Case Report On British Airways Ba Management Essay

Case Report On British Airways Ba Management Essay The fast changing technological advancement and unpredictable economic situation are forcing businesses to respond quickly to adapt to change. Failure to manage change will cause organisation lose its competitiveness and disappear from the market. In order to meet the challenge, British Airways has to review their development approaches, especially those related to the organisational behaviour, structure, culture and other human resource issues. The organisations vision of being worlds global premium airline can only be sustained and supported through continual review and improvements in the aspects mentioned. It is important to note that the change in the organisation is very much related to the role of managers in developing strategy. Though there is a pressing need for the organisation to undergo change, peoples need should not be sacrificed. This report aids the improvement process in British Airways by providing discussion on the key frameworks in the HRM issues and recommendati ons for future. 2.0 Introduction This is a report for the management of British Airways Plc which present, analyze and evaluate the change management issues in the organisation. Factors such as organisational structure, behaviour, culture and technology, political and social aspects as well as economic strengths and weaknesses are made throughout the whole report. It is hoped that this report would provide an insight to the human resource activities for future improvement. 3.0 Organisations Strategic Plan 3.1 Organisations Background British Airways Plc (BA) has a long history beginning from the launching of words first schedule air service by its forerunner company, Aircraft Transport Travel Limited (AT T) on 1919. In 1924, Britains four airlines merged to form Imperial Airways Limited. Later in the 1930s, some smaller UK air transport companies started their operations and merged to form the original privately-owned British Airways Limited. Following a government review in 1939, these two companies were then nationalized and formed the British Overseas Airways Corporation (BOAC). BOAC, together with a new airline, British European Airways (BEA) were the main British operators in the industry in the 1950s. However, these two separate airlines eventually merged to form British Airways in 1974. With the execution of Civil Aviation Act 1980, the government sold its shares in British Airways and Lord King was appointed as the chairman. Many changes were carried out since then to bring British Airways to its presen t status as one of the worlds leading global premium airline (British Airways 2010). The company is principally base in London, with hubs at Heathrow, Gatwick and London city airports. Its core activities are to carry out the operation of international and domestic scheduled air passengers and cargo services. In 2009/10, the company carried nearly 32 million passengers and 760,000 tonnes of cargo to different destinations. Together with its partners, BA flies to over 300 destinations throughout the world. It also has a strong fleet operation with 238 aircrafts in service at the end of March 2010 (British Airways 2010). 3.2 Organisations Vision and Mission The companys long term vision to be the worlds leading Global Premium Airline is constantly leading the company moving towards higher achievements in the future. BA has plotted different mission statements in pursuing toward this vision. These mission statements are: Be the airline of choice for long haul premium customers Deliver an outstanding service for customers at every point of touch Build presence in key global cities Build on leading position in London Meet customers needs and improve margins through new revenue streams (British Airways 2010) 3.3 Industry Overview The aviation industry has a big global economic impact. Few key facts provide the evidence of the worldwide influence of this industry. According to Capoccitti, Khare and Mildenberger (2010: 67), more than 2.2 billion vacation and business passengers flew on the worlds airlines. Over one-third of the values of worlds manufactured exports were carried through air freight. 32 million jobs opportunities were created for people in different countries. Moreover, the aviation industry contributes nearly 8% to world gross domestic product. In general, airline industry can be divided into four categories: International companies with annual revenue of $1 billion or more National companies with annual revenue between $100 million and $ 1 billion Regional companies with short-haul flights and less than $100 million revenue Cargo companies that generally transport goods only (Investopedia 2010) Though the degree varies with the category that an airline belongs to, air companies need to cope with various complicated issues. Some of the major issues include airport capacity, route design, technology, costs to buy or lease the aircrafts, weather, fuel price, and employees (Investopedia 2010). Despite these challenges, competition remains lofty as more and more airliners enter into the market by offering cheaper prices to customers. 3.4 SWOT Analysis Figure British Airways SWOT Analysis (Euromonitor International 2011) The figure above shows the current SWOT analysis of British Airways. Further explanations are made as follow. STRENGTHS Strong Fleet Operations British Airways has a strong fleet with more than 200 aircrafts. The fleet includes Boeing 737, Boeing 747- 777, Airbus A319 and Airbus 320. Recently, the company had also ordered additional 23 new Boeing 787 to replace the current Boeing 767. These new aircrafts will join in the long haul fleet from year 2012. With such a strong fleet, the airline covers all the continents around the world (Euromonitor International 2011). Online Services British Airways also seizes the opportunity of the widespread of internet to boost its business performance. With the implementation of online services, passengers obtain the convenience to book flights, hire cars, book hotels and access travel information in a quick and safe way. This has not only greatly reduced the companys operating costs, but also help it to attract more customers (Euromonitor International 2011). WEAKNESSES Labor Dispute The dispute over pay and condition of its cabin crew has caused an industrial action to take place in 20-22 March and 27-30 March 2010 (Euromonitor International 2011). The strikes held by Unite, which represents about 25,000 workers at British Airways, had incurred more than  £150 million loss to the company in year 2010. Poor Brand Image Apart from the above incident, the chaos that happened during the opening of Heathrow Terminal 5 airport also diminished the companys brand image. Cancellations, delays of flights and lost of baggages had led to huge disappointment on many loyal customers. This weaken the companys competitive advantage and loss many businesses to its rival. Poor Performance in All Geographic Regions Due to global financial crisis and high fuel prices, British Airways has a poor performance in all its geographic regions. The business revenues in its largest geographic market had decreased 12.9% in March 2010. The sales in its second largest market, America had also shown a decline of 4%. It is concerned that the continuity of such performance would lead to business collapse in no time (Euromonitor International 2011). THREATS Disrupt Operation With the unstable restructuring and changes policies, British Airways faces strong opposition from its workforce. The extension of labour dispute into future will continue to disrupt the companys normal operation. Huge amount of time and money will have to be spent on devising contingency plans to resolve the issues. Increased Competition Poor management strategies in handling labour dispute and the opening of Terminal 5 makes the company vulnerable to its rivals. Better offers made by competitors such as Virgins, Ryan Air and Easyjet will cause British Airways losses its premium passengers. Bankruptcy Poor performance in all geographic regions increases the risk of bankruptcy in BA. OPPORTUNITIES Reward Packages/Employee Relations Opportunities to offer better reward packages and to improve employee relations can be identified in the case of British Airways labour dispute. The restructuring and changes process will get into a better shape if two ways communication is to be built up. Monitor Operational Performance British Airways is currently monitoring its customer views on the Think Customer Survey (British Airways 2010). This offer great opportunity for the organisation to improve its business performance as it can find solution to improve its departure punctuality, which is one of the main concerns of the passengers. Merger Agreement with Iberia The entering into a merger agreement with Spanish airway Iberia offers opportunity for BA to step into Latin America market. This merger will also save the airline  £350 million a year (BBC 2010). 4.0 HRM Issues 4.1 Leadership and Management The terms leadership and management have been used interchangeably by many people. In fact, these two terms denotes two different meanings. From a general point of view, leadership can be defined as a relationship through which one person influences the behaviour or actions of other people. Management, on the other hand, is usually defines as getting things done through other people in order to achieve stated organisational objectives (Mullins 2010: 373). A major study of the nature of leadership has been developed by a political scientist, James MacGregor Burns in 1978. Burns states that organisation states can be categorized into two convergent (stable condition) and divergent (dynamic condition). He contends that the best approach for the convergent state is the transactional management style. The managers will aim at completing tasks, achieving companys goal, and striving for the companys performance through gradual changes (Burnes 2009: 498). On the other hand, transformational leaders are most appropriate in the divergent state. They will introduce radical change and use the influence of their personality to gain the trust and commitment of their followers (Burnes 2009: 499). The figure below shows Burns theory on leadership. Figure Burns Contextual Approach to Leadership (Burnes 2009: 499) Along with Burns theory, the diagram below also shows the distinctive activities between managers and leaders (Burnes 2009: 492). In fact, in real life situation, leaders need to possess both transactional and transformational characteristics, depending on the circumstances. Figure Distinct Activities between Managers and Leaders (Burnes 2009: 492) In relation to the theories above, BAs present Chief Executive Officer, Willie Walsh is considered to be a manager rather than a leader. This can be seen from the way he transformed his former company Aer Lingus, a nearly bankrupt airline into one of the most profitable one in Europe by cutting one-third of its workforce using the power of his position (The Independent Business 2011). This action had caused him to win an uncomplimentary nickname Slasher Walsh, thus revealing his sturdy personality trait. Partly because of this, he was attracted into the board of BA (The Wall Street Journal 2011). However, as the company is in a dynamic state, the transactional characteristic that Willie Walsh possessed is seemed to be unsuitable. In the dispute with the Unite Union, Willie Walsh is entirely focused on the present organisations need reduce costs but ignored the need to create a culture of shared value in the long run. His managerial approach will only enable him to carry out his du ty and fail to gain followers. The management should realize that the pressing need of British Airways is to have leader who is capable to win trust and support from its members in order to implement change. 4.2 Organisational Structure In order to ensure the organisation meets its goals and objectives, organisation usually has a formal structure to divide the work and responsibilities. This formal structure is presented in the organisation chart. Different roles and relationships are incorporated in this process to direct, control and carry out the tasks and activities (Armstrong 2009: 365). People in these groups are usually bound by certain formal rules, relationship and norms of behaviour. Formal work group can be differentiated by basis of membership, tasks to be performed, nature of technology or positions within the organisations and etc. (Mullins 2010: 311). Though the formal groups are planned and created by management, informal structure will also arise during the day-to-day interactions of the staffs. Unlike the formal structure which is based on a defined role, the informal groups are based more on friendships. The goal is to satisfy psychological and social needs rather than achieving the tasks (Mullins 2010:312). Both formal and informal groups are crucial as the formation can contribute to the enhancement of work performance. The higher the group cohesiveness, the more likely they can progress in the stages of group development and form teams. However, tasks at team level require higher level of coordination, control and trust. From the organisational chart in Figure 4 below, it can be seen that the division of work in the organisation is based on individuals different tasks and functions, such as sales and marketing, engineering, investments and etc. This institution is important as members tend to follow the established values and norms of behaviours. However, as group size increase, it will increase the difficulty for managers to handle. In general, group cohesiveness is hard to achieve when a group exceeds 10-12 members. Absenteeism, conflict over incentive payment and differences in opinions are some of the normal phenomena that can be seen in a group. Therefore, groups should be divided into sub-groups when the numbers go beyond 12 (Mullins 2010: 315). Managers should also be sensitive on the balance of work performance and social interactions in the informal groups. Sometimes, groups may be inclined toward social processes and spend too much time talking rather than working (Mullins 2010:314). Managers therefore need to be capable to observe and create a better climate in the groups. Figure British Airways Organisational Structure (The Official Board 2010) 4.3 Organisational Culture Organisational culture plays an important role to bring in change in organisation. According to Armstrong (2009:384), organisational culture is the unspoken ways that shape the ways in which people in organisations behave and things get done. Drennan (1992) also defines culture as typical of the organisation, the habits, the prevailing attitudes, and the grown-up pattern of accepted and expected behaviour (Brown 1998: 8). One of the factors that formed the organisational culture is the influence of visionary leaders. British Airways had undergone many waves of culture change since late 70s. Under the leadership of Collin Marshall, the companys chief executive during 1983, the company was transformed from a disastrous loss-making company into a profit-making world class organisation. He introduced Putting People First program and had successfully overturned the atmosphere in the organisation. He challenged the hierarchical and militaristic culture that existed at that time by asking the staffs not to wear uniform to work. He also constantly motivated the staffs to have positive attitudes in themselves, set personal goals and dealing with stress. Members of the organisation are very much encouraged by the families atmosphere promoted during that period (Irena and Adrian 2002). British Airways experienced few more restructuring processes in the hands of different leaders following Collin Marshall. It is believed the organisation is also undergoing a major culture change under the current leadership of Willie Walsh. The organisational culture is changed from people-oriented to power-oriented under the management of Willie Walsh. Members in the organisation became more competitive and responsive to personality as the values and beliefs are changed. Although it cannot be concluded by saying one culture is better than the other, the culture that Willie Walsh introduced into the organisation seems to be inappropriate and hinder its performance (Armstrong 2009: 398). 4.4 Resourcing and Legal Issues Another crucial aspect to achieve the goals of the organisation is people resourcing. Organisations need to make sure they can obtain and retain the right people that can fit into their organisational and perform in a productive way. Therefore, strategies such as human resource planning, recruitment and selection, selection interviewing, selection tests, introduction to the organization and release from the organization are genuinely required to build up the strength of human aspect in the organisation (Armstrong 2001). In devising its strategy on human resource planning, British Airways has to be to be able to forecast future people needs (demand forecasting), forecast future availability of people (supply forecasting) and make plans to match supply to demand (Armstrong 2001). These require the human resource department of British Airways to have thorough understanding of both the internal and external environments of the organisation. Examples of the internal environments include sales forecast and introduction of new technology whereby instances of external environment are such like labour market condition and labour turnover (Wilson 2011). Many organisations tend to promote people from within the organisation when there are vacancies in the upper level. This resourcing policy is known as qualification driven. British Airways is not an exception to this. British Airways advertises internal vacancies to its employees and provide cross training when necessary (British Airways 2011). With the implementation of restructuring programme named Compete 2012, British Airways also encourages its people to move between functions to develop their talents and skills. This once again confirms its usual practice of promoting people internally (British Airways 2010). Despite its focus on internal promotion, British Airways does not neglect the importance of injecting talents and fresh ideas into the vein of the organisation. Its external recruitment is carried out firstly through its recruitment website, which also forms the initial selection process. Applicants are then asked to attend the assessment day. They will then be accessed through different methods such as group exercises, interviews, psychometric tests, presentations, fact-finding exercise or role play (British Airways 2011). As a global organisation, BA is renowned in its workforce diversity. This requires the organisation to comply with different laws and legislations such as Sex Discrimination Act 1975, Race Relations Act 1976 and Data Protection Act (British Airways 2011). In spite of the diversified culture image that it has built up over the years, flaws can still be seen in the way British Airways manage its people. The company was sued for indirect sex discrimination by one of its female pilot in year 2005. Jessica Starmer, BAs female pilot requested to work 50% part time to take care of her newborn baby. However, the organisation can only offered her 75% work, which was unacceptable to Starmer and will cause her to give up her favourite job. It can be seen from this case that British Airways was not ready to accommodate working mothers and possibly exclude females from its pilot. Starmer eventually won this discrimination case and British Airways had to reconsider its way of managing work life ba lance for both men and women (BBC 2005). Employees well being should constantly be examined and improved in the organisation. 4.5 Skills, Training and Development Learning, training and development processes are ways to ensure individuals and organisations can enhance their performance and meet organisations objectives. One crucial framework of understanding how people learn is the work of Kolb. Kolb suggests learning as recurring process with four stages as shown in the diagram below. Figure Kolbs Learning Style (Clark 2008) The four stages (concrete experience, reflective observation, abstract conceptualisation and active experimentation) was then categorised by Honey and Mumford as activists, reflectors, theorists and pragmatists. It is contended that activists prefer to learn by actively participate in activities, reflectors learn through observation and reflections, theorists learn best through linking their experiences with concepts and theories, and pragmatists have a preference in transferring new information to real-life situations (Pilbeam and Corbridge 2010: 357). Understanding how people learn through different HRM frameworks are crucial for British Airways to design the learning for its employees. By examining the training and learning design of British Airways, it is quite satisfactory that British Airways has provide ample training resources such as learning centres, library facilities, reference materials, audiotapes and video based learning (Job Vacancies Advice n.d.). British Airways also develops different training schemes such as Behaviour for Success, Leadership Matters and A Leader Development Portfolio (British Airways 2010). Graduate opportunities and training schemes are also provided to the students and graduates through series of interviews and selections (British Airways 2010). These shows that the organisation is concern about different learning styles of individuals and have provided different designs to match their learning needs. However, In relation to the chaotic opening of Heathrows Terminal 5, British Airways employees claimed that their failure was due to inadequate training days and the lack of essential support (BBC 2008). This incident should provide a little window for the management to realise that there is still a lack the way British Airways evaluate its employees learning activity and process. Furthermore, in dealing with the recent strike issue, British Airways is planning on training its ground staffs who have no flying experience to become cabin crews in 21 days (The Guardian 2010). This is inevitably worrying as these employees might not have appropriate knowledge, skills, and attitude to fill in the positions in such a short period. This hasty decision will only pull the company away from identifying and analysing the learning needs of its employees (Pilbeam and Corbridge 2010: 352). 4.6 Appraisal Performance appraisal is a key attribute in driving an organisation towards competitive advantage. Though it may not be unwelcomed by the participants, it nevertheless provides crucial data for efficient decision-making, identifies training needs, and set levels of reward (Gold and Bratton 2003: 250). An effective appraisal system will also help the organisations to assess their staff against companies objectives, provide opportunities for the organisation to give good feedback to employees and motivate them (Business Link 2011). Appraisal can be carried out in different forms such as top-down schemes, self-appraisal, peer appraisal, upward appraisal and multi-rater appraisal or 360-degree feedback (Pilbeam and Corbridge 2010: 323). The employees progress is monitored both informally and formally in British Airways. Informally, the staffs will have to discuss with their manager about their performance and formally, they will need to go through an annual performance review (British Airways 2011). This top-down appraisal system is designed to encourage continuous improvement in employees performance and behaviour. However, it is questionable whether the appraisal is effective. Due to the linkage of appraisal with pay in British Airways, employees might be reluctant to openly discuss their problems at work with their line managers. Issues such as preferential treatment and lack of partiality may also invalidate the effort taken. Though immediate manager are inevitably in the best position to appraise employee performance, consideration should be given to evaluate performance through peer appraisal or multi-rater appraisal (Pilbeam and Corbridge 2010: 323). 4.7 Coaching and Mentoring According to Chartered Institute of Personnel and Development (CIDP) (2010), coaching is a process to develop an individuals skills and knowledge in order to improve their work performance. Though it may involve the employees private life, the target is on achieving specific skills and goals. Mentoring, which is a method to transfer the knowledge, skills and experience in the challenging workplace, is often used interchangeably with coaching. Comparing to coaching, which is conducted in a shorter period, mentoring tends to describe a long term relationship where a more experienced staff supports the progression of his inexperienced colleague. In fact, coaching and mentoring is very much linked with overall learning and development strategies. According to the 2010 Learning and development survey conducted by CIDP (2010), more than half of the participants felt that coaching is the most effective way of learning and development. British Airways has always been a great success in coaching and mentoring its employees. As mentioned earlier, British Airways embed different training resources and programs to support and sustain the development of its people. Qualified pilots who apply to the Direct Entry Pilot Scheme offered by the organisation will need to attend training courses before they are allowed to join the fleets. They will be put under the supervision of experienced training team until the completion of Line Check (British Airways 2011). This efficient coaching and mentoring thus lead the pilots into the right behaviour and work effectively. 4.8 Performance and Motivation People need to be motivated to work. In order to improve the performance, it is important for managers to motivate and encourage their staffs. Throughout the years, various schools of thoughts on motivation have been established. Some of the well known theories are McGreggors theory X and theory Y, Adams equity theory, Maslows hierarchy of needs and Herzbergs two factor theory (Wilson 2011). This section will focus only the first two theories McGreggors theory X and theory Y and Adams equity theory. A notable study conducted from 1945-1965 revealed that what employees desire the most from a job is security, following by advancement, type of work and company. This is against the common belief that money is the primary motivating factor. However, this should not send the signal to the company to reward employee inadequately (Accel-Team 2010). However, in the recent dispute with its cabin crew, it became obvious that British Airways Chief Executive, Mr. Willie Walsh is incompetent to address this idea. In this dispute concerning the cabins pay condition, Willie Walsh proves that his managerial style falls under McGreggors theory X. Unlike theory Y which encourages participative communication, Willie Walsh cultivates a downward direction communication flow from manager to subordinates (Barnett 2011). This can be seen by his act in snatching the offer of Unite union off the negotiation table in March 2010 without saying a further word (The Guardian 2010). His autocratic managerial style causes British Airways suffers heavy resistance from its employees and eventually leads to the decrease in employees morale. On the other hand, equity theory of motivation reveals the assumptions that individuals hold about what is value and worthwhile (Wilson 2011). This theory holds that a persons sense of fairness is resulting from comparison between his input-to-output ratios to the others see Figure 6 below (Business Balls 2010). According to a former British Airways crew member, the company has not treated its members with a fair view. The organisation compares its cabin crews salaries with low cost carriers such as Virgins and Easyjet. This is viewed as unreasonable since British Airways had been branded as a global premium airline. It is also found out that the organisations proposal for new fleet salaries of  £11,000 basic plus  £2.40 an hour is much lower comparing to other premium airlines such as Singapore and Emirates. Comparing to Singapore Airline (which pay not only  £20,792 to its crew, but also gives them the benefits of one months salary annual supplement plus health and pension p ackages) British Airways offer is apparently diminishing the effort of its members (The Guardian 2010). Equity theory should reminds British Airways management that its people must be managed and treated accordingly as they would compare the way they are treated with their surrounding environment (Business Balls 2010). Figure Adams Equity Theory (Business Balls 2010) 5.0 Future Directions 5.1 Change Management Plan With the fast changing global business environment, organisations have to be capable to respond quickly enough by implementing change. The chance of whether an organisation can survive is very much depending on how effective it deals with the changes such as new government policies, economic fluctuation, new competitors and etc. Changes are initiated by leaders who are clear with the organisations vision and put that vision into reality through medium term mission and deployment plan (Wilson 2010). Kotter and Schlessinger (1979) set out six approaches to manage resistance of change. These include the following: Education and communication inform people about the change effort beforehand Participation and involvement involve people in the change effort Facilitation and support provide coaching and mentoring to deal with adjustment problems Negotiation and agreement deal with resistance by offering incentives Manipulation and co-option give a leader a symbolic role in decision making without really involved in the change effort Explicit and implicit coercion force employees into accepting change by making clear that resistance can lead to losing jobs, transferring or not promoting (Value Based Management 2011) There is no one approach which out-ruled the other approaches. The suitability of the change approach is based upon the situation that an organisation is facing. Therefore, leaders have to exercise their wisdom and discernment when choosing the approach to deal with resistance. Willie Walshs tactic of using explicit and implicit coercion to manage change apparently is destructive to the organisation as it had pushed the resistance even further. As the cabin crews and the Unite union are in the position of power, it is more likely that negotiation and agreement should be applied. 5.2 Organisational Development Organisational development is defined as a process that applies behavioural science knowledge and practices to help organisations achieve g