I told him that if he got the account, he’d get tickets.”

The guy was chuffed, because he didn’t really expect it, because it wasn’t policy.

We’ve all heard the story that the one thing you can’t have is the thing you want the most. This is the opposite. If you don’t know you want it and you get it, you appreciate it more. Because then you realise you wanted it. So I think that works from time to time. You don’t want to do it too often, but I think it does work.

10. Keep the team motivated

One big issue that is always coming up is keeping the staff motivated, so that they’re all looking forward to the next chapter. You can’t run out of “the next” because if you do, you’re taking away that drug you’ve got them on.

The problem is that a lot of the “nexts” are kind of hidden and not visible to the staff. For example, the balance sheet work that we do, they don’t see that.

And there is a competitive element, too, because if you stop doing “the next” then you let the other guy catch up.

So it’s important to keep the staff looking at what’s happening next, rather than what’s happening today. The moment you get people looking at what’s happening today, or what happened yesterday, they become internally focused and that’s where all the trouble brews. So you’ve got to keep them thinking of something that they can’t quite put their hand on, but it sounds good.

It’s also very important to engage the staff randomly in corporate things. Every time I do a speech or we do a presentation, a function, whatever, we always have half a dozen cabin crew along. It opens their eyes to other parts of the business. It helps them to engage more. So I think that kind of activity is important.

What do I worry about the most? It’s not the price of oil. Not exchange rates. It’s how do we keep the team motivated.

Game Changer: How John Borghetti Changed the Face of Aviation in Australia by Doug Nancarrow (published by Harper Collins) is now on sale; it's also available in ebook format from Amazon, Booktopia and Apple iTunes.

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