Management Model at British Airways - Research Paper Example

British Airways After the recruitment and apportionment is over, it is the duty of the organization and its leader to provide the employees an optimal working environment. In that environment only, employees will optimize productivity and profit for the organization. This favourable state of recruiting apt employees, providing optimal working environment, leadership role, increasing productivity and profits can be actualized and continued, till the achievement of the set goals. However, when the organization does not perform up to expected levels and in other cases wanted to expand or diversify its operations, the management method has to be changed. This is where the concept of change management comes into the picture. That is, change management constitutes the structured changing or transitioning of employees, departments and the organizations as a whole from a current state to a favourable or desired future state. So, the main necessity for an organisation to change is to maximize the collective advantages for all the employees and leaders working for the organization, and thereby maximize the profit and standing of the organization. Importantly, the changes can be brought on by the factors that take place inside the organization as well as outside. In the outside, various political, social and economic factors will have an impact on the organization, necessitating a change. When this change shows positive results, organizations can extricate from any tough situations and ‘pilot’ on the path of success, achieving long term goals. So, this paper focusing on British Airways will analyse how, its current functioning due to the external factor of recession can be changed using the change management model, Lewin’s Force field analysis. Also, this paper will discuss the range of resistance BA management may face for the major change and finally the paper will discuss the key stages for recovery, which needs to be implemented Background The worldwide recession in many economies is having a major negative impact in all sectors, and airline industry is no exception. Airline companies all over the world are fighting for their survival not even their success due to recession and the resultant effects like drop in passengers’ traffic, high operating costs, etc. International Air Transport Association (IATA) in February reported a 4.6 percent decline in world passenger traffic due to decreased customer demand, high cost of fuel, high cost of finance and low access to credit. (iata.org 2009). Different airlines have since being counting their losses and responding to the prevailing economic condition. These losses are attributed to lower traffic volumes and higher than expected oil prices. According to a report in the Sun Herald, Singapore Airlines, the wealthiest of the world’s carriers, has been hit by the economic downturn affecting the industry, reporting its largest decline in profitability since the Asian financial crisis. Carriers such as Emirates, Korean Air Lines, MAS and Qantas have all acknowledged that they are financially-strapped, and have reduced services and grounded aircraft. Hong Kong’s largest airline, Cathay Pacific, has warned that its next announcement of results would be disappointing because of a slowdown in demand and hedging losses. The moves show the global economic crisis is battering even the biggest of airlines Franco-Dutch Air France-KLMs U.S. partner Delta Airlines has posted a big loss for the final three months of last year and plans to remove 40-50 mainline aircraft from its fleet to eliminate fixed costs associated with its 6- 8% system capacity cuts. Like these airlines, British Airways reported net loss in tunes of millions last year, blaming it on the weak pound and the global economic crisis. British Airways, UK’s national flag carrier, flies to more than169 destinations in around 75 countries making it the largest airline in UK in terms of destinations and fleet size. It comes under the category of full service airline, not the budget or low cost or no-frills airline as it provides a lot of in flight entertainment options, various foods and snacks as well as lounge services. BA operates mainly from its main hubs or airports of London Heathrow and London Gatwick. Because of its wise reach, it has a sizable market share in its home turf and thus operates under a defensive strategy against its major competitors. Even then, it is not smooth flowing for BA because recently only it lost the tag of UK’s largest airline in terms of passenger traffic. “Until 2008 British Airways was the largest airline of the UK, measured by passenger numbers. In 2008 the airline carried 35.7 million passengers. Rival UK carrier EasyJet carried 44.5 million passengers in the same year, taking the title from British Airways.” (flightsandfly.co.uk). With drop in passenger flow and importantly drop in finances, BA is in a problematic and tough ‘wicket’. “British Airways is on course for its worst ever year after plunging another £50million into the red. The airline, in the thick of a row with cabin crew, lost £543,000 a day between October and December. That took its losses for the first nine months to a whopping £342m - almost five times the £70m deficit in 2008.” (Hiscott 2010). To prevent BA from getting ‘all out’ and to put back on the right track, certain positive and strategic changes need to be incorporated into its functioning and operations as part of change management. Change Management To initiate the changes, the change management model that can be used by BA is Force field analysis, an important model developed by Kurt Lewin. Lewin’s Force Field analysis provides a framework, using which the factors that aids as well resists organizational change can be analyzed. “Force Field Analysis is a useful technique for looking at all the forces for and against a decision. In effect, it is a specialized method of weighing pros and cons.” (mindtools.com). So, it helps to find and ‘corner on’ the forces that are either driving or blocking the movement toward the goal of change management. After those forces are found out, the organization “can plan to strengthen the forces supporting a decision, and reduce the impact of opposition to it.” (mindtools.com). Any organization, which wants to make a change structurally, mentally (mind of the employees), organizational wise, department wise, hierarchically, etc, etc, will first plan out the strategies to actualize the change. While planning or formulating the strategies, the leader, management team and even the workers will firstly assess the favourable things that will fall in place, to make the change a success. That is, the functioning organization will have certain strengths or attributes, which, with slight modifications, will aid the organization to change. This will include the company’s past record (in profits, launching new products), employees’ skill level, flexibility, etc. So, while assessing the status of the organization or system, these favourable things have to be first located and used as motivating factors or confidence boosters for both the management team as well as the employees. By following this model, British Airways can have an optimal change as it can utilize its strong points in a more optimal manner, even while modifying other aspects. As BA was a successful organisation for many years, it has many aspects which are going right for it, thus the only necessity or the change that needs to be incorporated is to slightly tweak or reorient or optimize those right aspects. For example, the main image of BA is that it is a full service airline in the market of low cost airlines. This image and importantly this past record of BA was successful and it has been providing good benefits for BA for many years, except the last few years. As this favourable model was its strength, BA can continue this tag of full service airline without switching over to low cost model, albeit with few modifications. Although, there were views among many to switch to the low cost model, according to the change management model of force field analysis, it would be better for BA to stick to the full service airline with some reorientations. One of the direct approaches to low cost is to simply remove all frills and extra from product or service. Low cost airlines meet the need of a segment of the customer who wants low price. The airlines provide essentially air transportation, removing such augmented service such as meals on board, in flight entertainment, lounge services, limousine drop off and so on. The airline thus transfers all the cost savings to the passenger in form of reduced price. However, for a full service airline like BA it is difficult to reconfigure to a low frills airline as a response to the recession. This is because customers already have an expectation of the airline and their existing facilities which have been designed for such augmented services cannot be changed easily. That is, all the operational processes as well as organizational processes need to be changed, it cannot be a smooth sailing. More than this issue, there a lot of players in the already crowded low-cost market. As BA’s competitors from Ryanair to Easyjet focus on the low-cost market, it would not be feasible for BA to jump into this market. “For all their negative publicity, no-frills airlines are masters of their trade. If the flag carrier chooses to do battle on their home-ground, it could find itself hopelessly out of its depth” (riverscrap.typepad.com 2009). Also, low cost airlines focus on price sensitive travellers such as students, young entrepreneurs, visiting family and friends. Although British Airways has not narrowed down their target market and are neither the cheapest, they are still leading market because of their Brand Equity and Differentiation Advantage. Thus, with wholesome changes out of question, BA following Levin’s change management model of force field analysis can go for minimal changes, modifying or reorienting its current model. To obtain significant operational economies, BA must take a careful look at the value chain and identify intrinsic high cost component that could be eliminated or reduced by changing the way the business operates. So, as part of the change management strategy, BA can try to cut down costs in certain segments of its operations and thereby cut down losses in these recession times. That is, without cutting down or removing or changing all the cost centric processes in its operations and thereby turning into a low cost airline, it would be feasible for BA to just cut down costs in certain segments. This even while allowing BA to function in the same model of full service airline, would cut costs and thereby minimize losses to some extent. Normally, organisations can achieve low cost advantage through assets and competencies in operation which can be based on access to raw materials, low cost distribution, cost of labour, government subsidy, location cost, automation, purchase of inexpensive capital equipment and reduction of overhead. To travel in this track, BA has plans to incorporate lean management as part of its change management model. “We need smart innovation and smart change leveraged by technology. Lean and Agile methods are becoming key enablers.” (King 2009). As part of the change management, BA wants to ‘lean’ in many processes and thereby reduce the losses and impacts of recession. An example of Lean incorporation can be seen in BA’s storage warehouses, which contain crucial parts for its operations but was hampered by poor flow among the processes and general confusion of the employees. “The introduction of Lean development brought about a new layout with clearer processes, and a more integrated team, Coby said, adding: “The situation before had been costing us a lot of money.” (King 2009). As part of change management model of Levin’s Force Field analysis, the current successful processes can be made more ‘leaner’ and thereby ‘fitter’ using the lean and agile methodology. It is widely used in various processes in BA, and has becoming increasingly prevalent which is leading to flexibility in its operations, quick response to the various optimizations processes, and collaboration, instead of fixed protocols and processes. In line with the selected change management model of improving or slightly tweaking and changing the currently running process, BA can give more importance to e-tickets achieve reduced operational costs. The electronic ticket, e-ticket cost less to print, distribute, and process than a paper ticket. The e-ticket is also faster and more accurate to process than paper ticket. With internet check in, the airline can reduce its ground service rates. Furthermore, a scale effect reflects the natural efficiencies associated with size. Fixed cost such as research and development, staff works, overheads facilities up keep can be spread over more units. Resistance to change During any financial crisis inside the organization or throughout the industry, removal of employees could be a feasible solution to salvage the organization. That is, if the organization removes expendable workers in troubled times and becomes “leaner” and “fitter”, it can optimize its functioning, achieve success and can recruit more employees in the favorable times. “In particular, organizations need to be flatter, leaner, fitter and more organic in the way they operate than in the past, more settled times...more task orientated organic organisations has been achieved by downsizing.” (Norton, 2008). Thus, removal of expendable employees is a feasible option which BA is trying out as part of its change management. That is, as BA tries to cut costs in maximum ‘points’ of its operations, salaries for expendable employees is a major point. Cost advantage is a tool barely any company can do without under conditions such as Financial Meltdown. So, one of the major variable cost to control is the wage bill, which is done by BA by retrenching the employees, reducing the employees in the flights and also by reducing or freezing the salaries. These strategies have elicited a lot of resistance from the employees and could act as an impediment for the change management. Speaking about retrenchment, many companies are suffering losses and as a result of it, several companies are opting for retrenchment strategy. Cost cutting would have to eventually result in job cutting. BA said the job cuts would involve 1,000 cabin crew members as part of voluntary retirement and a further 3,000 being turned into part-time. "Without changes, we will continue to lose more money with every month that passes. It is essential we make ourselves more efficient if we are to ensure our long-term survival," BA said. (worldtravelguide.net 2009,). However, this elicited resistance strong resistance from the employees, who first fear that it would not be the last retrenchment and many employees will be forced out. “The Unite union criticised the cuts and warned BA staff in an email that "you can rest assured it wont be the last [job cuts]." (worldtravelguide.net 2009,). They threatened strikes to roll back this retrenchment and expressed their resistance through many ways. The other change management strategy of BA which also got a lot of resistance is the decision to cut down the numbers in the Cabin crew and the two-year pay freeze from 2010. These measures angered the BA staffs particularly the Cabin Crew members leading to a lot of resistance. So, February this year, BA cabin crew members has voted in favour of initiating strike action. To reduce wage or salary expenses, British Airways is cutting staff salary. Although, the pilots have agreed to a pay cut while other staff have agreed to work for free for a month, there is a storm of resistance brewing for this change management strategy. Future of course of action, with the issues that need to be addressed British Airways, the largest international airline in the world is one of the iconic airline brands. The airline has a strong corporate reputation for high quality and has a long tradition for excellence in the global aviation industry. The airline has pioneered the development of many routes and technology to facilitate service delivery. The British Airways brand inspires trust and confidence in its passengers. With such a strong and optimal image, BA needs to think more deeply while implementing various change management approaches as part of its change management plan. This is because those changes should only optimize BA’s current position, not degrade its current position. This degrading could happen if the change management strategies are not implemented aptly and this can be seen in the two processes, which needs to be actualized. The first strategy of BA, as part of its change management model to increase passenger inflow and thereby minimize losses, but which performed below expectations, and which needs to be addressed immediately to give better results, is the Terminal 5 initiative. Terminal 5 is Heathrow Airport’s newest terminal. Used exclusively by British Airways, Terminal 5 is a state of the art building - the largest free-standing building in the UK. The glass and steel structure gives a feeling of space, and can handle 30 million passengers per year with good resting space, restaurants and various other lounges. (heathrow-airport-guide.co.uk). However, it was not able to justify the expectations as the crucial process failed because of IT and other logistical problems. During the first five days, BA misplaced more than 23,000 bags, cancelled 500 flights and made losses of £16m and the investigation shows that a myriad of problems struck during the terminals first few days, and these were exacerbated by the way in which BAs IT staff handled the problems. (Thomson 2009). So, to counter these problems, in future, BA need to strengthen its staff force and make them come up with a foolproof plan or process. Also, trial run should be carried out with all situations put in, so to confirm that the ‘system’ can handle all the eventualities. This way, all technology or IT based change management initiatives can be carried out with a lot of successes, and not shortfalls. The other change management strategy which BA is mulling over and also implemented in certain sections is the outsourcing process. British Airways is planning on outsourcing some of its support services to the ground handling company. By outsourcing its ground services to a quality conscious aviation handling company, the airline can reduce variable cost without sacrificing service delivery and customer quality. This implies that even though outsourcing could be more profitable, but may have to be avoided if the competence of the third party is in question, so as not to jeopardise the Differentiation Advantage BA possess. In arriving at a decision to outsource a support service, managers at BA have to evaluate the trade off between cost and quality of service. Furthermore, the organization has to consider whether the outsourcing of an activity can result in business process improvement such as reduced lead time, higher flexibility and importantly reduced costs. Conclusion Thus BA, while planning the change management strategies should have to find out the factors that will block and also oppose the change. Only, if it finds that beforehand, they can formulate strategies to overcome it. So, assessing to find out the both the positive and negative things, and then generating a plan to remove the negative and impeding things, forms an important part of creating a change and BA need to incorporate that into its functioning to overcome the recession caused losses and emerge successful. When an organization is underperforming or wanting to expand its operations further, it will indulge in change management. As part of change management, the leader should initiate training programs, implement a common organizational culture, optimize motivation, exhibit decisiveness and actualize effective communication channels. When a leader initiates the above practices as part of organizational change with fullest cooperation from the employees, the organization including British Airways will be great success. References flightsandfly.co.uk, British Airways, viewed on March 6, 2009 http://www.flightsandfly.co.uk/top-airlines/british-airways.php heathrow-airport-guide.co.uk, Heathrow Airport Terminal 5, viewed on March 6, 2009 http://www.heathrow-airport-guide.co.uk/terminal-5.html Hiscott, G 2010, British Airways heading for worst ever year, viewed on March 6, 2009 http://www.mirror.co.uk/news/city-news/2010/02/06/british-airways-heading-for-worst-ever-year-115875-22023144/ iata.org 2009. International Cargo Down 13.5% in November - Passenger Declines by 4.6%, viewed on March 6, 2009 http://www.iata.org/NR/rdonlyres/250BD608-E428-4A49-B833-20C0E5B99344/0/industry_times_january2009.pdf. King, L 2009, BA CIO says Lean and Agile development will beat downturn, viewed on March 6, 2009 http://www.cio.co.uk/news/3203061/ba-cio-says-lean-and-agile-development-will-beat-downturn/ mindtools.com, Force Field Analysis: Understanding the Pressures For and Against Change, viewed on March 6, 2009 http://www.mindtools.com/pages/article/newTED_06.htm Norton, A 2008, Integrated Management. Maryland Heights: Butterworth- Heinemann riverscrap.typepad.com 2009, Has British Airways become a no-frills brand? viewed on March 6, 2009 http://riverscrap.typepad.com/home/2009/10/has-british-airways-become-a-nofrills-brand.html Thomson, R 2008, British Airways reveals what went wrong with Terminal 5, viewed on March 6, 2009 http://www.computerweekly.com/Articles/2008/05/14/230680/british-airways-reveals-what-went-wrong-with-terminal.htm Read More