Significance of HRM in the travel and tourism sector

The purpose of this report is to evaluate the significance of IHRM for the companies within the travel and tourism sector. The report will address this issue with reference to the case of the British Airways Lpc (BA) – one of the largest international airlines.

The report will begin by outlining the brief overview of BA, its market and current global position. Besides, the significance of culture change within the company will be identified.

Furthermore, the “hard” and “soft” models of HRM will be critically analysed in the process. The report also will discuss the staffing issues such as recruitment, selection, and training and development for the planned global expansion. The ways in which these issues may need to change will be illustrated through the strategic evaluation. In addition, all figures will be justified and referenced to the appendix. Moreover, the report will outline the appropriate conclusions and recommendations.

Company overview, its markets and current global position

British Airways Plc (BA) was created in the 1974s after merger between BEA (British European Airways) and BOAC (British Overseas Corporation) (Air flights, 2010). BA is the United Kingdom’s major international airline with two main hubs located in Gatwick and Heathrow airports, and the fifth world’s top airline. BA is a recognized brand within airline industry and the success could attribute to its constant global flight expansion and mergers with other global airlines. The merger between Iberia and BA (International Airlines Group) in 2010 is expected to create the third largest European carrier (see Appendix 1). In addition, the merger with AA (American Airlines) in 2008 will expand the company globally on transatlantic flights. These mergers will make stronger the global position of the new company with strong market capitalisation and will be able to complete with rivals such as Lufthansa and KLM-Air France (See Appendix 2) (Datamonitor, 2009; Euromonitor, 2010).

BA is a global leader with a network of 550 destinations internationally via code-sharing relationships serves nearly 95 million passengers a year, using 441 airports in 86 countries and approximately 1,000 planes and a world air share of 2.9% (See Appendix 3) (Brave New Talent, 2008-2010; Wikipedia, 2010). BA operates mostly in the EU and US and employs 40,627 people (Datamonitor, 2009). In addition, BA is a part of Oneworld alliance, which serves some 819 destinations worldwide and enables to compete more successfully around the world with other global alliances (Wikipedia, 2010).

Since privatisation in 1987, BA has had a sharp success in income and achieved financial independence, while other European airlines were dependent on state support and their US counterparts resorted to bankruptcy protection (Ledwidge, 2007 and BBC, no date). Despite the BA’s HR hard times (appendix) and recent global economic recession in 2008/2009 with the global GDP decline from 5.1% in 2007 to 3.1% in 2008 , BA had a net profit of £8 billion in 2009/2010 that is an increase of 2.7% over FY2008/2009, which improves its stable geographic increase (Datamonitor, 2010).

Besides, BA is the world’s first airline to establish a carbon-offset scheme in 2005 to decrease greenhouse gas emissions and to introduce online boarding passes in 2004 (British Airways, no date and AccessMyLibrary, 2007).

Despite BA calls itself as “The World’s Favourite Airline” it strives to become the ‘world’s most responsible airline’ (GreenAir, 2007-2010 and Street, 1994).

Cultural change and HRM models

Culture is very powerful; it influences people and it is vital for managers to understand the employees: what they believe, its customs and traditions, life style and values, beliefs and morals, to understand how people react, and their expectations in the company after the employment. Legge (2005) identifies culture as a “set of shared meanings, or taken-for-granted assumptions.”

According to Alzira and Easerby-Smith (1993), BA was “arrogant” before its privatization in 1987. BA believed the customers did not know what they wanted. The managers did not involve the staff in decisions, as they wanted to have distance from staff. The priority was safety of aircrafts and technical skills. Even the competition and profitability were not the main idea. The BA organisational culture was bureaucratic, strict, and formal. Thus, the careers developed slowly. Besides, the cost-leadership strategy is applied that leads BA to cut costs through a “hard” HRM approach and use staff as any other business resource. The staff is being used as cheaply as possible.

In contrast, Ledwin (2007) argues that since 1976 till nowadays it was a big cultural change for BA, where the product-centric approach has started to shape into customer-centric approach and the “hard” model started to adopt the elements of “soft” “developmental humanism” or Harvard model, where the core idea are human assets. The differentation strategy would reach the competitve advantage and try to “avoid less prone to disruptions and PR blunders”. Moreover, it would present a very effective framework for completely integrating HR with the business strategy” (Ledwin, 2007).

To improve the organisational performance and to achieve the employee commitment BA promoted the motivational culture change programmes in the 1980s.However, its argued if these programmes were successful or not as according to Hopfl (1992, cited in Legge, 2005), these programmes “engaged the mind but left hearts untouched.”

Despite the HR difficulties during the last five years (See Appendix 4), the company has achieved a respect from its employees in a way that helps the company fence the strike actions. In June 2009, BA told its 42,377 staff to work without pay for a month or take unpaid leave to reduce costs. Almost 6,000 non-cabin crew staff helped during the days of industrial action helped the company to run anoperation (Euromonitor, 2010 and Anglotopia, 2010).

Staffing approaches

BA can apply one of the three staffing approaches (Dowling et al., 2008):

Ethnocentric:- The main idea is to manage staff from the home country (PCNs). The company can apply this approach to all its foreign operations, where the staff holds central jobs, and subsidiaries and headquarters follow the home country resource management practice.

Polycentric/Regiocentric:- The idea is to develop HR management practices locally.

Geocentric/Global:- The purpose is to manage the employees on a worldwide basis, where the company employs staff from diverse countries.

4.1. Ethnocentric and polycentric approaches

BA uses mainly the ethnocentric approach: it controls all its operations from London (the locations of the head office) as it understands local culture, the economy language and avoids relocation costs. Regarding to BA job applications, the key management positions are filled by parent company personnel, where the priorities are given to UK nationals. Besides, it hires host country nationals in foreign countries instead of transferring its domestic staff to work.

Depend on the staff role, a polycentric or geocentric approach can be recommended. The polycentric approach would be ideal for BA to employ front line staff and cabin crew. The company should consider the cultural as the core competence and hire more people who speak other languages than English and think differently. Along with the cultural change BA needs to ensure the employees understand their role within the marketing progress and overall marketing orientation within the organization.

The best staffing approach to hire key management people and pilots is geocentric approach, where the company strives to reach the global expansion by combining the best from headquarters and the subsidiaries. Also, the nationality is ignored in favor of ability. BA could ”promote promote diversity, inclusion, and equality of opportunity in employment regardless of sex, marital or civil partnership status, gender reassignment, race, colour, nationality, ethnic or national origins, sexual orientation, disability, religion or belief, political affiliation and age” (British Airways, no date).

Staffing issues

The organisation’s stage of growth characterises with the integration of business strategy with HRM policies such as training development, appraisal and recruitment and selection. Recruitment is mailny linked to proactive attitude of employees, where training and development has to do with formal or informal education, enabling the staff to know inside out of the organisational mission and its products, thus leading to the quality service.

5.1Recruitment and selection

Effectiveness in recruitment and selection is vital as it avoids poor work performance, unacceptable conduct, internal disagreement, low morale and job satisfaction and dysfunctional labour turnover. In addition, luck of management quality and teamwork, and employee motivation and communication can lead to loss of customers, loss of organisation, and loss of life. Recruitment seeks to “attract best technical professional talent and then manage rapid internal labour market movements” (Legge, 2005:142). BA also tends to attract “the most talented people,” then assess and appoint a suitable candidate (Appelbaum and Brenda, 2002; Pilbeam and Corbridge, 2006). For example, the pilots employment issues had been based just on flying and technical skills before 1987. Nowadays, BA considers the pilots can work well in a crew situation. Interpersonal skills are appearing as crucial achievement factors for pilot performance and safety. In addition, it cares about quality frontline people as well. Good (1999, cited by Appelbaum and Brenda, 2002), stresses the point that “the single most reliable predictor of overall excellence is the ability to attract and hold on to talented employees.” The success is dependent upon the ongoing hard work, attitudes, and dedication of its staff.

Thus, to expand globally and to achieve the company’s long-term success BA should look not only at education related skills but also at staff attitude within the company, as skills can be trained but attitudes cannot be changed (Milmo, 2010 and Horn and Barkin, 1998).

5.2Appraisal, training, development

The globalisation of markets leads to emergence of multinational companies, operating on a worldwide basis. Good training enables the employees to perform their current and future roles effectively as, both organisations and their employees benefit (Beardwell and Claydon, 2006). To achieve a “high value added” services the staff should be well educated, trained, and committed. To increase competence and go high-class with high quality the company should consider the staff as the most valued resource and do investment in the core workforce. The accent is to include employee loyalty and reliance, internal labour market structures with promotion ladders and skill training. The “individualistic” approach should be applied to reach the quality and competitive advantage (Legge, 2005).

If the quality of service depends on the quality of the employee, the company should look on the society and organisation’s commitment to developing skills appropriate to a national economic policy and organisational corporate objectives (Legge, 2005). BA committed to “customer care” programmes and has had many motivational staff programmes for both existing and newly recruited staff since 1987, that at very least heightened employee awareness of quality issues. The programmes such as “Putting the Customer First…”,”Putting People First…”, “Customer First’ teams, “Managing People First”, “A Day in the Life”, “To be the Best” and “Winning for Customers” . In addition, to promote the values of customer services BA launched the re-educative online-learning programs for cabin crew how to teach in-flight sales system. Besides, BA tried to develop a self-direct learning that motivates and develops its staff not only professionally but personally (Ledwidge, 2007).

Conclusion

The report began with a brief nature of British Airways, overview of its markets and current global position. It analysed the cultural change within the company and evaluated the HRM models. BA has had a big cultural change since 1987, where the company changed the product-centric approach to a customer-centric approach. The “hard” model need to adopt elements from the “soft” “developmental humanism” model, where the company would realize the importance of integrating HR policies with business objectives involving treating employees as valued assets, as the success depends on securing commitment from people, not controlling them. It should keep adopting the “soft” model to avoid losses of customers and the bankruptcy and to keep its brand. Over the past decade or so, British Airways has evolved from a loss making, state-owned national carrier into a customer focused, publicly listed and consistently profitable airline. However, cultural change and nowadays change require modification in top management values to make the change successful. To improve the organisational performance and keep the company expand globally BA need to keep these recent changes. Furthermore, the report addresses the issue of staffing approaches such as ethnocentric, polycentric, and geocentric approaches. Despite BA uses the ethnocentric approach, the recommendation are to develop polycentric approach for front line and cabin crew and apply a geocentric approach for pilots and key management staff. The final parts of the report examined the staffing issues such as recruitment and selection, appraisal, training and development. BA should look not only at education related skills but also at staff attitude within the company, as skills can be trained but attitudes cannot be changed. In addition, BA should motivate and develop its staff not only professionally but personally by creating the training centres where staff could learn the sense of humour, ability to work with others and friendliness. Moreover, the new industrial relations backgrounds should be developed as “no-strike” clauses, acceptance of flexible working, its support for direct employee involvement, staff status and employee development

Recommendations

According to the mentioned above issues, there is more research should be done regarding to staffing approaches and staffing issues to help expand company globally. The need of change should be analyzed and evaluated deeper. HRM “Michigan” and “Harvard” models issues should be more critically discussed.

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