Strategic Contingencies Affecting Qantas and Needed Company's Change Management - Case Study Example

Strategic contingencies affecting the strategic choices that Qantas Table of contents Introduction 3 Group of Qantas Airways Limited 4 Strategic contingencies affecting Qantas 5 Strategic contingencies – theoretical perspective 6 Strategic contingencies on practice 8 Recommendations 9 References 11 Introduction Running a business effectively profitable is a goal of every commercial organization. However, as the world changes, companies has to adapt to their ever changing environments. Such adaptation is usually expressed in all the aspects of organizational performance, including strategic planning and HR management. Since each company operates in a unique environment and has unique characteristics, each one’s situation is different. Nevertheless, it is obvious that the general principle of adjusting to the external environment should be followed in order for the company to remain successful. The need to adjust, therefore, arises from the fact that an organization simply cannot control all the strategic contingencies that might affect it. Furthermore, not all of the external influences can be foreseen or predicted. So, in times of uncertainty the company should be prepared to respond to the external changes in an effective and timely manner. Ideally, an organization should have a prepared in advance change management, or even emergency management, strategy and procedures. Such a plan will help to respond to changes fast and effectively. In addition, it will help the HR department to ensure that the measures a company takes in such a situation are clear and understood by the employees. This particular goal of HR management is one of the focus points of the given paper. In addition, this works aims to analyse and evaluate real-life strategic contingencies that might have great impact on strategic choices, as well as HR planning, of an organization. In particular, the case of Group of Qantas Airways Limited, an Queensland-based group of companies, will be examined. The research will, then, help to provide recommendations on how the company can maintain the commitment of employees and implement HR planning. Group of Qantas Airways Limited Qantas was founded in 1920 in Queensland as Queensland and Northern Territory Aerial Services Limited (Our Company 2011). Growing and developing, with years it became a group of companies, among which are QantasLink, Q Catering, Qantas Freight, Express Ground Handling, Qantas Holidays, Qantas Defence Services and Jetstar (Subsidiary Companies 2011). Though the group owns a number of additional businesses, the major part of profits comes from Qantas’ airline brands – Qantas and Jetstar, which have 252 aircrafts that carry over 40,000 passengers a year (Fact File 2010, 1). Qantas Airways works both domestically and internationally, and is planning to expand its baseness and strengthen its positions in Asian market. In addition, the company already works in Australia and Papua New Guinea, Japan, North Asia, UK, Europe, the Middle East and Africa, Americas, New Zealand and the Pacific, and South East Asia (Fact File 2010, 38). Being one of the largest Australian employers, the company has 32,500 employees. Most of them are based in Australia (Fact File 2010, 44). However, foreign divisions of the company are continuously growing. For that reason managing HR is more complex for the company – foreign employees even have different, lower than in Australia, pay rates. So effective management of productivity, workforce planning and budgets is one of the company’s priorities. This task has become even more important as the company has been affected by a number of strategic contingencies. Strategic contingencies affecting Qantas Recently Alan Joyce, Qantas’s CEO, has announced that the company is going for restructuring and tough reforms (The Australian. 2011). This strategic solution came up as a result of a number of strategic contingencies that affect the company. In particular, the decision is based on the following facts: The Civil Aviation Safety Authority of Australia issued new aircraft maintenance regulations The Civil Aviation Safety Authority allowed a lower, "A" category, of license for pilots Unions have demanded higher wages for foreign employees of the company In addition, it should be remembered that natural disasters and soaring prices for fuel have also had a great impact on company’s operations. Working under the conditions of global financial crisis and fighting local natural disaster crises lead to a situation when the company has to take some measures in order to improve its operations and raise profitability. So, new regulations issued by the Civil Aviation Safety Authority have become the point at which Qantas has to introduce change in order to remain successful. On one hand, ability to employ pilots of a lower category is good for the company because this allows it to save on pilots – lower category means lower salary. On the other hand, however, new aircraft maintenance regulations require Qantas to modify its aircraft maintenance procedures and introduce newer technologies. This, of course, requires additional investments. So the company has to make a number of strategic choices that will lower the cost of introducing innovations. Among such choices was a decision to restructure the organization. Though restructuring might be a good option, it is worth to review the literature to understand why the company’s management decided to go for such a great change. Strategic contingencies – theoretical perspective Historically, strategic contingencies theory and approach to management appeared as a consensus between two extreme views on organizational management. One position was that there do exist some universal principles of business management. The other, on the contrary, stated that each company is unique and, therefore, should be managed in a unique and specific way (Zeithaml, Varadarajan, and Zeithaml 1988, 37). Therefore, the major point of strategic contingencies approach is that, while there are some general management principles, company’s external environment should be always taken into account because it determines how those general management principles will work in the particular situation. Furthermore, company’s success is dependent on how effectively the organization combines its strategy with internal structure in order to adequately respond to environmental issues (Heiens and Pleashko 2011, 33). So, in order to be effective a company would have to plan its HR management function in such a way that its structure and processes are designed for the particular environment and circumstances of operation. In addition, Heiens and Pleashko (2011) recommend companies undertake “(i) a lesser level of market orientation combined with a less aggressive service growth strategy and possibly (ii) a lesser level of market orientation combined with a focus on related service/product lines (Heiens and Pleashko 2011, 32-33). So, in order to increase profit it might beneficial for the company to concentrate on related areas of operations. In case of Qantas that would be the subsidiary businesses the Group owns. It is also suggested that companies should, in any situation, follow the contingency approach, because, as many studies suggest, more successful companies are such due to the fact that their internal processes and structures are aligned with the environment (Shenhar 2001, 395). As Ginsberg and Venkatraman outline, the major principle of an effective contingency approach is in a balanced “relationship between organizational factors, environmental characteristics, and the organization’s strategic response” (Ginsberg and Venkatraman 1985, 421). Therefore, since the company has to internally match to its environment, it is important that the company is structured properly. This function is definitively related to HR management and planning. Though, theoretically, HR-related functions should support all the aspects of organizational operations, it is not always the case. Lewis (2009) outlines that the problem of many companies is in lack of HR involvement in company’s operations (Lewis 2009, 3). It is a great mistake since HR is the function that possesses most of the tools that many help a company to deal with environmental uncertainty. Environmental scanning, selecting and interpreting external information for internal dissemination, shaping employees’ behaviour and reaction to changes – all these functions are within the power of HR management (Russ, Galang, and Ferris 1998, 126). So, HR function of the company should be responsible for how effective the company is in terms of adjusting to external changes. HR planning, therefore, should be conducted in such a way that the company is always ready to reflect environmental changes. That is, to some extent, what Qantas is trying to accomplish. Strategic contingencies on practice With the help of internal changes Qantas plans to become more adjusted to new external circumstances. In particular, the company is restructuring in order to reflect the changes that happened in the industry – new regulations of the Civil Aviation Safety Authority. Qantas has designed and is implementing a new technological solution for servicing and maintaining its aircrafts (Joyce 2011, 4). Much investment has been put into design and implementation of the new system. At the same time, introduction of the technological innovation leads to a need of changing employees’ roles within the company. As Qantas’ CEO outlines, qualified engineers will be less involved in servicing the aircrafts. This role will be assigned to pilots. In addition, pilot jobs will be provided to people with an “A” license. All these changes are purposed at reducing maintenance and repair costs. So, not only the structure of the company is to be changed, but all the internal processes too. All this is accompanied with job cuts and, of course, the employees are worried and frustrated. In general, on practice company’s reaction to external contingencies has resulted in great financial investments, job cuts, unhappy employees and unions’ demanding to increase pay rates. However, it can be said that a mistake of the organization was not the decision to restructure, but rather poor implementation of the change. It must be obvious that any decision, no matter what its caused by, has be implemented effectively. Any change should be thoroughly planned and implemented. HR plays a great role in this process since HR function is the one that can clearly outline when and how in particular the change will take place. In case Qantas, even though HR department managed to plan the change, it seems to have failed to effectively implement it. Employees are frustrated not because the organization changes, but because they lack information on how it changes and how the innovations will affect their lives. Recommendations It is obvious that changes and innovations that are to be implemented by Qantas are the company’s response to the changes in its external environment. Qantas is changing and developing together with its environment. However, it can be seen that the company’s change management plan lacks some clarity. In an ideal situation Qantas’ HR department would have a pre-written change or emergency management plan. A well-designed change management plan would help the company to, in the first place, introduce the change more effectively. First of all, it is important to build internal communication in such a way that information about the change is delivered to all the employees. HR department should have devoted some effort to making sure people understand what is happening. Unfortunately, this has not been done and resulted into such a strong resistance to change –employees, unions and institutions insist on maintaining the old ways of working. So, the only thing to do now is to, first of all, explain to the employees what kinds of changes are to come, and what their roles will be in scope of new roles and processes. This will help people to understand what is going on, so that they accept the change easier. It is also obvious that Qantas’ PR management is not ideal. Media coverage of the upcoming change is rather negative and this adds up to the initial frustration of employees. So, it can be said that both internal and external communication should be improved. Since the process has already been covered in the media, it might be worth for Qantas to issue a press-release that would clarify the situation. People, both internally and externally, should understand why the company is implementing the change – not only to save money, but to ensure that Qantas grows, develops and employs people in the long run. So, strategic contingency planning should account that in order to respond to the environment adequately, all the functions of the organization should be doing it jointly. More profound HR and contingency planning combined with improved communication are likely to bring more positive results. Effective communication and profound planning will help Qantas to cope with resistance to change and to implement this change less painfully. References Fact File. 2010. The Qantas group at a glance. Qantas Airways Limited. http://www.qantas.com.au/infodetail/about/FactFiles.pdf Accessed August 18, 2011. Ginsberg, A., and N. Venkatraman. 1985. Contingency Perspectives of Organizational Strategy: A Critical Review of the Empirical Research. Academy of Management Review 10(3): 421-434. Heiens, R. and L. Pleashko.2011. A Contingency Theory Approach to Market Orientation and Related Marketing Strategy Concepts: Does Fit Relate to Profit Performance? Management & Marketing Challenges for the Knowledge Society 6(1): 19-34 Joyce, A. 2011. New Approaches for Changing Times. Australia Pacific Aviation Outlook Summit. www.alaea.asn.au/attachments/article/278/20110720_Notice_40_Attachment_Alan_Joyce_Speech_20th_July_2011.pdf Accessed August 20, 2011. Lewis, A. 2009. Human Resource Outsourcing and the HR Function: Opportunity or Threat? Abstract of paper for T rack 1 “Management, Work and Organisation”, 15th World Congress of the International Industrial Relations Association: “The New World of Work, Organisations and Employment.”Sydney Convention and Exhibition Centre, Sydney, Australia. Our Company. 2011. Qantas Airways Limited. http://www.qantas.com.au/travel/airlines/company/global/en Accessed August 18, 2011. Russ, G., M. Galang, and G. Ferris. 1998. Power and Influence of the Human Resources Function Through Boundary Spanning and Information Management. Human Resource Management Review 8(2): 125-148. Shenhar, A. 2001. One Size Does Not Fit All projects: Exploring Classical Contingency Domains. Management Science 47(3): 394-414. Subsidiary Companies. 2011. Qantas Airways Limited. http://www.qantas.com.au/travel/airlines/subsidiaries/global/en August 18, 2011. The Australian. 2011. Joyces reform warning irks engineers. TheAustralian.com.au. http://www.theaustralian.com.au/business/aviation/joyces-reform-warning-irks-engineers/story-e6frg95x-1226098634626 Accessed August 15, 2011. Zeithaml, V., P. Varadarajan, and C. Zeithaml. 1988. The Contingency Approach: Its Foundations and Relevance to Theory Building and Research in Marketing. European Journal of Marketing 22(7): 37-64. Read More