British Airways (BA) has recently announced a merger with Iberia the results for both firms are due in May 2011. This case study will look at industrial relations within BA and how they will affect the recent merger and what is necessary to align both firms' resources whilst causing the least number of conflicts between stakeholders. The merger created the world's third largest airline in terms of annual revenue and the third largest airline group in Europe(CAA.co.uk, 2010).
Keith Williams is the new CEO of BA, previously the CFO it is unsure if he will follow Willie Walsh's (the former CEO of BA) move for consolidation in the market. Porter's Five Forces shows that the power of stakeholders is extremely high. This suggests the BA must reassess its position in the market or reduce its high costs base. Looking at the financial data below, BA's management took the decision to cut costs. So in 2005 Walsh was brought in as a result of caterer strikes and pressure from shareholders.
Walsh's airline background suggests that he will seek nothing but cuts in the pursuit to make BA profitable (BBC BA Profile 2007). Walsh came from Aer Lingus where he cut costs by 30% and sacked a third of staff, this type of no nonsense approach helped Walsh negotiate BA's staff pensions without strike until recently, where staff from the Unite Union have attempted to strike over industrial relations. Williams was head of finance so may need time to assess to whole situation.
Focusing on British Airways 2009/10 annual reports and accounts, it is clear that sales have dropped whilst costs have risen. Recent political stakeholders have affected performance more than employees yet management is clear on cutting staff. Hikes in taxes and prices have put BA in the red. Yet even older accounts suggest that BA's customers are moving to rivals. A Keynote study (2008) suggests that the recent decrease has arisen from increasing numbers of websites offering comparison price searches online.
Tags: British Airways, industrial relations, Keith Williams, Walsh's airline,political stakeholders
[...] Lewin (Burnes 2009) suggests the use of ‘push' and ‘pull' factors ‘Push' are drivers of change factors ‘Pull' are inhibitors of change BA must use Pestle Analysis to assess the environment and address the most important conflict of interest whilst not forgetting the others. It's similar to a trade-off yet Lewin(1947b) suggests that if the firms considers early enough i.e. a prescriptive approach to mapping the environment it can take the issues early on. The problem here is that the focus is removed from the firm and in reality large firms may not have the capacity to focus on all stakeholder. [...]
[...] (2001) How to Develop an Organization Capable of Sustained High Performance: Embrace the Drive for Results-Capability Development Paradox. Organizational Dynamics. Vol No. Burnes, B., (2004), Kurt Lewin and the complexity theories: back to the future, Journal of Change Management,Volume, 4(4),pp. 309- Clampitt, P.G., DeKoch, R.J. and Cashman, T. (2000) strategy for communicating about uncertainty', Academy of Management Executive. Vol 14 no. Ford, J.D., Ford, L.W. (2009) ‘Decoding Resistance to Change' Harvard Business Review, April Lewin, k.,(1947a). Frontiers in group dynamics, in cartwright, d. [...]
[...] Theory E has obvious drawbacks, one being the lack compassion and involvement of staff could have a negative effect on morale. This could de-motivate the staff and could lead to a breakdown of trust in the relationship. This can lead to employees seeking help from unions, which in BA's case resulted in strike action. This could have been avoided if the management had properly communicated their plan and the effects the change would have on the workers. BA should have adopted a better combination of Theory E and which would have seen a better balance between financial performance and involvement of staff. [...]
[...] Looking at the questionnaire results it is clear that staff want change in a positive way to improve their prospects of work. Nearly all staff at Heathrow are unsure about their role and future whereas Gatwick staff still feel valued. Looking at BA financial data it is necessary to reduce costs but depreciation has risen since 2009 due to an increase in spending on new aircrafts (BA Annual Report 2010). The Economic Value approach allows for technological innovation against cuts yet for staff there is an issue here: why technology when staff add value dealing with the customers? [...]
[...] Walsh came from Aer Lingus where he cut costs by 30% and sacked a third of staff, this type of no nonsense approach helped Walsh negotiate BA's staff pensions without strike until recently, where staff from the Unite Union have attempted to strike over industrial relations. Williams was head of finance so may need time to assess to whole situation. Finance and structure of B.A Focusing on British Airways 2009/10 annual reports and accounts it is clear that sales have dropped whilst costs have risen. Recent political stakeholders have affected performance more than employees yet management is clear on cutting staff. Hikes in taxes and prices have put BA in the red. Yet even older accounts suggest that BA's customers are moving to rivals. [...]
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