The Dynamics of Employee Relations at British Airways - Case Study Example

Case study: Employee relations at British Airways Introduction Employment relations are considered to be the study of regulating the relationship between the employee and the employer, not only on individual terms but also collectively. The concept also takes into consideration various issues arising at organisational, industrial as well as workplace levels (Korczynski 2002). British Airways is considered to have an inspirational story about the change in corporate culture and employee relations and how the initiatives taken by the organisation in the 1980s and 1990s became legendary in the corporate world due to the successful implementation of culture change. This paper therefore focuses on the various factors that shaped employee relations at the company, along with how these changes were reflected in the employee relations environment in the UK as well. Further, the paper would focus on the shifts in the management style of employee relations at BA and their rationale, while discussing the consequences of these changes. Contextual factors shaping BA employee relations The concept of employee relations include maintaining a healthy relationship between the employee and the employer so that the employee is motivated enough to contribute towards the overall growth of the organisation in a satisfactory manner. It is generally perceived that employee relations concern resolution and prevention of issues that an individual may face in the workplace, which in turn might be affecting his or her performance in the organisation (Korczynski 2002). The British Airways has earned the reputation of being a company that changed its corporate culture successfully and maintained its relationship with the employees in such a manner that it became an undisputed leader in the aviation sector in Europe during the 1980s and 1990s. However, there had been many contributing factors that shaped the employee relations policies within the organisation and continues to mould the core character of the company even to this day. The company started off as a traditional public sector organisation, focusing on employee relations that were governed by the trade unions. In fact, the company recognised around 16 trade unions during the 1980s, which included the British Airlines Pilots Association or BALPA. This led to a divide between the employees and the management in the organisation, with the employees being supported by the trade unions, while the organisation through industry bodies such as the National Joint Council for Civil Air Transport (NJCCAT). The pre-private years were dominated by bureaucratic form of governance, with the management making policies that were imposed on the employees and the employees negotiating with the management through trade unions. Due to the presence of a third party, the bargaining process between the employee and the management was often complex and fragmented (Blyton and Turnbull 1998). Although the company steadily changed it strategic focus during the 1980s it was careful enough to maintain its relations with the unions, along with initiating various cultural changes within the organisation. The organisation focused on making dual arrangements wherein it communicated its policies with the employees as well as the unions, a policy it adheres to even currently. The company however also tried to negotiate directly with the employees bypassing the union and therefore focused on creating an atmosphere of collective bargaining in the organisation. It in fact abolished the NJCCAT in 1996 (Blyton and Turnbull 2004). Post 1980s the company focussed on renewing employee involvement in the organisation and implemented various initiatives to foster a customer-centric, dynamic and service-driven culture. Some of these initiatives were Putting People First and A Day in the Life highlighted the advantages of collaborative working. In fact during the 1980s and 1990s the company focussed towards heightened customer service and imbibed this policy in its employees as well. The staffs of the airlines were focused on providing unique experience to their customers, especially the business class and executive class passengers. Therefore, customer service ethic became a major differentiating factor in the organisation which further shaped the employee-employer relationship as well. The employees were made to feel a part of the BA culture and the face of the company. They were given extensive training and education, which also helped in integrating the employees with the company vision and goals (Arrowsmith et al. 2000). Therefore, through the development of the employees and various cultural changes within the organisation, BA imbibed comprehensive employee relations policies which helped the company to grow and become profitable, especially during the 1980s and 1990s. Employee relations changes in BA and the UK The employee relations policies adopted by BA focused majorly towards providing customer-centric initiatives and therefore, the employees were also oriented towards such policies. From being a bureaucratic and traditional company like most organisations of the 1980s, BA changed the face of employee relations by being open with its communication with the employees, initiating more direct communication rather than through the trade unions and imbibing customer-centric policies within the organisation (Doganis 2006). British Airways’ customer-driven policies were unprecedented during that time and were emulated by most of the airlines. Due to the focus on customers, the airlines had to re-orient its employees as well and improve its relations with the employees so that the employees were able to understand and identify with the cultural change within the organisation. The company not only focussed on providing comprehensive training to the employees but also changed the structure of the organisation and management style. Due to these unique initiatives undertaken by the organisation, it was able to generate profits together with creating a good reputation with the customers (Colling 1995). However, such a customer-driven policy was also due to the changes in employee relations policies in the UK as well. The dominance of the trade union was at its decline and most companies like BA preferred to handle direct communication with its employees. Further, most companies also initiated changes in its structure as well, making the ranks and hierarchy flexible and the upper management much more approachable for all the ranks of employees. The dominance of the trade unions although diminished was not abolished all together. Many companies preferred to have the unions as well along with direct employee communication channels, especially for undertaking mediation process with the employees. Such trends were also reflected in the changed policies of BA as well. However, BA adopted these changes in a unique manner which although could be followed but could not be copied in an exact manner. The success model of the airlines was soon adopted by other companies in the industry as well. The organisation was given the status of being a role model in most management literature of those times due to the changes it initiated in its organisation. The organisation taught the companies to not only to imbibe customer service ethics but also focussed on how such a policy helps in turning around the performance of an organisation as well (Warhurst 1995). BA was one of the few UK-based airlines that recorded profits during the early 1990s due to its customer-centric policies and improved employee relations focus. Further, such a policy helped in improving its reputation as well and making it ‘World’s favourite airline’. Due to the many benefits of the policies adopted by the airlines, it was able to influence various other companies as well (Barsoux and Manzoni 1997). Shifts in the management style of employee relations at BA and their rationale The management style of employee relations policies at BA underwent several changes over the years and especially during the recent few years due to the flux in the economy and industry as well as political and social changes. After initiating successful customer-centric employee relation policies, the company was faced with similar dilemmas and issues that it faced during the 1990s due to the economic slowdown and increase in competition in the market. During the late 1990s, BA changed its management policy from creating customer centric employee policies to only focussing towards premium or high class passengers. During the time of Chief Executive Rod Eddington in 2000, the company focused on short-haul flights within Europe and initiated various measures to cost to make these flights profitable. However, after 9/11 the company suffered major losses just as the entire aviation industry. It had to undertake cost cutting efforts like retrenching around 7,000 employees with indication of further job cuts. In fact during 2000 to 2005, the management fired more than 14,000 employees. This not only created an atmosphere of uncertainty within the employees but also dented the reputation of the company. Although, the management provided the rationale that in order to survive the market pressure and declining profits, it had to take such severe cost cutting measures, it cannot be denied that such a step harmed the deep-rooted employee-employer relationship that the company established over the years (Grugulis and Wilkinson 2002). Later the company decided to outsource its non-core jobs as well such as in-flight catering and operated under franchise model rather than company-owned divisions. All these measures resulted in cutting more jobs and creating lesser opportunities within the organisation. The company focused more on generating revenues rather than customer satisfaction or improving employee relations. Thus, the employment relations within BA faced major issues. The management style has become much more stringent in the recent years due to changes in the market situation and increased competition. However, the company initiated most of these employee-related policies even before the 9/11 incident. The changed company culture has therefore impacted the employee morale as well as the behaviour of the staff as well. Some recent employee misbehaviour incidences include drunken pilot behaviour in 2000 and 2004, threats of industrial acts etc. Thus, the management changes in employee relations policies have impacted the behaviour of the staff as well, and have resulted in low level of motivation and constant discord with the management (Beaumont et al. 2006). The increase in low-cost carriers and financial issues has also resulted in making the management take stringent decisions regarding employee policies. The recent global recession has also added fuel to the problems and the management had to initiate further cost cutting strategies and retrenchments. In case of BA, it has been found as per the annual report 2006-07 that the employees contribute to around 30 per cent of its total cost, while fuel accounts for 24 per cent of the cost. As labour is perceived to be replaceable, most companies initiate cost cutting strategies by retrenching employees and levying added work on the existing workforce. Further, the company also hires low-cost employees who do not possess most of the desired skill sets. Such policies usually result in denting the reputation of the company and dissatisfied customers (Harvey 2007). Although, BA initiated most of these management changes with the genuine rationale of decreasing the loss margin and helping the company to remain afloat, its stringent employee relations policies have dented its image in a major manner, which might take time to get rectified. Consequences of these changes In the early 1990s and later, most of British Airway’s strategy related to employment was focused at reorganization and collective bargaining.  NJCCAT was taken off in the year 1996. Although, national level bargaining through separate National Sector Panels for pilots, clerical grades, cabin crew, and management remained and ground/support crew was also redefined (Blyton and Turnbull 2004). Since the dispute in the year 1996 with pilots, BALPA and BA got into a new ‘partnership’, and in spite of the fact that the company got into a new co-operative approach with the other unions which were different than the pilots and there was no formal agreement signed as well. Nevertheless, through the period, employment relations were difficult and were always remained at the surface. The problems were always perennial and continue to plague on improving customer service. On the other hand, the cost cutting by taking up people on contracts kept enforcing redundancies and also engendered others as it made it increasingly difficult for delivering benefits to customers (Blyton and Turnbull 2004). Staff issues were also some of the problems that emerged. Disputes regarding baggage handlers, engineers, cabin crews, or even pilots came to the fore. The issues regarding introducing new ‘swipe card clocking-in’ system in the year 2003, cost the firm some millions pounds.  In the year 2004, strikes were there on over pay and staff levels were common. In 2005, a dispute erupted that involved sympathy strike by BA workers for sacking nearly 670 workers in catering suppliers, Gate Gourmet. This was estimated to cost company some £45 millions.  Also in 2005, BA introduced regulations that cut the absence levels which were around 22 days per staff on an average per member a year. Although, employees did not strike on the matter but it substantially worsened the situation.  Strike in the year 2006, over changing the pension system Threatened strike action took place in 2006, over changes to the pensions system, which was repeated in February of 2007 by GMB members had representation of 8,000 BA staff (ground) which was for changes done on pay and condition of the policies for sick leaves. March 2008, when BALPA announced the strike over company’s decision for establishing new subsidiary airline OpenSkies that would have taken advantage of new regulatory framework that was between the US and the EU (Harvey 2007).   The union in the company also showcased that the company would change policies and continued to make changes with thorough negotiations. The steps were difficult and lasted long and this also resulted in too many cases that were farfetched with regards to employment practices. As an example, in 1990s negotiations regarding the changes with the cabin crew that involved agreement which was on the basis of two-tier wage structure, which stated lower pay for the new members, there was a pay freeze, when one moves into a flexible working zone. The agreement was considered to be significant, it effectively was able to create two-tier workforce amongst the crew (cabin) for those who were recruited before the year 1997 and whose maximum pay could rise only to £26,600 per year. For those, post-1997, wherein the pay was operated with ceiling £15,748 per year, this was mandated.  Agreement included some important rebates on flexibility that included that the staff could be trained on four aircraft types than three. The agreement on temporal flexibility was undertaken essentially for working towards a new shift in employee relations (Doganis 2006). It could be noted that Heathrow unions and the management had negotiated two agreements. One was on long-haul and the other was for short-haul operation.  In this case, separate unions got involved which was BASSA (British Airline Stewards and Stewardesses Association) which was a part of the TGWU and the main union who represented cabin crew on short-haul operations. While for Cabin Crew ’89, which was TGWU represented for long-haul. Thus, the management decisions undertaken and initiated with regards to employee relations generated several issues for the organisation post the early 1990s. The company has acted exactly like the others in the industry by cutting costs and retrenching employees, while putting additional burden on the existing employees. Such policies not only hampered its relations with the employees but also impacted its quality of services and therefore, dented its reputation with the customers as well. References Arrowsmith, J., Edwards, T. and Sisson, K. 2000, “Industrial relations at British Airways - setting a new course?” European Industrial Relations Observatory (EIRO). Barsoux, J-L. and Manzoni, J-F. 1997, “Becoming the World’s Favourite Airline: British Airways 1980–1993,” European Case Clearing House, Bedford. Beaumont, P. et al. 2006, “Lean Production in the Air: Low Cost Competition Taking Off in the Global Airline Industry and Implications for Employee Relations,” Paper presented to the 58th Annual Meeting of the Labor and Employment Relations Association, Boston, USA. Blyton, P. and Turnbull, P. 1998, The Dynamics of Employee Relations, 2nd ed., New York: Macmillan. Blyton, P. and Turnbull, P. 2004, The Dynamics of Employee Relations, London: Palgrave. Colling, T. 1995, “Experiencing turbulence: competition, strategic choice and the management of human resources in British Airways,” Human Resource Management Journal 15(5), 18–32. 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