1.0 Executive Summary
British Airways PLC is one of the largest international airlines in the world, founded in 1974 and based at Heathrow Airport in London, the busiest international airport in the world. It has a global flight network through partners such as USAir in the United States, Qantas in Australia, and TAT European Airlines in France. Via its own operations and those of its alliance partners, British Airways serves 95 million passengers a year using 441 airports in 86 countries and more than 1,000 planes. British Airways’ earliest predecessor was Aircraft Transport & Travel, Ltd., founded in 1916. On August 25, 1919, this company inaugurated the world’s first scheduled international air service, with a converted de Havilland 4A day bomber leaving Hounslow (later Heathrow) Airport for London. In February 1987, British Airways was privatised and listed on the London Stock Exchange.
Moreover, British Airways is showing changes that have taken place in the company. The choice reflects a number of diverse strands within the economy and employee relations within the organisation. A one-time public sector company, formed through merger, privatised in the 1987 and seen by many commentators as one of the great successes of the privatisation era, starts to experience difficulties in the 1990s as trading conditions become less favourable. The combined impact of recession and intensified competition as a result of European de-regulation has led to important shifts in business strategy with contrasting implications for its staff, an approach that has, with some modifications, continued until today.
2.0 Introduction
The assignment focuses specifically on changes in employment relations since privatisation in 1984, as well as the specifics of the BA situation, the extent to which the story of BA mirrors developments in employment relations within the British economy more generally over this period. It is also important to focus on the interactions between BA’s wider operating environment, its business strategy and its evolving approaches to employee relations.
Furthermore, British Airways and Spanish airline Iberia have signed a deal to merge and create one of the world’s biggest airline groups, which was provisionally agreed in November last year, is expected to be completed by the end of this year. In a statement, the two companies said the merger would benefit shareholders, employees and customers. It is expected to save the airlines 400m euros ($533m; £350m) a year. (http://news.bbc.co.uk/1/hi/8608667.stm). But on the other hand, with the unpleasant opening of Terminal 5 in March 2008 and with the travel chaos of the Icelandic volcanic ashes which made UK airspace being closed, it has nonetheless prevented its cabin crew staff to call upon strike as staff are unhappy with BA because the company wants to make major savings on its operational costs. In November it cut 1,700 jobs, including a reduction in the size of long-haul flight crews out of Heathrow from 15 to 14. The airline also wants three-quarters of its cabin crew to accept a pay freeze this year. It says the changes will save it £60 million a year and are designed to secure its long-term future. The company says cabin crew face no pay cut or reduction in their terms and conditions, and remain the best rewarded in the UK airline industry. Unite is the trade union fighting for cabin crew staff and their negotiators offered that cabin crew would take 2.6 per cent pay cut and agree to the changes of their work practices, which the union claimed would save BA over £60 million. This was rejected by BA, which said the savings fell far short of what was needed. Unite fears BA’s offer would mean a four-year pay freeze for cabin crew.
3.0 Strategic Human Resources
Business strategy concerns the long-term direction and goals of a firm and the broad formula by which that firm attempts to acquire and deploy resources in order to secure and sustain competitive advantage (Faulkner and Johnson, 1992: Porter, 1980). Wright and McMahan (1992) defined Strategic Human Resources as an outcome “the pattern of planned HR deployments and activities intended to enable an organisation to achieve its goals”. The link between HR strategy and business strategy may have critical implications for firm’s performance. For example, British Airways is currently being hit by a wave of strikes by its cabin crew staff where the board of directors were unable to come to a decision which implicated the long strategy of the business to their cabin crew staff expectations. It is assumed that it is impossible to understand the nature of HR strategies without taking both intraorganisational politics and environmental/institutional contingencies into account.
3.1 Employee Relations
Organisations are facing problems in the current market. The last thing that companies would want is confusion and havoc within their departments and that is what is currently happening with British Airways. Employees who are in unions have a strong say over their own welfare and on management policies. If the BA strike is finally resolved, what might be hard to rectify is the working relationships between staff and bosses and among employees. The union claims 14 staff have been suspended for membership of a Facebook group that discussed a list of pilots who were prepared to be trained to cover for striking cabin crew. British Airways says it is appropriate it investigates allegations that some of its employees have been intimidated. Some cabin crew say there are now divisions between staff who worked during the strike and those who took industrial action and they dread what kind of atmosphere this could create in the claustrophobic environment of a jet. (http://news.bbc.co.uk/1/hi/business/8597519.stm?utm_source=WorldTradeNews&utm_medium=twitter)
3.2 Employee Retention and Engagement
In its broadest sense, as per CIPD “employee retention” simply refers to how many of the current employees stay in an organisation over a period of time. Using this definition, a high retention rate would not simply be a good thing. It includes firing non-performing employees fearing lawsuits, as well as unhappy employees who feel trapped in their jobs due to finances, inertia, a sense of obligation or other reasons. As an example, British Airways is paying its cabin crew and pilots up to twice as much as rival airlines, prompting the carrier to demand significant cuts from its staff. This in turn has caused a backfiring from trade unions. Data from the Civil Aviation Authority (CAA) has shown that BA’s employees wage are higher than its rivals. The average salary for BA cabin crew, including bonuses and allowances, is £29,900, compared to £14,400 for Virgin Atlantic and £20,200 for EasyJet (The Times 10th June 2009).
Employee engagement can be seen as a combination of commitment to the organisation and its values plus a willingness to help out colleagues. (http://www.cipd.co.uk/subjects/empreltns/general/empengmt.htm) It goes beyond job satisfaction and is not simply motivation. Engagement is something the employee has to offer: it cannot be ‘required’ as part of the employment contract. The diagram below explains how employee engagement contributes to the strategic progress of an organisation.
Although BA employees are not happy with working conditions and are resisting the change the board of directors is bringing to the strategic planning of the company, employees should be motivated by giving them alternatives to the change or otherwise employees are not going to participate in the company’s strategic planning.
4.0 Issue and Crisis Management
Chase and Barry Jones described issue management as “a tool which companies could use to identify, analyze and manage emerging issues… and respond to them before they became public knowledge”. Others see it as a good means to prevent a crisis or maybe to be more prepared in case a crisis does occur. It is a sign of a learning company, up to date with the environment it is working in and apt and able to address a situation in a more poised and prepared manner. Issue management can be very beneficial as research has shown that companies that practice issue management can “increase market share, enhance corporate reputation, save money and build important relationships” (Michael Regester & Judy Larkin, 2008).
Crisis management is sometimes underrated by companies. It is a long process that needs deep thinking through the whole planning of the before, during and after of the crisis (Alison Theaker, 2008). In a situation that is already very delicate due to the nature of events, crisis management is crucial for the company to be projected positively through the media channels.
In the case of BA, having previously had staff walk out on the company and faced strikes, the organisation should have done more research and surveys to anticipate the crisis that is about to occur. Not only were they not well prepared with the strike that caused £40 million (http://uk.reuters.com/article/idUKTRE64633K20100507) loss in revenue, but also the situation turned into a crisis whereby BA had to face national inquiry about its ability as an organisation to manage its own staff and to satisfy its customers. The BA strike made the headlines in the media for weeks, highly affecting the credibility of the company.
Public Relations is a management function that classically focuses on long term patterns of interaction between an organization and all of its various publics, both supportive and non-supportive. Public relations seek to enhance these relationships, thus generating mutual understanding, goodwill and support. (Strategic planning for public relations by Ronald D. Smith). Therefore, BA has reassured its customers that strikes are not going to affect them despite close competitors taking this opportunity to ask potential customers not to risk booking flights from BA and Channel 4 can confirm that Travel agents are saying that strike action is leading to BA losing “a significant amount of market share amongst business passengers.” (Channel 4 News Exclusive).
5.0 Branding
Branding may be defined as the marketing practice of creating a name, symbol or design that identifies and differentiates a product from other products. Brand values must be right to fit the nostalgia megatrend (Marie Ridgley, Added Value, 2009).
A PR storm has been created by mismanagement, strategic circumstances and simple bad luck, and the events of the past few days will blight BA’s brand for years.
British Airways is a Branded House; the best possible brand architecture for employer branding, service businesses and brand strategy. However, one of its key disadvantages is its vulnerability to crisis. When Coca-Cola endured the unmitigated disaster of Dasani, it took one on the nose and scrapped a brand that had been expected to make millions. But no damage was done to Coke, or any of the brands in its portfolio, because of the house of brands structure it operates. In BA’s case, the problems at Terminal 5 and strikes hit 100% of the brand, all over the world.
Then there is the very specific damage done to BA’s brand equity. At the heart of its positioning are ‘reassurance’ and ‘reliability’, making it peculiarly vulnerable to the havoc caused by strikes. In branding terms, there is a world of difference between inconsistency and contradiction. BA is facing the mother of all contradictions, amplified by global media coverage. This, however, leaves the brand facing a torrent of negative coverage and passenger experiences, without any possible injection of brand equity in the foreseeable future.
BA’s marketing has also become its own worst enemy. Only a few days ago, it was drawing as much attention to Terminal 5 as possible, and promoting it as the future of the airline. The image of BA chief Willie Walsh, arms outstretched, gushing, ‘I think it’s great and it’s going to get better. This is a hundred times better than anything else at Heathrow, which has been etched in the annals of PR blunders. Aside from undermining Walsh and his tenure as chief executive, this has compounded the damage to the brand. It is one thing to get it wrong. It is another to boast about how right you have got it, then get it wrong.
Once the crisis began, BA’s well-prepared crisis-management plan kicked in. But despite the sincere apologies and professional PR job, this was a crisis that could not be managed.
6.0 Evaluation and Recommendation
BA’s plan of one of the pillars, which is for the workplace, indicates that they are enabling colleagues to be responsible by bringing people and processes together, which started in 2008 and is still continuing. This shows BA has taken the workplace as important in order to make the organisation successful, but with the current situation, the board of directors should take every step in order the long term targets and objectives are not affected such as the strike action has a negative impact on all aspects of the organisation, both internal and external. BA’s strategic plan of cutting expenses should have been dealt with without making it an issue for the company, as such making its staff aware of the current situation and taking steps such as finding the effects of each cut and its impacts on the company using an appropriate way to implement change management and see the cost and benefits to the company. For example, using the PDCA (Plan-Do-Study-Act) cycle which is a four model for carrying change. Diagram A below shows the cycle:
Diagram A- PDCA diagram
In order to use this tool, there is a procedure to follow which is as follows:
- Plan. Recognise an opportunity and plan a change.
- Do. Test the change. Carry out a small-scale study.
- Study. Review the test, analyse the results and identify what was learnt.
- Act. Take action based on what was learnt in the study step: If the change did not work, go through the cycle again with a different plan. If you were successful, incorporate what you learned from the test into wider changes. Use the outcomes to plan new improvements, beginning the cycle again.
7.0 Conclusion
It is therefore the relationship between the management of British Airways and its staff to come to a decision where they can agree on a deal that would be to the good for the long term benefit of the company, if appropriate steps such as a better way of implementing change by using the PDSA cycle as an example.
References
Faulkner and Johnson, 1992: Porter, 1980
Wright and McMahan (1992)
Business and Jobs Krish
(http://news.bbc.co.uk/1/hi/business/8597519.stm?utm_source=WorldTradeNews&utm_medium=twitter)
(http://www.channel4.com/news/articles/business_money/ba+8216losing+market+share8217+claim+travel+agents/3591962)
(http://www.cipd.co.uk/subjects/empreltns/general/empengmt.htm)
(http://news.bbc.co.uk/1/hi/8608667.stm)
(http://news.bbc.co.uk/1/hi/8608667.stm)
Michael Regester & Judy Larkin, 2008
Alison Theaker, 2008
(http://uk.reuters.com/article/idUKTRE64633K20100507)
Strategic planning for public relations by Ronald D. Smith
Marie Ridgley, Added Value, 2009