Managing Employee Relations in Contemporary Context of British Airways - Essay Example

Managing Employee Relations in Contemporary Context British Airways Introduction British Airways (BA) is the official carrier airline of Britain and it is headquartered near the London Heathrow Airport. Based on fleet size, BA is the largest airline in Great Britain. “British Airways was formed in the 1970s as the result of a merger between BOAC (British Overseas Airways Corporation) and BEA (British European Airways)” (Case study given). BA functioned as a public company for around 13 years and it was privatized in 1987 when the majority of the public companies were nationalized by the government of that time. From then onwards problems started to creep into the BA organization. The combined impact of recession and intensified competition as a result of European de-regulation led to important shifts in business strategy with contrasting implications for its staff, an approach that has, with some modifications, continued until the present day. BA has realized that the competition in the airline industry is growing as the globalization and privatization policies have opened the limits of sky widely and international air carriers started to intrude into the territories of BA. As a result of that, BA decided to adopt the merger policies to strengthen their business prospects. In November 2009, BA reached an agreement with Iberia and both the companies decided to merge together to form a single company. The merger between BA and Iberia resulted in the creation of world’s third-largest airline in terms of annual revenue. The merger was confirmed in April 2010 and it is expected that it will take effect from the end of this year. “Iberia Airlines appoints its chairman, Antonio Vazquez Romero as the new chairman of International Airlines Group (IAG), the new company formed under the merger agreement between Iberia and British Airways (Goldstone, 2010) ‘Employee relations’ in BA is a much debated topic in UK now. Many people believe that BA could have improved their relations with the employees and sustain its identity as a national icon, even amidst stiff competition. Many contextual factors affected the employee relations in BA. Moreover, the employee relations in BA have made lot of impacts in the UK employment sector also. This paper critically analyses the above aspect with the help of the case study provided about British Airways. Employee relations in BA and its wider impacts in UK labour industry If employee relations is understood as an arena in which the contest between the pursuit of a market society and the defence of the principles of moral economy is played out, then it is impossible to separate market from nonmarket relations, economy from society or the organization from political economy (Blyton &Turnbull, 2004, p.6). The problems in BA started in the beginning of the eighties because of recession and rising fuel prices. In 1981 itself BA lost around 140 million pounds. It was impossible for BA to sustain its operations without making serious changes in the organization. Privatization is one of the core activities of globalization and UK was probably the first country which started the privatization of public sector companies in an effort to reduce the government’s burden in public utility services. UK Governments don’t want to spend too much money in public utility areas which resulted in the privatization of the national icon; British Airways. Globalization has created cross country business opportunities more and air transport industry is one prominent industrial sector in which the competition increased heavily. The air transport industry is growing rapidly everywhere as a result of the globalization, liberalization and privatization policies; however the story of BA was against the global trend. They struggled even for the survival when the recession problems and the rising fuels price problems started to haunt them. They started to implement some new organizational strategies and change management theories to survive during the recession period which resulted in strained relations with the employees. The famous British economist, Herbert Spencer, who first coined the phrase ‘survival of the fittest’ to summarize Darwin’s revolutionary thesis, says that only the companies that were most adept at competing for and garnering the limited resources in a given environment would survive (Bartolini, 2009). BA struggled for the survival from the 1980’s and they started their survival effort by implementing new policies in the human resource management. Differentiation, quality enhancement like strategies were followed. “It has started to outsource so called ‘non-core’ activities (e.g in-flight catering) and has franchised operations, where new routes can be exploited using labour at significantly lower costs” (case study given). It is a fact that the labour costs in UK is so high compared to that in some of the emerging countries like India, China etc. Outsourcing of jobs is one way of exploiting cheap overseas labour market and BA started to do that which again spoiled the employer employee relations in BA. Outsourcing helped BA to cut down a substantial number of their employees. The decline of trade union activities across Britain during the latter half of the twentieth century helped BA to implement many anti-employee laws In the 1990s, disputes occurred involving baggage handlers, cabin crews, engineers and pilots, and more recently problems over the introduction of a new ‘swipe card clocking-in’ system (in 2003), estimated to have cost the company tens of millions of pounds. 2004 witnessed a strike over pay and long-standing concerns over staffing levels and in 2005 a dispute took place involving sympathy strike action by BA workers over the sacking of 670 workers at BA’s catering suppliers (case study given) Labour unions were so strong in BA in the 1990’s even though they are not so at present. Regular strikes and labour agitations were there in BA in the 1990’s. Both the BA management and the labour unions think in different directions and hence the progress of the company was drastically affected. BA employees thought that the company was deliberately cutting down their benefits and imposing restrictions upon their freedom in order to maximize the profits. The BA employees sensed dangers in most of the policies implemented by the privately managed BA Company. Many of the facilities enjoyed by the BA employees when the company was under the governmental control were taken off by the new private management. The employee pension issue was another major problem faced by BA in the beginning of the twenty first century. The pensions issue is a particularly contentious one for BA pilots, represented by the trade union, BALPA, where salaries can rise to more than £100,000 in the final years of their employment. Not surprisingly BALPA, which has around 2,500 members at BA threatened strike action if the final salary scheme was ‘watered down’ to a less generous ‘career average version’ a threat which was estimated to cost the company £80 millions. The union estimated that such a change would lead to some members facing a 36% cut in their eventual pension (case study given) “BALPA represents well over 75% of all the fixed wing pilots and helicopter aircrew based in the UK - as well as many working overseas”(BALPA, 2008). After lengthy negotiations conducted between the management and the employee unions, an agreement was finally proposed which was accepted by some unions and rejected by other unions. In other words, the above negotiations with the labour unions regarding the pension issue worsened the employee relations further. “The GMB and TGWU in particular have threatened industrial action in 2006 and 2007 over the operation of the sickness absence scheme, management statements about absence levels and general concerns over what the unions see as worsening pay and conditions” (case study given). It is misguided to assume that developments over the recent past such as the decline in trade union member ship and collective bargaining coverage, the increased legal circumscription of the industrial conflict and the greater prominence being given to the human resource management techniques of employee management, signal the demise of the collective aspects of employment relationships (Blyton &Turnbull, 2004, p.4). BA has miscalculated that they can survive in the market with the help of the anti-labour policies implemented in their organization. It is an accepted fact that employees of an organization often raise protests when they were forced to work on long shifts with reduced salaries or when the organization terminate them without adequate reasons. It is difficult to convince the employees that the change is inevitable in an organization because of recession or changing business climate. “It is necessary to make staff become supporters and followers to implement change” (Lau & Yau, n.d). In some cases, even after the management’s repeated efforts, some employees may not be willing to change their established working culture. Under such circumstances, the management may force to take disciplinary actions against them. In any case, the management needs to implement the strategies carefully to overcome the problems related to competition, recession, and economic depression. Blind enforcement of new policies in an organization may result in negative results rather than the intended positive outcomes. In BA’s case employee costs made up almost 30% of total costs in 2006/7, the next largest costs were fuel, accounting for 24% of total costs. There is therefore an ongoing tension between service delivery quality and efficiency for airlines such as these that by the nature of their business cannot compete solely on cost terms (Case study given). According to Neetha (2009), some of the suggested strategies during recession can be summarized as; review cost operations, focus on core fundamentals, communicate with internal and external customers and employees and be forthright or take strong actions against those who hesitate to accept the organizational change (Neeta, 2009). BA tried to implement too much in too little time and most of their cost cutting efforts affected the employees. Change management is inevitable in every segment of business because of the rapidly changing trends in business. But according to Lau & Yau, (n.d), changes have to be made to improve the efficiency and effectiveness of the management team and the employees (Lau & Yau, n.d). The customers will be more focused about the quality and the prices of the product or service they purchase during recession period because of the increased value of money they are spending during recession compared to other prosperous periods. The bargaining tendency will also be increased during recession period. It is difficult for the managers to convince customers during these periods because of the changing consumer psychology during recession. BA failed to recognize the above fact and tried to implement anti-employee policies rather than making changes in the business strategies. “The companies with the high performance culture have the advantage in the recession. As the employees in the high performance culture organization are used to compete among them, they can compete with the recession and it is much easier to make them motivated for such a fight” (High Performance Culture and Recession, n.d) The high performing organizations will be benefitted from such healthy competition among employees because the recession will increase the productivity and common sense of the employees in such organizations. The abilities of the employees to face tough situations will increase the overall strength of the organization. On the other hand for underperforming organizations the recession would be another curse. Their performance will be worsened by the recession because of the employee’s inability in tackling the stiff challenges resulted from recession. “Despite its efforts, or perhaps in some cases, because of them, employment relations at BA retain the potential for serious disruption. Management style has toughened somewhat in recent years in the context of a more competitive operating environment”(Case study given). BA employees were unsatisfied by the poor treatment they received from the management and they were not ready to put extra efforts to save the company when the UK economy started to dip. Any organizational changes must be accompanied with the consultation with the employees. Democratic approaches always ensure the success of a changed organizational strategy. The employees must be fully aware of the need of change before implementing it. An employee with better understanding of the changed strategy will function more efficiently than an employee who doesn’t understand the strategy well. In BA’s case, all the above principles were violated and the BA management did not bother about educating the employees the needs of change management during the crisis situations. Racial discrimination is another major issue in BA which spoiled the employer employee relations. According to the Guardian reporter, Milmo (2010); British Airways cabin crew based in Scotland, Ireland and in Europe has lodged claims against the airline under race discrimination laws. A group of BA flight attendants is claiming that the removal of discounted travel from strikers discriminates indirectly against employees based in Scotland, Ireland and mainland Europe who use the scheme to commute to and from Heathrow airport (Milmo, 2010). In a highly globalized market, most of the organizations are giving more emphasize to building a diverse manpower resources. No internationally operating organization can survive in the current market with the help of employees of a particular community or culture. Even though BA is a British organization, the BA flights are travelling across the world with diverse passengers. Under such circumstances, BA cannot argue that they will use the services of British employees alone. Racial discrimination will definitely spoil the image of a company since we are living in a civilized society now. Conclusions Poor business management was the major reason for the spoiled relations between the employees and management of the British Airways which finally forced BA to think in terms of a merger. The cost cutting methods implemented in the BA organization in order to escape from recession and poor economic and business climates, was not discussed with the employees prior to the implementation. The labour unions in BA have not taken the actions of BA management in confidence and they watched the management actions suspiciously. BA was earlier a public organization and the conversion from public to private was indigestible to the employees. References 1. BALPA (2008). Chairmans Welcome, [Online], Available at: http://www.balpa.org/About-BALPA/The-Association-(Who-we-are).aspx [Accessed on 12 November 2010] 2. Bartolini A. (2009), Global Supply Management Insights, [Online], Available at: http://research.aberdeen.com/index.php/global-supply-management [Accessed on 12 November 2010] 3. Blyton, P., &Turnbull, P. (2004), The Dynamics of Employee Relations, Publisher: Palgrave Macmillan; 3Rev Ed edition (6 April 2004) 4. Goldstone, B. (2010). Iberia Airlines Approves British Airways Merger Appoints New Board. Stress [Online], Available at: http://avstop.com/news_sept_2010/iberia_airlines_approves_british_airways_merger_appoints_new_board.htm [Accessed on 12 November 2010] 5. High Performance Culture and Recession,(n.d), [Online], Available at: http://hrmadvice.com/blog/2009/01/21/high-performance-culture-recession/[Accessed on 12 November 2010] 6. Lau C K and Yau David, (n.d) Management of Change in a Recession , [Online], Available at: http://www.bre.polyu.edu.hk/rccree/events/pm_symposium/CKLau.pdf [Accessed on 12 November 2010] 7. Milmo D (2010), Racism claim opens new front in BA dispute, [Online], Available at: http://www.guardian.co.uk/business/2010/jul/18/britishairways-theairlineindustry [Accessed on 12 November 2010] 8. Neeta B. (2009). Managing Change in the Times of Recession, [Online], Available at: http://ezinearticles.com/?Managing-Change-in-the-Times-of-Recession&id=1717583[Accessed on 12 November 2010] Read More