Strategic Review of Human Resource

Management Analysis for Malaysia

Airlines Berhad

By

Mohd Faridz bin Mohd Shuraimi

0012FSBFSB1216

14 FEB 2017
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 TABLE OF CONTENTS

Title Page

Abstract 3

Part One Company Profiling 4

Part Two Current HR Issues and Challenges by 6

Business Unit Head

Part Three Impact of Issues on Organisational 9

Performance

Part Four Improving Staff Engagement and Motivation 13

Using HR Theories and Model References

Conclusion 19

Reference/Bibliography 20

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ABSTRACT

This report is strategically reviewing an in depth analysis of Malaysia Airlines Berhad (MAB)
Human Resource Management. Analysis was made based on survey questions results from the
company’s employees itself and a complete review of the company profiling, in line with
current situation in lieu with the present aviation environment.

Main results indicate lack of staff engagement and motivation is currently the priority issue
that is plaguing the relationship of the company to perform well. Thus proposals and
suggestions to mediate the issue have been laid out in the report.

It is the author’s belief that by remedying the staff engagement and motivation will prove to be
the turning point for Malaysia Airlines Berhad to achieve its vision and mission to be a
sustainable and profitable airline, thus enabling it to be relisted back into Bursa Malaysia in the
near future.

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1.0 COMPANY PROFILING

The newly formed Malaysia Airlines Berhad is currently the national airline carrier of
Malaysia. Forming a part of its parent Malaysia Aviation Group under the Air Transportation
Services section together with Firefly and MASWings, Malaysia Airlines Berhad (MAB) was
incorporated on November 7, 2014 following the dissolution of the old company of Malaysia
Airlines System (MAS) due a radical restructuring by Khazanah Group, its major shareholder
at that time.

Continuing on the record of excellence from the old company of Malaysia Airlines, MAB now
flies 40,000 guests daily on various destinations globally while adhering to its vision of being
the preferred choice of connecting Malaysia with Malaysia, with the region and with the world
– under commercial terms and not at all costs.

FIG 01 – Malaysia Aviation Group Organizational Chart

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At the time of this report being written, the corporate address for MAB is at Level 1,
Administration Building, South Support Zone, Kuala Lumpur International Airport. Currently
lead by Peter Bellew, its Chief Executive Officer (CEO) of MAB, the company boasts a total
strength of 8,146 employees as compared to its rival AirAsia Group manpower strength of
nearly 17,000.

Flying a significantly smaller number of destinations of 53 routes globally as opposed to nearly

70 travel destinations flown by the old company MAS, MAB compensates by utilising the
strength of its OneWorld alliance network. Through the OneWorld alliance, MAB passengers
are offered seamless interconnectivity and destinations throughout its 15 airlines members and
over 40 over affiliate members.

Strength of its current aircraft fleet consists of six A380-800s catering routes to London and
Hajj/Umrah while fifteen A330-300s and fifty four B737-800s covering the regional routes of
India, Korea, Japan, China, Indo China and Australia plus the numerous domestic routes around
Malaysia itself.

Attrition rate obtained from the Human Resources department of MAB for the year 2015 was
high at 18%. This is possibly due to the fact that a significant majority of the senior workforce
of that time was on a one year contractual basis whereby the management hoped that there will
be a successful handover of skills and knowledge to the new workforce post the formation of
the new company in 2015. However, when comparing to the attrition rate for the year 2016, it
was noticeably high with the attrition rate at 8%. The reasons for this high rate will be further
examined in part two of this report.

As of the time present, MAB is currently keeping true to its preordained targets of attaining a
sustainable airline business, to develop and significantly grow again in the airline market while
ultimately recording sustainable profits on every quarter of the financial years to come in order
to be finally ready for the re-listing into the Bursa Malaysia stock exchange.

It is the author’s belief that the most significant driving force for MAB to achieve its targets
would be the complete in depth analysis of the Human Resource Management and if possible
a revamp of some of its core standards and methods in managing the human capital
strategically.

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2.0 CURRENT HR ISSUES AND CHALLENGES BY BUSINESS HEADS

The main function of a company is to generate profit based on its core and auxiliary business
models. This will be carried out by its staffs and employees, termed traditionally as manpower
resources and headed by its own respective division leaders or business heads. However,
having good leaders or managers with commendable staffs is not the complete criteria in
sustaining a good business model. Armstrong’s Handbook of Management and Leadership for
HR (2016) dictates that a high performance management would make an impact on the
performance of the organization provided that the HR function is there to enable it to achieve
its objectives by taking strategic initiatives whilst providing guidance and support on the
matters relatable to its human capital. Therefore, it can be concluded that a strategic symbiotic
relationship between the HR department and the business heads is vital in steering the
organisation into greater heights.

In dissecting the current HR issues and challenges faced by MAB’s business heads, a recent
people engagement survey was held with a total of 75% of the total workforce being queried.
This part of the report will focus on 5 major Human Resources Management (HRM) issues
which are found to be of the upmost importance and critical for revamp based on the results of
the survey as follows:

2.1 Lack of Employees Engagement & Low Motivation

Since the formation of MAB close to one and a half year ago, the current staff force, which
was handpicked by the current business heads to assist in the turnaround of the new company,
was found surprisingly to be lackadaisical in a majority of them. This was proven by the lack
of engagement by the staffs earlier in the participation in the HRM survey, even when early
notices and memos were sent regarding the importance of the survey. The deadline for the
survey had to be extended twice in order to garner in a sufficient number of participants to
quantify the results to be of significance. What’s more surprising is that some of the business
heads themselves are eluding to complete the survey even when it provides the best outlet for
them to voice out their challenges and grievances.

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Results from the survey revealed that the main reason for the lack of employees’ engagement
is that they do not feel that their engagement was worthy enough to warrant a change in the
current HRM environment. This may results from poor information or criticism flow from the
staffs up to the higher management and the lack of corrective actions when grouses or problems
are aired. It is the author’s belief that the staffs may have simply stopped caring after seeing no
significant corrective actions are being made despite numerous inputs and suggestions. Another
noteworthy issue is that based from the feedback of the employees’ states that there has been
multiple, similar engagement surveys being conducted in the past with no clear improvement
of the issues being highlighted. This may also factors for the low engagement and ultimately
low motivation of the employees.

2.2 Improper Compensation and Benefit

Citing results from AON Hewitt Hot Topic survey 2011 Q1, it was noteworthy to say that the
main reason for people to leave a company is due to improper compensation and benefit. MAB
people engagement survey shows that majority of the workforce especially in the engineering
department felt that they are improperly compensated in term of basic pay and allowances.
Although the new management of MAB is driven to streamline the basic pay of the engineering
staffs and the flight crews, the benchmark used to determine the pay scale for engineers and
flight crew were found to be grossly misguided.

It is plausible that the HR division of MAB may be using general survey inputs data from sites
such as JobStreet Malaysia (2016) which states that executives in the aviation field, where
engineers and flight crews are graded in MAB, would be garnering an average of RM4, 300
salary per month. However, when comparing salaries of these positions in rival companies such
as AirAsia and Malindo Air, the difference can be as much as doubled or sometimes tripled
compared to what MAB is offering. It is the author’s belief that this may contributed to the
high attrition rate of 2016 whereby these talents were swayed away by lucrative offers by rival
companies.

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2.3 Ambiguous Appraisal System

Survey results show that the third issue being raised is the appraisal system being employed to
gauge employee performance. The current appraisal system was found to be too ambiguous
with intangible and unspecific key performance indexes. Appraisers were found to be gauging
subordinates based on these unspecific KPIs guidelines which tends to lead them to finally
using gut feelings and personal perception to gauge one’s performance. The bell curve
performance appraisal was also used with too much rigidity and forced emphasis on the low
performance side, leading to a constant number of employees being rated as low performers
without correct appraisal.

2.4 Poor Training and People Development

Another reaction garnered from the survey shows employees’ displeasure on people
development and training matters. With the high rate of employees leaving the company, it was
prudent that the current manpower of flight crews and engineers be aptly trained to fill up the
gaps. However since there are only minimum numbers manpower left to keep the operations
running, these developments are being constantly brushed aside in favour of operational
requirements. Although there are continuous e-learning courses available online, these were
found to be inadequate as most of them were skimmed through by the employees. As a result,
employees are feeling stagnant with no chance for the betterment of themselves.

2.5 Unconducive Working Environment

A conducive working environment is vital to an organisation (Ajala, 2012). That being said,
survey reports revealed MAB employees grouses over unconducive working environment with
the emphasis on lack of working lavatories and suitable crew rooms to exhaustive 12 hours
working shifts. Lavatories were reported to be in an unserviceable state most of the times with
clogging and water disruption while operation crews were often crammed together in tiny
makeshift crew rooms during break times which is highly unsuitable to provide comfort and
rest that they need. This unhealthy environment coupled together with the gruelling working
shifts will ultimately take a toll on the manpower strength and ability in the long run.

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3.0 IMPACT OF ISSUES ON ORGANISATIONAL PERFORMANCE

The issues being highlighted in part two of this reports will ultimately bring some impacts on
the organisational performance if left unchecked and unrectified. Part three of this report will
stress and accentuate the possible impacts into 4 distinct categories as shown in the table below.

Talent Operational Clients Financial

o Retention o Productivity o Internal and o Revenue and
o Absenteeism o Safety External Sales Growth
o Wellness Satisfaction o Operational
o Customer Income/Cost
NPS and
Retention
Table 01 – Categories of HR Issues Impact on Organisational Performance

3.1 Impact on Talent

Talents within MAB company would be the first impacted. Low motivation coupled together
with the rest of the unsolved HR issues would promote absenteeism, lackadaisical attitude and
adversely affect the overall working energy throughout the whole pyramid of manpower. Soon
this cancerous attitude would ultimately bring about an epidemic of workplace prisoners. As
described by Joe Folkman in Forbes website article (2017), these workplace prisoners will be
actively disengaged in all of the company’s direction, highly demotivated and performing less
productively compared to when they first joined the company. Some of these prisoners would
eventually join rival companies in search of positive challenges and better offers but many of
them will stay on, contributing to a decrease in overall productivity of the company. The
quantity of manpower will be there but the quality of work actually being done will be
questionable as most of the employees will be spending time doing personal endeavours such
as researching new job opportunities or engaging in social media sites and other non-work
related matters.

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Apart from the low retention rate of the employees, the overall wellness of the workforce would
be affected as well. Unhappiness will often lead to detrimental increase of work related stress
and unhealthy habits to develop, such as stress eating disorder, lack of exercises and ultimately
suicidal tendencies. Unhappy staff often evolves into unhealthy staffs and this may incur extra
costs to the company as they will be away on sick leaves and affect productivity. If not being
kept in check, in the long run, the damage will then transmogrify into other aspects such as
operational productivity and overall safety as elaborated in the next topic.

3.2 Impact on Operational

Impacts on aspects of operational will be focused on overall productivity and safety accords.
Generally the output of productivity will be decreasing as more and more of the manpower
becomes disillusioned by the lack of direction and meaningful engagement by the management.
Poor appraisals will also spell out potential damning situations as the highly motivated staffs
are slinking slowly into workplace prisoners due to under appreciation of their contributions to
the company whilst the underperformers would continue their destructive attitude as they felt
that no matter how much they are trying to change, the assessors have already deemed them to
be on the lower side of the bell curve during performance assessments.

Insufficient training and lack of people strength investment would be detrimental in regards to
safety also as the MAB staffs will be generally misinformed on the correct operational and
maintenance process and procedures. Aviation operation and maintenance is an ever evolving
process whereby new procedures are being introduced daily by manufacturers and vendors,
and failure to keep abreast due to improper training and people development will eventually
lead to future incidents and accidents happening. A constant continuation and refresher courses
on safety while deemed to be extra costs to bear, might help to avert future catastrophe which
will may prove to be even costlier to bear as compared to conducting said courses.

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3.3 Impact on Clients

Impacts on clients can be even more diverse as clients here can be categorised into internal
clients and external clients. Internal clients by definition, are described by Chris Joseph in a
Chron website article (2017), to be any member of the organisation who relies on the assistance
from another to fulfil his or her job duties. This can be for example, a sales marketing business
head unit requiring the help of risk analyst business head unit.

Now with the lack of engagement between the internal clients of the company, communication
can prove to be futile as there will be a lot of distrust and finger pointing whenever there is a
crisis occurring. Instead of working together to find the solution, there will be a blaming culture
in which all staffs will be looking out for individual self-preservation. Lack of proper
communication and blame culture can eventually mount into lower productivity and income in
general for the whole company.

External clients on the other hand, are described as someone who uses or utilises the company’s
services and product but are not part of the organisation itself. For MAB, this can be translated
as airline passengers and other vendor companies that have business dealings with the
company.

Impacts to external clients will be lower a Net Promoter Score (NPS) which is a public general
management tool usually used to gauge one company’s customer relations (Medallia, 2017).
By having a lower NPS score, existing partnership or clients may be absolve its current
business dealings they have with MAB and on a much worse case scenario, further dissuade
other parties from patronizing with MAB in future. It is absolutely imperative that these issues
be catered to with the highest of priority.

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3.4 Impacts on Financial

Impacts on financial aspect will be a combination of all deficiencies of talent aspect,

organisational and clients combined together. The summation of all the negative impacts will
ultimately affect the total MAB revenue and sales growth as all aspects are not committed in
generating positive business culture. Demotivated staff will be less inclined to align with the
company’s mission, operational aspect affected and be of less effective of the usual standards
whereas relationships with clients are strained and rife with problems as neither parties are
really committed in a non-zero sum game.

Operational costs will nonetheless, increase as employees are not going the extra mile to save
costs, incidents and accidents occurring at a more frequent rate and improper process and
procedures are implemented. The gap left behind by leaving employees will also have to be
addressed to by sourcing out and training new talents, incurring unnecessary costs as well.
These are all classic Swiss cheese model accident causation whereby the defects or impacts of
all other aspects will ultimately results in the overall financial losses bore by MAB itself.

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4.0 Improving Staff Engagement and Motivation Using HR Theories and Model
References

In this part of the report, it is now clear that the Human Resource Management of Malaysia
Airlines Berhad is in dire needs to revamp its current HR model and practices in order to stem
the damaging errors and carve a way for the company to be aligned back with its vision and
mission of being a sustainable and profitable airline.

A strategic HRM instead of a traditional HRM model is suggested whereby as dictated by

Graham and Bennett (1998), the employees of the company are used in such a way that the
company obtains the greatest possible benefit from their abilities and the employees obtain
both material and psychological rewards from their work. As such, it is the author’s belief that
the main HRM issue that needs to be addressed first would be the staff engagement and
motivation factor of MAB’s workforce.

In order to improve staff engagement and motivation, the report is proposing some
recommendations which will be based on the Alderfer’s ERG model and Sirota’s Three Factor
Theory.

4.1.1 Alderfer’s ERG Model

The Alderfer’s ERG model, developed by Clayton P. Alderfer in 1969 is somewhat similar to
Maslow’s five human needs but compressed into three distinct categories which are existence,
relatedness and growth.

Fig 02 – Maslow’s and Alderfer’s Needs Theory

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 1. Existence Needs
The first category of needs basically encapsulates all the physical and psychological
desires of one’s individual. Typical examples of the existence needs includes basic need
for food, water, safety, comfort and love plus affection. It is observed that it follows
suit of Maslow’s first two lower tiers.

2. Relatedness Needs
The second category of needs refers to the relatedness issues of an individual. This
desire comes into being by including the social and external esteem desire of people to
maintain interpersonal relationship with other people to be satisfied. It also express the
need for an individual to be recognised and be accepted into a group. In Maslow’s
theory, the relatedness needs follows suit the third category of belongingness.

3. Growth Needs
The last category of needs focuses on the individual needs for personal development,
internal esteem and self-actualisation. If compared to Maslow’s theory, this growth
needs would be similar to the fourth and fifth category of needs. The desires for one
person to better himself and complete creative and meaningful work falls under this
need.

Although the Maslow’s Theory of Needs is somewhat similar, this report chooses to use the
Alderfer’s Model to rectify MAB’s issue of employee engagement and motivation. This is
solely due to the fact that Alderfer dictates that the lower level needs does not need to be
necessarily fulfilled first before moving onto the next tier. Alderfer also states that although
the needs have different levels of hierarchy, the concreteness of the needs differs from one
individual to another. A person may need to fulfil his self-satisfaction of his work first before
concentrating on being a part of the team to satisfy his relatedness needs. As such, owning to
the multitude of personalities and positions in MAB, the report suggests the application of
Alderfer’s ERG Model in formulating strategic HRM approaches and methods to increase staff
engagement and motivation.

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4.1.2 Sirota’s 3 Factors Theory

The Sirota’s Three-Factor Theory was formulated by Dr David Sirota in 2005 and proposed
that to boost up staffs’ motivation, it often comes down merely to giving them exactly what
they want. And in the effect of building up enthusiasm among the staffs, 3 main factors must
be achieved which are illustrated in the diagram below:

Fig 03 – Sirota’s Three Factor Theory

a. Equity and Fairness

This factor proposes that all humans thrives on fair treatment and will as such, expect
the company to respect and provide the basic conditions of physiological, economic
security and psychological health needs. When looking at physiological needs, the
workers need to be working in a safe environment whilst maintaining a reasonable
work/life balance. The economic security needs looks at the workers’ needs to have
some sort of job security pertaining to their job designations and fair compensation in
regards to their wages, performance bonuses and other profit sharing programs. The
last need of psychological health focuses on treating everybody equally without facing
discrimination or cronyism. Status differentiation and power abusing should never
come to play when even to the lowest rung of rank.

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 b. Achievement
This factor states that as much as a person wants equity and fairness during work, the
person also strives to be recognised for his achievements. Apart from a good value pay
check, self-satisfaction of a job well done may also generate high motivation. As such,
the company must then provide an outlet to provide an enabling working scene so that
the workers can feel that their jobs are somewhat challenging instead of mundane, and
be compensated for a job well done through a well-structured reward system. This can
be in the form of monetary or job promotion.

c. Camaraderie
This factor focuses on the feel good feeling of oneself when interacting with fellow
work colleagues and superiors. A company that promotes good friendly working culture
and interpersonal relationship often boosts up motivation as the staffs are actually
enjoying their time at work.

4.2 Proposals to Improve Staff Engagement and Motivation

Based on the Alderfer’s and Sirota’s theory explained in the earlier part of this topic, the author
would like to propose some strategic approaches that can be utilised to better staff engagement
and motivation in MAB.

a) Create a harmonized working environment that caters to both physical and mental needs
of the staff. Staffs must be able to work without feeling dejected or worried about
aspects of safety, discrimination and rank bullying. Physical needs as highlighted in
part two of the report may include upgrading of washrooms and lavatories, better crew
rooms and perhaps the beautification on the whole by installing better lighting, new
paint works or wallpapers and placement of living plants around the office and hangars.
It may be worth noting that sometimes even the most basic improvement can have a
much desired improvement on employees’ motivation.

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b) Implement a user friendly reporting tool to enable staffs to voice out potential hazards
or grouses without any threats of repercussions or discrimination. Methods to report on
issues that the staffs view as important should be concise and easy to fill to encourage
more inputs from the staffs. Managements should also follow suit and respond in a
timely manner on the matters being reported, no matter how small the issue is. By
keeping a good and clear corrective plus preventive steps taken on the reports, staffs
will have more confidence to engage and assist the management in solving detrimental
issues.

c) Train and upgrade HR department staffs to develop and embody strategic human
resources values instead of implementing traditional human resources procedures
which only emphasise on McGregor’s Theory X that focuses on the immaturity of the
workforce. By having an emphatic and committed HR department, staffs are more
likely to be energized with vigour, knowing that their human capital needs are being
taken care of professionally.

d) In order to tackle the issue of unfair remuneration package offered to engineering staff
and flight crews, the report suggests a direct comparability of the same job position
with other rivals companies such as Airasia and Malindo. This is to better refine the
actualisation of these specialist jobs instead of lumping them together with post
graduates executives job descriptions. A survey done by Payscale website (2017)
indicates that a median value for maintenance engineers’ monthly wage would be
MYR8, 000 instead of MYR 4, 500 that the company is offering. A better remuneration
package would definitely help to retain invaluable talents from losing them to rival
companies which will then incur extra costs of hiring and retraining new staffs.

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e) Set up an engagement method between superiors and subordinates by the utilisation of
working council representatives from each business units. The working council
representatives will bring up matters relatable to each division via a controlled and
specific medium to the management instead of the management to get inputs via
hearsay and gossips. Each matters discussed must have the full support and
acknowledgment from all divisions related, even up until the level of board members.
This will then prove that the company is committed into the human capital aspect of its
employees.

f) Develop a fun working culture to satisfy the camaraderie factor according to Sirota’s
theory. Always have a reason to celebrate something during work ie someone’s birthday
or a colleague’s personal achievements even if it’s not work related. Arrange for team
building activities inter department such as a talent-thon competition or sports events
to give staffs a chance to mingle around with other divisions which will in turn increase
the sense of belonging.

g) Redefine each business section to have a specific, measurable, challenging but yet still
attainable targets and KPIs. By focusing and making the targets more distinct and
tangible, staffs will have a better chance of concentrating and understanding what is
expected of them in their job scope. This will also help during appraisal of each
employee as their performance can be clearly measured instead of just relying on the
general perception of the assessor.

h) Finally, the top management and board members should always be committed in giving
their utmost support to any enhancement to the human capital strategies without having
to worry too much on the costs constraint. A little investment in building up staff
engagement and motivation would definitely pay in the long run by avoiding recurring
trainings and hiring due to staff leavings plus avoidance of accidents and incidents from
occurring. This commitment from top level will boost up the MAB Company’s already
strong branding as a national airline carrier and will install brand loyalty to all its
employees, thus propelling all to strive for success.

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CONCLUSION

The report shows that there are a number of issues pertaining to the human resource
management present that is currently plaguing all levels of employees of Malaysia Airlines
Berhad. The report summarises that the most critical issue that needed immediate attention
would be the low staff engagement and motivation which if not rectified, may incur damaging
impacts to all aspects of the company.

It is highly recommended that the proposals and suggestions laid out in part 4 of the report be
actioned at the earliest opportunity by the company in line with its costs and resources
constraint. By applying the strategic human resource management suggestions to follow suit
the theories of Alderfers and Sirota, the author believes that swift and significant positive
results will be bound to take place.

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