Organizational Culture And Change Management

The world has become a global village and so do the businesses. Competition among industries is becoming more and more global and businesses are facing ever climbing pressure to compete at this level. The market needs are changing rapidly and continuously and to cope with this, organizations have to keep on changing themselves to meet the new demands. The change can be a change in product or service, marketing strategies, change in management or IT system etc. but the most difficult thing to change is the values and beliefs of the people because its natural that people resist change. Cultural change is a difficult thing to do as there are people involved in it.

British Airways had gone through a cultural change which started in early 80s when the company was in bad condition and was about to go bank corrupt. The newly appointed CEO Colin Marshall lead the change and took the company out of the crises and made it one the most respectable airlines of the world in less than 10 years time. This paper will talk about the problems with BA’s leadership and organizational culture which lead the company to those crises and its affects on performance and this paper will also talk about the successful implementation of the change. The paper will demonstrate the analysis of the change process and flaws in the change which could have lead to better results if managed properly.

Organizational Culture:

Culture is the beliefs and values of people. The collective programming of the mind which differentiates the one group of people from another, culture in this sense includes system of values. Culture comprises of language, religion, customs, manners and education (Bode 2008). Language is the most important way of understanding cultures as this is the way information flows. Many scholars have been trying to define culture and they have defined it but it is always said that it is difficult. Culture is a very complex a phenomenon and cannot be captured in a few dimensions (Bode 2008).

Organizations do have a culture and in simple words it was defined by Deal and Kennedy (1996) that the culture is the way things get done around here. Organizational cultural is influenced mainly by the leaders of the organization and also by the personal values and beliefs of the people. It is basically the system of mutually shared beliefs and values by the people of the organization. Organizational culture is a key component in achieving the organizational goals and strategies, improving the organizations’ competitiveness and effectiveness and management of change (Adeyoyin, 2006).

BA’s History:

British Airways came into existence in result of a merger of two British carriers, BOAC (British Overseas Airways Corporation) and BEA (British European Airways) in 1970s (Marriott 1998). British Airways is one of the most respectable and preferred airlines in the world today. British Airways won the Airline of the year award in 2007 on 25th OAG awards (BBC news). This success of the airline is the outcome of a successful cultural change started in early 80s. Before 1980s BA was doing good as there was little competition in the market and BA controlled 60% of the UK domestic markets and faced competition on only 9% of the routes in and out of the UK (Redman & Wilkinson 2009). Due to little or no competition BA didn’t focused on customer satisfaction and other issues and carried on the traditional way of doing things which lead them to disastrous situations when they felt the need for change.

In 80s the rivalry among the airlines was limited in concerned to BA because BA was controlling 60% of the routes (Business & Economics 1982). The threats of the substitutes was also limited for BA because BA has covered most of the routes and had large number of destinations and left the customers some times with no other choice. BA didn’t have the focus on customer satisfaction and profit maximization and this caused major customer dissatisfaction. Lack of punctuality and uncomfortable flights were the reasons for this dissatisfaction (Warhurst 1995). BA recorded financial losses of £140m and this leaves a threat for the new entrant in the market. So the threat for the new entrant was there.

Drivers for change:

Humans change with the passage of time as per the requirement and situation at hand. Similarly organisations need to change as well to adapt to the changing internal and external environment. A need of change can arise from two kinds of factors i.e. Internal and External factors. External factors include the competition, technological advancements, innovation, and deregulation of industry, labour costs, and access to resources, international economic changes, and government policies. Internal change factors tend to follow on from the external ones, and include adapting to shifts in corporate missions, changes in technological equipment and processes, shifts in employee attitudes and behaviour and corporate culture. In BA’s case the initiating factors were both internal and external. The external factors were the competition, the governments’ threat of privatization, and access to cheaper resources and increasing prices of oil. The internal factors involved in pushing BA towards going for a change were the internal rigid culture, Change of equipments and staff related issues.

How the culture was formed?

BA’s cultural change was a success and still it is being used as a reference or a guide for the firms who go for cultural change (Mills et al 2008). There were four major companies who went through cultural change and some of the reasons among them were common, e.g. threat of privatization. Those companies were Jaguar, British Airport Authority (BAA), British Nuclear Fuels Limited (BNFL), and British Airways (BA). The founders of a company or the forefathers have a significant influence on the culture formation of a business. The way they do things leave a long lasting impact on the followers thus become the part of the culture (Poole et al 2004). Jaguar and BAA for example have always had charismatic leaders. Sir William Lyons and Sir Norman Payne were both charismatic leaders and autocratic in style (Salama 1995). This leaves the impression on the follower managers and showed its effects in their decision making styles.

BNFL and BA till 1984 didn’t have any charismatic leader like Jaguar and BAA (Salama 1995). There was variation in departments which shows the values of each of the departmental head. Christopher Harding was appointed as the chairman in 1984 and before him there wasn’t a single dominant character at the top management level. Because BA had its origin from the ministry of defence, there was a strong civil service influence in the company. BA had a strong and close contact with Royal Air Force and both pilots and managers were recruited from RAF frequently. These militants left a very operational flavour to the organization’s culture. In a survey a manager said that we couldn’t get away from the fact that we are on a mission and that mission is everything to us and the customer are just an unfortunate add on. The management and leadership style was not participative as the CEO and the former chairman personally were very distant from the staff. The technical knowledge was considered to be very vital and the managers were recruited and promoted on the basis of their technical abilities instead of managerial abilities.

All these factors made the culture of BA very rigid and a critical cultural change became the only solution for the company to survive.

The Change Scope:

Background: Other than the increasing competition and fuel costs, old fleets, and high staff costs in 80s, BA’s management had to tackle these issues in order to avoid going bank corrupt,

Improving the company’s financial performance fundamentally, pre-tax losses were showing a figure of £240m in 81 and 82 (Annual report 1st April 1983). CEO of BA said in 1982 that their money is draining at the rate of £200 every minute (Mills et al 2006).

Convincing the workforce of the supreme importance of customer services for the success of the company.

Improving the perceptions about BA in the market.

Maintaining momentum and regaining the focus which will allow them to meet new challenges.

The main reasons for this crisis on BA were its culture and history. BEA and BOAC came together to form BA in 1981 (Staniland 2003). They remained sovereign till 1976 when the group division was changed to a structure based on functional divisions. Still a distinctive split within BA persisted until the mid 1980s. This improper assimilation disallowed BA to achieve the desired benefits of the merger, could not attain a common focus, created management segregation squabbles and resulted in a lack of a unifying corporate culture (Doganis 2002).

The funny side of the merger was that most of the BEA and BOAC employees were war veterans who used to fly military aircrafts and they had a great influence on shaping the culture of BA. BA’s culture was influenced by military mentality with a purely operational focus. The employees believe that their job is only to fly the plan safely and land it on time. Customer satisfaction and customer care, profit maximization and productivity were not considered as top priorities (Bowhill 2008).

BA had financial support from the government and was doing a profitable business in the 70s (Parker 2009). These were the reasons which made it easier for BA to neglect its increasing inefficiencies over time. It was getting even more difficult to persuade the workforce and the management towards the need of a fundamental change. The competition was rising in the market and customer dissatisfaction plus the employee’s absenteeism were on the rise and the need for change was critical.

The 1981 survival plan: The merger in 1981 leaves the company overstaffed and the staff expenses were unaffordable. The survival plan involves downsizing and the staff was reduced from 52000 to 43000 through voluntary measures. A 20% decrease in workforce in 9 months was a major downsizing (Thompson & Martin 2009). Freezing pay was increased for a year which caused more volunteers leaving the job than was required. 16 routed were closed, 8 online stations and 2 engineering bases were shut down (Carleton & Lineberry 2004). The survival plan was all about minimizing the costs and expenses as the company was heading towards bankruptcy. The activities involved in minimizing the costs also includes the halting of cargo service and selling the fleets and massive cuts in number of offices, administrative services and staff clubs etc (Jones and Lockwood 2002). Things were not going right and the survival plan was amended and staff was reduced by another 7000 and the total number than was approximately 35000. The voluntary laying off schemes cost the company around £150 million and the company ended up with more volunteers than necessary because of no job security and sinking conditions of the company (Carleton & Lineberry 2004).

Changing image of the Airline: British airways had a bad image in the customers mind dew to unsatisfactory services and relatively higher prices. A survey by the International Airline Passengers’ Association put BA at the top of a list of the airlines to be avoided. (Redman & Wilkinson). To improve the image of the organization BA launched its “Manhattan Landing” and “The world’s favourite Airline” campaigns and raised the advertising budget which was £19m to £31m for the year 1983-1984 in order to signal a clear commitment to changing the corporate image (Leban et al 2005).

Building its turnaround team: 30% of the old employees had left the organization voluntarily which involved senior mangers as well (Barsoux & Manzoni 1997). Culture is formed by leaders and now these leaders were not there which helped the cultural change process. Newly appointed CEO Sir Collin Marshall was a very charismatic leader. He brought in some new blood to give the company a fresh perspective and to regain focus. In 1983, Colin Marshall made customer service a personal crusade (Reichheld 1996). Customer services were something absent in the BA’s culture which was very rigid and he wanted to achieve a shift from a strongly British, engineering, and operationally driven culture to one that emphasized productivity and profits while increasing the value placed on customer service.

Support from top management: To make a change successful the leaders need to play the role model. Leader needs to be the one, who actually put the change terms in practice, supports his team and give them freedom of expression (Cameron 2004). Collin Marshall in this regard was very concerned and he used to spend lot of his time in terminals with staff communicating and reinforcing the desired culture for the organization and its mutual and individual advantages. Employees were given the freedom to share their ideas and thoughts and give their suggestions about helping the change to carry forward. Employees feel listened to and feels themselves as part of the company’s success.

Education and Training: Change needs to be reinforced and communicated regularly to make it feel happening. A continuous training needs to be done to help employees adapting to the new culture. BA in this regard conducted a training program named PPF (Putting People First). This training program was aimed at the people to examine their interactions with other people. The main focus of the training was to build positive relationships and customer services. Nearly 40000 of BA’s employees attended the training program (Leban et al 2005). Another training program conducted by BA was MPF (Managing People First). This training program was aimed at other issues like culture and its importance, the leadership, trust, vision and feedback. These behaviour moulding programs resulted in good and BA was able to move on towards cultural change. After one year of training with TMI (training consultants), BA moved into profit (Senior & Fleming 2006).

Make the Change visible: Change needs to visible to the outside world. British Airways unveiled their new planes at Heathrow Airport and their new uniforms to give the world an impression that they have gone through a change and now they are a better organization (Leban et al 2005). With in 10 years the cultural change program succeeded in creating a strong commitment to productivity, profits and customer services. The morale was higher and the company’s image in the market was better and this change lift the company out of bankruptcy to become one the worlds’ most respected airline. British Airways have launched a new campaign in 2009 named “ONE DESTINATION”. The CEO said at the time of launch that we started our journey towards responsible air travel in 1984 and we have discovered that our customers love to fly with us but are concerned about their impact on the environment (BBC news).

Getting over the resistance with the help of suitable change models:

Kurt Lewin’s change model comprises of three steps, i.e. Unfreeze-Change-Refreeze. The first stage in Lewin’s change model is unfreezing that is when manager develops a felt or need for the change which can be because of declining profits or shrinking market shares etc. In BA’s case both profits and market shares were declining. This is where the CEO Collin Marshall felt the need for the change. The unfreezing stage is very crucial as this is when managers are making the workforce ready for the change. This is the advertising phase where the vision and content of the change is communicated which inspires the workforce and gains their commitment. Brirish Airways in this regard conducted the behaviour moulding conferences named PPF and MPF to change the behaviours and make the people ready for the change.

The next stage in Lewin’s model is the change it self. This is the stage where the terms of the change are practically implied and practiced. The survival plan discussed above aimed at cost reduction and than the activities like increasing the advertising budget, hiring new blood and educating and training the people was the change process which was very well lead by the CEO. At this stage continuous feedback and reinforcement is required to make the change feel happening. Collin Marshall himself used to talk with the employees in small groups and spent his most of time reinforcing his vision and desired culture.

Refreezing is the stage when people start to embrace the change and the organization has moved to the new culture. This is the stage where the change should be visible and BA made the change visible by inaugurating their new fleets and uniforms.

John P. Kotter in his 8 step change model says that a strong enough team is required to carry the change process forward. BA did create a team of new blood managers who gave the company a fresh ad current perspective of business. Kotters’ model emphasize on communicating the vision of the change and BA was up to the task and had a great support from the senior management as the employees had the freedom of sharing their ideas and thoughts.

Leadership Styles:

As mentioned above that leadership of BA was heavily influenced by the retired army officers and co ordination and co operation was missing and leaders were like dictators. When the new CEO took over he changed the way of leading as in the process of downsizing, some senior managers were also removed from their positions because of the out dated leadership techniques. The success of the change was because of the new leadership who acted as mentors, and by adopting the democratic, consultive and persuasive, and transformational styles of leadership.

Analysis of the Change at BA:

The Thatcher Government’s announcement of privatizing British Airways was the initial trigger which started the whole process of change (Staniland 2003). The need for the cultural change in BA arises in the transitional phase of the economic environment. The airline industry in UK was facing a severe competition which was an outcome of the privatization. Airline industry in UK was put to work under highly deregulated market which historically used to work in highly regulated market. The privatization decision changed the historic values and beliefs of BA dramatically as the organization’s mission in the past was to make sure that planes fly safely and land safely. Profit maximization and competition were not much of an issue.

Changing the culture is an ongoing process (Schabracq 2007) and even it is fully achieved, it still goes on in the form of monitoring and continuous inspection. British Airways since 1984 is in the transition phase and is replacing some of its main historical values and beliefs to be consistent with the new mission (Salama 1995). Collin Marshall was appointed as the CEO in order to accomplish this required cultural change. Training and behaviour changing programmes and evaluation systems have been introduced to motivate and stimulate changes. But in some areas other managerial career subsystems such as selection and promotion, had experienced minor modifications. Despite BA had put great deal of effort into encouraging certain behaviours, staff did not collate its employment policies and practices around the new culture (Coles et al 2000). BA failed to institutionalize the change through their stabilisation action plans. Management techniques were certainly impressive, but not everyone benefited from them. In areas such as marketing, the criteria for choosing Managers had changed from technical to managerial skills. However, some managers still preferred the old fashioned recruitment procedure based on promoting and selecting people who were good technical individuals, therefore BA had difficulties maintaining the change. At the corporate level, the managers were now rewarded based on performance. The new appraisal system varies across functions as the criteria for good performance was different among different departments. This issue arises from the HR department’s ignorance towards the different subculture. The HR department had been trying to impose its own values and beliefs on the rest of the organization and this was identified by Marshall and a new structure for HR was developed later on in order to give the department units more autonomy. This conflicting situation reflects a lack of consensus regarding the desired organizational culture as viewed by top management.

Recent Issues:

BA had won awards for Best Airline and Best Business Class, a total of 7 awards (Investors Report BA.co.uk). However, BA was also on top of the list of the companies that had complaints, made by the AUC (Air Transport Users Council), totalling 117. Air France came second with 110 and Ryanair third with 77, EasyJet had 42 total complaints (BBCnews.co.uk 20 Aug 2002). If BA adopt a strategy for focus differentiation, tighter controls on the safe handling of baggage, more effective booking services would require to be implemented in order to provide this ‘quality service’, thus gaining customer satisfaction and justification of price differentiation. This would inevitably enhance its image and reputation (Johnson et al 2008).

CONCLUSION/RECOMMENDATION:

British Airways had gone through many changes in order to promote this cultural change. British Airways lacked a holistic approach while implementing the change because despite of the HR department’s attempts towards forming policies and procedures around the new culture, there was evidently a gap between HR and middle management. Some managers were still using the traditional approaches of reward system and recruiting people. British Airways needed to adopt a partnership model within HR. This model is about establishing a common interest in order to secure the competitiveness, viability and prosperity of an organisation. Economic tensions appreciated within this model, are fitting to British Airways unstable environment. The Partnership model talks about getting a commitment from employees to improve quality and efficiency and the acceptance by the employers as stakeholders with interest to be considered when decisions are made. In the beginning it will require a top to bottom approach in order to promote and advertise the change. However promoting good strategies which are suitable for all the departments and areas of the organization, as opposed to some areas, is the key to its success. British Airways need to adopt this model to promote teambuilding and working together kind of environment. This model will help in identifying the organizational goal by mutually sharing the values and beliefs of the people and they will start moving in same direction and the outcome of the change can be seen in the whole organization.

British Airways is once again in crisis at the current time and is showing record £401 million pre tax losses (BBC news). Flights are late and customers are facing some sort of the same issues as there were in 1980s. British Airways has a good history and current image in the consumer market. They might need another change in the organization.

The change started in 1984 and still things need to be done. Therefore it can be said that changing culture is a complex and long term undertaking (Thomas 2005). It involves coordinated efforts by the top management to change its own values and behaviour and communicates it to the followers and others in the organization. Such changes must be reinforced by shifts in management education, selection and promotion. Culture cannot be managed on its own or as separate from the rest of the organization.