Analysis on the Organizational Structure of Oman Air - Essay Example

?Analysis on the Organizational Structure of Oman Air Introduction The Sultanate of Oman’s Civil Aviation founded the Oman Air, which began its operation in 1993. Prior to that event, in the year 1970, the Oman International Services was inaugurated. It was followed by the establishment of Oman Aviation services on 1981 with an aim to expand its services offered to other airlines such as in cargo handling and ground handling. With the operation of Oman Air, this company was responsible for creating a traffic hub in Muscat, which led to the growth of the tourism industry, commercial, and industrial. The company first offered direct flights in Colombo and Dubai, then succeeded by Trivandum, Kuwait, Karachi, and Sri Lanka from 1993-1994. In 1995, it started to open direct flights in India, Bangladesh, and Dhaka. The destination offered expanded, but it started to limit its operation since 2003. In 2005, it commenced to offer other destinations until it expanded internationally. Oman Air was introduced as the new identity of Oman Aviation Services (SAOC) on April 21, 2008 (Oman Air, 2012e). The company commits itself in providing quality services to its target markets, which is construed by 28 awards they received from the independent sector. The company was recognized as the Best Airline Worldwide 2011 based on the survey conducted by the travel magazine (Oman Air, 2012f). SWOT Analysis Strength Oman Air has monopolized the airline industry since it is considered as the national carrier within the country. There is no competition involved because the government owns 99.825% while others have a percentage of 0.175 (Oman Air, 2012a). The government is primarily bounded in its marketing campaign, which will increase the tourist in Oman. Since it is the flag carrier of the Sultanate of Oman, it has been widely known in the country. The market presence of Oman Air is relatively high. Moreover, Oman is notable for its hospitality. The company desires to render comfort for customers while they travel across the countries. Furthermore, Oman Air leaves an impression of their services based on the international standards with emphasis on quality and safety. Oman Air was the first airline that offered satellite telephone and internet connection. The investment in green technology strengthened the brand name of Oman Air because modern facilities and aircraft reduced carbon emission. Weaknesses The internal structure of Oman Air reflects its weakness. Due to the poor performance of every department, the profitability of the company is affected. The large organizational structure of the company needs good leadership and management. The departmentalized structure divides the attention of the CEO, which weakens the interdepartmental communication. The poor management of HR resources in recruiting technical and administrative tasks leads to the poor performance of every department. It results to the staged strike by the Oman Air employees, which aim for higher wages (Pollack, et al., 2011, p.181). The conflict inside the Oman Air is influenced by politics regarding on poor management and corruption. The strike reminds the employers to provide opportunities for employees. Lastly, the culture of Oman Air has not yet altered despite the deviation in the cultural background of its staff. Opportunities Monopolization in the airline industry provides opportunities for the business operation of Oman Air. This company is the only air carrier that offers services globally. When there is no competition, the company can be secured of its profitability and sales. Oman Air has no apprehension on the prices of air fare. Thus, Oman Air caters to the large market of travellers in its country. According to Rajasekar and Moideenkutty (2007, p.128), the population of travellers in Oman is about 800, 000. Furthermore, modern facilities such as “new passenger terminal, a brand new cargo terminal, new engineering facility, and in-flight catering facility” can elevate the profitability of Oman Air. The customers’ experience will increase, which also influences loyalty (Oman Air, 2009, p.9). Moreover, this is the only airline company that offers ground handling and air freighter. The customers’ value boosts because services are extended at the ground level or at the terminal gate. The freighter carries cargo and other transportation of goods, which increased the viability of Oman Air. The engineering department invests in maintenance of aircraft, which enables to secure the travel experience of customers. Government’s investment in infrastructure and local airports increased the business operation of Oman Air. Threat The introduction of low-cost carriers such as Air Arabia, Air India Express, and Jazeera limits the capability of Oman Air to increase the air fare during the peak season. Price conscious travellers are aiming for cheaper fare. Foreign competition increases such as the British Airways, Emirates, Qatar Airways, and Lufthansa affected the profitability of Oman Air. The company retains destinations that are viable in the business industry. Furthermore, these companies such as Eithad, Qatar, and Emirates weaken the ground handling services of Oman Air since they have the strongest services provided to customers. Furthermore, the increase in fuel price affected the viability of airline operation because the air fare is dependent on the cost of fuel and other operating expenses. Rajasekar and Moideenkutty (2007, p.133) construe this statement by stating that the survival ability of Oman Air is vulnerable to “crude oil and related products.” On the other hand, high oil prices are not detrimental on the economy of the Sultanate of Oman because it will be utilized to sustain the airline industry, but when the price of oil declines, the priority of Oman government will be altered. McKinsey 7S Framework Structure The organizational structure of Oman Air is broad and flat as seen on its layers with different functionality or division. It has a large number of staff and managers under the company’s operation. The current structure of the company is motivated by its aim to match the model of 5 star airlines. However, the company has a costly organizational structure due to the duplication of functions in other divisions. The tasks are divided according to the functions of each employee such as internal auditor, which caters in inspecting the financial records of the company. Furthermore, Oman Air constitutes the element of centralization in its structure because the manner of reporting renders importance to the upper levels. The lower level reports the problem to the general manager or the chief operation, then manager reports back to CEO where the final decision is based on its judgment. Furthermore, minor problems are supervised by the chief operation. Strategy Oman Air aims to be the “first choice airline.” Its goal is to “provide a safe, reliable, and seamless flying experience, enhanced by warm and friendly customer services, without compromising on quality and profitability.” Moreover, the company is committed “to support the local community and to promote in-bound tourism to the Sultanate of Oman” (Oman Air, 2012b). The mission statement of Oman Air is designed to surpass the expectations of their valuable customers. Since the competition in the airline industry is tough, Oman Air chose Boeing, as its partner, to install the winglets technology. This strategy is the company’s response in increasing its productivity while saving cost because winglets technology is the answer in the midst of high fuel prices. Oman Air can save expenses in the aircrafts’ fuel (Flightglobal, 2005). Moreover, it limits the combustion of carbon that is harmful to the environment. This strategy is implemented in most of its aircrafts for its viability and sustainability. Systems The system of governance is bureaucratic because the roles and responsibilities are clearly manifested in its organizational structure. In addition, the hierarchical structure conveys the pattern of authority, which comes from the upper level. The rules and procedures are based on Omanization strategy that involves the company’s objectives to produce staff, which can qualify their nationalistic principle. The company exhibits their policies and procedures based on the agreed statement of its corporate code. The company’s policies and regulations are communicated through a letter or memorandum, which informs or reminds staff on the changes made. Furthermore, the management and leadership style of Oman Air is an open door and strategically oriented. Thus, employees can seek for the assistance of managers or even CEO when they have encountered difficult problems, which allow open communication among them. Shared Values Oman Air is a service company that provides the needs of travellers. It is under S.A.O. C. that is owned by the government of Oman. The main objective of Oman Air is to be widely known as an excellent service company in its expanded operation. In response to its objectives, the company strives to incorporate values such as team spirit or collaborative value, which is signified in its common goal. The common goal of employees is centered on the continuous success of Oman Air. Furthermore, the company encourages for the two-way communication between managers and employees. Managers provide practical feedback on the performance of employees, including motivational comments and suggestions for maintaining or improving their productivity. The values and beliefs are reinforced through company portals and social gatherings. Another method is through the immediate line managers that relay the values of Oman Air. Lastly, the atmosphere is encouraging because of the alteration in its management. Skills Oman Air caters to the transportation service in the Sultanate of Oman. The roles of employees are identified based on their functionality and the department where they belong. The skills that are valued by the company are mostly related to the aviation industry. To be specific, the company emphasized the importance of customer service skills, communication skills, professional IT, and managerial skills. These skills are vital in the success of the company. For example, baggage handlers must be familiar in handling customers through training and development reinforced by the company. Thus, they must be pleasant in treating customers. Moreover, they must know how to communicate properly to add customer’s value. The company is investing in training and development of employees to achieve standardization in its customer service. Oman air aims to enhance services in ground handling, catering, and cargo. Style The organization is perceived as competitive and reliable in terms of its product and services. This is apparent on the number of its award and recognition regionally and globally. Recently, the company is rated as a four-star airline, which is dependent on the consistency of the quality and products offered. Thus, the organizational style is of high quality. The company gives importance to its corporate social responsibility as part of its values and beliefs. The management of Oman participated in the spirit of a “caring corporation” based on their extended support to Lebanon. The company utilized its aircraft to transport Lebanon nationals in a secured place (Oman Air, 2006). Furthermore, the power and authority are used to enforce the corporate culture through its policies and regulation. Oman Air manages employees based on their style in leadership wherein open communication is applied to stimulate a close, but professional relationship. Staff Staffs are comprised of human workforce that performs different tasks according to their role. The objective of Oman Air is to recruit employees that are mostly Oman nationals. This strategy is called omanization, which is “a dignified principle aiming towards accelerating the national economy also, increasing the sectional efficiency” (Oman Air, 2012c). Since this company is the national flag carrier of Sultanate, increasing workforce from Oman will also elevate the economy. In 2006, 72% of company’s staff is comprised of Omani nationals with a total of 3, 125 employees (Oman Air, 2006). Employees are nurtured through the benefits and trainings provided by the company. The new management is the source of employee’s motivation and morale because reorganization implies changes in the company’s management towards the betterment. Finally, the behavior of employees is based on their compliance to the rules and policies of the company. Balance Scorecard Learning and Growth Perspective As part of the company’s initiative to contribute in the development of its employees, trainings are provided constantly. The company wants to increase customer’s satisfaction through standardization of service and quality. Trainings are given in the field of civil aviation and students are enrolled in the technical training of Oman Air (Oman Air, 2012d). Students have the opportunity to study abroad for the captain position. Employees have developed their self confidence in dealing with their work, but they must practice working independently. The cultural attitude is diverse because most of staff employed in a higher position are foreign, which impact the employee satisfaction of Omani nationals. Although trainings are prioritized, without actualization, it will be insignificant. Business Process Perspective Aside from the minor problem in the weak internal communication of the company, other business process is doing well, but internal process needs improvement. The tasks given are appropriate in the roles and responsibilities of employees. Oman Air is committed to enhancing the customer’s experience, so they invest in the “outsourcing industry’s training standards” as stated in Gulf Daily News (“Oman Air Completes,” 2011). The company received an award in its on-time performance by the British Airport Authority (“Oman Air Ranks,” 2011). Thus, Oman Air’s business affairs are in strict compliance with the flight schedule. Furthermore, they have celebrated their success after receiving its ISO certification from Bureau Veritas as reported in Arab News (“Oman Air achieves,” 2011). Financial Perspective The financial performance of Oman Air is affected by its expansion programme and the behaviour of travellers from 2008-2010, which is influenced by the financial crisis. The net loss of Oman Air increases from $108M to $165M consecutively (Fenton, 2010). Although the revenues boost by 40 %, Oman Air experiences financial losses due to its investment in technology and infrastructure of airlines. Also, the passengers’ number increases by 38% and profit in cargo raises to 238%. The financial perspective of Oman Air is supported by the government of Oman, so it will contiguously expand to be rated as a five-star airline with consistent quality and service. Another factor that dropped the revenue of Oman Air is the fuel prices according to Incentive Travel (“Oman Air’s annual report”, 2011). Customer Perspective The level of customer satisfaction is 7% since the company is investing in adding value to the customers’ experience. Its investment in technology proved to be the source of customer’s satisfaction from the ticket service and baggage handling to the internet services. The development in its world class infrastructure at the airport increases the security, reliability, and comfort of customers. Customer’s satisfaction is evident on the awards earned, the number of complaints handled by the call center agents, and the cases solved. In addition, the hospitality of staff and their helpful attitude impact the emotive function of customers. The company garnered an award as the best staff service excellence, which rated Oman Air as a four-star airline. Locally, there are 60 percent of customers in the Sultanate of Oman that are using the services of Oman Air. Figure 1 Current Organizational Chart Figure 2 New Organizational Structure Recommendation Based on the company assessment tools and the organizational structure of Oman Air, the following are the recommendation that might improve the organization design. To reorganize the Structure The reorganization of the structure involves changing the internal organization from broad and complex to simple. When comparing the current and the recommended structure, the duplication of roles and responsibilities is evident. Thus, the recommendation includes the HR & planning; administration and management affairs; marketing; IT management; and finance department. HR department has weak management because they are not fully utilized, so its task is to train and develop personnel. Revenue optimization will also be part of their planning, which aligns on the company’s mission statement. Moreover, marketing is classified under the commercial department since it handles the activities that increase customer value. Accounting and auditing is classified under similar department, but internal auditor must work independently to review the accuracy of finances. Furthermore, flight operations and airport operations are retained so that the company can focus on the two main functions of airline. However, IT and software management is identified under airport operations because information technology is part of it. IT aids customer services and other operations of Oman Air. To focus on diversification strategy, instead of Divisional/Functional Structure Divisional and functional structures rely solely on the capability of the board to decide on the business matters of Oman Air. Employees are not given an opportunity to empower and lead in their direct management of customers. They are obligated to report directly on the manager, which delays the decision of the management. This is construed by Heynold and Rosander (2006) that the “decision-making bottlenecks at the top of some companies began to hinder their ability to respond rapidly to shifting competition.” Staffs at the lower level are the carrier of organizational values, so the skills and talents of employees must be utilized by allowing them to lead. Diversification strategy allows the company to expand or contract without affecting their morale. Also, this strategy enables Oman Air to be flexible since the current environment requires it to do so. To assign manager that will cater for its global operation While the company is aiming to improve customer experience, it is essential that Oman Air will invest on standardization of their services globally. The managers will ensure that employees have consistent attitude in dealing with customers. Conclusion Oman Air is the national carrier of the Sultanate of Oman, which was established in 1993. Its weakness centered on the complexity and large organization structure, so it is recommended that this organization must be restructured, particularly on the HR functions. Based on the new organizational chart of Oman Air, there is a repetition of HR functions. Thus, the simplification of its structure involves the correct designation of its role. Moreover, diversification is relevant in today’s environment. It endows flexibility in the decision-making process of Oman Air. In addition, employees must work independently including empowering themselves in making a decision that requires immediate response to customers. Lastly, in its attempt to be consistent in its customer service, management must add staff in managing its global activities. References Fenton, S., 2010. Oman Air: despite losses, Muscat’s flag carrier is pushing ahead with aggressive international expansion plans. Middle East Economic Digest, [internet], May 7. Available at: http://business.highbeam.com/409213/article-1G1-227812373/oman-air-despite-losses-muscat-flag-carrier-pushing [Accessed 26 Jan 2012]. Flightglobal, 2005. Fuel prices tilts Oman Air to blended winglets. [Online]. Available at: http://www.flightglobal.com/news/articles/ fuel-price-tilts-oman-air-to-blended-winglets-203203/ [Accessed 25 Jan 2012]. Heynold, Y. & Rosander, J., 2006. A new organizational model for airlines. McKinsey Quarterly, [internet]. 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