HRM and US Commercial Airline Industry - Research Paper Example

U.S.A. Commercial Airline Industry Case Study Abstract In 2008 and early 2009, most businesses experienced extreme difficulties in coping with the impacts of the global economic meltdown. The financial crisis and the bursting of the credit bubble have led to severe downturn in the economy with major repercussions in the global business. Global businesses are facing pertinent challenges arising from several other factors that are driven by the economy. American businesses have incurred great losses and have experienced a major share of the negative impacts of the global recession. To counter these negative impacts, the human resource department has to play a major role in cutting down on costs and maximizing on productivity. This paper will explore the negative impacts of the global recession and the measures adapted by the human resource department to cut down on costs, improve productivity of the employees and increase the profitability levels of commercial airlines in the United States of America. In particular, the paper will establish the practices embraced by the human resource department in cutting down on operational costs through human resource management practices. Human Resource Management and US Commercial Airline Industry More than 3,000,000 workers of the United States of America have lost their jobs in the last fourteen months and more continue to loose jobs to-date. According to a report released by Watson Wyatt in early 2009, most of the employers expected to make more than 13% layoff of the employees by the end of the year 2009 while more than half of the employers had already done so. In these turbulent times, businesses keep a strict eye on costs and the utilization of available resources, focusing more on the human resource department activities. The human resource department focuses specifically to those activities that are important in the critical running of the business. The human resource department is the only department through which a company can be able to efficiently cut down on costs and improve efficiency and productivity of the employees. In the current turbulent times, the human resource has a major role in not only helping the organizations cut down on costs but also to ensure that the top performers remain productive and engaged for future endeavors. Achieving the balance between the cutting down on cost and maintaining productivity of the top performers means that the human resource managerial organ must maintain a laser focus on adherence to the key clients needs like the employees, executives, and line managers. The hardest hit sector of the economy in this global recession is the aerospace industry as clients are trying to cut down on traveling expenses by limiting the frequency of travel or using cheaper means of travel. This has subjected the aerospace industry to incur great losses especially the American commercial airlines. Human Resource Importance The human resource as a key department in any organization has to ensure the continued generation of funds and profitability trends. This is done through cutting down of costs or through engaging the human resources into productive activities that generates income for the organization or company. It is through the human resource that companies can support the revenue growth, improve operational effectiveness and enhance workforce productivity. In this global recession and unpredictable business environment, the key source of market for company products is shifting from the tangible assets to intangible assets and the continued dominance of the knowledge employees in the workforce and thus the human resource becomes an integral part of this process (Jackson, Schuler & Werner, 2008). The human resource leadership has the responsibility of determining the size of the human capital resources necessary for the efficient working of the organization. The human resource management determines the number of pilots, air hostess, engineers and technicians that can work well in the given environment and still meet the needs of the customers. The productivity of these employees in the aerospace industry is particularly important as the human capital resources costs represent one of the major cost in any industry. In the service based industry, the human resource costs account for more than 60% of the total costs and represent 64% of thee gross domestic product in the United States of America. Owing to the importance of the aerospace industry in the growth of the economy, nature of the products and the rising competition from emerging players, the human resource leadership has to embrace the right and appropriate practices when dealing with the human capital resources. The air travel industry is important in facilitating economic growth, international investment, world trade and tourism and is core to globalization practices. With the promising future in the aerospace industry, the industry players have to embrace the correct measures and practices to continue in profit making trend (adgstanfordedu, 2000). Coping with the Turbulent Times The commercial airlines have embraced various practices in order to cope with the negative impacts of the global recession. Some of the industry players have resulted to downsizing of the workforce while others have embraced practices that best utilize the resources available. The human resource according to human resource experts is by far the most important resource that an organization has. Most organizations and companies have embraced downsizing of the workforce. Being a highly robust industry, the human resource leadership has resulted to retrenching of the workforce including the managerial, technician, clerical, machine operators and the professional employees. Others have been sent on compulsory leave while others subjected to rotational work routines. This is in efforts to mitigate the negative effects of the recession and maintaining the operational costs of the company (Hamel, 2002). The human practices embraced by the management directly or indirectly have great impacts on the reputation of the company either in present or in the future. Therefore the human resource leadership should take note of the practices they engage in and the impacts they may have. For example retrenchment of the employees may expose the company to the competitors and thus may lose customers to the competitors. Worse still, the clients of the company may not be happy with the move and thus stop their engagement with the company. These considerations should be paramount whenever the company management is engaging in any management activity (Ray, 1999). To cope with the impacts of the turbulent times, commercial airline industry players have embraced various practices and measures. Some of the industry players have resulted to reduction of wages of their employees so as not to enter into loss making trend. This is mainly to the new employees who are always hired on a lower rate compared to the existing employees. Reduction of employees wages and salaries by any employer is illegal under the labor code. The code prohibits diminution of the benefits of the workers once granted but it does not prevent the company from hiring employees at a much lower rate than the existing employees. The commercial airline industry players have embraced and taken advantage of this fact in mitigating the negative impacts of the turbulent times. The airline industry has embraced outsourcing and automation of services. The industry players have resulted to outsourcing some of the departments in efforts to cut down on labor costs. The human resource leadership has outsourced some of the departments and jobs to independent contractors and thus reduces labor costs. Outsourcing is particularly beneficial in that there is no retainer for the workers and the services are paid for when offered. The independent contractors do not have to be paid philhealth, social security fees, health care fees and other government imposed fees. This ensures that such costs that would have been incurred by hiring a permanent employee are non existent and that boosts the profitability of the company. Services like information systems development and implementation have been outsourced to independent contractors and thus the companies do not have to maintain a software or information system development unit. Some of the services offered by the commercial airlines have been automated and thus less people are involved. This ensures that the company cuts down on costs and increase revenues. Services like booking of a flight have been automated and the clients can be able to book online for flights. Also through the system, the clients can be able to view the flight time details and be able to make prior arrangements. Through service delivery automation, the companies have maintained few employees while at the same time efficiently offering the required services. Retrenchment of workers has negative impacts on the reputation of the company. However this can be covered up by installation of labor saving devices which attracts lower benefits to the retrenched employees. Services like security checks and offloading have been automated (Doganis, 2010). Also the commercial airlines in the United States of America are now paying more attention to the redundant positions in their companies. For example, are four people doing a task that two people or one person can effectively discharge? The companies are more concerned with simplifying the work procedure structures in order to create job efficiency. An employee retrenched due to the restructuring of the company’s organizational structure attracts separation pay which is lower than the retrenchment costs that can be incurred by the company in case of retrenchment. This reduces the operational costs of the airliners and improves the profitability levels. The restructuring of the managerial organizational also ensures that the reputation of the companies carrying out the practice is maintained. Through restructuring the idle labor is eliminated and the productive labor utilized to the benefits of the companies. The human leadership of the various commercial airlines has resulted to retrenchment of the employees. This is one of the worst, among the options available, measure to undertake in mitigating the negative impacts of the global recession by the commercial airlines. This has resulted to a mass lay off of the employees of the commercial airlines. A retrenchment process is usually hectic and tiresome as the company has to prove that it is suffering substantial financial losses, the losses are imminent, other measures had been adapted but did not work and the losses are convincing and sufficient evidence. Retrenchment has adverse effects on the company as it is not based on a specific criterion and thus the company risks losing the most experienced employees (Bateman, 2007). The American airline companies have also reduced the working hours of the employees. This is particularly important in reducing the labor costs if there a large number of employees who are paid on the number of hours worked. Reduction of working hours may be in form of shorter working hours or forcing some of the employees to go on leave for a determinate number of days. Through this option, the airline companies and the employees have win/win solution to management and labor problems. Also reduction of working hours attracts lower costs as compared to retrenchment therefore the company is able to maintain operational costs within desirable range. This therefore ensures that the companies continue to make profits though may be small (Schaufele & Bhadra, 2008). The global recession has forced most of the companies into loss making trends with no exception to the aerospace industry. This has resulted to suspension of business operations temporarily and in dire circumstances closure. Every flight is accompanied by a certain number of crew members and thus if there is a cancellation or suspension of a flight, the costs that would have being incurred on the crew members are avoided. The commercial airlines, due to loss of clients and low business volume, have worked towards reduction of the number of flights. This has significantly improved the performance of the airlines and ensures that the available funds are efficiently used. Suspension and cancellation of flights ensures that the accommodation fees for the crew members are not incurred on that particular day (Kakavogianni, 2009). Conclusion Although the above strategies have helped reduce the negative impacts of the global recession and turbulent times, more has to be done. This is in terms of ensuring that the practices are not counter productive. As much as the airline management is concerned with cutting down on operational costs, the management should consider the effects the embraced practices have on the employees and the4 reputation. The nature and the manner in which an employee is handled during these turbulent times determine future engagement of the employee with the company (Allen, Allen & Zook, 2010). If the employees are handled well and are made to understand the situation, then in future they will engage well with the company. If the management does not put into consideration the psychological concerns of the employee, then the employees will not feel at ease in future engagement with the company (Fuehl & Hoeck, 2002). Worse still, the employee can join a competitor on a revenge mission and therefore it is good to help the employees understand the situation before carrying out any activity that will directly or indirectly affect them. Today’s economic crisis gives the airline companies opportunities to improve operational effectiveness through various workforce management applications, selective outsourcing and continued process streamlining. In order to improve service delivery in the airline industry in the future, the human resource management should enforce talent and skill management program in order to strengthen the overall business performance. The leadership should help the employees understand the overall business strategy, ways to align and support the strategy. The human resources leadership can take advantage of the turbulent times by sending employees technical training programs and professional development to sharpen their skills and technical expertise and at the same time preserving morale (mohrgovmy, 2010). References Adg.stanford.edu (2000), The airline industry, retrieved on 24th September 2010 from http://adg.stanford.edu/aa241/intro/airlineindustry.html. Allen J, Allen J. G. & Zook,C. (2010), Profit from the Core: A Return to Growth in Turbulent Times, 2nd edition, London, Harvard Business Press. Bateman H. (2007), Retirement provision in scary markets, Massachusetts, Edward Elgar Publishing. Doganis R. (2010), Flying Off Course: Airline Economics and Marketing, 4th edn., London, Taylor & Francis. Fuehl A. & Hoeck B. J. (2002), Profiting in Turbulent Times, West Conshohocken, Buy Books on the Web. Hamel, G. (2002), Leading the revolution: how to thrive in turbulent times by making innovation a way of life, 2nd edition, London, Harvard Business Press. Jackson S.E , Schuler R. S. & Werner S (2008), Managing Human Resources, 10th edn., London, Cengage Learning. Kakavogianni D. (2009), Charismatic Leadership and its emergence under crisis conditions: A case study from the airline industry, retrieved on 24th September 2010 from http://eprints.whiterose.ac.uk/8884/. Mohr.gov.my (2010), Alternatives to Downsizing, retrieved on 24th september 2010 from http://www.mohr.gov.my/index.php?option=com_content&view=article&id=1319%3Afmm-hr-conference-2009&catid=140%3Aspeech-yb-minister&Itemid=566&lang=en. Ray, S. J. (1999), Strategic communication in crisis management: lessons from the airline industry, Santa Barbara, Greenwood Publishing Group. Schaufele R. & Bhadra D. (2008), Major turbulence ahead for the airline industry, Journal of Airport Management, Volume 3, Number 1, pg. 37-47. Read More