Two Companies wiith One Efficient Operation Strategy - Essay Example

Living the Southwest Way

Introduction

In a globalized and competitive modern business environment, companies are constantly adjusting and restructuring their ways of operations to survive. Mergers and acquisitions (M&A) are some of the strategies that firms are using to gain competitive advantage for survival. However, the success is not always assured in M&A, as studies have indicated that between 70% and 90% of mergers fail to meet their objectives (Wadee & Gilson, 2007). The high rate of failure is associated with the HR issues like incompatible cultures, morale of the workforce, poor communication as well as the lack of trust. To such extent, successful mergers chiefly depend on the effective HR management. Therefore, the primary objective of this paper is to analyze the merger between the Southwest Airlines and AirTran Airways with regard to HR issues.

SWOT Analysis from HR Perspective

Strengths

• Highly motivated employees due to the great working environment
• Less than 5% turnover for both companies, leading to increased productivity
• Adequate training and leadership development programs, which enhances effectiveness and efficiency, including employee performance
• Strong way of solving employee grievances

Weaknesses

• There exist cultural differences between the two companies. The culture of “living the Southwest way” is in conflict with the centralized culture of AirTran.
• Differences in operation strategies: Southwest depends on real cost and fare structure while AirTran relies on differentiated services and selling of tickets on a third party (Wharton University, 2010).

Opportunities

• Joint training and development programs, which is cost-effective
• Opportunity to engage AirTran employees in a comprehensive and timely review
• Enhance creativity in the workforce, as employees with different ideas, knowledge, and skills come together
• Increased bargaining power with the labor unions, leading to favorable contracts

Threats

• Conflicting values and behaviors of employees
• Difficulties in hiring and promoting employees

Recommendations to Address the Issues

Culture clash is the main problem that is likely to affect the success of the merger between Southwest and AirTran, as the two companies will struggle to bring two different cultures into line (Stafford & Miles, 2013). Therefore, to ensure harmony when the companies finally come together, both Southwest and AirTran should abandon their cultures and come up with integrated culture. Moreover, to facilitate successful cultural integration, the two companies should first develop the cultural integration agenda. They should first set the broad cultural objective that defines the culture they want to use when they merge. Secondly, they should examine and diagnose the differences that exist between the two cultures. Even though it may be challenging to come up with clear differences in cultures, the two companies can use tools like management interviews and employee surveys to identify the differences.

After the identifications of the differences in the two cultures, the companies should define the preferred culture. Notably, the chosen culture should bridge the gaps that existed in Southwest and AirTran’s cultures. Finally, the firms should create the culture-change plan that is sustainable and measurable. Therefore, the only way the companies can avoid culture clash is to integrate the conflicting cultures in a systematic way.

Integrating workers, especially on seniority is another challenge that is likely to face the merger between Southwest and AirTran. The rank scale, especially for pilots, is one of the problems that have led to the failure of many airline mergers (Wadee & Gilson, 2007). Therefore, to integrate the seniority successfully and to avoid conflict between employees, the two companies should combine the seniority list in a fair and equitable manner. For fairness and equity to prevail when the list is being combined, the combination should be based on the date of hire (DOH) (Jerman & Joshi, 2012). This method will ensure that no employee feels discriminated because seniority will be based on how long they have been serving the two companies. DOH system should be used to determine the seniority of employees in the same level of management.

Besides, insecurity over compensation issues is a challenge that the two companies cannot avoid when they merge. The uncertainty over compensation and benefit can affect the morale and productivity of workers (Suff & Reilly, 2007). Therefore, the third recommendation for the two companies is to come up with the new compensation and benefits plan that reflect current changes. Indeed, coming up with a new compensation and benefits plan is important because the two companies have different remuneration policies. They should come up with new salary structures, including incentive measures. Coming up with the new compensation plan is also advantageous because it gives the two companies chances to introduce changes that they were not able to implement before the merger such as salary reduction and removal of some benefits. However, to avoid backlash with employees, HR professions should effectively communicate the changes to workers. Most importantly, the changes should be communicated as soon as possible.

Additionally, the two companies should ensure that their one labour union represents their employees. Like Southwest, different unions such as Air Pilot Association and Flight Attendant Association represent employees of AirTran. Therefore, to ensure harmony in the workplace, the companies should make sure that same unions under similar conditions represent employees in different departments.

Tasks for Recruiting and Hiring for Expansion

Southwest is likely to face some recruiting and hiring challenges when it merges with AirTran because it currently restricts its operations in the US. Firstly, it is liable to encounter international laws that may be lacking in the US airline industry. For instance, laws such as paternity leave and on-site child care that lacks in the US but are common in Europe are likely to affect its hiring and recruiting process. Secondly, it is probable to face socio-political issues such as language, social norm, and the different political environment. Therefore, the list below shows some of the tasks for recruiting and hiring that the companies are likely to face when they merge.

• The requirement to comply with international laws
• Language barrier in the workforce and during the recruitment and hiring process
• Cultural conflicts in the workplace, especially regarding time, behaviors, dressing codes, conflict resolutions, and labor union contracts
• Differences in work-life balance
• The need to abide by the affirmative action programs
• Different work ethics
• Cultural diversity
• Diverse political environments

Therefore, Southwest Airline is likely to face some complex issues in term of recruitment and hiring when it is expanding to the international market.

Metrics of Evaluating Outcome of the Expansion

Some HR metrics that can be used to evaluate results of the expansion to assess the success of the merger. One of the primary metrics is to measure employee productivity within a year after the merger, which should be compared with productivity before the two companies came together. Secondly, the company can use the retention rate or turnover to determine the willingness of employees to work in the company after the expansion. The expansion will be considered to be successful when the turnover is low and unsuccessful when it high. Thirdly, training outcome after the merger can be used to determine the success of the expansion. Merged employees are expected to perform better after they have been trained. Therefore, productivity, turnover, and training outcome are some of the standardized HR metrics that can be used to evaluate the merger.

Conclusion

The decision by Southwest to acquire AirTran is one of the best strategies that can enable them to solve some of the issues affecting the airline industry such as increasing fuel prices and dwindling capacity. It will give Southwest an opportunity to expand to the international market. However, there are many HR issues must consider before finalizing the acquisition. Importantly, it will be forced to forgo its current organizational culture, which is currently one of the best, to accommodate employees from different cultures. At the same time, the two companies will have to know compensation and benefits plan as well as integrating the seniority to ensure that merged employees remain motivated and productive. It is also important for the two companies to come up with one efficient operation strategy. They currently have two different operations strategies that can affect effectiveness and efficiency.