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Airline Issues

Human Resource Management Strategy in the Global Airline Industr y –
A Focus on Organisational Development
a report by

S t e v e n H A p p e l b a u m and B r e n d a M F e w s t e r
Professor and Research Chair, John Molson School of Business, and
Researcher Coordinator of Webster Library, Concordia University

Steven H Appelbaum

Brenda M Fewster
Steven H Appelbaum is a professor
and holds a Research Chair in
Management at the John Molson
School of Business of Concordia
University, Montreal. He was elected
as a member of the Board of
Governors of Concordia University
(1998–2004) and served as Dean of
the Faculty of Commerce and
Administration at Concordia University
from 1983 to 1990. Professor
Appelbaum has research interests in
organisational stress, organisation
development and human resource
management.

The commercial airline service industry is extremely
competitive, safety-sensitive and high technology.
People, employees and customers, not products and
machines, must be the arena of an organisation’s core
competence. The implications are vast and pervasive,
affecting the organisation’s structure, strategy, culture
and numerous operational activities. Completed by
13 respondents (executives), this audit presents a
series of select findings of a human resource
management (HRM) audit carried out in 2001–2
and contains extensive data on airlines from nine
countries worldwide.
The conclusion drawn from these three bodies of
work is that, with the exception of a handful of
high-performing airlines, the industry as a whole
continues to function as per a traditional, topdown, highly divisionalised, industrial model of
operations and governance. This model is
manifestly inappropriate in such a highly
knowledge-based service market as the airline
industry. HRM expertise in general and
organisational development in particular are
required now, more than ever, to spearhead the
strategic development of a customer-centric,
learning-oriented workforce that is capable of
adapting quickly to the strategic goals and change
imperatives facing the airline industry.
Introduction

Brenda M Fewster is Researcher
Coordinator of Webster Library at
Concordia University. She is a former
member of the Continuous Quality
Improvement Council of Concordia
University and has also served as
Labour Relations, Training and
Development, and Grievance Officer
for Concordia University Library
Employees’ Union (1992–2003). Ms
Fewster is an MBA graduate of John
Molson School of Business, Concordia
University, Montreal, Quebec, and
holds an MA in History from
Concordia University, with a focus
on strategic, political and economic
matters in US foreign policy.

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Strategy in the aviation and airline industries is
premised on two fundamental drivers that have been
evolving since deregulation of the US airline industry
in 1978: one, a growing global concern for safety; and
two, ever-increasing consumer expectations of broad
service choice and service excellence. Research has
long shown that accidents and poor service quality are
rooted primarily in sociotechnical human factors, not
technology per se. Suboptimisation, or poor quality
with regard to management, decision-making,
teamwork, employee motivation or communication,
can translate into loss of customers, loss of market share,
loss of organisation assets and, above all, loss of life.

In such a safety-sensitive, customer service-centric
environment, the traditional product-centred
industrial model of corporate structures and industrial
relations is inappropriate. HRM expertise is required
now, more than ever, to spearhead internal marketing
strategies in order to gain customer loyalty. The
primary area of strategy focus is the manner in which
the HR department aligns activities, policies and
procedures with the organisational development
strategic imperatives of the organisation.
A series of select findings of an HRM audit carried
out in 2001 is presented. The audit contains
extensive data on 13 airlines from nine countries
worldwide. The audit data was gathered by 13
students/aviation managers in the Global Aviation
Master of Business Administration (GAMBA)
programme at the John Molson School of Business,
Concordia University, Montreal, Quebec.
Strategy –
Organisational Development

In an intensely competitive marketplace, where service
innovations are replicated so easily, a key strategic
variable that nobody can copy is an airline’s culture.1
HRM functions as:
“a set of processes, which – through the recruitment,
training, motivation, appraisal, reward, and
development of individuals, and through the effective
handling of industrial relations – translates strategy
into action.”1
Such a definition combines the notion of how an
organisation selects, interacts with, evaluates, enriches
and compensates employees with the culture that is
created and how employees, in turn, provide service
to the organisation’s customers. Alternatively, to
paraphrase Seal and Kleiner (1999), it is the
management style of the chief executive officer, good
communications, good labour–management relations,
respectful treatment of employees, incentive

1. S Holloway (1998), Changing Planes: A Strategic Management Perspective on an Industry in Transition: Volume
One: Situation Analysis, Ashgate Publishing Ltd, Aldershot.
BUSINESS BRIEFING: AVIATION STRATEGIES: CHALLENGES & OPPORTUNITIES OF LIBERALIZATION

ProQuest. “Spirit and Community at Southwest Airlines: An Investigation of a Spiritual Values-Based Model”.. K Ellis. J Seal and B H Kleiner. vol.5 Southwest Airlines also monitors the perceptions of its employees and those of the unions closely. Reed Elsevier. 12.qxd 3/3/03 12:20 Page 71 Human Resource Management Strategy in the Global Airline Industr y programmes and effective recruitment that are the keys to a healthy organisation. which is beset by communication problems. 6. J Falter (2000). One.. 2nd ed. Two. is not in good health. setting controls and carefully monitoring behaviour”. Emerald. Jan Carlzon of Scandinavian Airline Systems (SAS) points out that hierarchies create environments where those higher up legitimate their roles only “by issuing instructions. Managing Service Quality. 4. 9. employee focus groups are used to generate new ideas. J Eaton (2001). no. Lincoln. 50. according to Libby Sartain. unfortunately. J Ferguson. and why it would be missed were it not in business. Successful. Old hierarchical command and control structures must give way to delayered organisations that improve communications and bring management closer to employees and customers. such efforts can define an organisation’s culture and translate into lower costs of labour. are built on three essential critical success factors: management commitment. MCB UP Ltd. University of Nebraska. we won’t know what’s going on”.Applebaum_edit. Training (January 2001).”5 The results of the study were used effectively by Duncan management to launch three HR initiatives as part of the company’s reorganisation. The survey indicated: “low morale and low job satisfaction . the company created a “viable company-wide pay schedule based on accurate job descriptions” (after having the employees complete a job analysis questionnaire). The latter is what occurs in high-performing organisations. Employees noted lack of communication.6 SWA “constantly surveys its employees and unions to identify their perceptions and solicit ideas about how to run the company”. This is the foundation of organisational development. 1–5. and distrust of management as areas of concern. orientation programmes for new employees. Operational and administrative functions. Journal of Organization Change Management. vol. Organisation communications are largely a product of an organisation’s structure. Emerald. “Managing Human Behaviour in the Airline Industry”. 22. Lexis-Nexis.”1 There is little empirical evidence that this sort of communication is yet widespread in the industry. Ashgate Publishing Ltd. The case of Duncan Aviation offers an excellent example. customer focus and employee involvement. is “if we’re not getting feedback. no.3 These are not the norm in the airline industry. well-run organisations are often cited in the literature for actively shaping their culture through their hiring practices.5 At Duncan. 5. 3. Management Research News. Southwest Airlines”. and unions are encouraged to research problems and present solutions to SWA 2. “The Company as Family: Perceived Strengths of Duncan Aviation”. treatment of employees as internal customers and for paying ongoing attention to the opinions of line staff. 7. “Vice President of People. J Milliman. Three. MCB UP Ltd. BUSINESS BRIEFING: AVIATION STRATEGIES: CHALLENGES & OPPORTUNITIES OF LIBERALIZATION 71 . management took employee opinions seriously when the results of a survey given to Duncan’s employees provided important and revealing feedback to the HR specialist who conducted the research.2 The airline industry.. pay discrepancies. what value it is adding. pp.7 As part of SWA’s internal marketing strategy. G P Laszlo. When performed sincerely and professionally.. pp. D Tricket and B Condemi. The movement towards the flattening of organisations is indicative of a shift in HRM from seeking control over employees to gaining commitment from employees. particularly in customer service organisations. vol. Duncan Aviation is a leader in US aviation service and maintenance and has received top ratings for the last 25 years in Professional Pilot magazine’s annual survey for avionics and maintenance. Aldershot. improved productivity and an increased sense of empowerment on the part of employees. Holloway suggests that: “communications need to encapsulate what an airline is doing in its markets. 2 (1999). The attitude at Southwest. Vice-President of the People Department. ProQuest Information and Learning Company. 3.4 This style of leadership discourages initiative among employees and ultimately translates into suboptimal performance and lower customer satisfaction. 221–233. formalised on-going employee-training programmes were implemented that improved skill levels and communication across the organisation and ameliorated the employees’ sense of empowerment. 46–48. 2/3 (1999). UK. pp. PhD Dissertation. Globalization and Human Resource in the Airline Industry. the vice-president in charge of implementing the structural changes was asked to resign when he failed to “create strong teamwork at the senior management level” (individuals were found to be scared and mistrustful of the vice-president). “Southwest Airlines – Living Total Quality in a Service Organization”. lack of respect. across the company. Nebraska.

Marketing Management (September/October 2001). developing. ProQuest. Station Managers/Traffic and Ground Engineers”.Applebaum_edit. UK. innovative in-flight services and young and enthusiastic customer contact staff help to communicate the entertainment-oriented and lighthearted corporate image. our customers won’t be either. Instruction and Organization. pp. Delta’s absorption of Pan Am’s Atlantic Division. or fail to create.9 Image is another dimension of an organisation’s culture that can unify a workforce. two-thirds of mergers and acquisitions either destroy. Boeing 737 operators Piedmont and Canada’s Pacific Western had both operated as profitable companies until consolidating.”10 This is what organisational development is intended to accomplish. collective decision-making and an open-mindedness to new ideas are typical hallmarks of successful airlines.. 72 10. two. Aldershot. and Northwest’s problems with Republic are striking as they represent takeovers of airlines within the same country. A J Czaplewski.. In fact. Reed Elsevier. Different groups in an organisation may act as different ‘tribes’ and result in intertribal conflict.1 Finally. ProQuest Information and Learning Company. According to Milliman (1999). Airline Business (July 2000). the underlying belief is that the better employees are treated. J M Fersuon and J F Milliman.e. a strong emphasis on community. employees will be provided the same concern. Lexis-Nexis. Lexis-Nexis. K O’Toole. communicating. is usually the outcome. Airline Business. Reed Elsevier. rarely take place with prior due diligence being given to HR factors. “Expanding Teamwork Beyond the Cockpit Door: An Integrative Program (“OASIS”) for Pilots. respect. intergroup hostility.”10 Singapore Airlines countered this problem with its Operational Areas Seminar in Synergy (OASIS) programme. an airline that offers the lowest air fares. Singapore brought pilots. and three. L McCully and C T Chan (1997). C Shifrin. employees feel empowered and can really make a change in their customers’ lives and at work. Cabin Crew. “Culture has long been recognized as a determinant of any carrier’s safety subculture. mergers and acquisitions. “the informal culture at Air Ontario” was a contributory factor. if our employees aren’t happy. These spiritual values include the following: one. cabin crew supervisors. Airline Business (April 2001).qxd 3/3/03 12:20 Page 72 Airline Issues management. The result is that few mergers in global aviation are actually successful. We keep our employees happy through strong. SWA’s strong set of values is a manifestation of spirituality. 9. teamwork and serving others. KLM and Alitalia were clearly incompatible. “When the beliefs or behaviors of one group are not congruent with the thoughts or actions of a different group. Aviation Training: Learners.8 Management at Duncan Aviation also shares the belief that the way that an employee is treated will dictate the quality of customer service: “. likewise. The impact of an airline’s culture on that organisation’s safety subculture is critical to airlines.1 Other examples include Canadian Airlines’ takeover by Air Can (having failed for a decade after absorbing CPAir and numerous regional airlines) and American Airlines’ takeover of Reno Air.7 Treating employees well and empowering them is derived straight from the airline’s mission statement: “. K O’Toole. 74 (April 2001). M K F Karlins. caring and consistent leadership.14–17.Above all. Cultural rifts within airlines are inherent to the global and multifaceted nature of the industry. and staying true to our solid mission. employee-centred values espoused and practised by management teams.. after which they struggled to survive. The most oft-cited reason is the failure of the merging organisations to pay enough attention to people factors in their due diligence and the subsequent failure to integrate organisation cultures. US Air’s difficulties with Piedmont.”5 Attention to detail.11 There are many examples of failed consolidations.” In simple terms. which are an everpresent theme in the airline industry. Avebury Aviation. Lexis-Nexis. frequent flights and personable service). Reed Elsevier. At Virgin Atlantic Airways. and high values that we live by on a daily basis.. shareholder value. 12. the better they will treat customers.. rather than teamwork. Southwest Airlines and Delta Airlines pay a great 8. Other recent examples include the Value Jet DC-9 crash in the Everglades of Florida in May 1996 and the loss of an F28 at Dryden in Canada in 1989. “Still Delivering”. In a three-day seminar.12 Successful organisations such as Duncan Aviation.”1 The decision process that led to the Space Shuttle Challenger disaster in 1986 has become the aviation world’s most dramatic example of decisionmaking gone wrong.8 SWA is particularly noted for the ‘spiritual’/family-like. “Time to Invest in Human Assets”.1 According to the official investigative report of the crash at Dryden.. (Eds R A Telfer and Phillip J Moore). and caring attitude within the organization that they are expected to share externally with every Southwest customer. BUSINESS BRIEFING: AVIATION STRATEGIES: CHALLENGES & OPPORTUNITIES OF LIBERALIZATION . “Southwest Airlines: How Internal Marketing Pilots Success”. “Buyer Beware of the Human Element”. ground engineers and station managers/traffic personnel together to “reduce intergroup conflict and enhance intergroup cooperation and effectiveness between operational areas. employees feel that they are part of a cause (i. 11. a forward-focused vision which keeps our company strong and competitive.

100% of respondents said that they believed their organisations provided quality customer service to both internal and external customers (see Question 37). HRM weakness gleaned from audit results for one of the major categories suggests that organisation culture is in bad shape. Overview of Audit Findings – Organisation Development The overwhelming consensus in the literature was that. What is surprising is that. Management personnel at the top airlines possess excellent interpersonal skills. more than any other organisation characteristic. As members of a service industry. empowers employees. Management style in the successful airlines is far more hands-on and communicative than the military command and control style more typical of the industry. and a shockingly low 20% said that their organisations had attained the desired culture. is customer-centric and focuses on teamwork and quality. gathering of information. However. committed and motivated) in order to be far more customercentric (aware of customer-perceived value and customer-perceived risk). succession planning. Scores relating to consistency of organisation culture throughout the organisation and level of attainment of desired culture were surprisingly low. and a mere 33. Not surprisingly.qxd 3/3/03 12:21 Page 73 Human Resource Management Strategy in the Global Airline Industr y deal of attention to organisation culture. Not surprisingly. only 53. such organisations employ an employee-centred strategy (employees should be participative. Shareholders and managers should be aware of these deficiencies. 2. Airline administrators appear to show little awareness of or interest in their own internal customers’ opinions and insights. less than half (40%) of the respondents said that there was a consistent culture throughout their organisations.33% (see Appendix 1. Opportunities to improve organisation development appear to have been bypassed by most organisations. Summary and Recommendations 3. a hands-on management style and the organisational development function. a strong emphasis is placed on recruitment.33% of respondents said that training on change management was offered (see Question 47). consistent with the findings indicating low scores in the areas of communication. training and development and employee input. While 73. of the audit clearly signal problems in this area. At the industry level. The enormous variance between this stated belief and the numerous indicators showing otherwise illustrates an alarming disconnection between perception and practise in HRM in these airlines surveyed. BUSINESS BRIEFING: AVIATION STRATEGIES: CHALLENGES & OPPORTUNITIES OF LIBERALIZATION 73 . 4. Conclusions Five themes emerge from the review of the literature.33% (see Question 2) had a representative in HR continually monitoring trends and techniques of organisation development. the responses in the organisation development section The most obvious conclusion to be drawn from the results of the audit is how poorly understood the concept of ‘internal marketing’ is in the airline industry. there appears to be a shortage of talented managers that possess more than the required technical skills.Applebaum_edit. in spite of all these low scores. The leading airlines emphasise two-way communications and employee input into operational matters. Broadly speaking. an organisation’s culture was the key to a competitive advantage. The culture of the highest-performing airlines makes internal marketing operational. Airlines cannot offer optimal service to external customers because they do not know their internal customers very well. A commitment to training and development unquestionably distinguishes high-performing organisations from their less successful counterparts. The reason for this lies in the poor state of HRM in the airline industry. empowered. In this context. Management also tends not to communicate many types of important information (with the exception of rules and regulations) to their internal customers (both supervisors and line personnel) and often do not provide sufficient internal services that would contribute to optimising internal customer performance (for example training and development). Question 3) of respondents said that their organisations had identified a desired culture. These organisations plan and develop a safety and customer-centric culture continuously by creating a learning-oriented and lively workforce with a sense of community and the ability to respond to customer needs and change. 5. only 33% (see Question 20) of respondents said that their organisations carried out surveys or analyses of organisation culture and effectiveness. 1. are accessible and approachable and recognise employee performance. Only 60% of the organisations in the audit appear to provide training for the improvement of team performance (see Question 49). selection. employee empowerment.

In other words. ■ BUSINESS BRIEFING: AVIATION STRATEGIES: CHALLENGES & OPPORTUNITIES OF LIBERALIZATION 75 .33. The results of the surveys should also be communicated to all employees. mission. 60 Has the organisation attained its desired culture? 20.33. Airline administrators should conduct audits of their respective organisations in order to ascertain the gaps between what they thought their airlines were doing and what they actually were doing. 40 co-ordinating the organisation development activities of the organisation? Does an individual within the HR department continually review current 53. 40. cultural diversity. change management. 6. N/A (or other as indicated in the question box) % Is there an individual within the HR department accountable for 60. 5.qxd 3/3/03 12:22 Page 75 Human Resource Management Strategy in the Global Airline Industr y Appendix 1: Select Audit Findings – Organisation Development Number Out Question of a Total of 52 Questions 1 2 3 5 6 7 12 15 16 20 22 36 37 38 47 49 Yes. 26.33. The most notable area is that of management training for managers and supervisors. strategy and culture) to the same level they score in questions concerning rules and regulations. 33. strategy and desired culture. employee relations.67 conducted? Is training provided for managers and supervisors in organisation effectiveness? 66.67.33 Is training offered to employees in how to deal positively with change? 33. 33.67. 6. interviewing techniques.33 the organisation’s managers? Is there a consistent culture throughout the organisation? 40. 40 Unless airline administrators begin conducting HRM audits in their own organisations. 2. Airline administrators must make the connection between what their external customers value and how and why employees provide that value and more. Training and organisational development should be greatly expanded on.67. No.67 strategic planning process? Are organisation development considerations a part of the organisation’s 66.67 trends and techniques of organisation development? Has the organisation identified a desired culture? 73.67 Is training provided for the improvement of team performance? 60.33 tactical planning process? Are surveys and analyses of the organisation’s culture and its effectiveness 33. they will remain crippled by endless price wars and shortsighted cost-cutting binges. an audit constitutes both a reality check and a baseline from which to plan for the future. 40. 3. 6. The recommendation is that airlines appoint a person whose responsibility it is to conduct timely employee opinion surveys on the following subjects: organisation culture. 66.Applebaum_edit. In other words. The bridge linking customer value to employee performance is HRM.67 Are organisation development considerations a part of the organisation’s 53. The emphasis placed on communicating rules and regulations and performance improvement and disciplinary procedures should be equalled or surpassed by the clear and on-going communication to all employees of the organisation’s mission. however.33. communication skills and socialisation into the organisation’s culture via organisational development. To this end. 46. administrators should seek to raise their audit scores for these latter points (i.67 external customers? Does the organisation believe in providing quality customer service to both 100.33. for example. 66. 13. 0 internal and external customers? Have employees been provided training in improving the quality of customer service? 86.33. the following five recommendations are offered. greater education and training are required in such areas as teamwork. National and international regulatory bodies in civil aviation should collaborate on formulating an airline-specific HRM audit that could be readily adapted and used by individual airlines. 4. equal opportunity employment and sexual harassment and benefits preferences.33 Have departments been encouraged to identify their internal and 93.67 If your answer to Question 3 was yes. has it been communicated to 60. 33. In general. 1. 6.33. organisation leadership. An opportunity exists here for researchers in the field of HRM to conduct additional audits in the airline industry.67. 80 Is there a consistent organisation structure throughout the organisation? 53.e.