Qantas Airways: Strategic Contingencies - Essay Example

? Qantas Airways: strategic contingencies Table of contents Introduction 2 Background information 2 Strategic contingencies 3 Strategic contingenciesaffecting Qantas 5 Strategic choices of Qantas 6 Checks and maintenance 6 Pressure from unions 7 Conclusions and recommendations 8 References 11 Introduction Every organization operates in a certain, specific to it, external environment. For this reason each company is exposed to certain risks and influences over which it has no control. The only solution in such a situation is to respond to the influence in an adequate and timely manner. Since an organization, being interrelated and interdependent with its environment, has to be continuously adjusting to new circumstances, it makes sense to apply the strategic contingencies approach to managing external changes that affect the company’s operations. This is exactly what Group of Qantas Airways Limited companies is doing. Qantas has faces a number of strategic contingencies that affected strategic choices and HR planning of the company. therefore, the purpose of this paper is to determine the strategic contingencies that impact Qantas’ strategic decisions, and examine how such decisions affect HR planning. In addition, recommendations regarding commitment of employees and HR planning will be given on the basis of strategic contingencies analysis. Background information Qantas Airways was founded in 1920 in Queensland. Since then the company has become, according to its website, world’s leading long distance airline business. Group of Qantas Airways Limited companies consists of Qantas Airways and 7 subsidiary companies. It is a recognized brand in Australia, and is already operating some subsidiary businesses, among which are Jetstar, Qantas Holidays and Q Catering (Our Company 2011). Though the company is quite large and operates internationally, it has been heavily influenced by the recent financial crisis, natural disasters, increases in prices for fuel and complex negotiations with labour unions. As a result, prices for Qantas shares dropped by one third by June 2011 and the company has decided to cut jobs in order to increase profitability. This strategic decision was taken under the influence of a number of the strategic contingencies that affect business operations of Qantas. Strategic contingencies Definitely, no organization exists in vacuum. On the contrary, each one is a part of larger systems, such as financial, social or legal, and operates in certain specific environments. Therefore, an organization, being an integral part of its external environment, is influenced by it, whether such influence is predictable or not. Similarly, an organization has some influence on its external environment, since both are interrelated and, in some cases, even interdependent systems. For this reason Lawrence and Lorch (1967) introduced using systems approach to managing organizations and built a foundation for the contingency theory. The core essence of the contingency theory is that there exists no ideal prescribed way to organize a company. instead, it should be organized in accordance to the nature of its operations and environment (Walker 2007 , 40). So, the contingency approach connects HR management practices with organizational performance on the basis of the idea that if HR policies and practices are more flexible and responsive to the external environment and immediate circumstances, the overall organizational performance improves (Guest 1997, 267). Therefore, effective HR policies should be based on the qualities of the particular environment in relation to company’s function, and the extent to which the environment of the company is uncertain. At the same time, it should be remembered that no theory is perfect. Regarding the contingency approach, Child (1977, 170) argues that it does not take into account all of the difficulties relation to organizational design that a company may face under the influence of multiple external contingencies. Therefore, it might be that a combination of several contingencies will make it impossible to form a clear picture of a proper organizational design and, consequently, corresponding HR practices. Nevertheless, the concept of strategic contingency approach to management does make sense in terms of manager’s having freedom to choose how to act under particular circumstances. Following the strategic contingencies theory, a leader will have to use one’s problem solving skills in order to adapt organizational behaviour to the ever changing external environment (Hickson et al. 1971, 216). This approach, as Allani, Archand and Bayad suggest (2003, 237), “seeks to exceed the only financial dimension of performance to integrate other criteria like innovation, customer satisfaction, product quality, flexibility, or social image.” Therefore, in agreement with Allani, Archand and Bayad (2003) and Guest (1997), it can be said that linking strategic contingencies to HR management practices and polices will have a positive impact on organizational performance. Such improved performance is achieved through company’s adequate and timely responding to the changes of external circumstances. Company’s leader, in his turn, has the power to modify organizational internal processes and structures for them to adequately respond to external circumstances. In case of Qantas such a leader is Alan Joyce – company’s CEO (The Australian 2011). Strategic contingencies affecting Qantas As the leader of Qantas, Joyce undertakes the responsibility to restructure the company in order for it to remain competitive in the changed environment. This strategic decision was taken on the basis of a number of strategic contingencies that affect the company. Qantas has no direct power over the strategic contingencies affecting it. Such contingencies include: New aircraft maintenance regulations of Civil Aviation Safety Authority Introduction of a lower "A" category of license allowable under the new CASA regulations New wage demands from unions Natural disasters at home and abroad Soaring fuel prices As a result, union leaders are trying to save the old ways of working and Australian Licensed Aircraft Engineers Association is encouraging Qantas to drop the reform. Obviously, all of the listed above factors have some impact on organizational performance and profits. However, since most of them are unfavourable for the company (Qantas' share price got lowered, international business became loss-making), the management is taking a strategic decision to implement certain changes. Strategic choices of Qantas Checks and maintenance Civil Aviation Safety Authority issues new aircraft maintenance regulations that reflect presence of updated modern technologies to be used for maintaining the planes. However, introducing new technologies and related to them innovations requires substantial financial support. So the company decides to save, not to spend, and to reduce maintenance and repair costs by means of stopping licensed engineers from performing unneeded, as Joyce thinks, transit checks. Instead, regular checks will be conducted on old airplanes only. This decision is explained by the fact that newer, modern aircrafts are in a better condition than old ones, so maintenance is not needed as frequently. In addition, Qantas is working on implementation of a new IT system that will allow technicians to account, monitor and control all of the check and maintenance cases for all the aircrafts (Joyce 2011, 4). This means that engineers, who previously were doing all the scopes of work manually, will have new processes in place that will allow them to work faster and more efficiently. At the same time, these people will be performing different scopes of work in a new manner. So, they will have to be trained and, of course, motivated to accept the changes positively. Some part of qualified engineers’ work is planned to go to pilots. Pilots will be performing transit checks of aircrafts. This means roles of both engineers and pilots will be modified. Therefore, it will be essential for HR department to clearly outline and distinguish the particular responsibilities of each role. Another decision taken by Qantas is to give some work to employees with A licence. This means some people within the company will have their roles changed. This requires careful HR planning that will ensure that, as the changes are implemented, proper people perform each job and proper tasks are assigned to each position. Only careful planning and active participation of HR in the change process will ensure that the change is positively accepted by the employees and implemented successfully. HR management has, as Guest (2011) outlines, “more impact on productivity than operational and lean management approaches” (Guest 2011, 7). Pressure from unions Qantas’ management realizes that new market conditions call for new approaches to managing business, as well as for new HR policies and practices. The goal of the company is to become more productive and profitable by means of making its employees more productive and efficient in their everyday work. For that reason all of the upcoming changes were designed. Nevertheless, as the company’s CEO reports, leader of union are trying to block the company from implementing the changes. Position of the unions is understandable – change is always associated with uncertainty. Uncertainty is, in its turn, what most of people fear. So the unions are trying to prevent change implementation in order to make sure people’s positions in the company remain as secure as they were before. At the same time, it should be understood that negative reactions of both unions and company’s engineers are just typical for such situations resistance to change. For this reason it would be better if HR had developed proper change management programs and policies before the change was announced. The change process is always tough for all the departments of an organization. However, properly designed and implemented by HR change management measures would significantly simplify and speed up the whole process. As for the union’s demand for higher wages for Asian employees, it should not be forgotten that, first of all, living standards in Australia and Asia are, in most cases, different. Secondly, increased wages for pilots of affiliate airlines will increase ticket prices and, as a result, lead to that airline’s becoming unviable. If, however, Qantas removes the affiliate from codeshare regime, only more jobs will be lost and nobody will benefit. All this is considered in HR management as factors that impact salary formation and strategic HR decisions. A deeper analysis of the situation and Qantas’s strategic decisions makes it obvious that in most aspects of change implementation the agreed by the company HRM strategies are the optimal for the particular circumstances. HR planning has been performed in such a way that job losses are outweighed by financial gains received from restructuring. The decisions taken are well-balanced in terms of saving jobs versus losing the business. Conclusions and recommendations Information given to the employees of Qantas made them disappointed about the company’s decision and, consequently, extremely resistant to the upcoming change. This might mean that initially the change management strategy and program of the organization had not been developed or implemented properly. In an ideal situation HR department would have agreed the change management procedures with the company’s management and developed more efficient strategies for introducing the change. However, since the change has already been introduced, it can only be recommended to work on correction of past mistakes. In particular, HR should devote time and resources to explaining the situation to people in a correct way. The negative role in current situation is played by the media, which present the case as company’s pure desire to fire people for the purpose of saving money. This means that public relations aspect of company’s operations is not ideal as well, and the roots of it lay within poor or underdeveloped change management strategy. So, in order to fix the situation and strengthen the lost commitment of employees Qantas should spread the message about the benefits and real reasons for the change. In particular, the company should stress out the potential growth and development opportunities of the long run operations, new promotion opportunities for current employees, more automated and, thus, simpler ways of working and future stability based on the current change. It might also be recommended that all of the working procedures to take place after the change should be determined and written down before change implementation starts. This will help employees to understand how their future work will look like. Such knowledge will, in its turn, reduce the feelings of fear and uncertainty that cause resistance to change. Furthermore, all the HR changes should be planned in advance. Employees should know what to expect and why the changes are good for them. Furthermore, strategic contingency planning, though should be based on the company’s strategic planning, must be incorporated into HR management strategies. This will result in organization’s being more prepared to and united in its efforts to minimize the risks associated with its external environment. References Allani,N, M. Archand, and M. Bayad. 2003. Impact of Strategic Human Resources Management on Innovation. 12th International Conference on Management of Technology: IAMOT 13-15 May: 235-243. Child, I. 1977. Organization design and performance: Contingency theory and beyond. Organization and Administrative Science 22: 169-183. Guest, D. 1997. Human Resource Management and Performance: A Review and Research Agenda. International Journal of Human Resource Management 8(3): 263­276. Guest, D. 2011. Human resource management and performance: still searching for some answers. Human Resource Management Journal 21(1): 3-13. Hickson, D., C. Hinings, C. Lee, R. Schneck, and J. Pennings. 1971. Strategic Contingencies' Theory of Intraorganizational Power. Administrative Science Quarterly 16(2): 216-229. Joyce, A. 2011. New Approaches for Changing Times. Australia Pacific Aviation Outlook Summit. www.alaea.asn.au/attachments/article/278/20110720_Notice_40_Attachment_Alan_Joyce_Speech_20th_July_2011.pdf Accessed August 16, 2011. Lawrence, P. and J. Lorch. 1967. Organization and Environment. Cambridge: Harvard University Press. Our Company. 2011. Qantas Airways Limited. http://www.qantas.com.au/travel/airlines/company/global/en Accessed August 15, 2011. The Australian. 2011. Joyce's reform warning irks engineers. TheAustralian.com.au. http://www.theaustralian.com.au/business/aviation/joyces-reform-warning-irks-engineers/story-e6frg95x-1226098634626 Accessed August 15, 2011. Walker, A. 2007. Project Management in Construction. Wiley-Blackwell. Read More