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Factors that Influence Labour Turnover of Aircraft Maintenance Engineers in Kenya: A Case of Kenya Airways

Samuel Obino Mokaya BA, PGD, Ph.D. (Student) Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya,, Luke Kangogo Kittony Kenya Civil Aviation Authority, Nairobi, Kenya Paper presented at Makerere University Business School International Management and Conference, 2008

Kenya Airways has been experiencing high turnover of engineers, weakening its capacity to service and maintain its aircrafts internally. Arising thereof, the company incurs huge expenditures in maintaining and servicing its fleets in Europe and Asia. This study sought to establish the factors that influenced high turnover of engineers at Kenya Airways. A descriptive research approach was adopted for the study which covered simple random of 54 respondents out of a population of 270. A survey questionnaire was used to collect data, and analysis was through descriptive statistics. The results indicated high turnover of engineers with poor remuneration, industry dynamics, competition and poaching, a non-responsive management and poor leadership being the main causes of high turnover; with no immediate remedial plans. Though issues of high labour turnover had been raised with management, no action had been taken on them; instead the company had opted for external servicing and maintenance of its aircrafts. The study concluded that high turnover of engineers, was a major problem with Kenya Airways that needed immediate actions to reverse the trend. Further, labour turnover was factor of internal organizational issues of remuneration, working conditions and leadership. There were no immediate plans to address the problem as manifested by the companys continued reliance on external services with associated high costs than if done locally. Te study recommended improvement of terms and conditions of service in line with the dictates of the industry (benchmarked to those of leading competitors); regular consultations with and improvement in communication with engineers; acquisition of modern maintenance equipment among others to help reverse the trend. The ultimate focus should be to build its own internal capacity to service and maintain aircrafts as the savings from doing so are enormous. Key Words: labour turnover, aircraft engineers, industry dynamics, competition and poaching, working conditions, reward systems, non-responsive management, internal capacity, aircraft servicing and maintenance.

Background to the Study

Labor turnover is a measure of movement of employees in and out of employment within a particular firm (Owen, 2007). An annual turnover of 25% is considered to be normal. However a turnover rate of 100% would be considered as a major problem (Cole, 2002) and excessive labor turnover in an organization is a sign of existence of internal problems 1

(Armstrong, 2001).Certain professional skills take a long time to build with enormous organizational resources and loss of such professionals have profound negative impact on the organization (Cole, 2001). Apparently labor turnover is a global phenomenon and studies by Gonzaga (2003) revealed that labor turnover in Brazil is one of the highest in the world. An average of 3.4% of the formally employed are admitted and separated from their jobs every month, posing an annual turnover of 40.8. Studies carried out in USA (Owen, 2007) indicate a substantial decline arising from improved labour relations between employers and employees. According to Cole (2001), the current labor market situation is that of a buyers market, with the advantage firmly in the hands of employers. Even when there is high unemployment, there is invariably a shortage of employees with particular skills. In the case of engineers, competition will be fierce, for they are already trained to high standards. Waweru (1984) argues that high turnover is an indication of low morale and dissatisfaction amongst the employees. This view is consistent with Armstrong (2001) who contends that high turnover in an organization is an indication of a problem in that organization. High rate of labor turnover brings about negative publicity to an organization and causes dissatisfaction amongst employees resulting to negative production. The major asset of any organization and indeed a country is its human capital. Ivancevich (2003) views labor turnover as a perceived situation whereby employees see themselves as being unwanted in the organization. Armstrong and Tina (2005) emphasized what Karlmax (1865) wrote in Das Kapitas that the value of goods and services is determined by the amount of labour that goes into them and not the market place that determines prices. The knowledge and skills a worker has which comes from education and training, including that acquired through experience generates a stock of productive human capital. It is this human capital that is eluding Kenyan Airways (Naikuni, 2007). Kenya Airways was established in 1977 as a Government Parastatal following the collapse of the then East African Community. The organization inherited majority of the communitys fixed and current assets including a fully equipped aircraft maintenance facility. The engineering department at Kenya Airways is composed of Hangar, Engine workshop, Avionics workshop, component workshop, line maintenance, store, technical support services. At the time of collapse of the community, the engineering department was manned by a well trained and qualified labour force with all aircrafts serviced and maintained inhouse. However, over the years, Kenya Airways has been experiencing a high turnover of engineers as compared to other staff cadres, seriously affecting its internal capacity to maintain and service its aircrafts. Currently all major aircraft servicing and maintenance is currently being carried out in various parts of the world, mostly in Europe and Asia where the hourly cost of labour is higher than that of Kenya (Naikuni, 2007). This has resulted in the organization loosing the much needed revenue to other countries and a confirmation of the inadequacy of the engineering capacity at Kenya Airways. One major reason attributed to this trend is that Kenya Airways has been unable to attract qualified engineers, whereas the existing ones have been leaving for greener pastures in other competitor organizations.

Statement of the Problem

It is critical that Kenya Airways attracts and retains qualified and experienced engineers, as the safety of the traveling public depends to a great extent on the engineer who is releasing an aircraft. According to records with Kenya Airways (2007), the company lost 30 engineers to other competitor organizations between 2004 and 2007. This has led to its aircrafts being 2

maintained in other parts of the world, mostly in Europe and Asia where the cost of labour is relatively high as compared to Kenya. The results of un-audited interim financial report for the six months ended 30th September 2007 indicated a decline in pre-tax profit by 18.8 % and a major factor attributed to this is the high cost of aircraft maintenance. Kenya Civil Aviation Authority regulations (2007) require organizations like Kenya Airways to employ and retain adequate number of licensed engineers as appropriate to their maintenance ratings, failure to which the organization risks being closed down. Naikuni (2007) indicates that high turnover engineers in Kenya Airways has been one of the greatest challenges to the organization, especially licensed aircraft engineers who were leaving the organization for employment in other companies. Further, the number of engineers has not been growing in tandem with the growth of aircraft fleet. The introduction of three new major Airlines into Jomo Kenyatta Airport in 2008 further complicates the existing problem, as the new air lines are likely to poach engineers from Kenya Airways.

Purpose of the Study

The study was to investigate factors influencing labor turnover of engineers in Kenyan Airways. Specifically, the sought to establish the influence of rewards on labor turnover of engineers in Kenya airways; determine the extent to which poaching and competition, leadership style and working conditions on labour turnover of engineers in Kenya Airways.

Research Methodology
The study adopted a descriptive research approach. The population comprised of 180 engineers and 90 managers, all totaling 270. A sample of 54 respondents was selected for the study, through probability sampling approach. A survey questionnaire was used to collect data. Owing to the nature of information sought, data was analyzed qualitatively according to themes and presented by use of descriptive statistics: frequency distribution tables and charts.

Results and Analysis

A total of 54 questionnaires were circulated with 100% response rate. The research sought to find out the relationship between gender and labour turnover in the organization. 95% of the respondents were male while 5% were female, an indication that there were more male engineers than were female. 67% of the respondents were engineers, also referred to as the technical part of the organization and 33% were managers, comprising of quality assurance personnel, supervisors, system controllers, production and the senior engineering personnel. According to the results, 70% of the respondent felt that the rate of turnover of engineers at Kenya Airways was generally high, with the situation not likely to slow down as there were no immediate remedial plans. In span of 5 years (2002 2006), turnover showed an increasing trend (Figure 1). The year 2006 witnessed the highest incidence of turnover at 41%. It was 28% in 2005, 13% in 2004, 11% in 2003 and 7% in 2002. The results do reveal an increasing trend in turnover of engineers at Kenya Airways over the years. With this growing trend, the organization is likely to experience a serious lack of engineers in the next few years if the trend is not checked and contained.

Figure 1: Turnover of Engineers over a 5-year period

45 40 35 30 25 20 15 10 5 0 2006 2005 2004 2003 2002

Source: Survey data (2008) Low salary was the main cause of high turnover of engineers at Kenya Airways (Table 1). 65% of the respondents indicated that the salaries paid to engineers was not attractive, and was generally low to those paid other international airlines. Other causes were overworking (11%), lack of training opportunities (9%), lack of motivation and career advancement opportunities with 4%, lack of adequate recognition and rewards (7%) and pursuit of greener pastures (4%) of the respondents. The respondents felt that even though there were other benefits in addition to basic salary, salary was the main consideration to attract and retain engineers. The main explanation to this was that salary formed the basis for position setting and basis for retirement benefits. Table 1: Causes of high turnover of engineers Response Frequency Low salaries 35 Overworked 6 Lack of training 5 Lack of motivation 2 Lack of reward & recognition 4 Greener pastures 2 Total 54 Source: Survey data (2008)

Percentage% 65 11 9 4 7 4 100

Towards generating appropriate recommendations to address the problem of high labour turnover of engineers, the study sought respondents views on possible actions to address the problem and their responses were varied (Table 2): 61% of the respondents felt that increase in salaries of engineers could address the problem as it was the main cause. 18% suggested improvement in communication between management and engineers to ensure that even in 4

cases where demands could not be met, there was clear understanding among the parties affected. 15% of the respondents felt the need to implement proposals from engineers and meeting agreements, while 6% suggested the marching of experience, performance and qualifications with salary scales. Table 2: Respondents views on actions to address labour turnover Action Frequency Increase on salary 33 Improve communication among management staff 10 Implementation on agreements and proposals from 8 engineers March experience, performance & qualification with 3 salary Total 54 Source: Survey data (2008)

Percentage% 61 18 15 6 100

The results revealed an inadequate reward system for engineers and pointed to the need to improve their terms and conditions of service and ultimate retention. On the rating of rewards for engineers (Table 3), 11% of the respondents felt it was good, 35% felt it was fair with 28% feeling it was poor and 25% of the respondents describing it as very poor. Interestingly, none of the respondents felt that the prevailing rewards for engineers were very good. Table 3: Views on reward system Response Frequency Very Good 0 Good 6 Fair 19 Poor 15 Very poor 14 Total 54 Source: Survey data (2008)

Percentage% 0 11 35 28 26 100

The study also sought the opinion of respondents on how they viewed the prevailing management and leadership style in the organization and its effect on the high turnover of engineers (Table 4). 7% of the respondents were of the opinion that it was very good, 19% felt it was good and 44% felt it was fair. 30% of the respondents felt it was poor. This finding does indicate dissatisfaction with the management style prevailing and possibly a cause for high turnover; a confirmation that the prevailing management style was a factor in labour turnover. In particular, the respondents pointed to the non-responsiveness and non-attention to the issues affecting the engineers and lack of participation and involvement in decision making processes. Table 4: Views on prevailing leadership style Response Frequency Very Good 4 Good 10 Fair 24 Poor 16 Total 54 5

Percentage% 7 19 44 30 100

Source: Survey data (2008) There was a strong indication that the leadership style was not in consonance with the prevailing conditions in the airline industry and an appreciation that certain airlines could be having better styles that were more responsive, enabling and facilitative as was not the case with Kenya Airways. The results made it clear that Kenya Airways operated in a competitive environment and therefore, needed to benchmark its practices with major airlines which were destinations for its engineers. On the prevailing working conditions and its influence on high labour turnover of engineers, 5% of the respondents described the conditions as being very good, 41% felt the conditions were good with 52% feeling that the conditions were fair. The remaining 2% of the respondents described the conditions as being poor. This finding does indicate that the working conditions at Kenya Airways are generally to acceptable standards to the engineers. It can be deduced thereof, the high labour turnover of engineers may not be attributed to the prevailing working conditions. The study also revealed that the prevailing industry dynamics was a factor in high turnover of engineers. 44% of the respondents were of the opinion that Kenya Airways was a good trainer but a poor retainer since a high number of its engineers ended up with other competitor organizations. Specific aspects of industry dynamics which influenced high turnover of engineers were training opportunities, advances in technology and existence of better pay with competitor organizations. Further, the study revealed that competition and poaching (77%) were also factors that influenced high turnover of engineers (Figure 2). The key argument was that competition gave rise to poaching of engineers as the companies sought to outdo each other with manpower being the tool to gain a competitive edge. However, 23% of the respondents were of the opinion that competition and poaching did not have much influence on high turnover of engineers. The major argument advanced to support this viewpoint was that the aviation industry is of global nature and competition is not new or unique to Kenya Airways as all airlines operate in a competitive environment. To this view, the causes of high turnover of engineers were purely internal. Figure 2: Views on influence of competition and poaching on labour turnover

Source: Survey data (2008) As part of the study, the respondents made a number of suggestions to help address issues of industry dynamics and thus reduce its impact on labour turnover. The suggestions were improvement of staff welfare (37%), improvement on training and retaining (24%), appreciation and adoption of new technologies (21%) and consultation with other organizations with 18% of the respondents. As was the case with the management style, the respondents were of the view that Kenya Airways should consult other organizations in the industry to gain insights and get ideas on how manage such issues, indicative of the need to share best practices and benchmark its practices. This is against the traditional view where companies in the same industry regarded each other as adversaries and rivals; instead they need to complement each other and therefore, should be willing to share their experiences and best practices for mutual benefit. Another factor that was significant in high turnover of engineers was the reward system (Figure 3). Majority of the respondents (99%) were of the opinion that rewards, both monetary and non-monetary issues had very strong influence on labour turnover. As justification to this opinion, 22% of the respondents felt that rewards influenced labour turnover to a very great extent with 61% being of the opinion that the influence was of a great extent. The remaining 17% opined that the influence of rewards on labour turnover was moderate. Figure 3: Influence of reward system on labour turnover

Source: Survey data (2008) The study sought to determine the influence of both monetary and non-monetary issues on labour turnover of engineers at Kenya Airways as distinct from each other. The results 7

indicated that monetary issues had a greater influence (54%) on labour turnover than nonmonetary issues (46%). However, the closeness in percentage response is clear indication that both monetary and non-monetary rewards were equally important in addressing labour turnover issues. According to research results, there were two major issues relating to rewards which were considered important in addressing the issue high turnover of engineers. They were low salaries for qualified and experienced engineers (59%) and the existence of better pay packages in competitor organizations (41%). The above finding brings into discussion the major considerations and bases for reward systems at Kenya Airways. In a competitive industry environment, one of the major considerations in setting up an effective reward system is a check on what the other players in the same industry give as rewards. Hence, in the event that engineers were leaving Kenya Airways because rewards were better in competitor organizations, it shows a weakness in the way in which rewards for engineers were determined. The study also did reveal that on a number of occasions, the engineers had raised issues which affected them with the management, but no action had been taken to address them (80%). Instead of addressing the issues raised, the organization opted to externally source for the services which engineers performed internally, with associated high costs. With these results, it is clear that Kenya Airways had not addressed the issues raised on high turnover of engineers. The organization opting for external services to maintain and service its fleets, is clear indication that it did not bother to address the issues in an effort to build and strengthen its own internal capacity to maintain and service its aircrafts, which ultimately could be cheaper than maintaining them abroad. This practice is contrary to normal business practices in the 21st century where businesses engage in cost-cutting measures and one way to achieve this is outsourcing of non-core functions such as cleaning and security among others. It is not common for companies to outsource core functions such as servicing and maintenance of aircrafts as is the practice with Kenya Airways, considering that the cost of outsourcing such a function is far much higher than if done locally. Financial report for the six months ended 30th September 2007 indicated a decline of pre-tax profit by 18.8 %, with high cost of aircraft maintenance being a major factor. It is therefore, implicit that internal servicing and maintenance of aircrafts could save and provide the company with the much-needed funds for business expansion and improvements, and reinvestments, thus improving the Kenyan economy, through additional jobs and shareholder value. It is the view of this study that if Kenya Airways focused on building its internal capacity to service and maintain aircrafts locally, the savings could be enormous. Further, going by the Kenya Civil Aviation Authority (2007) requirement that organizations like Kenya Airways should maintain an adequate number of licensed engineers as appropriate to its maintenance ratings, failure to which the organization risks being closed down, this effort would save Kenya Airways eminent closure and save the country lose of jobs and associated revenues .

From the analysis of the results, the study concluded that high turnover of engineers, was a major problem with Kenya Airways and there was no indication of the trend reversing in the immediate future, as the organization had resorted to external services for the maintenance 8

and servicing of its aircrafts. High turnover of engineers was a result of internal factors which included inadequate remuneration, a non-responsive management, poor working conditions, industry dynamics, competition and poaching and insensitivity of the management to address the issues of concern which were often raised by engineers. Further, the company did not have any immediate plans to address the problem of high turnover of engineers.

Based on the analysis of the study results, the study made a number of recommendations, which is carefully considered and implemented, would help reduce turnover engineers at Kenya Airways. First, Kenya Airways should take immediate action to improve terms and conditions of service of its engineers in line with the prevailing economic and industry dictates, since it was evident that the organization acted as a stepping stone to many individuals who found their future careers in competing organizations. Specifically, the salary issue seems to have been a major factor causing high turnover for the basic reason that all other allowances such as housing and transport and other benefits were based on the salary scales. Secondly, Kenya Airways should benchmark its terms and conditions of service with other leading players in the industry to avoid its engineers being tempted to join them. The flight of engineers to its competitors is an indication that the terms and conditions of employment in those companies were better than Kenya Airways. Third, the company should as a matter of urgency hold a consultative meeting with its engineers to bring out issues of concern, with a commitment to addressing them. This session would give the Kenya Airways an opportunity to determine an agenda for immediate action and this is likely to avoid further departure of its engineers to other competitor airlines. Fourth, the company should review its current management and leadership style with a view to making it facilitative and enabling, improve communication with engineers and accept constructive suggestions from its engineers; provide training opportunities and upgrade its aircraft maintenance and servicing equipment. It is a view of this study that Kenya Airways operates in a highly competitive environment with many players, and therefore, benchmarking its operations and practices to those of leading players will be a major step in reducing turnover of engineers. It is also the view of this study that whereas a number of factors were identified as influencing and causing high turnover of engineers at Kenya Airways, remuneration of engineers was outstanding. The implication here is that the organization should take immediate attention to the remuneration package ranging from basic salary to allowances and other benefits associated with the engineering jobs in an effort to make them acceptable and attractive to engineers. Ultimately, Kenya Airways should focus on building its own internal capacity to service and maintain its aircrafts due to the enormous savings resulting thereof which could be used to business expansion, improvement and reinvestments for job creation and increase in shareholder value.

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