How Importance of Good HRM for Aasia's Leading Cost Airline in Malaysia - Essay Example

? The importance of good HRM for Asia’s leading low cost airline BY YOU YOUR SCHOOL INFO HERE HERE TABLE OF CONTENTS 1 Introduction................................................................................................... 1.2 Research title, questions and objectives...................................................... 1.3 Research rationale........................................................................................ 2. Literature review.............................................................................................. 2.1 Introduction.................................................................................................... 2.2 Cultural diversity............................................................................................. 2.3 Performance management and evaluation..................................................... 2.4 Participative leadership................................................................................... 2.5 Line management training............................................................................... 2.6 Conclusion....................................................................................................... The importance of good HRM for Asia’s leading low cost airline 1.1 Introduction Air Asia, headquartered in Kuala Lumpur, Malaysia, is considered a pioneer of low cost airline travel and is considered the world’s best low cost airway provider. The company operates in an oligopolistic market structure, one where there is only a small handful of air travel carriers. In this type of market, competitive rivalry dictates the majority of strategic business decision-making in which the organisation must be adaptable and flexible to changing market conditions and competitive behaviours. In 2011, Air Asia sustained revenues of US $1.62 billion (Air Asia 2012). The company operates as Air Asia and also under different subsidiary brands, including Air Asia X, Air Asia India, Air Asia Japan, Philippines Air Asia, Thai Air Asia, and Indonesia Air Asia. This makes the company a legitimately multi-national organisation, one which must work with distinct regional social cultures in a very diverse employment model. Cultural differences make training and development critical in order for Air Asia to maintain its positive brand reputation and ensure that the organisational structure operates much like a cohesive, family-oriented unit. The company’s mission is “to be the best company to work for whereby employees are treated as part of a big family” (Air Asia 2013, p.2). In order to accomplish this mission, having good human resources practices, especially in areas of training and development, is absolutely essential. Gaining competitive advantage involves ensuring expatriates adjust to new cultures within subsidiaries, promoting career succession and emphasizing team ideology in all inter-dependent business units. 1.2 Research title, questions and objectives Research Title The importance of good HRM for Asia’s leading low cost airline Research Question How can the training and development programs impact on the performance of AirAsia Airlines known as a budget airline? Research Objectives 1. Provide an analysis of training and development programs. 2. Evaluate the effectiveness of training programs for employees 3. Discover how Air Asia utilises performance management in a budget carrier business model. 1.3 Research rationale Training programs are very important for companies today as it helps to bring the company a positive brand reputation by ensuring that employees understand all operational and service delivery roles. Training and development brings more benefits to the company in terms of talent management and also provides advantages against competition through building of competencies and service skills. To understand an oligopoly, one must understand how a business utilises its employees as valuable resources to achieve mission and vision, whilst also satisfying important revenue-building customer segments. Through the evaluation of training and development and understanding best practices in this part of HRM, Air Asia’s competitive successes in relation to service excellence can be comprehended. Competency development and efficiency, under a low cost business model, can assist in creating a benchmark for other companies to improve human resources best practice in a decentralised business model. This is why analysis of training and development programs, evaluation of effectiveness of existing training programs, and performance management can assist in giving a snapshot of what drives competitive advantage at Air Asia in terms of human capital development. 2. Literature review This section addresses and evaluates literature on four components of training and development: cultural diversity, performance management, participative leadership and training of line management to absorb the roles and responsibilities of HR practice. 2.1 Introduction Training and development systems provide a business with more competent employees and higher service delivery quality for customer satisfaction. Companies are concerned about budget issues which is especially important for Air Asia that must maintain its reputation for providing low cost air travel to consumers whilst also satisfying a more lean business system under a no-frills operating model. Staying efficient and productive, therefore, becomes a training imperative throughout the entire organisation. At the same time, retention saves very high costs to the business meaning that employees must be happy with their role and stay loyal to achieving Air Asia’s mission and vision strategies. 2.2 Cultural diversity Because Air Asia is a genuine multi-national operating in many different countries, training employees and managers in cultural diversity is very important to ensure that the company meets its team-focused mission strategy. In the Philippines, the culture is very collectivist, meaning that there is a strong social emphasis on loyalty to in-group members and family and where loss of face is considered an offence (Hofstede Centre 2013). However, in Japan, cultural values favour more individual expression and want rewards and recognition for individual accomplishment. In Malaysia, employees are accustomed to considerable power distance between ranked authorities (Hofstede Centre 2013). Power distance is defined as the extent to which less powerful individuals in a society are willing to tolerate and accept power inequality and consider it customary (Leng and Botelho 2010). In Japan, there is much less power distance between managers and employees with more emphasis on shared decision-making and decentralised authority. The aforesaid illustrates that training and development at Air Asia should theoretically involve establishing a focus on cultural diversity to ensure that employees and managers are accustomed to working collectively. Different cultural groups vary widely in their perception and belief of what constitutes effective leadership, where in some cultures employees will favour strong and decisive management whilst in other cultures more sensitive and empathetic leadership is perceived as competent (Den Hartog, et al. 1999). Air Asia requires many different expatriate managers in order to manage and operate foreign subsidiaries, however in order to be an effective manager, they must be trained with the cultural knowledge necessary to develop productive HR systems and practices. When expatriates are not trained properly in this dimension, it can lead to culture shock, a type of personal disorientation that occurs when moving into a foreign country or other socially unfamiliar environment (Macionis and Gerber 2010; Pantelidou and Craig 2006). Though Air Asia attempts to streamline its business policies and practices with the Malaysian cultural ideology throughout all of its subsidiaries, differing cultural values can greatly undermine team performance if not properly addressed. Expatriate managers that would theoretically be accustomed to working under centralised hierarchies of authority and control could have difficulty establishing trust, rapport and effective communications when forced to work inter-dependently with lower-level employees. In order to adjust long-standing values and acquaint foreign managers to new business practices and strategy, cultural diversity training is critical to maintaining a team-focused organisational environment. Concepts of responsibility and personal accountability, two important factors for learning and establishing control systems, are embedded within the productive group norms that exist in work teams (Wilson 1996). Managers, when forced to work as team leaders, experience substantial work role changes and are then instructed to become coaches and mentors requiring productive communications skills and consulting skills (Fairholm 2009). Good leaders, something required of Air Asia in its team ideology, must motivate and inspire others by satisfying their basic needs (Kotter 2001). Without proper training on cultural diversity and understanding the social values of subordinate employees, managers will be ill-equipped to control costs of retention and could substantially de-motivate workers. Armstrong (2007) refers to this HR strategy as soft HRM, appealing to the minds and hearts of employees in order to gain motivation and top performance. Differing cultural values are important for companies like Air Asia that must operate in a multi-national, globalised business environment. Culture dictates the level of trust or degree of corruption that is tolerated in a society (Efrat 2012). The establishment of cultural training at Air Asia would be beneficial for developing cohesive work groups, building trust with all ranking members of the organisation and also ensuring that a singular moral and ethical code of conduct is developed. With a mission of having a business structure set-up like a family with shared decision-making, training and development would be absolutely critical to sustaining competitive advantages with human capital. Investors are even driven to invest in companies that have unified cultures within a business that operates globally (Very et al. 1999). Therefore, cultural diversity training for employees and managers at Air Asia have the potential to bring more financial capital, improve knowledge of different cultures, ensure better engagement between managers and subordinates, and also satisfy employees at the social level to improve their intention to stay with the organisation. 2.3 Performance management and evaluation The main goals of a performance management system are to motivate employees toward a particular goal, assisting in helping employees develop better skill sets, determine who has eligibility for promotion, and establishment of disciplinary or reward systems for poor or proper performance (Bayat 2011). Performance management systems identify strategic goals, establish the criteria for what actually makes up quality performance, establishing a formal review system, and then reinforcing desired behaviours through discipline or reward system establishment. Performance management, therefore, is a holistic evaluation of employee worth, quality and value in which feedback plays a substantial role in motivating positive performance outcomes (Dunning 2008). Best practice in HR in relation to training and development involves the utilisation of performance evaluation instruments and metrics. At Air Asia, the company utilises the 360 degree feedback system in order to capture a broader picture of how the employee has performed. This system involves feedback from managers, peers and even customers which assist in training the individual on operational procedures and improve their performance toward goal achievement. When an employee receives feedback from more sources than just their direct manager, they are more likely to find equity and value in the feedback process. Work habits are changed as a direct result of achieving esteem from important co-workers and this translates into motivation (Edwards and Ewen 1996). This could be an important explanation for how Air Asia is able to maintain a cohesive organisational culture that remains dedicated to achieving the company mission. By giving employees a more balanced method of evaluating performance, fairness and justice are perceived as being part of the management ideology. If Air Asia were utilising less sophisticated feedback systems, the company could have de-motivated employees and much lower productivity. It would provide information about employee performance that would significantly impact training and development as only a single rating source (i.e. the immediate manager) could supply knowledge that would make operational training irrelevant. Air Asia would seem to maintain its high competitive advantages in terms of human capital by setting up performance management systems that are unbiased and even-handed, translating into data that enhances training effectiveness. 2.4 Participative leadership Air Asia is highly decentralised and there is shared decision-making between managers and employees to produce innovations and solutions to service and the overall business model. This is participative leadership when employees are considered to be valuable and trusted resources within the business (DeBruin, Parker and Fischhoff 2007). It is a democratic process whereby employees have much more authority in speaking up and in knowledge creation. However, in cultures where power distance is considered normal and is tolerated, it can be difficult to establish participative systems. Therefore, Air Asia would theoretically need to develop training that provides workers with legitimate experiential knowledge in working within democratic systems. Poorman (2002) recommends utilising a role playing in training that allows individuals to understand the training course content more productively and role playing increases the learner’s interest in the training subject matter (Poorman). Employees with no experience in working cooperatively must gain practical skill in a decentralised environment. This could be a limitation under the current training model at Air Asia which is not supportive of building training programs that allow for experiential knowledge in participative business environments. 2.5 Line management training Managers that do not have some level of control over reward and feedback systems have a negative outcome on retention of employees (McConville 2006). It is a large obstacle to getting performance and productivity from employees (McConville 2006). In today’s business world, the depth of HR involvement in the business requires a convergence of roles between the HR department and the line manager who works dependently with employees on a regular basis. Line managers, therefore, must understand the strategies and ideologies of human resources in order to motivate employees, satisfy their basic and individual needs, and inspire higher levels of dedication to achieving performance goals. There is no evidence that Air Asia provides this type of training. Costs of recruitment for businesses are high, as well as the need to supply new employee training packages each time another, existing employee leaves the firm. Air Asia might be able to improve its employee turnover rates and also save substantially on administrative costs if the business adopted a training package that provided line managers with best practice HR theory. Success in all areas of HRM involves line manager involvement and conducting various HR duties (Brandl, Madsen and Madsen 2009). Air Asia might find substantial cost advantages in recruitment and experience better competitive advantage if the company merged the roles of line management and HR management to create greater competencies in areas of training and development. 2.6 Conclusion There are many implications to Air Asia in terms of how the company pursues training and development strategies. First, since there is no evidence that the business understands line management and HR management role congruence, it could be what causes the company to experience much higher costs in recruitment and training. Secondly, the company’s utilisation of a 360 degree feedback system has psychological consequences on the employee, providing them with positive motivations for providing equitable and fair employee evaluations. This is the foundation of career succession at Air Asia and, therefore, it would seem the business is adept in following best practice HR strategies and practices. Lastly, by injecting cultural diversity training into the company’s training model, it provides the foundation for more effective and inter-connected work groups that can work dependently to provide more innovations for Air Asia and improve its competitive and financial positions. Air Asia follows some of the more valuable HR models, but also appears to neglect other strategies that could invite more inspiration and provide more employee satisfaction. Through the 360 degree feedback system as part of Air Asia’s performance management system, the data gained assists in producing more effective and productive training programs with content that is relevant to the individual and/or group needs of employees. This is efficiency for Air Asia, something necessary to sustain competitive advantage. There is, however, a gap in research knowledge about the specific training systems and strategies at Air Asia that lead researchers to inconclusive evaluations about the overall performance of current HR strategy. Though it is clear that good HR practices provide value and productivity for companies like Air Asia, there is a need for future qualitative research studies utilising the Air Asia corporate business model to determine what attitudes exist in the company in relation to training and development and the specific strategies being undertaken by the company. This gap in knowledge creates an opportunity to conduct primary research, utilising questionnaires and interviews, to uncover what aspects of training have failed and which have brought the business better advantages and performance outcomes. References Air Asia. (2012). Air Asia Annual Report 2011 – Reports and financial statements. 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