Models of Strategic HRM: British Airways Case Study

Strategic human resource management may be observed as an address to the management of human resources that furnish a strategic framework to sustain long-term business goals and outcomes. The approach is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment and matching resources to future need.

Comparison with the Model:

Fiedler Contingency Model

Bath People and Performance Management

Leadership membership Relationship which is the most important variable in determining the situation favourable (Accept and respect by followers)

The development and successful implementation of high performance work practices, partially those concerned with job and work design, flexible work resourcing (recruitment, Selection and Talent Management), employee development (increasing skills and extending the skills base), reward and giving employees a voice;

The degree of task structure which is the second most important input into the favourableness of the situation(structured task)

The formulation and embedding of a clear vision and set of values (the big idea)

The leaders position power obtained through formal authority which is the third most important dimension of the situation.(Great deal of Authority and power are formally attributed to the leader position)

The provision of support and advice to line managers on their role in implementing HR policies and practice.

Reason for the importance of HRM in Organisation:

Human resources are great significance to organizations in 10 specific areas, to extent from strategic planning to company goodwill. HR practitioners in a small business who have well-balanced expertise equip a number of services to employees. The areas in which HR maintains control can enhance employees’ perception of HR throughout the workforce when they believe HR considers employees to be its internal customers and renders services with that in mind. There have ten importance of Human Resource Management in the organization.

• Strategy
• Compensation
• Benefits
• Safety
• Liability
• Training and Development
• Employee Satisfaction
• Recruitment
• Selection
• Compliance

Strategy

HR improves the company’s bottom line with its knowledge of how human capital affects organizational success. Leaders with expertise in HR strategic management participate in corporate decision-making that underlies current staffing assessments and projections for future workforce needs based on business demand.

Compensation

HR compensation specialists develop realistic compensation structures that set company wages competitive with other businesses in the area, in the same industry or companies competing for employees with similar skills. They conduct extensive wage and salary surveys to maintain compensation costs in line with the organization’s current financial status and projected revenue.

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!
Find out more about our Essay Writing Service

Benefits

Benefits specialists can reduce the company’s costs associated with turnover, attrition and hiring replacement workers. They are important to the organization because they have the skills and expertise necessary to negotiate group benefit packages for employees, within the organization’s budget and consistent with economic conditions. They also are familiar with employee benefits most likely to attract and retain workers. This can reduce the company’s costs associated with turnover, attrition and hiring replacement workers.

Safety

Employers have an obligation to provide safe working conditions. Workplace safety and risk management specialists from the HR area manage compliance with U.S. Occupational Safety and Health Administration regulations through maintaining accurate work logs and records, and developing programs that reduce the number of workplace injuries and fatalities. Workplace safety specialists also engage employees in promoting awareness and safe handling of dangerous equipment and hazardous chemicals.

Liability

HR employee relations specialists minimize the organization’s exposure and liability related to allegations of unfair employment practices. They identify, investigate and resolve workplace issues that, left unattended, could spiral out of control and embroil the organization in legal matters pertaining to federal and state anti-discrimination and harassment laws.

Training and Development

HR training and development specialists coordinate new employee orientation, an essential step in forging a strong employer-employee relationship. The training and development area of HR also provides training that supports the company’s fair employment practices and employee development to prepare aspiring leaders for supervisory and management roles.

Employee Satisfaction

Employee relations specialists in HR help the organization achieve high performance, morale and satisfaction levels throughout the workforce, by creating ways to strengthen the employer-employee relationship. They administer employee opinion surveys, conduct focus groups and seek employee input regarding job satisfaction and ways the employer can sustain good working relationships.

Recruitment

HR recruiters manage the employment process from screening resumes to scheduling interviews to processing new employees. Typically, they determine the most effective methods for recruiting applicants, including assessing which applicant tracking systems are best suited for the organization’s needs.

Selection

HR professionals work closely with hiring managers to effect good hiring decisions, according to the organization’s workforce needs. They provide guidance to managers who aren’t familiar with HR or standard hiring processes to ensure that the company extends offers to suitable candidates.

Compliance

HR workers ensure that the organization complies with federal state employment laws. They complete paperwork necessary for documenting that the company’s employees are eligible to work in the U.S. They also monitor compliance with applicable laws for organizations that receive federal or state government contracts, through maintaining applicant flow logs, written affirmative action plans and disparate impact analyses.

Explanation and analysis of an HRM framework

Explanation of an HRM Framework:

External Context

(Fixed Effect)

Labour Law

Labour Market Condition

Characteristics of labour supply.

Factory Specific Characteristics

Location, size, age, capital investment, product, vertical integration, buyers and work place philosophy.

Defect Rate, Employee Turnover, Absenteeism and Production efficiency.

Productivity

Output , Sales, Profits.

Explanation of the HRM process and how strategies are developed

Human Resource Management Process

There could sub functions in the HRM Process in practice.

The key areas of HRM Process are

1. Human resource planning
2. Attraction – also called as recruitment
3. Selection
4. Directing
5. Training and development
6. Performance appraisal
7. Promote, demote or transfer regarding to performances

The HR Strategy development process should contain the following steps:

HR Information Gathering – The team has to complete the information about different HR Processes, their performance and their impact on the profitability of the organization. The profitability can be difficult, but the team can always make a good estimate about the impact of the process to the results of the organization.

Organizational Development Information – the information about the development of the organization in the past and its current status. Each organization has several stages in its organizational lifecycle and some trends in the organization are healthy and some trends are extremely dangerous and can impact the future profitability.

HR Workshops – when the input information are gathered the HR Team has to organize the workshops inside Human Resources, where the piece of the new HR Strategy can evolve. The teams should discuss the findings one by one and all the ideas should be gathered as they can impact the overall HR Strategy.

HR Managerial Workshops – the information from the previous HR Workshop with employees should go to the next level and the HR Managers should talk about the trends and the topics, which should be included in the HR Strategy and what is the impact on the whole organization and the HR team. The results of the HR Managerial Workshops have to be recorded and the priorities of different parts of the story have to assign.

Preparation of the HR Strategy – a dedicated HR sub-team has to prepare the story of the HR Strategy from the approved outcomes from the HR Managerial Workshops. The story has to be strong and appealing for the audience and HR employees.

HR Strategy Feedbacks – the HR Management Team has to present the pre-final version of the HR Strategy to the fellow managers in the organization and their feedback has to be appreciated and fully and honestly discussed with the managers. The same session has to be organized for the HR employees as they can say their feedback to the HR Strategy Story.

HR Strategy approval – the HR Strategy has to be approved by the top management as they are the final customers of Human Resources and they should fully agree with the way, the HR wants to operate in the organization within several years.

An Assessment of the Roles in Strategic HRM

HRM is central to a firm’s strategic management policies. For starters, the business cannot implement its operating strategy, however astute, without the full cooperation of its personnel. Consequently, corporate leadership makes sure to get employees’ buy-in before rolling out operating tactics. HRM also enables organizations to take a peek at what rivals do and what personnel management strategies they use to trump others. Another HRM advantage is that it allows a firm to ensure regulatory compliance in its operations, which is generally a money saver and reputation builder.

Assignment Two

British Airways Human Resources (HR) strategy

a. Human Resources Management (HRM) models

There are many HRM models out there (Harvard, Michigan, etc€¦) but there are mainly three different approaches (Torrington, Hall and Taylor 2008) to achieve competitive advantage through HRM. The universalist approach described by Guest (1989) as a one size fits all i.e. derived from the best practices philosophy also supported by other academics e.g. Delery and Dory (1996), Pfeffer (1994) but some others are also questioning how easy it may be to shift focus of the organisation (Whipp 1992) and even to achieve the goals (Purcell 1991). The fit or contingency approach that can be found in Fombrun et al (1984) is based on both internal and external fit and focus on selection, appraisal, development and reward. This model has been criticised mainly because of its one-way relationship with organisational strategy. The resourced-based approach (Boxall 1996) is built on attributes of resources. To achieve competitive advantage, resources should be Valuable, Rare, Inimitable and Non-substitutable (VRIN).

B. British airways HRM aspects:

To define the HR model used by British Airways, we should first analyse the main aspects of its HR Management:

• creating motivation and commitment of all employees which continue to play a major part in the success of the company.
• some of HR measures are clearly designed to improve and support employees’ motivation (British Airways Plc. 2010).
• a remuneration scheme with profit sharing and encouraged share ownership, this is an effective way for employees to feel more involved in the company’s results (British Airways Plc. 2010),
• training and development are instrumental to ensure resources will be able not only to feel valued in the company but also will be able to enable business objectives achievement (British Airways Plc. 2010)
• diversity and inclusiveness is seen as a key aspect in the recruitment strategy, this includes genders, ethnicities, religions, etc€¦ (British Airways Plc. 2010)

c. HRM model used by British Airways:

The aspects depicted in the previous paragraph show that the internal resources are linked (KPIs, ownership, etc€¦) including the human resources. As described above we also realise that human values are in the middle of British Airways strategy. As quoted page 236 of the 4th edition of Managing Change (Burnes 2004), Hax and Majluf (1996 p. 10) state that: “The essence of the resource-based model €¦ [is] that competitive advantage is created when resources and capabilities that are owned exclusively by the firm are applied to developing unique competencies. Moreover, the resulting advantage can be sustained due to the lack of substitution and imitation capabilities by the firm’s competitors.”

British Airways used a Resourced Based Model to achieve above average profitability by developing VRIN (Value, Rare, Inimitable, Non-substitutable) resources (Barney 1991). To substantiate this (Parker 1999), let us go back to the mid-nineties when the group started a portfolio analysis and defined the level of criticality of its operations. Based on this review, decision has been made to outsource resources (including human resources) that are not key to the core business. As other major corporations, they retained the strategic components (VRIN) and outsourced the routine activities. This decision helping the group to achieve outsourcing goals i.e. costs reduction, higher quality of services, agility and better focus on core business to meet the business objectives as defined in the introduction.

d. Limitations of the Resource-based model

There is no perfect model, or else there would only be one. But what are the ones of this model used by British Airways? Burnes (2004) mentions the lack of empirical support and also the complexity and ambiguousness of the resources definition. By design, the model is more focusing to the internal resources than on the external competition e.g. there is no link with the product markets, it may be difficult to find VRIN resources. There is also little evidence that many firms have adopted the model.

http://sdbplus.wordpress.com/2012/01/02/british-airways-hr-management/

Task 2: British Airways merged with Iberia in 2011. Analyse the impact of the merger on strategic HRM at British Airways.

This M&A briefing note provides an overview of the merger of British Airways and Iberia which led to the formation of a new firm – International Airlines Group (“IAG”)

Background

• BA and Iberia had developed strong links over many years:
• BA acquired a 13% stake in Iberia in 1998
• BA & Iberia started co-operation and route-sharing in 2003
• BA first made a bid for Iberia in 2007
• Impact of the continued economic downturn led to the resumption of merger talks in 2009

The Deal

The initial announcement:

• Merger of British Airways and Iberia announced in November 1999.
• BA shareholders get 55% of the new company; Iberia shareholders get 45%
• BA and Iberia to continue their existence as airline brands
• New company called IAG plc, with shares listed on both the London and Madrid stock markets
• IAG initially estimated £349 million of annual cost savings by the fifth year after the merger
• A quarter of the cost savings to come from IT and back office efficiencies + savings on maintenance and purchasing
• Implementation cost of the merger estimated at £350 million.

The final merger agreement

• Definitive (legally binding) merger agreement finally signed in April 2010:
• Merger details took two years of complex and often strained negotiation
• Creates Europe’s third-largest airline group: behind Lufthansa (90 million passengers p.a.) and Air France-KLM (70 million passengers p.a.)
• Combined scale would have an aircraft fleet of 408 planes, carrying more than 58 million passengers a year
• Willie Walsh (previously CEO of BA) to become the new CEO of IAG
• On the day that the shares of IAG first traded (Jan 2011), the market capitalisation of the firm was £5.6bn

Key motives and drivers of the merger:

• Very much a merger that looks to the long-term.
• Industry consolidation – a process that has already begun and is expected to continue over the next 10-20 years
• 2010: combined airline losses (whole industry) of almost $3bn in 2010
• BA and Iberia seen as well-matched businesses that complement each other
• BA strength: North American & Asian routes and destinations; Iberia strength: Latin America
• BA gains better coverage of key routes in Latin America
• Structure designed to allow IAG to participate in “further consolidation” (i.e. more takeovers)
• Further takeovers by IAG would be judged on whether they could meet or enhance a target of 12 per cent return on capital.

What happened next?

IAG takeover of British Midland International (BMI)

• Announced November 2011
• BMI – a loss-making subsidiary of Lufthansa (losing approx £160million per year)
• Deal subject to clearance from the Competition Commission and the European Union
• Significant opposition from Virgin Atlantic – the main competitor affected by the deal
• Main rationale – BMI’s extensive landing slots at Heathrow – which will be used to add British Airways flights to destinations in emerging markets
• A possible short-term drawback to IAG: the takeover adds to the groups capacity at a time of weak demand for air travel

The main risks facing IAG

• Unforeseen external events (e.g. disruption to travel caused by volcanic ash)
• Industrial relations – a constant thorn in the side of management at BA & Iberia
• BA’s pension fund liability – a shortfall of £3.7bn
• The global economy – demand and profits closely linked to the global economic cycle

Key quotes relating to the merger

Prof Peter Morrell (Cranfield University):

“They’ve come up with various cost savings that they can get out of the merger of the companies. These are on things like procurement, IT, maintenance. These are the things they can get from a merger which aren’t really available from alliances.”

Ashley Steel, head of transport at KPMG:

“the creation of IAG heralds the start of an exciting era of airline consolidation, with further marriages of convenience as pressures on costs and revenues continue to increase.”

Willie Walsh on the day the merger was confirmed:

“Our goal is for more airlines-but, importantly, the right airlines-to join the group. Today is the first step towards creating a multinational, multi-brand airline group.”

http://www.tutor2u.net/blog/index.php/business-studies/comments/6-essential-ma-cases-ba-iberia-merge-to-form-iag, 23/12/2012, 20:46 PM

Impact of Merger in British Airways:

British Airways’ and Iberia’s stock stopped trading Friday as the BA-IB merger officially took effect, to be replaced in both the London and Madrid markets by International Airlines Consolidated Group stock on Monday.

Based on combined passenger count, IAG is now Europe’s fourth largest carrier group after Lufthansa Group, Air France KLM Group and Ryanair. Both airlines’ shareholders approved the merger in late November (ATW Daily News, Nov. 30, 2010). The carriers will continue to be separately branded.

The commencement of IAG was clouded Friday by Unite union’s notice that BA cabin crew “voted overwhelmingly” to take further strike actions, the latest salvo in the long-running dispute between the airline and its flight attendants (ATW Daily News, Dec. 22, 2010).

“Surely BA management must now wake up and listen to the voice of their skilled and dedicated employees,” Unite stated.”This dispute will be resolved by negotiation, not litigation or confrontation, and it is to negotiation that BA management should now apply itself. We are ready.” The union said 75% of 10,220 eligible voters cast ballots, with over 78% voting in favor of more work actions.

http://atwonline.com/airline-finance-data/news/ba-iberia-merger-formally-takes-effect-ba-flight-attendants-vote-strikes-0