Organisations, People & Performance - HR Strategy for Easy Jet - Essay Example

Organizations, People & Performance Introduction As Kourdi says, every business in the modern world must have a business strategy which will help it grow and sustain itself in the market. Most businesses have core and non-core strategies. The noncore strategies have to be aligned with the core strategies in order for them to work. In this regard, having a proper HR strategy is paramount for a business to thrive. According to Kim and Mauborgne (2013), human resource has become such an indispensable aspect of the business strategies that failing to have one is a big challenge for most businesses and would lead to failure. Modern human resource management has shifted and it has entered the core of business strategy. Unlike the earlier times when HR strategist were never included in the core firm strategy, a modern firm has to include it in its core strategic planning because HR has become the most important resource a firm can have (Stonehouse & Houston, 2013). Part I HR strategy for easy Jet Introduction to easy Jet Easy Jet is a London based airline which operates within Europe and is headquartered in London Luton Airport. The airline is a low budget airline and offers low cost flights between cities within the euro region (Topham, 2014). According to Michael Porter, being a low cost producer is one of the strategic edges a firm can have (Stonehouse & Houston, 2013). Most of its airbuses make return flights, landing back to their airport of origin within twenty four hours. Easy Jet’s Strategic intent Easy Jet intends to be the pioneer and the leader in Europe’s short haul flights. Easy Jet also looks to have a customer-centered strategy which is geared towards making sure that customers are happy with its services. It intends to do this by having a good HR strategy that is geared towards having a safe workplace with positive values and a healthy working requirement. Michael Porter’s Strategic Model and the easy Jet strategy Michael Porter (2008) defined competitive strategy as anything that gives a firm an edge over its competitors. He argued that this competitive edge can be derived from five major business factors. Cost is one of these factors and those businesses which are able to drive costs down while maintaining good quality are at a better chance of succeeding in the market (Schuler & Jackson, 1987). The following figure shows Porter’s model of competitiveness Easy Jet has operated on the business strategy that is based on cost leadership. The firm has managed to be in the market even during the most chaotic market times. To be able to maintain this strategy in the future, easy Jet must be able to have a HR plan that is just as useful and make sure that its HR costs are kept down. Easy Jet and Miles and Snow theory Miles and Snow (1978) described the various ways in which different types of firms develop their strategies. According to them, firms can be divided into Defenders, Prospectors, Analyzers and Reactors. Easy Jet falls under Protectors due to some factors that identify Defenders. According to Miles and Snow (1978), these Defenders have a narrow market domain and do not try to go outside this narrow domain (Miles and Snow, 1978). Easy Jet has focused on the Euro market although the flight industry is a global one. This is one indication that the firm is a protector. The managers of a defending business are highly qualified and skilled and are able to apply their knowledge of the market to take advantage of the available opportunities. These firms also try to assert their power and authority in the small domains in which they operate. Easy Jet fits in this category of firms because it has a narrow market, does not intend to venture to wider market and continues to increase its assertiveness in the local market. HR strategies HR issues in easy Jet One of the issues that easy Jet has is the increasing fuel costs. The increase of jet fuel cost will have to affect easy Jet’s strategy because its strategy is based on cost management. However, this is being handled by increasing sitting capacity in order to reduce the cost per flight. This, however, introduces a new kind of problem especially with regard to easy Jet’s HR strategy. Increased sitting capacity for easy Jet airplanes means that the firm will have to recruit new employees in order to meet the new HR capacity needs. For easy Jet to minimize the costs associated with the boarding charges it might have to employ employees from different countries and this might bring in culture variances. This cultural difference among the employee may offer a challenge in communication and organizational culture which may then affect easy Jets human resource strategy in a negative way. Easy jet’s SHRM Employer brand One of the major issues that any modern firm has to consider is its public image (Christensen, 2006). As Savitz (2012) noted, the pressure for businesses to meet the triple bottom-line is an important aspect of the business strategy. One of the three parts of the triple bottom-line is the relationship of the business with its stakeholders. Employees are the most important stakeholders that a firm has and being unable to have a positive relationship with them can lead to the firm being unable to have the right relationships with the other stakeholders such as the public and the shareholders. A firm with a good psychological contract with its employees can have a good public image and this is the start of meeting the triple bottom-line. Minimize costs other than salaries One important fact with airline employees, especially cabin crew is that the firm has to incur some costs associated with them yet these costs don’t go towards the welfare of the employees. While other common costs such as salaries, benefits and allowances all go towards the total economic benefit of the employees, other costs associated with airline employees such as the cost of renting hotel rooms for employees who stay away after flights are not necessary beneficial to the employees (George, 1999). Reduce employee turnover Employee turnover is one of the main issues which many firms are concerned with (Phillips, 2004). This big concern is not without ground because there are many costs associated with high turnovers of employees in a firm. The cost of training new employees after old ones leave the firm is always a big predicament and should be evaded at all costs (Schuler & Jackson, 1987). In this regard, easy Jet should try as much as possible to ensure that the rates of employees’ turnover are as low as possible (Kearns, 2010). This will keep the cost of human resource down and also help in making sure that the firm can maintain its strategy of low cost (Schuler & Jackson, 1987). It will also help easy Jet to continue giving its employees the best service as its employees will always have the necessary experience to do a perfect job. One of the main issues with high rates of employee turnover is that the firm will always have new employees who are not experienced and this leads to the firm being unable to offer high quality services (Knapp, 2001). Aligning this to business strategy Easy Jet’s strategy is to be the brand of choice in the European short haul flight market. It also intends to do this while maintaining a low cost strategy. Its human resource strategy is geared by giving the employees the best salaries and rewards based on their performance. According to George (1999), having a low cost strategy is risky and one has to know the limits which must not be crossed. Having a low HR cost strategy for easy Jet can be dangerous if not well managed. However, it is in line with easy Jet’s strategy in that it will help in reducing the cost. If well used, this can help in reducing the cost of the firm and at the same time make it possible to maintain the high quality of service that easy Jet has been known for in a long time. Part II Psychological contract Definition of Psychological contract According to Guest et al (2010), the psychological contract in the workplace environment is the informal and unwritten contract that arises from the passive expectations and promises of each of the parties to the employment contract. These two parties are the employer and the employee. Employees get into a psychological contract with their employers based on their employers’ promises, apart from the agreements on the written legal contract. The employer may also have some passive expectations with regard to their employees and this also forms part of the psychological contract (Bal, 2009). The psychological contract is very important for an organization because it affects the productivity of the employees and this is very significant to a firm and how the firm will perform. The psychological contract also affects the civic virtues of the employees and has a fundamental impact on the employees’ productivity and the general workplace productivity (George, 1999). According to CIPD (2009), today’s relationship with the employees has changed. The expectations of each side of the employment contract towards each other have also changed. For instance, unlike firms in the earlier days, modern firms are looking for employees who are able and willing to learn continually. The organization has become a learning machine and any employee who cannot learn will act as a setback to the organization. Earlier firms used to look for employees who already had knowledge. At the same time, as Rousseau and Schalk, (2000) point out; knowledge requirements did not change as often and as dynamically as they do today. In this regard, a modern firm is looking for individuals who can learn and who can participate in the development and the growth of the firm by being part of the solution for the many challenges which the firm faces on a daily basis. Employees are also seeking to work in organizations where they are accorded a chance to grow and to become better with time (Rousseau, 1995). This is unlike the earlier times when employees were seen as only being small parts of the organizational machine. In today’s organization, employee wants to be part of the system and to be involved in the decision making process. This has introduced a whole new way in which a firm and the employee relate. As Holman (2010) argues, modern employee relations depend less on the legal contract and depend more on the new kind of contract which has come to be referred to as the psychological contract. Those firms which are able to implement this kind of psychological contract with the employee are able to have the best workforce that an organization can ever hope to have. Once this contract as been achieved, the firm should be careful to guarantee that the contract is not breached (Hiltrop, 1996). High Performing Organization As Bal (2009) argues, an organization that is able to implement an effective psychological contract between itself and its labor force is always able to become a High Performing Organization. A High Performing Organization is an organization whose human resource is able to work together in highly effective ways to produce highly effective and profitable business results. Performance management Apart from giving the firm a competitive advantage, the psychological contract increases the productivity of the employees. However, for this to happen, the psychological contract has to be right and the employees have to feel that their psychological contract has not been breached. In cases where the employees feel that this contract has been breached, their motivation will diminish and this will negatively affect their productivity. In cases where the employees feel that the employer is taking care of the psychological contract, they will be more productive and will give extra to the firm. In fact, according to (Wellin, 2012), this is the pinnacle of the psychological contract. The fact that employees will give extra in their input is a major aspect of modern human resource management strategy. When employees feel obligated and responsible towards the firm, they will go beyond what the written legal contract binds them to do. They will be more interested in helping the organization to become better. They will also always put the interests of the organization ahead of theirs, where necessary and where possible. They will also be creative in the way they do things, always being proactive and creative in developing solutions for both small and big problems. Most modern firms are realizing that they can tap more benefits from their existing employees rather than employing new employees. There are many ways in which easy Jet can implement this strategy. One is by using overtime as a way to increase the productivity of these employees. Employees can be paid for overtime and asked to work extra time which will be paid hourly. This means that they can input their extra efforts and be paid for it rather than employing new employees. The reason that this saves money is because there are other costs associated with each employee, which are not included in the employee’s basic salary. These include medical covers and training costs and other similar costs. By avoiding these costs, the firm can save a lot of money. However, as Kearns (2012) argues, there is however only certain situations in which this method can be used. In essence, this is only practical in cases where the available work can be executed by having a number of existing employees do it at extra time as opposed to hiring a new employee. If this is not possible, the firm can hire a new employee. As part of easy Jet’s HR strategy the firm should be able to know how to use this without overworking these employees and without affecting the quality of services offered to employees. This will help in managing costs and thus helping in making sure that the overall business strategy is implemented effectively. One of the most useful theories about human motivation which can be applied directly to the psychological contract is the Maslow’s (2013) theory of human motivation. The D. Guest psychological contract model Implementation Every organization needs to know how to implement the psychological contract in their operations. The psychological contract has become so important that it is extremely essential to have a good one for any organization to succeed (Keanrs, 2012). The psychological contract is important due to a number of reasons as follows; It offers businesses competitive advantage In a modern business environment, firms have to grapple with a new reality in terms of their business strategy. In the earlier days, other factors such as technology and financial resources offered a firm the highest competitive advantage. For instance, through the 1990s and early 2000s, technology was the major leverage that firms could have. As time has passed and the information age is fading away ushering the conceptual age, the human resource has become the main source of competitive advantage (Christensen, 2006). The HR has become the most important resource for any organization (Schuler & Jackson, 1987). Making optimal use of this resource is important for a firm to participate competitively in the market. Having the right psychological contract is therefore definitely for the benefit of the firm (Bratton & Gold, 1999). It reduces HR costs One more advantage for the organization to have the right psychological contract with the employees is that this can reduce its HR costs in two major ways. One way is that when the employees feel that that employer is fulfilling his side of the psychological contract, they will not be wishing to leave the firm and this will help the firm to reduce recruitment costs. As already discussed, in the easy Jet’s HR strategy, reducing HR costs is one of the major important factors to be considered. Easy Jet can make sure that it honors its psychological contract with its employees in order to guarantee that the employees feel comfortable in the firm and that they are willing to stay. This will enable the organization to retain its human capital and to also be able to minimize recruitment costs. Understanding the needs of the employees Each and every employee is unique and has unique needs. Understanding these individual needs can help a firm to develop a unique psychological contract for every employee. Easy Jet should be able to understand the needs of the employees and strive to meet these needs. The younger employees have needs which seem to border on the financial aspects. They want to earn well in order to afford the things they have been wishing to buy. In this regard, creating a system that guarantees these employees will earn more if they work harder and if they are creative will be necessary in creating a better psychological contract with them. This is in line with easy Jet’s HR strategy which is geared towards rewarding performance. These are the employees who would be more willing to work overtime to earn even more. The more experienced people are likely to look for personal growth in terms of promotions and more responsibilities in the firm. Giving these employees the guarantee that they will be able to grow and that their efforts are recognized is also a better way to make them remain in the psychological contract. Involving the employees in order to make them part of the firm This is another aspect of implementing the psychological contract. Involving them in the problem-solving processes of the firm is an important aspect of making sure that these employees are able to remain committed to the firm (Kiazad, 2010). Studies have shown over time that involving the employees in the decision making is a way to get them to own the problems and challenges of the firm. For instance, if a firm is looking to implement an Information System, the firm should be able to involve the employees in the decision making. Involving the employees can be as easy as informing them of any changes that are imminent in the organization (William, 1995). Informing the employees about the challenges the firm is facing and involving them in the solution seeking processes can also help in enhancing the psychological contract. Factors affecting the Psychological contract There are many factors affecting the psychological contract and it is necessary for any firm to know how to deal with these factors. As already discussed, the psychological contract is not precise and it is more fluid and fuzzy. In this regard, the firm is most likely to fail in implementing the psychological contract and this can affect the way the firm will relate with its employees. One factor that affects the employees is their expectation of the employers. Violation of the Psychological contract According to Morrison and Robinson (1997), employees feel that the psychological contract has been violated if their expectations are not met. These expectations are not explicit and therefore many firms are more likely to not fulfill them if they are not careful. Although the psychological contract applies on both sides of the employer-employee relationship, the most important side in this case is the side of the employer because failing to meet this will mean that the employer will incur some cost. The psychological contract arises from the needs of human beings. Due to this, the employer can easily know the terms of the psychological contract between itself and the employees if he understands the needs of the employees (Bohlander & Snell, 2010). It is also necessary to note that the psychological contract is not a generalized one, but each employee may have his unique psychological contract with the employer. Implication of the violations of the social contract When the psychological contract is violated by the employer, or when the employees feel that their psychological contract has been violated, there will be some consequences which the employer will have to incur. The most important one is the diminishing of productivity among the employees. This, according Society for Human Resource Management (2006), is the most important and there is a need for employers to ensure that the psychological contract is fulfilled. Conclusion With many deliberations on HR strategy, it is apparent that having a good HR strategy is good for any modern firm. HR is one of the resources that a firm can ever have and in this regard it is necessary for any firm to take good care of their human resources. The psychological contract is a passive agreement between the employer and the employee about the expectations and promises with regard to each other and this affects the way a firm is able to utilize its HR. 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