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Evaluate the human resource systems at American Airlines in 1990, prior to the pilot's contract settlement, in terms of their internal coherence and relationship to American's business goals. AA' strategic goal was to achieve long term profitability through effective ways of reducing costs. During the 80's AA implemented several new and innovative programs in the field of human resources that helped them take more control over costs and improve their service, but during the negotiations for new contracts in 1990 they had to revise some of those decisions, in particular the system of compensation. Before the reform during the 80's AA had high entry salaries, but they introduced a new system, so called “two-tier” compensation system where all employees started at about 50% lower wages than before and were paid more as they gained seniority. For this program to be acceptable to the employees company had to grow from within so that the employees would be able to be promoted. On top of the pay, employees were rewarded by cheep travel for them and their families. Even though two-tier system gave great results in cutting costs initially, its effect was lost because during the 80's new contracts and change in the composition of employees caused that new employees would merge with previous employees in regard to their salaries after only few years. During 1990 negotiations, union members argued that “two-tier” system was only a temporary measure and demanded that a single tier system should be brought back. The contract that was agreed upon decreased number of years it took for two tiers to merge, increased pensions and increased profit sharing component of the compensation for pilots, all resulting in increase of costs. In fact, all employees received share of the profits after the profit reached certain set limit, differing in percentage, dependent on the level of position. Employees of all levels, in lower and higher tier voiced their discomfort and dissatisfaction with the salary structure, and they considered it to be unfair. AA had several programs focused on employee commitment and efficiency. They started with “President's conferences” where the president would visit branches and employees could openly state their problems and suggestions. The program was so successful it became an annual event. After that, “Quality of work life” program was introduced where employees on lower levels in the company were given more discretion in making decisions and working without supervision. The system was effective in some work groups, but not all. The next program introduced was “Peak performance through commitment” which was focused on motivating employees by having their supervisors coach and counsels them, rather than punishes them. This program was not successful and did not give any tangible results. Another unsuccessful program was “Service improvement process” which was supposed to give employees on the front lines more freedom in dealing with customers and resolving customer complaints, but
etc. I believe that the key is in improving efficiency of work so that there are no employees whose time on the job is not fully filled and also in decreasing levels of management and empowering lower level employees to do their jobs perfectly and allowing them to make decisions. Another way for AA to lower its costs and improve the quality of their service is to outsource as many of their operation which are not their core business as possible. productivity improvement and new revenue sources. The program was very popular and gave great results.without specific and concrete instructions employees were not able to implement this program efficiently and it just resulted in waste of resources. and over the years the department accumulated a list of costs saved and new revenues generated as results of their work. AA also conducted two successful programs: “IDEAAS in action” and “Committing to leadership”. new programs should also be based on this premise and should be organized as competitions for works with individual or group awards. and the group that wins should get a trip or some other award. this will have to be done in some other way. which make the biggest part of their cost structure. for example work groups on the same level in the company should compete for the best result in some area. as well as offer scholarships for interested employees who want to further their education. or all crew fly attendants. 2. Same can be done on the level of individuals. rather than in the area of employee compensation. Some of the programs introduced by HR were successful. Another idea for motivation of employees is to offer them education programs for their personal and professional development. In regards to cost saving operations management should focus on decreasing all operational cost and working as efficiently as possible. If they were to hire other professionals who were better at performing these tasks. for example least customer complaints. they would be heavily rewarded. Many managers found this program very useful. and quality at American Airlines in the future? The outcome of 1991 pilot contract settlement was an increase in labor costs. Outsourcing would result in less employees for AA. for example all managers of same level. or least delays. although it was not as well received and IDEAAS. . productivity. that is to "increase the alignment of employees with the corporate vision and empower them to achieve it”. Since the strategy of company is to focus in lowering costs. Since the IDEAA program with individual awards was so successful. IDEAAS was a program where employees could come with ideas for cost savings. Company can organize internal seminars and training programs. because the price of this service would be negotiated. etc. what is your plan to manage costs. and if their idea was implemented. CTL was a program created to encourage managers to more fully share information and decision making with their subordinates. Given the outcome of 1991 pilot contract settlement. they would achieve increase in quality and the cost would be lower.