The organisation & how it functions
I work as HR advisor for British Airways. I am required to investigate and write a report to the Chief Executive Officer (CEO) on business and contextual factors impacting my organisation. Here is the report based on my research and fact finding.
British Airways is the largest airline in the United Kingdom. It was founded in 1972. They have their head office in Harmondsworth. However, its main base is London Heathrow and Gatwick airport. British Airways employs 40,000 people, based mainly in the UK, although it has staff based in over 75 countries around the world (https://www.britishairways.com/en-gb/bamediacentre/newsarticles?articleID=20140108100818#.VflDRxFViko)
For almost 13 years as a public company, British Airways became a privately owned company in 1987.
Organisational structure plays a vital role in determining the strategy planning of the company. It is imperative to performance of the business. British Airways had very traditional and bureaucratic approach in terms of its organisational structure before privatisation. However, the company has undergone several structural changes to keep up with market needs.
British Airways can be best described as a divisional organisation. Due to the global requirements of the business it becomes easy to have small operational divisions reporting to the central authority. While these small divisions handle operational decisions, all the strategic decisions are with central headquarters (Business Issues and the Contexts of Human Resources, pg. 11). (British airways structure model refer to appendix A)
British Airways worked in very conventional autocratic management style in the past, however due to the changing environment, and tough competition it had to change its style and adopt the democratic style of management. This style of working gave the employees liberty and motivation to work their methods to achieve the targets.
Many organisations face situations here they need to change their structure, style and culture of work. In recent years, British Airways had to change its beliefs, traditional authoritative approach to a more participative one to keep up with the competition and cope with changing environment. According to Charles Handy, there are four kinds of Culture; http://beta.tutor2u.net/business/reference/models-of-organisational-culture-handy
Organisations where the employees are given responsibilities according to their abilities. Every individual handles their tasks.
Organisations where few people take authority and decisions. They delegate tasks to employees.
Organisations where the team is formed to fulfil certain tasks or project. Person
In organisations where an individual gives themselves more value than the organisation.
Table 1- Charles Handy Culture Model
• British Airways has adopted role culture in their organisation. Employees are given the task to work according to their specialisation and also they take ownership of fulfilling them. Depending on the position and responsibilities individuals are given power.
HR has played a vital role in supporting British Airways to achieve its objectives. It works hand in hand with strategic business partners and management. HR department objectives are linked with company's culture, values and business plans. Since British Airways had undergone many changes In terms of its business strategy and objectives, Hr has not only been a support system but also evaluated the success of these changes at every step. According to Ullrich's ‘three-legged model,' HR is perceived as: (http://www.cipd.co.uk/hr-resources/factsheets/hr-business-partnering.aspx)
• HR business partners (or strategic partners) – senior or key HR professionals working closely with business leaders or line managers.
• HR centres of excellence – Usually small teams of HR experts with specialist knowledge of leading-edge HR solutions.
• HR shared services – Single, often relatively large, unit that handles all the routine ‘transactional' services across the business such as recruitment administration, payroll, absence monitoring and advice on simpler employee relations issues.
As per Ullrich's model HR falls in the first category of business or strategic partners. HR works as a link between the business and other departments, ensuring organisational effectiveness.
British Airways being a very large and diverse company, HR plays an important role in building and binding departments. HR is involved with various activities, administrative tasks, strategic planning, performance management, manpower logistics, training and recruitment. However the main function of HR is being an integral part of strategy planning. HR makes sure the policies are procedure are effectively followed. HR contributes as a support for the organisation to achieve its objectives.
Business Performance & the dealing with changing environment
There are numerous factors that affect the functioning of the organisation; these factors can be both internal and external. To identify and evaluate these external and environmental factors a common tool used is PESTLE analysis. PEST Analysis is a simple and widely used tool that helps you analyse the Political, Economic, Socio-Cultural, and Technological changes in your business environment. (https://www.mindtools.com/pages/article/newTMC_09.htm).
Adherence to changing legislations
Change in tax policy
Environment regulations Economic
Competition from low cost budget Airlines
Increase in fuel cost
Risk factors with suppliers e.g. (timely delivery, negotiating rates)
Employment and unemployment rate
Cost of living
Change in customer behaviour
Outsourcing catering services
Safety and security awareness Technological
Social media and Internet
British Airways needs to keep up with technology, but at the same time not becoming so dependant as there are also customers who need help with changing systems.
Industrial actions e.g. strikes
Laws and legislations Environmental
New environmental legislation e.g. Noise pollution control can affect the cost and budget.
Environmental consciousness amongst customers.
Table 2 PESTLE Analysis
All these factors shown in PESTLE affect the business and shape the future strategies of British Airways. It is therefore, essential to analyse and identify these factors. To deal with these external factors organisation needs to prepare itself. Forecasting, planning and redesigning can help while addressing to these factors. Apart from factors stated in PESTLE analysis there are also other factors that impact organisation. Impact of changes in legislation can also effect the functioning of organisation for e.g. the new legislation of state pension regulation 2015, according to this legislation the employer and employee have to put their contribution on pension. This could impact the business as earlier there was a flexibility whereby if employees could opt out and the employer would also not contribute, however under this legislation there is no such flexibility. This could impact the revenue of the organisation. Therefore current or forthcoming legislations and policies also impact the business.
One of the biggest challenges British Airways faces is to maintain high standards of customer service, due to the competition it becomes hard job to maintain and improve its image. To track our progress, we use Key performance indicators, employee engagement surveys and customer surveys.
Speak Up! The survey, conducted and hosted by the independent research organisation IPSO MORI is conducted among employees to measure performance. With the help of this survey, we are trying to assess the level of engagement knowledge about the organisation. Another survey conducted for customers is Think Customer Survey. This is independent market research involving more than 36,000 customers each month. (https://www.britishairways.com/cms/global/microsites/ba_reports0910/our_business/strategy5.html). This survey is very useful in determining customer satisfaction. Apart from these surveys, Key performance indicators Profit margin, operational strategy are primarily used to assess our achievements and downfalls.
We set annual targets in the organisation as part of our business strategy and planning. Towards the end of the year key indicators and survey's helps to compare and establish what percentage we have been able to achieve our targets and also make necessary changes where needed.
Curt Lewin in his change model talks about three stages: (https://www.mindtools.com/pages/article/newPPM_94.htm)
Unfreeze: In this stage, it's necessary to prepare the organisation of changes. This stage is usually difficult as we need to cut down on way things usually happen. Also need to motivate organisation for re-examine core.
Change: In this stage, people start to accepting the changes, this transition is not instant. In order to accept changes it's important to understand the benefits of this change.
Refreeze: In this stage change is taking place and people are accepting it. People get confident and get use to changes.
Time and communication are two main aspects of brining in any change in organisation. One example of trying to bring in change with reference to Lewin's model was with the help of employee survey. In the last survey conducted it was found that due to redundancies job security had become a major issue. This was affecting the performance of employees to great extent. In order to justify the changes and motivate the employees the management decided to have departmental meetings whereby the restructuring was explained to all the employees this was the first stage of Unfreeze. In order to accept the changes the benefits was explained also how the changes will take place in the second stage of change. In the final stage of refreeze, the changes were established giving full support to staff.
The Positioning of the Organisation
British Airways is United Kingdom's leading airline. Despite being the dominant position in the market, British Airways needs to match constantly up with changing requirements of the industry and competition. Market position of British Airways is explained further with Porter‘s five forces of market position (https://www.mindtools.com/pages/article/newTMC_08.htm)
Supplier Power: British Airways has a well-established relation its suppliers. However, a lot of it depends on the requirements for, e.g., in case of fluctuating fuel prices can affect the price of tickets. In terms of the buyer, choices are limited as more or fewer fuel prices are fixed.
Buyer Power: Due to stiff competition lot of buying power depends on what kind of deals people are being offered. Also, strikes can further add to unsatisfied customers. To attract more customers, BA is always trying to introduce holiday packages and deals.
Competitive Rivalry: In the airline industry since the supply is more that demand airlines have to cut down on their prices to meet their margin. British Airways is faced a high level of competition more on short haul. In the aim to maintain its image organisation is trying to overcome competition at all levels.
The Threat of Substitution: Due to the economic situation, customers are resorting to substitute modes of travelling for e.g. trains, coaches. These competitors are providing discounts that are more economical to customers.
Threat of New Entry: Although British Airways has a powerful position in the industry also with customer loyalty and new entrants are not major threat, however new entrants such as Ryan Air, Easy Jet are giving competition in terms of short haul flights and deals.
Organisational success depends on external and internal factors were affecting it. The organisation has very little control on these external factors but awareness of these can help the organisation prepare itself and act accordingly. As we have seen in PESTLE analysis in Table B, there are many factors that affect Organisation. Social demographic factors such as ageing population, pension credit, safety and security, etc. influence the organisation. Porter‘s model also as we have seen shows the threats and market situation that the organisation faces. Data acquired from Office of National Statistics shows that in terms of increase in the proportion of older people in the UK, the percentage of persons aged 65 and over increased from 15 percent in 1985 to 17 percent in 2010, an increase of 1.7 million people. By 2035 it is projected that those aged 65 and over will account for 23 percent of the total population. (http://www.ons.gov.uk/ons/rel/mortality-ageing/focus-on-older-people/population-ageing-in-the-united-kingdom-and-europe/rpt-age-uk-eu.html). This would directly impact the organisation as on one hand it would retain the experienced workforce but it will be difficult to get younger workforce in the organisation. An ageing population has various implications on HR. Retaining the older population does benefit as the cost of training and recruiting new staff can be saved; however there are many other added costs such as flexible working, health benefits, long-term retirement. The HR has to act in accordance with what benefits the organisation most. In our organisation, we use ONS for analysing many other economic and social factors such as Inflation rate. Other data like CIPD labour outlook is used to refer to employment trends. With the help of many such data sources organisation can prepare itself to cope with changes and impact of external factors.
Globalisation is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. (http://www.studymode.com/essays/). Globalisation affects the environmental, cultural, political and economic developments in the world. Airline Industry is rapidly growing and subject to many changes due to the external environment. British Airways have been also affected majorly. Oil price fluctuation is one of the examples affecting British Airways and many airlines as well. The increasing price of oil has affected the profit margin in a major way. Globalisation also has a positive effect on the organisation. Due to international trade and increased economic activity, consumer power and tourism industries are going up, as a result, leading infrequent travelling and giving the airline profits.
The term ‘government policy' can be used to describe any course of action which intends to change a certain situation. (http://www.nidirect.gov.uk/what-is-government-policy) Government policies affect any organisation at all levels local and international. Like all other organisations, British Airways comply with all the EU and government policies. One example of EU policy is complying Health and safety legislations. Safety and security of employees and customers are of prime importance. British Airways is making efforts to make sure we can provide the safe working environment. With the expansion of T5, we worked with regulatory agencies and contracted external agencies to impart safety training. HR worked along with these external agencies to arrange training at all levels. Also came up with programmes like Ramp safe, aiming health and safety for ramp agents. In addition to this introduced minimum 30kg weight per suitcase adhering to BAA standards.
British Airways complies with the employment legislations such as Disability Discrimination Act, sex discrimination act, Minimum wages Act, working time directive act, etc. British Airways assures that these policies are followed in the organisation with best practice. HR in the organisation is highly affected by the government legislations, labour and employment laws. It is the function of HR to comply with regulations. Any changes in these legislations can affect the organisations and its HR's function to introduce and inform the changes for the e.g. change in paternity leave, the flexibility of splitting the leave between father and mother.
Role of HR in Your Organisation:
British Airways is a very diverse and multicultural organisation, due to the nature of work we encourage people from different cultural background to share their experience and knowledge. HR plays a vital role in ensuring the business has right people and right skills in reaching our goals. Along with its many functions like Recruitment and Training, Retention of employees, Performance appraisals, absenteeism, etc., HR also plays an important part in strategic planning and execution. For example when British Airways was moving its base to T5, there was large-scale recruitment, urgent need to hire people in various departments, HR's worked along with Line managers and business management discussing the number of spaces that needed to be filled. To cope with the pressure, we hired contractors to assist with recruitment. David Ullrich identifies five roles (Business Issues and the Contexts of Human Resources, pg. 100) in HR. British Airways HR department fits in the category of Hr as a strategy partner (Refer to Appendix B). HR is very proactive and heart of the business. HR is not only involved in developing but also implementing polices. The external factors such as cost, Recession, Unemployment rate, inflations, technology change, competition, social factors such as ethics, employee motivation all these factors can affect the functioning of HR.
The HR dept. Is effectively trying to manage such changes, right communication, empowering the managers and employees, keeping the motivation high by providing required skills are some of the ways they deal with external situations. HR understands the business needs and can influence decisions and policies. Thus, HR not only fulfils its day to day tasks but also provides platform and right conditions for employees to grow.
Organisations use both internal and external sources of data to gather information. These data sources act as a guide to anticipate and plan activities. British Airways uses many such databases, manuals, surveys, and statistics to plan business. These databases could be technological, social and demographic or organisational. For example recently the company is facing a lot of absentee's and incurring a huge loss. The HR department to understand the pattern and reason for absentee's referred to absentee management data, which is an internal data storing information of absentees. Another example HR refers to is IPS (International Passenger Survey) carried out by Office of National statistics, this survey is conducted on passengers travelling to or out of UK. This survey helps in analysing the trend of tourism in UK. These trends help in knowing customers better and also boosts operational efficiency.
On the basis of PESTLE analysis and also other factors that are we looked at that's affects the organisation, recommendations I would like to propose are;
BA operates on a global scale and one of the biggest challenges British Airways is facing is Competition. The main challenges the organisation facing costs and competition. To deal with competition it's important firstly to understand travel trends and consumer behaviour, and accordingly introduce travel deals that no other competitors are offering for e.g. on the basis of passenger survey analytics data, forecast the travel patterns of the customers, and accordingly introduce aircrafts frequencies where customer travel more during the holiday period. Also, provide flexibility in bookings so the customer can make changes within reasonable period without affecting company's revenue. This would motivate customers to explore more holiday options within British Airways. Promote loyalty points on domestic flights, fast check in services and low-cost travel deals which will attract more frequent flyers.
Another factor that affects the organisation costs. Although there is flexibility in terms of suppliers we choose but the fuel price is more or less fixed. To overcome the fuel cost we can introduce low efficient aircraft's, introduce fuel efficiency training that can help with the accurate calculations of fuel needed by aircraft. However, these changes require both high levels of cost and time. Another way to balance the profit margin is we can reduce cost in other sectors e.g. operational costs, logistics, reduce waste and promote recycling.
The cost involved in these recommendations are as follows:
Figure 1-Cost Benefit Analysis
Following the cost implications is a communication plan designed to understand who and why I would recommend my proposals.
Recommendation to Why Method of Recommendation Time of Communication Reason
CEO Senior Stakeholder Powerpoint Presentation After being reviewed by other departments Heads Proposal approval by the CEO to start execution of the factors identified.
Finance Director To analyse and approve cost Cost/Benefit Analysis Immediate Review the feasibility of the proposal.
Chief Marketing Officer To plan and execute travel deals Powerpoint presentation Immediate Review the feasibility of the proposal.
Operations Director To analyse operations cost and possibilities Meetings Immediate Review the feasibility of the proposal.
HR Director To support and facilitate the proposal Meetings Immediate Review the feasibility of the proposal.
Based on my investigation, I have identified the contextual business factors that impact my organisation and HR issues within it. These external factors influence and impact the business. Therefore, it is important to recognise these factors. These factors shape in the decision making of the business for future. The role of HR is varied and it provides guidance and support to reach organisations goals. HR effectively supports the changes in the organisation due to the impact of contextual business factors. HR is overall responsible for overall smooth functioning of business.
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