Our target-driven corporate culture is failing customers | Simon Jenkins

It would take a heart of stone not to feel for United Airlines. The company had built a reputation for cost control. Its boss, Oscar Muñoz, recently won a “communicator of the year” award. Fed up with bribing overbooked passengers who would not budge, even for $800, and needing seats for its own staff, it employed “an algorithm” to select passengers for compulsory “re-accommodation”. When one of them refused, the company protested it had no option but extreme persuasion. After all, what did people think “no-frills” flying meant? Planes are only overbooked because careless passengers often fail to show up. Where is the public relations “fiasco” in this?

The giveaway in this week’s United saga was the behaviour of the company’s shares. As news of the violent “bumping-off” spread on Monday, Bloomberg’s data tracking showed them rising strongly, both against the market and against United’s chief rival, Delta. Analysts clearly felt the company was honouring its commitment to capacity control. Only after Muñoz sought, ham-fistedly, to explain away the incident did the shares slump, but soon recovered. All United’s budget now needs to do is factor in Dr Dao’s lawyers.

The affair illustrates the iron law of a modern service industry. The bigger the company, the more it needs rules, targets and objectives to control operations and hold down costs. That means the less the company can tolerate discretion in its frontline staff, let alone in subcontractors such as air marshals. Big corporations are not subtle enough to mould the crooked timber of mankind. The money lies in straightening it.

The management guru Peter Drucker’s pertinent maxim was that all small organisations need to be bigger, and all big ones need to be smaller. The second need is the tougher. Britain’s hard-pressed NHS is now so target driven and rule bound as to yield weekly tales of institutional inhumanity. A&E queues are lengthening. A patient’s operation is painfully delayed. An old person is sent home to a cold house in the dead of the night.

Universities likewise are obsessed with research “outcome” targets and, until new rules come in, feel they can neglect teaching. Last December a court ordered that Oxford University had a case to answer when a student sued it for his failure to win a first-class degree. This seems ludicrous, until you read the evidence. The university allowed its teaching staff term-time sabbaticals on top of the six months a year they get off for research. Like United, Oxford was accused of putting its own interests before those of an untaught student. It left him “significantly underachieved” and thus, so he says, ruined his career to the tune of £1m. The salutary implication for higher education could be momentous.

The essence of a service industry is the point of contact with the customer. From a yoga class or therapist to a decorator, a restaurant or a tour operator, we expect value to lie in the personal nature of the delivery. It lies not in product quality but in experience quality – in courtesy, humanity and kindness. We do not expect a difference between a first- and a second-class experience, between caring and not caring.

That is why trouble occurs when services subcontract. Each link in the hierarchy erodes the bond between boss and front-of-house. The larger the organisation, the more likely are its staff to curse its bureaucracy and blame senior managers for their own failures. The loyalty of Chicago’s airport marshals on Monday would not have been to United but to their local police service. They had no interest in the airline’s reputation.

Big service firms always try to pretend they are small ones. They erect walls of linguistic euphemism. United declares itself guardian of “the friendly skies”. HSBC declares itself “the world’s local bank”. The empty slabs of London’s investment estates are invariably “villages”, and hypermarkets “high streets”. Every hospital is “caring”. Every police service is “about community”.

I once asked a friend who worked in hospital administration why the NHS treated whistleblowers so savagely, when surely they were an aid to frontline safety. She said it was simple. You could not run a large organisation with someone in its ranks who broke its omerta, who “ratted on colleagues”. At the very least, they had to go elsewhere. Big organisations crack if staff break confidences or disobey orders. The target is what matters, not the customer.

This is why we must accept a difference between a truly personal service and an impersonal one, and pay more for the former. I find it unnerving at a cheap Gatwick hotel that you check in without meeting a single human being. Airline travel used to be smart, its staff glamorous, and its comfort and safety assured. Nowadays passengers must acknowledge that low fares mean low service. They must put up with delays, cancellations, cramped seats and in-flight famine – and with being bumped off planes.

Some time ago, I was returning from Latin America to Lisbon and was told in-flight that, as no one else was landing there, the plane was flying direct to Hamburg. I could howl as much as I liked. In retrospect, my predicament was no different from that of the tourist who is dumped in a semi-derelict hotel, or an Airbnb landlord who returns to a trashed apartment. If I do not opt for a more costly “service”, I will not get one.

All roads lead back to EF Schumacher’s “small is beautiful”, or “economics as if people matter”. The economist’s maxim was usually applied to big, bureaucratic manufacturers. Today it is more relevant to the far larger sector – some 60% of the British economy that is services, such as banking, leisure, health and education.

Despite the digital revolution, we still expect these services in some sense to be “personal”. But the bigger the deliverer, the more this is implausible. That is why big service organisations punish us with long waits if we try to find a human being in their corporate depths. If you want quality, go small and costly. Dr Dao would have had a delightful flight if he had gone first class. Yes, his treatment was inexcusable. But let the big organisation that is without sin cast the first stone.