Staffing and Other Issues for Continued Global Expansion - Case Study Example

British Airways: A Report Introduction: British Airways plc is the largest international airline in the world. It is a member of royal family of European Airlines. British Airways (BA) operates from London Heathrow and Gatwick airports. The carrier has a fleet of more than 240 airbuses and Boeing jets. It serves 150 destinations in 75 countries around the world to transport 36 million passengers in a year (BA fact book 2007; british-airways.com). BA is the founder member of oneworld airlines including American airlines, Quantas, Iberia, Cathay Pacific etc. The oneworld members work on bilateral basis. They have code sharing and marketing alliances (BA fact book 2007). They sell tickets of one another offering more destinations to their passengers. The group eventually grew to eight members and 23 affiliates by 2001, and collectively served more than 200 million passengers in 133 countries with 566 destinations. Besides, BA has two fully owned subsidiaries also. These are BA Cityflyer which flies from London city airport to all destinations in Europe and Openskies flies to Europe and New York BA is a public company with 43,501 employees and an employee growth of 12.9% annually. The sales in financial year ending in March 2007 was $16,663.0M with annual increase of 12.5% and net income was $596.5M showing a growth of 131.7%. Martin F. Broughton is currently the chairman and Willie Walsh is the chief executive. The finances of BA are managed by Air Cargo Services. (answers.com; britishairways.com ). BA, though made a public Limited Company in 1985 but its stocks were retained by the government till these could be offered to the public. The opposition to privatization was opposed on the grounds of its huge debts and also by British Caledonian stating BA too large to compete with. Staffing and Other Issues for continued Global Expansion: Despite the successful "putting peoples first' campaign to change the culture of BA, it has not remained without its share of troubles: 1. The ability to carry out expansion plans successfully received a blow when chaos occurred at Heathrow terminal 5 opening. Hundreds of flights were cancelled and thousands of bags lost. The staff was not trained to handle the new baggage handling system and software too did not work well. Later Willie tried to compensate somewhat for the debacle by surrendering his bonus. Nevertheless, it exposed the shortcomings of the expansion plan or may be the haste. Though, there was an apology from Willie Walsh, BA passengers are not going to forget or forgive the debacle for quite sometime (Webster 2008). 1. Staff survey in 1992, rated BA as poor employer despite the HRM initiatives. The staff stated that BA attracts, retains and develops committed employees (Hofpl 1992; Lundy & Cowling 1996 as cited in McCourt & Eldridge 2003: 37). 2. In mid-1997 BA faced a damaging strike due to its attempt to impose new payscales without negotiations with the employees (Walich, 1997 as cited in McCourt & Eldridge 2003). 3. Recently, in 2007 nearly 4500 ground staff refused to accept the pension plan and went on strike. They stated disparity between ground staff and cabin crew options. (Guardian 2007). 4. The environmental issues are also getting bigger everyday with people vowing to cut down on air travel for environmental safety. There are campaigns by Greenpeace and other organisations that aviation companies are not considering enough for environmental protection. BA is likely to lose more on this ground than other UK airlines (Timesonline 2008). The environmental and noise pollution issues raised protests on expansion plans of Heathrow airport to increase its passenger capacity. The chairman replied to Greenpeace that upgradation is good for environment since the queuing up of planes would be reduced and so the climate change gas emission (BBC News Channel, 2007). The organisation constantly undergoes reorganisation and resizing to be flexible and adaptive to changing customer and the staff has to mould. To help staff adapt itself to change, the top management must give assurance by: First, it must create what can be called a 'holding environment'. It should have pressure sufficient to deliver goods but not to blow things up. It took time in BA to shift from an internal to a customer care focus. Second, The leader is responsible for direction, protection, orientation, managing conflict and shaping norms. The staff learns new roles and finds new directions to meet adaptive challenges. Besides a job security for few years during change has added positively to the success of BA. A leader has to have the emotional capacity to tolerate uncertainty, frustration, and pain. Meanwhile the pressure should remain there, if it is lost the stimulus to learn also goes away (Heiftz & Laurie, 1997) but it should not force a personal ambition on the unprepared staff. Since the HRM management in MNE like BA is basically strategic International HRM so the recruitment has been global irrespective of the nationality. Further, the top management to be given international assignments and company should develop and reward cross-cultural skills (Warner & Joynt 2001). 5. HRM MODEL AND STRATEGY: The Return of PPF strategy The journey of British Airways from an unpunctual and uncomfortable to the world's favourite airline is impressive even by the standards of tough modern management gurus (Corke, 1986, Warhurst, 1995). The huge profit earning airline fought the bad reputation of low productivity airline compared to its overseas competitors, involved in industrial disputes and incurring huge financial losses amounting to 200 a minute. The staff discontent added negatively to the customer dissatisfaction and BA topped the list of worst airline (Blyton and Turnbull, 1998). What was the picture, though, by 1996 It was world's most profitable company for which most graduated wished to work for (Financial Times 9th July 1997). It was one of the most admired company in the Europe also(Financial Times, 18th March 2000). Who reversed the fate of a drastic airline and how It was Colin Marshall, the company's new chief Executive in 1983 who began 'putting people first' (PPF) campaign Georgiades and Macdonnell, 1998; Barsoux and Manzoni, 1997a; Salama, 1994, Leahey and Kotter, 1990). The present chief Executive, Wllie Walsh has also turned back to strength of PPF. Which though remained basic management strategy of BA but diluted year after year as financial reason again became the core. It was Marshall's vision to motivate his workers for committed enthusiasm. The employees were given importance as more bonus, putting the families of staff in same shifts. The confidence boosted as a result and workers set personal goals and cope up the stress better. They felt more responsible towards the customers and made them comfortable and genuinely welcome. To achieve this goal the Managers were told to develop Clarity of objectives and helpfulness towards subordinates, Care and trust, Achieve goals and Influence through personal excellence and team working ((Source: Georgiades & Macdonnell 1998 p174). The most important component of this PPF program, by Marshall, was that decision making involving workers of lowest rung and it was no longer the prerogative of those high up in the hierarchy only. To bring about such culture change in the organization Marshall looked at three places: ideas and concerns of the people inside and out side, he himself worked with the catering and even baggage handlers, conflicts that needed to address adaptive challenges, they (top line managers) themselves to be adaptive first (Heifetz & Laurie, 1997). The PPF aimed to mould the employee attitude to 'customer first' duty . BA realised satisfied customers as its real assets and that the passenger-staff relationships were twice as important as operational factors (Bruce, 1989). The programme was attended by all employees and not only those who come in direct contact with the customers. The programme sessions were kept informal and workers need not wear the uniform during these (Young, 1989). The environment thus freely encouraged opinion, experiences and difficulties, which later used in decision making. In other words the planning and decision making has gone from internal looking to outward looking. The PPF objectives could be well defined by the strategic model of Guest (1998). The normative model of Guest has integration of three important components of HRM, commitment, quality and flexibility leading to superior employee performance and translating into financial gains to the company. The model also emphasises that HR department is to be the participant in the overall strategy planning of the company (Guest 1997 as cited in Bratton & Gold 2001: 21-22). The model is presented below after adapting it to the BA strategy (Table - 1). Table 1. Guest (1997) SHRM model as Applied to BA HRM Strategy HRM Practices HRM Outcomes Behaviour Outcomes Performance Outcomes Financial Outcomes Differentiate (Culture change) Selection (Global) Commitment Enthusiasm/ Motivation High: Productivity Quality Innovation Profits Training (PPF& work related) Cooperation Focus (Customer Care) Appraisal Quality Involvement Rewards (enhanced wages , excellence awards etc) Organizatio--nal citizenship (Interpersonal relations) Low: Absence Labour turnover Conflicts Customer complaints Cost (reduction) Security (to adapt) Flexibility Job satisfaction Change needed in the PPF Strategy: The issues of environment, terrorism, fuel price hike and workers unrest have constantly troubled the present chief executive. These were either absent or not so prominent at Marshall's time hence the strategy is to be modified to resolve these. The transfer of powers to subsidiaries (OpenSkies, BA City flyer) or decentralisation is a positive decision by the subsequent chief executives. As a result, Subsidiaries can take their own decisions. Bob Ayling who took over from Colin Marshall, IN 1996, was criticized for replacing Union flag. He also replaced 737 fleet with smaller 777s and A320s to accommodate high paying business passengers. His staff was his biggest critic since his era witnessed the cabin strike in 1997 causing 125 million loss (Osborne 2000). Recommendations: The strategy formulated by Colin Marshall to put customer first by changing the culture at BA is still the basis of management practices. However the enthusiasm to carry it out has diluted somewhat. As a result there is employee unrest , complains of wages and pension disparity between ground and on air staff. To plan further extension and maintain its global position the BA needs to pay attention to: 1. Prior negotiations with the workers to impose new pay scales or pension plans. The outcomes to be implemented only when these are agreeable to both sides. It will reduce protests and strengthen BA's image as a good employer. Employee commitment and quality of work can not be disengaged from employee satisfaction. 2. Any expansion plan of the services by BA should also be judged on its impact on the climate. The environment is a very sensitive issue to people and it is necessary to consider it integral part of customer care. BA should establish itself as a 'Green' airline in the eyes of its clients. REFERENCES: BBC News Channel 22/11/2007 'Reaction: Heathrow expansion plan', Available at http://news.bbc.co.uk/1/hi/uk_politics/7107549.stm British Airways Fact Book 2007, Available at: http://media.corporate-ir.net/media_files/irol/69/69499/bafactbook/2007/Section2_March2007.pdf British Airways Plc. Available at http://www.answers.com/topic/british-airways-plc-adr Blyton, P and Turnbull, P (1998) The Dynamics of Employee Relations, (2nd Edition),Macmillan. Bratton, J & Gold, J 2001, Human Resource Management: Theory and Practice, Routledge, 432p Bruce, M 1989 'Learning in British Airways - A Case of Putting People First', Innovations in Education and Teaching International, 3 (August), 236-241. Corke, A. 1986, British Airways: The Path to Profitability, London: Frances Pinter Georgiades, N.& Macdonell, R. 1998, Leadership for Competitive Advantage, London: John Wiley. Guest, D. E. 1998, 'Beyond HRM: Commitment and the Contract Culture' in Marchinton, M. & Sparrow, P. (Eds.), Human Resource Management, Financial Times Pitman, London Heifetz, R. A. & Laurie, D. L. 1997, ' THE WORK OF LEADERSHIP' Harvard Business Review 124-134. Available at http://www.rci.rutgers.edu/goeller/bpw/46-60.pdf Leahey, J. and Kotter, J.P. 1990, Changing the Culture at British Airways Bedford:European Case Clearing House. Lewis, B. R. & Entwistle, T. W. 1990 'Managing the Service Encounter: A Focus on the Employee', International Journal of Service Industry Management, 1(3), McCourt, B & Eldridge, D 2003. Global Human Resource: Managing People in Developing and Transitional Countries, Edward Elgar, 332 pages Osborne, A. 2000, 'Ayling sacked by BA after four years of turbulence'. Saturday March 11, Available at http://www.telegraph.co.uk/htmlContent.jhtmlhtml=/archive/2000/03/11/nba11.html Salama, A. 1994, The Culture Change Process: British Airways case study Bedford: European Case Clearing House The Times Online April 30, 2008. 'British Airways is big loser as public stay grounded' Available at http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article3841751.ece Warner, M. & Joynt, P. 2001, Managing Across Cultures: Issues and Perspectives, Cengage Learning EMEA Warhurst, R. 1995, 'Converging on HRM Change and Continuity in European Airlines' Industrial Relations' European Journal of Industrial Relations 1, 2, 259 -274. Webster, B. 2008, 'BA sacks two managers as chief Willie Walsh tries to deflect T5 heat', April 16, Available at : http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article3754026.ece Young, D. (1989) British Airways: Putting the Customer First, Ashridge Strategic Management Centre, July Top of Form 3 Bottom of Form 3 Top of Form 4 Bottom of Form 4 Read More