Recent cybersecurity scares and emerging regulation motivated boards to re-think digital risk. While downside fears monopolize attention, strong IT controls serve a second valuable and underappreciated purpose – to help businesses run smoothly.
Beyond loss prevention, CFOs and CIOs must also ensure that system designs do not impede “what must go right” for key stakeholders. Such unforced errors can be equally or more damaging to company strategies, reputations and finances.
For the second time in five years, American Airlines (AA) reported that a scheduling platform “glitch” left thousands of flights without pilots. While the airline characterized the resulting operational disruption as minimal, the long-term effects could prove far more costly and problematic. That’s hardly unique to American’s business.
Holiday crew scheduling is not a new challenge to airlines. Pilots and cabin staff are assigned to flights weeks in advance. Trading systems allow for time off without jeopardizing published flight schedules.
On July 2nd, a system control lapse left over 12,000 upcoming AA flight cockpits understaffed. The turmoil and confusion quickly drew the pilot union’s ire, as American is contractually prohibited from re-assigning pilots in such circumstances.
“[American Airlines] failed to keep the IT system running properly and now thousands of flights do not have pilots assigned, ”said Dennis Tajer, Allied Pilots Association (APA) spokesperson.
APA union president Ed Sicher soon added, “Management’s trip trade system allowed many July trips to turn ‘green’ last night, resulting in more than 2,000 sequences and 37,000 flying hours to be dropped into open time. Once again, AA’s operational mismanagement is at the heart of an issue that will soon go public. “
With long-term contract negotiations underway, the timing could not be worse. To swiftly resolve the immediate matter, American Airlines made some significant concessions – including agreeing to pay pilots triple their normal rate for all re-assigned July flights. Additionally, all future holiday flights will pay pilots double.
That’s an example of how a “tech glitch” can be costly, even without malfeasance.
In November 2017, American encountered a similar issue, which then left approximately 15,000 flights understaffed. According to CNBC, “pilots loaded up their schedules with flights in early December but many opted to take days off around the holidays, after the system allowed it.” At that time, American agreed to pay pilots a 50% premium (time and a half) to cover reassignments.
The American Airlines crises shows that effective data controls must do more than preventing inevitable bad actor mischief. They’re essential to well-run enterprises.
Then and now, both instances gathered much media attention. Such negative press further challenges an industry facing skyrocketing fuel prices, intense competitive pressures, record delays and tenuous customer service reputations. Increased labor costs and overtime rates only raise profitability hurdles and stress cash flow.
The real underlying problem is that many C-suites tolerate the term “glitch” as a comfortable excuse for inadequate management oversight. Too often, system designers and software engineers lack fundamental business process insights – and, in turn, their operations peers conveniently blame “system flaws” for workplace mistakes.
As companies move to digitize workflows, tech leaders must thoroughly understand routine business activities, critical resource paths and risk points. Otherwise, avoidable crises can quickly derail strategy, devour leadership time and disillusion employees.
To start, frequent walkthroughs of routine transactions, resource allocations and scheduling needs can help close troublesome gaps. Here are three questions that directors and senior leaders must regularly ask and address:
- Do system designers understand how automated and digitized business processes should speed throughput and improve revenue generation? Technology is increasingly important to customer experience, supply chain management, employee staffing and financial management. Tech challenges can, do and will impair value chain effectiveness and efficiency.
- Do decision tools connect operating decision quality to financial consequences? Misestimation jeopardizes sales, erodes margins and drains cash. For instance, well-known retailers, including Target and Bed Bath & Beyond, recently announced significant markdowns of excessive inventory. Similarly, Cerner and now-bankrupt Astria Health just settled a longstanding dispute over medical billings and accounts receivable collection timeliness.
- Do credible plans exist to deploy and utilize artificial intelligence-driven analytics to proactively identify, diagnose and curb transaction variances? Emerging data tools allow for real-time assessment and corrective action of deviations that could signal or devolve into more significant challenges. Such “smart” technologies provide sharper and more timely oversight, but also require heavy utilization to justify investment.
Management responses likely reveal much about digital era readiness – or lack thereof.
Just as race cars use precision steering and brakes to navigate turns at high speeds, companies need data controls that both prevent losses and accelerate strategy. Who’s roaring ahead or off course scrambling for excuses?