How Effective Korean Air Hr Strategy Is Management Essay

This report discusses the details of suggested HR scorecard for Korean Air that shows how effective HR strategy is crucial for the successful achievement of its own strategic goals with appropriate measurement system “HR Scorecard”. Development process began with a clear statement of the company’s strategy and operational goals with a strategy map showing the causal linkages in the value creation process. As next steps of process, workforce competencies and behaviors and strategically relevant HR system policies and activities are identified to create HR scorecard and the process concludes with presenting suggested HR scorecard with measurement. >During analyzing HR system and the organization, some points to be improved were emerged and these are mentioned with recommendation. If the HR concerns are solved, the company will be more resilient to face external environment with competitive workforce. HR Scorecard helps employees know and understand the organization strategic goals, encourage them to have skills and responsibilities in accordance with the goals, and guide them to achieve goals with measures. To make measurement system, the cooperation of HR managers and line managers for choosing proper metrics is very important. As strategies and goals are changed, the metrics and measurement system of HR Scorecard should be updated to be an effective and influential tool for strategic success.

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I. INTRODUCTION

Many CEOs agree with the concept “People are the most important assets” and the fact that the companies with more effective HR management systems outperform their competitors, however, HR function and influence on company’s performance are difficult to measure.

Besides professionalism in Human resources are challenged to take a more strategic perspective and HR professionals are requested to prove Human resources are competitive advantages with measuring HR’s performance corresponded with corporate strategy and its contribution to the company.

Effective HR measurement system shows a clear and consistent view of how the company can implement its strategy in the organization and how HR can contribute to company’s success with discovering and solving current HR problems.

To start with defining corporate strategy of Korean Air, it will be evaluated how HRM play a strategic role, produce core values and interrelated with every level in the organization for achieving company’s strategic goals using creating its own HR scorecard.

II. BACKGROUND OF KOREAN AIR

1. Company overview

Korean Air is an international airline headquartered in Seoul, Korea. As Korea’s first private airline in 1962, it has grown into the world’s largest air cargo carrier and the thirteenth largest airline in the world. According to World Air Transport Statistics, Korean Air is the world’s largest commercial airline cargo operator since 20041. and was rated as the best airline in Asia for the third straight year, having the best business class on routes to Asia in 2009.

< Table 1: Company overview 2) >

2. Corporate Vision and Mission

Keeping with its vision “To Be a Respected Leader in the World Airline Community,” Korean Air is committed to provide best service that customers can value and trust and make a corporate culture that encourages innovation upon their mission “Excellence in Flight” 2).

< Table 2: Corporate vision and mission 2) >

3. Major Business Processes

Passenger service takes the biggest part, however, cargo service gives the company considerable profits with a reputation as the largest international air cargo carrier.

Korean Air has developed catering, maintenance, and unusually for an airline, an aerospace manufacturing business with researches and development programs for general aviation craft, military trainer and satellite since 1976 3). The aerospace division generated revenues of $470 million in 2008 and employs a little over 2,500 staff.4)

1) Business Review 2) (As of 2008)

[Unit: Hundred Million Won, 1 US Dollar Ã¢â€°â€™ 1,150 Won]

2) Operating Results 2) (based on 2008 IATA standards)

4. Structure

Korean Air reorganized a corporate structure with new promotions for divisional responsibility management in 2003. It offers flexible management for planning, budget, recruiting and other key functions to all divisions. Every head of divisions would take a firm responsibility for outcomes and be appraised based on achievement.5)

a) Employees 2) (Total: 18,600, As of January 2009)

b) Organization chart 2)

5. Business strategy

Korean Air takes improved business strategies to implement corporate missions as below.

1) Globalization: To be ranked as global leading carrier with globalized manpower,

service, and brand image.

2) Knowledge management : Encouraging learning and continuous improvement.

3)E-Business: Introducing more e-Commerce solutions and constructing upgraded Intranet for training and fast communication.

6. Relationship with external entities

1) International competitors : Business travelers who still consider Singapore Airlines with its young fleets and strong branding and Cathay Pacific which has a superior hub location due to its geographical proximity to China as superior in service and quality to Korean air.6)

2) Global airline alliance – SkyTeam: Korean Air is a founding partner in SkyTeam, the world’s second largest airline alliance of eleven members and three associate carriers and expands its operations by code sharing and seat trading.7) Recently, Korean Air helped Uzbekistan airway and Garuda Indonesia to be joined.8)

III. HR SYSTEM AND THE STRATEGIC ROLE OF HR IN KOREAN

AIR

1. HR system of Korean Air

1) Job Grade system

Job Units are divided largely as Administration, Engineering, Cockpit crew and Cain crew. 9) Administration and engineering units operate a Course system for training and application purposes. Each unit has job grade scheme organized differently for every job unit and course to fortify expertise competencies.

< Table 3: Job Grade scheme >

2) Development & training system

Ã¢-Â Training organization

Korean Air has developed and operated various training programs.10)

Human resources development department and center take a charge of establishing training plans and integrated education. Professional training organization offer enriched education.

As an implementation of Ubiquitous learning, Cyber campus is used.

< Table 4: Training organization >

Ã¢-Â Training programs

The training programs are prepared for each job grade and divided as Management development training, global competency training, job skills improvement training, and organization revitalization training.

< Table 5: Training programs >

3) Appraisal system 11)

The appraisal system is based on measuring a contribution to company and individual work competency including performance, job aptitude and leadership. As Total analysis with giving feedback, they use appraised data for granting differential rewards or training and development.

< Table 6: Appraisal system >

4) Compensation and welfare system 12)

Korean Air provide incentives, benefits (housing, medical and education support and culture & leisure benefits) and favors such as discounted tickets and easier ticket purchase as a privilege of being with airline.

2. The Strategic Role of HR in Korean Air

The long term strategies of Korean Air can be defined as follows;

Ã¢-Â² To be ranked among top 10 international passenger airlines

– Developing new routes and reinforcing SkyTeam network

– Heighten global image awareness with excellent quality service and culture sponsorship

1) Korean Air will reopen the route to Saint Petersburg and launch Irkutsk, Russia this year.

When Tunxi international airport in China opens this March, a route will be put on Huang Shan line. It is planned to expand a route network to Central Asia, Europe and Africa and extend the number of destination cities to 140 cities by 2019 through SkyTeam. To attract more customers, more investment for ordering A380 Airbus fleets and changing new luxury and upgraded seats for all classes is drawn from revenue. 13)

2) As global cultural sponsorship, Korean Air tries to cultivate different type of brand image. Korean Air sponsored the multimedia guide at the Louvre Museum in Paris and Russia’s State Hermitage Museum in St. Petersburg in 2008. It is spread out to the British Museum’s new set of handheld Multimedia Guides.14)

Ã¢-Â² To make China its biggest Market

Korean air has strategic relationships with China Airlines and China Southern Airlines and makes an effort to expand it more with other Chinese airlines.

Routes to Guangzhou, Dalian, Weihai, Yantai, Changsha and Shenzhen were added and its route network has covered 19 Chinese cities with more than 150 flights.

It is one of the most expansive networks in the China among non-Chinese carriers and chosen as “The best foreign airline in China”. 15)

Korean Air established a Chinese-only counter ‘China Express’ in Incheon International Airport and began its operation to enhance convenience for a growing number of Chinese tourists.16)

For brand awareness, outdoor billboards in Kunming, Wuhan, and Zhengzhou were built. Book donations to poverty schools and inviting children in earthquake damaged cities to Jeju island are one of its social responsibility activities in China.17)

Ã¢-Â² To be a leading air cargo carrier

Korean air made a contract to create Central Asian logistics hub with Uzbekistan government and Navoi airport in 2008 with cooperation from Hanjin Transportation Co., Ltd. (ground transport) and Korea Airport Service (airport ground handling). 18) By 2013, constructing an airport infrastructure and attracting investments from global logistics companies will be kept up. Whole project is planned to be finished by 2018.

In China, cargo terminal in Tianjin will be completed until the end of 2010 for activating the market.19)

HR Strategic roles for these major strategies

All strategies are global related and to achieve these goals, it is necessary to recruit manpower with international competency and train its employees with various and differential programs per position as long term system.

1. Recruiting

As the demand of international professional staffs for conferences with SkyTeam and developing Chinese market is increased, fluent English speakers, China regional experts and MBAs with proper educational backgrounds are highly needed to improve business competiveness. Common recruitment is by internet, headhunters, employment agencies, internal sources and college recruiting.

2. Training :

Korean air operates Global online education system around 50 branches in the world. The systems handle the hands-on skills of reservation, ticketing, customer service, transportation, maintenance, and language study. Yet, it is needed to be more practical and wide ranged for employees to solve their problems encountered at work.

1) Foreign languages: New flight attendants take 4-week training included correcting pronunciation and aviation English and Japanese at cabin crew training center. Every employee depends on online education system afterwards.

2) Management knowledge: Customized MBA courses developed with Seoul National University for executives are offered. Manager level complete AMS courses which cover specialized knowledge of air transportation industry and management theories.20)

3) Overseas regional specialists: To enlarge global network, area specialists are indispensable. 1 year of “Overseas services- short term international assignment” for senior managers and managers is executed to send them to foreign branches for experiencing local languages, cultures and operating systems. New employees go to Mongolia as volunteering activities to plant trees for desertification for brand image and giving opportunities to look around the Mongolia as a next market.

3. Corporate culture:

Korean air has reformed hierarchical culture which caused serious accidents as creating a central clearinghouse for monitoring and investigating safety reports and audit findings so that all divisions are ordered to share and coordinate data.

In 2009, Korea’s Ministry of Gender Equality signed an agreement with Korean Air to promote a women-friendly corporate culture and support career possibilities for women. 21)

IV. HR SCORECARD OF KOREAN AIR

Step 1: Define Business strategy

21C leading global airline with globalized human resources, services, and brand image

– To be ranked among top 10 international passenger airlines

– To make China its biggest Market

– Leading air cargo carrier

Step 2: Value chains of each division

Step 3: Outline a strategy map and identify the strategically required organizational

Outcomes

Strategy map

Outcomes

1) More customers choose Korean air because of excellent service and flight convenience.

2) Korean air will leap to global brand not restricted to an airline in Korea.

3) Empowerment and teamwork will help to be a Learning organization.

4) Improved revenue is expected owing to transport increase of passengers and cargos

Step 4: Identify the Required Workforce Competencies and Behaviors

– Speaking good level of English, Chinese or other languages to deal with foreign customers and doing business with international companies

– Fast operation based on participation and empowerment – immediate feedback, open communication

– Service-oriented and committed employees for attracting and retaining customers

– Top management who educated with efficient and practical management knowledge

– Continuous trained maintenance and engineering manpower for safety

– Creating a powerful corporate brand with full understanding competitors and the future direction of company.22)

– Deepened knowledge about other countries to start or have projects with.

– Professional service training force for satisfying every needs of passenger service

Step 5: Identify the Strategically Relevant HR system Policies and Activities

1. Inspiring allegiance to the company and raising morale

1) Setting up firm policies of compensation and benefits for motivation

Specify pay per performance, rewards, recognition, retirement, family friendly benefits, time off with pay, maternity leave and safety & health protection programs.

2) Rewarding individuals and teams, team development

3) Encouraging organizational commitment, job satisfaction and job security

2. Professional training schemes for cabin and customer services

Reinforcing on-line and OJT programs, participation in related seminars of experts,

comparison with those of competitors, refined grooming and etiquettes.

3. Provide segmented and enriched education for required job skills and the knowledge

improvement of all level from in or outside.

– University-industry collaboration for academic programs

– Arrangement of related reputable institutes to short term education

– Job rotation for internal training by superiors

– Increasing overseas dispatch for studying languages and cultures

– Support to study abroad for highly performed employees.

4. Recruit right employees

Select candidates with language proficiency, proper educational backgrounds and global experiences under conditions of detailed job description and specification for reduction training costs and fast adaptation to the organization.

Step 6: Design the HR Scorecard Measurement System

Applied assessing measures for HR activities about workforce competencies and HR systems for HR scorecard are as follows;

Assessing HR system 24)

10 Step 7: Periodically Evaluate the Measurement System

It is hard to manage all of HR systems with interrelated metrics as the organization is bigger and its business is diversified.

Currently “Balanced scorecard”, a computerized model, help top management track and monitor HR data with marketing and finance metrics for company’s strategic success. With establishing customized software system (refer to http://www.activestrategy.com or http://senalosa.com), it is expected to have improved effectiveness for updating and evaluating HR information periodically.

Yet, it should be implemented on the premise that creating Scorecard team to select and validate measures and collecting data with cooperation of all departments.

11 V. Conclusions and Recommendations

1. Conclusions

Below suggested HR scorecard process of Korean Air shows how the scorecard measures the organizational outcomes, workforce competencies and behaviors and HR system policies and activities aimed at implementing the corporate strategy ” 21C leading global airline with globalized human resources, services, and brand image”.

Basic themes are 1. Create service-oriented workforce, 2. Provide enriched training for global competency, and 3.Raise morale and create positive corporate culture.

For example, the theme “Create service-oriented workforce” is implemented from “Recruiting and selection”. The metrics for recruiting can be chosen among No. of applicants per sources; No. qualified applicant/position, proportion of employees selected based on validated selection methods. After selecting, the step would be moved to “Training and appraisal” with related metrics. Outcomes also can be measured upon 3 major tiers of customer responses, international corporate image, and inner communication derived from the strategy.

With metrics for each process combined with strategic goals, HR performances can be objectively and quantitatively. It is easier to see and check from the start to the final purpose of company “increased revenue” from the point of view of HR.

2. Recommendations

Despite aggressive strategies to grow, Korean air hasn’t been identified as distinctive global airline. Among business travelers who still consider Singapore Airlines and Cathay Pacific China as superior in service and quality to Korean air.

HR should play a pivotal role for reinforcing employee development one of an organization’s competitive advantages more than ever because the competencies will be determined as Human resources with definite strategic goals ultimately.

1) Training – Foreign languages and academic learning

Company puts a huge energy to China market so speaking Chinese is another challenge. Furthermore their English proficiency is still rather below compared with Singapore airline, Cathay Pacific and Thai Airways as Asian airlines. It is important to create competitive environment with rewards or punishments through taking a test regularly and prepare for efficient language learning system with qualified teachers and teaching methods. Speaking languages with proper level is not accomplished within short period so it should be planned as long term schedule or to save relative costs, hiring international manpower at the first step should be considered.

2) Corporate culture:

Chronic top down and secretive management style due to primogeniture and reluctance to outsiders is one of organizational factors in Korean Air to be improved.

The solution of safety concerns and increasing customer expectation of broad and excellent services is satisfying employees as internal customers.

Research has long shown that accidents and poor service quality are rooted primarily in social aspects not technology such as inferior management, decision making, teamwork, employee motivation or communication, can translate into loss of customers, market share, organization assets and, above of all, life. 26)

High quality service is principal for differentiating among airlines and influential in customer choice. HR need to check whether the company has positive corporate culture encourages innovation, improvement and responsibility of each employee. Supervisor’s open door policy for communication, treating employees with respect and dignity can be a start.

3) Appraisal and compensation

Fair compensation with appraisal will strengthen the organization.

Regular in-house training for the system by HR department will be helpful for understanding and participation.

Compensation should have its own schemes to prevent further grievances. Fairness of salaries and promotions should be kept because pay equity is connected to job satisfaction.

These three HR factors should be complemented with validated measures and implemented into HR scorecard soon for achieving strategies efficiently. HR managers need to cooperate with line managers to select effective measures for evaluating required HR activities and revise HR scorecard as the strategies are changed.

It is important to have a comprehensive human resources measurement policy which enables to collect consistent information relevant with overall business strategy. With a solid HR metrics program, HR management can make business decisions that are based on facts and use the exact figures to support company performance.

*Word count: 2,933.

Notes

1) International Air Transport Association (2008), World Air Transport Statistics. 52nd ed. Canada: IATA. Section 4: Airline ranking 2007. p.95-96.

2) http://www.koreanair.com/local/sg/gd/eng/au/ci/eng_au_ci_ov.jsp, accessed Feb 15, 2010.

3) http://www.globalsecurity.org/military/world/rok/kal.htm, accessed Feb 15, 2010.

4) http://www.flightglobal.com/articles/2009/06/18/328529/interview-korean-air-chief-executive-cho- yang-ho.html, accessed Feb 16, 2010.

5) http://www.airportal.co.kr/life/history/lee/LfLeeGu010.html, accessed Feb 16, 2010.

6)http://www.usatoday.com/money/companies/management/profile/2009-08-23-travel-airlines-korea_N.htm, accessed Feb 16, 2010.

7) http://www.skyunionvirtual.co.cc/about/carriers/koreanair.html, accessed Feb 16, 2010.

8) http://www.thefreelibrary.com/Indonesia%3a+Korean+Air+expands+codeshare+with+Garuda.-

a0218567145, accessed Feb 16, 2010

9) http://recruit.koreanair.co.kr/personal/personal_b.asp, accessed Feb 15, 2010.

10) http://recruit.koreanair.co.kr/personal/personal_d.asp, accessed Feb 15, 2010.

11) http://recruit.koreanair.co.kr/personal/personal_e.asp, accessed Feb 15, 2010.

12) http://recruit.koreanair.co.kr/personal/personal_f.asp, accessed Feb 15, 2010.

13)http://www.etimes.net/service/etimes_2007/ShellView.asp?LinkID=6001&ArticleID=201002041 8164103144, accessed Feb 17, 2010, The replacements will be in 32 B777s and A330s, which have recently been furnished with Kosmo Suites (First Class), Prestige Sleeper (Prestige Class) and New Economy (Economy Class) seats.

14) http://www.chosun.com/site/data/html_dir/2009/02/17/2009021700672.html, accessed Feb 17,

2010.

15) http://www.highbeam.com/doc/1P1-136897605.html, accessed Feb 18, 2010.

16)http://news.mk.co.kr/english/newsRead.php?rss=Y&sc=30800011&year=2009&no=461130,

Korean Air Puts Effort to Attract 1.3 billion Chinese Tourists, accessed Feb 18, 2010.

17) http://www.newswire.co.kr/newsRead.php?no=452353&lmv=A02 , “Korean air is the best foreign airline in China”, accessed Feb 19, 2010.

18) http://www.airliners.net/aviation-forums/general_aviation/read.main/4128479/, Korean Air Builds A Logistics Hub In Central Asia, accessed Feb 19, 2010.

19) http://www.sgtusa.com/detail.php?number=7280&thread=22r07, Interview with COO Lee Jong

hee, accessed Feb 19, 2010.

20) http://www.hankyung.com/news/app/newsview.php?type=2&aid=2009110446921&nid=910&sid

=0001, accessed Feb 19, 2010.

21) http://joongangdaily.joins.com/article/view.asp?aid=2900768 On board, gender equality still up in the air,

accessed Feb 19, 2010

22) Steven Howard, Corporate Image Management: A Marketing Discipline for the 21st Century”

23) Gary Dessler (2008), Human Resource Management: 11th ed. Singapore: Prentice Hall. Chapter 2: Strategic HRM and the HR scorecard. p.62

24) Gary Dessler (2008), Human Resource Management: 11th ed. Singapore: Prentice Hall. Chapter 2: Strategic HRM and the HR scorecard. p.67

25) Brian E. Becker, Mark A. Huselid, Dave Ulrich (2001). The scorecard: Linking people, strategy, and performance. Boston: Harvard Business School Press. p.66.

26) Steven H. Appelbaum, Brenda M. Fewster (2003). Human resource management strategy in the global airline industry – A focus on Organizational development. Equal opportunities International. Vol. 21. No.7. The International Civil Aviation Organisation (ICAO). p.70.

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