Organisational Strategic analysis on British airways

The issue of organisational changes is a corner stone of organisational functioning, development, competitiveness and, yet, effectiveness. Over the past decades, the way in which people are managed, promoted and stimulated at workplaces has become a primary key to assess and improve organisational efficiency and marketability and became a part of a general organisational strategy.

The purpose of this report is to conduct a Organisational Strategic analysis one of the largest airline company British Airways. The objective of the report is to evaluate the competitive and changing market condition of the airlines companies how these companies specially BA’s organisational changes occurred in last five years

In terms of globalisation and rapidly changing business environment, as well as growing competitiveness on the market, modern companies increasingly need to rely rather more on their skilled and motivated personnel than on pure technologies and products

the report will show us how BA addressed following issues:

Main objectives in making the change in last five years.

Key factors Influence of BA’s organisational changes

How managed change toward resistance of changes

In the Chapter D, the aim of the Chief Executive Willie Walsh for BA to be simpler and improving employee’s behaviour and performance has discussed the 7S framework are also used. The aim of the report is to outline the areas in which the current strategy could be improved and further related changes.

Conclusion and recommendations are also drawn.

Table of Contents

Page No

1.0 Overview of the Company

1.1 British Airways Organisational Changes in last Five years

1.2 Objective in making change

Part 2

2.0Factors influencing British Airways change strategy__

2.1 Internal influences

Part 3

3.0 Organizational Change

3.1 Organizational Resistance & how it’s managed

3.2 Types of Organizational change & process

5.0 Recommendations and Conclusions

Part 4

4.1 Timetable for implementations

Table of Figures Page No

Figure 1: Model of Change- Sequence of Events

Figure 2: Forces Causing and Resisting Change within an Organization

Figure 3: Statistics of Favourite airline

Figure 4: Europe Share Market Movement

Figure 5: Timetable for full implementation

Figure 6: 7S framework

Figure 7 : Herzberg’s Two Factor Theory

Figure 8: Factor affecting employees’ attitude

5.1 Recommendations for achieving Mr Willie Walsh’s goal for BA,

Part 1

1.0 Overview of the Company

British Airways happens to be one of the biggest airline operators that is U.K. based and among the different operators of Europe it is holding the position of the 3rd position after the Air France, Lufthansa and KLM. The major canters of the airline are at London Gatwick, and London Heathrow in which their range of the services being provided by them from the long routes to the short routes of the domestic European flights. Manchester happens to be one of the Britain Airports from where it is operating for the long distance flights. There are about Five hundred and fifty destinations to which the airways is providing flights at convenient timings.

Thus the British Airways is a group which comprises of the other subsidiary firms like the British Airways Plc and others like the BA Connect Ltd. and British Airways holidays Limited.

As British Airways is considered to be a leader in the industry mainly because of the kind of the technology that is being utilized by the company in providing various services like the online booking system and the ticketing method of self services(www.britishairways.com)

1.1 British Airways Organisational Changes in last Five years

British Airways Plc: the sky’s the limit. British Airways Plc, BA, is the leading airline in the United Kingdom, and naturally one of the biggest in the world. In May 2005, Willie Walsh, newly taken over from Rod Eddington as chief executive, continued this active management of company culture and said of his staff:

“I want them to feel inspired, I want them to feel optimistic, I want them to feel that this is a good place to be” (Dangerous Company, BBC2 April 2006).

Willie Walsh’s vision of change was so ambitious (doing better and better, never enough for him), Walsh justified himself in saying that he had a long-term vision and staff a day-to-day one. Although before Walsh’s tenure as chief executive, BA was a very well-run and profitable company and it was considered as “the world’s favourite airline”. But as visionary leader he was made number of changes, such as he reduces top heavy executive team from 25 to 14. Thus, he presented five objectives to achieve:

To sustain BA as the world’s favourite airline.

Improve customer service

Diversify through merger and acquisitions

Improve management and to be best managed company in the UK

Cost cutting

1.2 Objective in making change

The overall objective of Walsh’s approached to reduce the expenditures with in the organization as well as exterior. Walsh’s claimed BA needed a second revolution. At the beginning Willie Walsh’s vision of change and strategies were correct but its implementation to achieve his objectives were not well-liked by employees or people around him this resulted in employees’ de-motivation and de-moralization. As a result there was a planning to strike by the employees which was temporarily held by the court decision but there are planning to have a strike.

This paper discovers the phenomena of radical organizational change in last five years, its implications and consequences over the company’s on the whole performance and the controversy of leadership and its issues? In this paper author discuss how leadership effect on organization’s performance in the context of organizational change? And how well Willie Walsh did his change management strategies. Was he successful or failure. This paper reviews these questions by analysing the case study of British Airways, and also discusses the role of effective communication and the motivation of staff in BA and how these aspects are interrelated with each other.

Part 2

2.0Factors influencing British Airways change strategy__

Monitor global competition, customers, competitors and other factors

Need for change

Initiate Change

Implement Change

Evaluate problems & opportunities, define needed changes in technology, products, structure & culture

Facilitate search, creativity, idea champions, venture teams, skunkworks & idea incubators

Use force-field analysis, tactics for overcoming resistance

Environmental Forces

Internal Forces

Consider plans, goals, company problems & needs

Figure 1: Model of Change- Sequence of Events

(Source: Richard, 2001)

Corporate Innovation is something that is very hard to change and employees need time to get used to the new way of organizing. Many people are not willing to change unless they perceive a problem or a crisis. For companies with a very strong and specific culture it will be even harder to change.

Mr. W. Walsh, Chief Executive of British Airway’s decision to implement change at BA was influenced by a number of various factors. These were mainly based on the effects of the external environment on British Airways. BA’s technology was not in keeping with the technology of their competitors and so this was reflected in its products. To combat this threat, W.Walsh.,(2009) tried implementing new procedures and changing the culture of the organization. He decided to change the organization from a technology driven company to a more service oriented one, lacking the technological strength of its competitors, BA proposed to offer a superior level of service instead. The external environment threat of technology was the main reason behind BA’s change.

Change within the Organisation

Forces Resisting Change

Forces for Change

Global Pressures

Competition

The Market

External Environment

Aspirations of the Workforce

Technology

Costs

Inertia

Lack of Trust

Complacency

Conservatism

Fear of Failure

Fear of the Unknown

Power Blocks

Figure 2: Forces Causing and Resisting Change within an Organization

(Source: Jewell, 1990)

In order to survive and prosper in a competitive and rapidly changing environment, organizations also need to change. This may be brought about by many influencing factors which may be internally within the organization or in external environment of the organization.

External forces originate in all environmental sectors, including customers, competitors, technology, economic forces and the international arena.

External influences:

Political factors including legislation or other government measures. Organizations are forced to change in order to meet, for example, health and safety, environmental or consumer protection requirements.

The EU’s laws could prevent to diversify into the no-frills market.This will make less competitions for BA from no-frills airlines.

Noise pollution’s stricter laws from EU could affect all the airlines.

United Kingdom have decided not to introduce the Euro would reduce number of tourists to come into the kingdom.

Slots reductions at the airport could enable BA to take over other routes which are served by the other airlines.

Reduction in the protection of slots, particularly those at the primary airports could enable British Airways to take routes served by other airlines.

Government is always tried to protect BA as a national flag carriers.

Costs have been increased due to increase fuel price.

Economic factors such as changes in levels of unemployment and interest rates which can have a major impact on demand.

Increase the airport taxes could increase costs of the BA.

New members of EU could increase or introduced new flights to the UK which could prevent to hold up the profits.

Current economic downturn and swine flu could prevent people to fly.

BA and Spain’s Liberia airlines merged decision to increase £400 millions of synergy (http://www.breakingtravelnews.com/news/article/ba-and-iberia-agree-merger-deal)

Social factors including changes in life styles and environmental issues which organizations must respond to if they are not to lose out to competitors.

Threats from terrorists attacks could reduce people to fly such as September 2001 and most recently failed suicide bomb attack at American Airlines .

Technological progress such as word processing in the office or robots in the factory can change working materials, methods and practices and create the need for new skills.

Trade unions can influence wage rates, working conditions and other aspects of industrial relations.

Competition and changes in consumer tastes and demand all impact on business organizations, making change necessary in order to respond.

Media reports which can influence consumers’ and employees’ perceptions of an organization and its goods and services.

Internal forces for change arise from internal activities and decisions. If top managers select a goal of rapid company growth, internal actions will have to be made to meet that growth ( Smillie & Hailey., 2001). New departments or technologies will be created. Demands by employees, labour unions and production inefficiencies all can generate a force to which management must respond with change.

2.1 Internal influences:

New products or services which require change in order to introduce them.

Management changes, due perhaps to a merger, take over or the appointment of new staff. This may affect the management style and culture of the organization.

Quality assurance systems which are becoming increasingly important in organizations in order to meet changing customer expectations.

Productivity and profitability improvements which often require change in systems or procedures in order to control or reduce costs and/or increase output.

Customer service is now more crucial than ever for organizations in competitive markets because they can only survive and prosper if they satisfy customers.

After analyzing the external environment, it can be summarized that no-frills zone may pose a big threats in the future. Another Problem that most recent painful terrorists attack had cancelled number of flights of BA.

After the need for change has been perceived and communicated, change must be initiated. This is a crucial stage of change management- the stage where ideas that solve perceived needs are developed. Responses that an organization can make are to search for or create a change to adopt.

The modern complex business world is being rapid changes. There are number of factors such as globalization amongst companies, changes in market trends as well as companies who are more globally demanding and mature, necessary to reduce costs and the introduction of new technology has lead to companies to face large amount of competition than they had in the past.

It is therefore important for organizations to stay ahead of their competitors and recent research has indicted that the creativity and innovation of an organization can give them that competitive edge they require. By being creative and offering consumers a more innovative service or product, the company or organization will be able to differentiate themselves from others who offer similar services. Cook (1998) found that creative organizations “harness the ability to think and act in different ways that make sense to their current and future customers”.

BA’s CEO presented his views and identified on the key drivers and directions for the airline’s industry and the strategies BA will follow in the transition into the next millennium. He also reiterated BA’s commitment to achieve long term growth in earnings and shareholder value in the top quartile of the major airline by focusing on people, performance and growth.

Part 3

3.0 Organizational Change

Organization changes its overall strategy for success, adds or removes a major section or practice, and/or wants to change the very nature by which it operates. Willie Walsh’s vision was the same. When together all employees or the group of people work to achieve the organizational goal, the organizations are become operational and successful. Therefore, organizational change is possible only when employees of the organization understand the need for change, buy-in the idea of change, are motivated towards the change, and express their interest (McGuire D. & Hutchings K., 2006; Beer M. et al, 1990).

Keeping in view the importance of employees, management thinking for change should consider the effect of the change on employees as well as their resistance and reaction on it. They should be taken into account and should be motivated and explained reasons of change by the management while taking any decision. Other researchers (e.g. Tichy, 1983) acknowledge the frustration that manager’s feel when their organizations do not respond to elaborately analyzed plans, where there is a lack of interaction between decision and action. In the case of BA, Willie Walsh did not plan to follow up change because he did not think fundamental changes as process but wanted to change entire organizational culture immediately. As Whittington and Mayer (2002) also vindicate this need, ” ‘adaptive reorganization’, the ability to redesign structures frequently, is now critical to organizational performance”.

However, an effective change can only be achieved if change managers encourage employees’ participation as much as possible, address their concerns and repercussions and ensure them that leader’s involvement would be role models for a change (Heracleous, 2002). Enthusiastic Willie Walsh eager for bringing changes in BA forgot to get his employees involved in the change management process.

Nevertheless, employees or group of people working together for organizational goal made the organizations as successful.

3.1 Organizational Resistance & how it’s managed

There are number of factors are playing for resistance to changes such as fear of the unknown, the possibility of economic insecurity, habit, threats to social relationships and failure to recognise the need for change (Nadler, 1988). Another issue of importance in change which is difference between how organisation looks at present and look after the change. According to Cameron et al (1993), readiness for organisational change depend on how the degree to which a change (TQM) and existing culture differs from that culture, an organisation may be more or less ready for such a change.

Tichy and Devanna (1986) discuss “creating a need for change”; in effect, opening up the organizational culture to be receptive to the change. They note that this is especially difficult when there is no apparent crisis, but rather the long-range vision of a leader who anticipates the time it takes to implement organizational change. Resistance to change is especially relevant if the vision of a leader differs from the values and beliefs of the existing organizational culture. If that is the case, then cultural issues must be addressed (Schein, 1991; Trice and Beyer, 1991). In the case of BA, Walsh’s vision was very good because organizations continuously need improvements and changes to maintain its competitive advantages. Willie Walsh started the change process and neither involved management nor his staff and stressed too much on cost cutting activities then these radical changes turned employees’ repercussion and resistance to change into aggression and they went on strike. Because employees thought that these changes were not needed and they were not convinced, also, they were worried about their future.

In this part of the paper author will now discuss the controversy of leadership and its effect on organization’s performance in the context of organizational change.

3.2 Types of Organizational change & process

Change management is a process to bring modification and transformation into an organization to sustain and improve its efficiency (John Hayes, 2002).There are different overall types of organizational change process, including planned versus unplanned, organization-wide versus change primarily to one part of the organization, incremental (slow, gradual change) versus transformational (radical, fundamental), etc.

Organizational change is a step by step and a learning process which involve everyone in the organization. There are number of researches has conducted and researcher stated that the change in the organisation should have organisational culture capacity (Garratt, 1987, 1990; Bahlmann, 1990; Senge, 1990; Senge et al. 1994, 1999; Pedler et al., 1991; Burgoyne et al., 1994; Swieringa and Wiersma, 1992; Watkins and Marsick, 1993; Redding and Catalanello, 1994). This approach differs clearly from the literature trend which puts an emphasis on knowledge management and which associates organizational learning capacity with the ability to create, acquire, transmit, retain, or use organizational knowledge. This trend is led by authors such as Amponsem (1991); Nonaka and Takeuchi (1995); Nonaka and Nishiguchi (2000); Nonaka and Teece (2001); Nonaka et al. (2003); Baets (1998); Von Krogh and Roos (1996); Von Krogh et al. (1998); Despres and Chauvel (2000); Chauvel et al. (2003).

It is clear from the above literature that Willie Walsh should have involved all the members of management and staff while making change in British Airways. They should have been convinced about the need of change for the improvements and encouraged to support this process. Despite of considering all that, he brought radical changes in organization without making his management and employees involved, like cost cutting activities, outsourcing of different departments and sale of operations etc.

Buono and Bowditch (1993) notified that uncertainty during change processes is typically about the aim, process and expected outcomes of the change and implications for the individual employees (Buono and Bowditch, 1993).

Part 4

The change in the BA has partly successful, as Walsh five objectives are partly achieved. Below has explained which changes are successfully meeting its objectives or not:

1) Sustain BA as the world’s favourite airline:

According to Consumer Travel Alliance survey shows that Southwest Airlines was no 1 favourite in the world because of price and customer service. Below graph shows its result:

Figure 3 : Statistics of Favourite airline

(Source: http://consumertraveler.com/wp-content/uploads/FavoriteAirline1.gif)

2) Improve customer service

A survey conducted by the BA shows that satisfaction rating across the network rose by 72 percent. The survey conducted among 21millions customers(.http://www.britishairways.com/cms/global/microsites/ba_rep)

3) Diversify through merger and acquisitions

Most recent M & A with Iberia agreement of £3.9bn brought share price up and according to Willie Walsh both brand would be retained(http://images.google.co.uk/imgres?imgurl=http://static.guim.co.uk). Below graph shows of share market movements, it has shows that BA has gaining Europe share market in significant wa,

Figure 4 : Europe Share Market Movement

(Source: http://www.centreforaviation.com/news/share-market/2009/11/13/british-airways-and-iberia-establish-mou-for-merger)

Improve management and to be best managed company in the UK

British Airways has failed to reach an agreement with union for stop strike but at the end strike called off because of court order. He have not succeeded with his instant reform but he is able to overcome competition from low costs budget airlines(http://www.businessandfinance.ie/index.jsp?p=222&n=22)

Cost cutting

British Airways have struggling to cost cut because of resistance of employees, as they have made controversy by asking staff to take unpaid leave, reduce hours or work for nothing (http://www.guardian.co.uk/business/2009/jul/06/british-airways-jobs-pay-unions). Thus they have facing strong resistance from the Union which discussed earlier in the part of this study.

4.1 Timetable for implementations

Moreover, the parallel running and big bang strategies and pilot studies would be the best approach for the BA’s changes for strategies. Such as However, it is very important to combination new technology and old technology until new systems is working properly in effective and reliable way, i.e. parallel running.

The ‘big bang’ strategy can be approached with the motivational courses and management training. The absenteeism could assist to loosing money by the company, as a result the change is evident in speed way. Big band theory could generate resistance to change, as well as a risk of failure, but in order to implement changes can be improve employees’ work environment, i.e. carefully planning will ensure successes and great resistance can be avoided. Below graph shows the timetable for full implementation,

Figure 5: Timetable for full implementation

4.0 Recommendations and Conclusions

A 7S framework model was developed as a model of not just structure, but model of organisational change by Tom Peters and Robert Waterman (1980). This frame work can also be used as an organisational analysis tool and it also depicts that organisational effectiveness from interaction of various factors. The 7S framework show below,

Figure 6: 7S frmaework

Skills

Style

Strategy

Systems

Shared

Values

Staff

Structure

(Source :http://www.themanager.org/models/7S%20Model.htm) the BP Group. Post acquisition, 240 BP employees will continue working for and in support of the ground fuels business to be transferred to Hellenic Petroleum. The remaining personnel will continue to support BP’s other activities in Greece. The agreement also provides for a transitional period regarding the management of the network and branding. The deal is subject to regulatory approvals, Greek competition authorities and other relevant approvals. The deal is expected to complete towards the end of 2009. N M Rothschild & Sons Limited acted as financial advisor to Hellenic Petroleum SA. Pratap Amin, Sebastian Lawson , Jocelyn Mitchell, Avril Martindale, John Fordham, David Taylor, Daniel Lawrence, Eli Hilllman, Vanessa Jakovich, Ned Staple, Van der Staal, Olivia Wyld, Patrick Taylor, Susan Doris, Michael Müntefering, Chun Wing Yeung, Dylan Cunard, Todd Kramers of Freshfields Bruckhaus Deringer LLP acted as legal advisors for BP plc.

The above diagram has no starting point or hierarchy and it shows that by seven elements which are considering organization form these 7 viewpoints it would be possible to establish major strength and weakness. 7S framework shows the 7most important things that should be kept in mind by the management for achieving organisational goals. The BA’s management framework clearly sets out principle on how to delegate authority and responsibility. As the responsibility of running the company is efficiently is given to CEO, therefore CEO should take of all &7S mentioned in the framework.

BA’s group Chief Executive Willie Walsh is aiming to make BA a simpler and more efficient by enhance of employees behaviour with embedding a high performance culture by 2012. He had suggested that simplification is the key to success. According to Walsh (2008), BA had incredible assets and a great workforce. The only need was to bring these assets and people together to form a more productive, efficient and powerful organisation. The core problem that was cited was the Bureaucratic management structure which was formed because of the number of mergers and acquisitions in the organization. According to Walsh (2008), the people who knew most about the company were the people who were running operations at the bottom level. He also noticed that the management had become too introspective at the level and was not listening to the employees about safety and reliability.

Furthemore, According to De-Witt & Meyer (2004), business strategy is concerned with “how firms should go about creating a sustainable competitive advantage in each business they operate. Therefore, In order to achieve sustainable competitive advantage, goals and make company the best in the industry, the owners (CEO, Top level management) of the company should take care of the people working in the company, as their efficiency in performance would help company to achieve its goals. So, therefore a good integrated communication and co-ordination network would be required to sustain its image in the industry.

Figure 7 : Herzberg’s Two Factor Theory

(Source: http://tutor2u.net/business/people/motivation_theory_herzberg.asp)

Herzberg’s Two Factor Theory was developed as a model of understand of employees motivation and attitudes. This theory was developed by Fredrick Herzberg in 1959. Herzberg suggested both the factors are very important to understanding employee motivation and satisfaction.

Following some of the factors which are causing satisfaction and dissatisfactions of the employees:

Factor affecting employees’ attitude

Figure 8

Hygiene Factor

Dissatisfactions

Motivator Factor

Satisfactions

Company policy and Administrations

Achievement

Supervision

Recognition

Working condition

Responsibility

Salary and other financial factors

Opportunity for advancement

Job Security

Personal Growth

Relationship

Challenging

The above list of factors shows that management of BP not only avoid Hygiene factor also provides Motivator factor to the employees in order to Tony’s aims to make a simpler and more efficient by enhance employees performance and behaviour.

5.1 Recommendations for achieving Mr Willie Walsh’s goal for BA,

Considerable steps should be taken up so as to make employees sure that they are working in a safe and healthy environment. This would help Walsh to retain the employees and also to generate a sense of belongingness among them.

Another major factor is that there should be a new operating management system which should be designed so that it would help to bring more consistency in the operations of the company. This can be done by implementing cross group programmes. It can be done minimum once a year to call all the employees at one place (city by city) People are one of the main assets of a company to perform efficiently and effectively.

Walsh would require focusing on improving behaviours of employees by motivating them to work in a more efficient and coordinated way. This can be done by rewarding them, giving them more fringe benefits and providing them safety and security at the workplace. There is also need to build a high performance culture in organization. With coordinating among different operations and departments, a high performance culture and highly motivated employees, Tony can achieve him aim.

For effective change management process, good communication between management and staff is imperative. In order to keep competitive advantages and to minimize fundamental effects of political and economical disturbance, the continuous change is required but this should be taken place with the involvement of each and every member of staff. In the process of decision making, if employees are taken into confidence and are convinced about the required change while taking them on board in decision making process, they would as a part of change management process adhere and admire the change. On the other hand, if they are left disconnected and aren’t motivated about this change process, subsequently their spirit and enthusiasm will go down. Certainly they will have apprehensions and impact about this change process. Senses of insecurity and uncertainty of job within the organization created due to lack of communication which spread out rumours. Thus little-convinced employee will give low output and will not remain loyal to the company. Having gone through the case study and examining it with different supportive theories, it is apparent that even though the British Airways was a well-run company, Walsh decided to bring changes to compete in competent industry but he did not use properly communication techniques and therefore his employees were not communicated his ideas fully.