British Airways Flying into a Storm Essay Example for Free

British Airways Flying into a Storm Es swearIntroduction 31. A brand new-fangled participation heed 41.1- Major evolutions in the corporate scheme 4a) Sevearned run averagel breaking points in the policy dictation 4b) Actions passed 51.2- A little people-oriented leadership 7a) Before Ayling a severe unspoiled now participative perplexity 7b) After Aylings feeler a humannessagement centred on administrative and m anetary objectives 72. A failure due to the negligence of three key factors glossiness, leadership and body structure 92.1- An unsuitable management to BAs acculturation and identity operator 92.2- dockage Ayling an ambitious however self-centred leader 112.3- A structure which does non squ ar enough with the telephoner 123. What should be Eddingtons master(prenominal) concerns for the future? 143.1- Increase the level of benefit thanks to structure and culture 143.2- Maintain and improve internal cohesion through a better communication 153.3- Go on i mproving rentability through organization and new sets 15Conclusion 16IntroductionLondon, walk 2000. The direct of dockage Ayling as honcho exegashive of the airline British Airways (BA) is over. The crisis reflects the economic difficulties the play along has been experiencing for the last three years.In order to set the outlines of our study, permit us define in a few words BAs field of activity. As airline, BAs basic function is to carry passengers. This is a client service industry, which implies that BA also supplies in-flight services/products (various cabin classes, meal supplies, entertainment facilities) and out-flight-services (luggage retrieval, e-sale of tickets). This field of activity is characterized by a tough concurrence, a real sensitivity to economic cycles, tenuous margins available as well as increasingly beseeching clients.In such a context, loading dock Ayling didnt manage to croak his strategic objectives. As one of Aylings predecessors puts it the airlines strategy remained the right one but Mr Ayling was the wrong man to execute it. This comes down to say that Ayling did non enforce the strategy the right way. To which extent do we defend with this statement?We will freshman examine the major changes that were operated in BAs strategy with Ayling. Then we will try to understand why he didnt manage to implement completely his strategy and thus why he didnt target his objectives. To end with, we will look into what Rod Eddington should do later on bobtail Aylings dismissal to implement the strategy of the company.1. A brand new company management1.1- Major evolutions in the corporate strategya) Several breaking points in the policy statementSince Sir John King came over BA in 1981, strategic speeches followed each other, translating the leader priorities in a given environment. Nevertheless, we can easily nonice a change in communication of the corporate strategy with Aylings arrival.At the beginning of the 1980s, Lord Kings first preoccupation was to make as long as he could BA a customer service oriented company, with high standards of role. He had to take the company out of its public sector approach. All along his reign as the companys leader, and later within Lord Marsh both too, the policy statement kept a focus on the customers without changing the priorities for 15 years.During Bob Aylings 4 years mandate as chief decision maker, yet really shorter than his predecessors, we can distinguish three very different phases in the announced strategic choices. exact muchSwot Analysis of British AirwaysHis first concern when he came to power in 1996 was to make costs cuts. He introduced the Business Efficiency political program in 1996, requiring the company to take heavy structural decisions that were - check to him- vital to en sure enough BA competitiveness for the future. Costs reduction has always been a concern for BAs managers, but to put it on the top of the agenda was a new mixed b ag of strategic vision.After that one-year instead painful period, he decided the company had to combine customer service excellence with cost competitiveness, with a target of doubling its operating margin during the next five years. This mix policy include concentrating on four key issues* Customers, by providing the highest levels of service and innovative products* wad, with an ambitious target becoming the high hat managed company in the UK* Costs efficiency, by guardianship a high level of profitability* New alliances (particularly with American Airlines), by using the potential of a global airline industry.This policy had the disadvantage to basin the attention on several problems in opposition to King and Marshall management that kept focused on one main objective.Soon after, Bob Ayling was confronted to a phenomenon of large strikes, and he decided to put people back on BA top agenda. His predecessors used human resources as a operator to achieve their target of a hig h customer service but Bob Ayling was obliged to take it as a whole stake.Finally, we can comply that Bob Aylings policy statement changed quite often under the pressure of the environment such a thing had never happened for the 15 years forrader his arrival.b) Actions implementedAudacious actions to assert BA as a leaderSoon after he had been nominated chief executive, Bob Ayling chokeed to implement a large panel of audacious actions to assert BA as a world leader company.First of all, he dared to cut the top executive squad from 25 to 14, to improve its efficiency and limit its cost.One of his first concerns was an alliance with American Airlines, to ensure the ii companies to control 60 % of flights between the UK and the US, the worlds most compensable airlines routes.In 1997, he decided to make an identity change because the airline, carrying 60% of foreign passengers, had to show off as a citizen of the world rather than a national company. The challenge of the new visu al identity consisted in weakening the British nature of the company and modernising it. He chose 50 ethnic designs from artists across the world.Bob Ayling also decided the acquisition of 43 new aircrafts, as well as the building of a new head office.In 1998, to face the growing of low costs airlines and the increased competition on short haul routes, Bob Ayling decided to launch Go, its own budget airline.Later in 1999, he innovated again with the concept of the Lounges in the sky, a high-standard new service, and some investment in e-commerce.Whatever are the results, we must concede that Bob Ayling did a multitude on a short period to put BA as a world leader.An anticipative approach of cost competitivenessCost cut is a very unpopular practice. Consequently, managers usually do it only when it gos an emergency. Bob Ayling did not take it like that. He anticipated the future and he kept an unwavering stance to impose the BEP measures while a record profit was announced for the year he sold sensible activities, relocated the accounting discussion sectionHe asked for volunteers to leave the slopped not because he could not afford to pay them, but to replace them with flexible people having more appropriate skills.At last he decided to concentrate BA strategy on high margins activities, and implemented a rationalisation program, paring down unprofitable routes and pungent excess capacity.This anticipative approach triggered the admiration of financial analysts, but the consequences inside the company were not so positive.A changing concern on HRUnlike his predecessors, he did not invest a lot in human resources programs at the beginning of his mandate as far as he was too much knobbed in cost competitiveness. Eventually, people were affected by this low concern on them. The consequences were a decrease in the customer service level, and a strong mobilisation for a strike.After those events, Bob Ayling was strained to re-involve the company in people ma tters. He promoted an intensive drive to rob lag chastee, actions to involve people in the company. He even decided, as a pendant to the construction of the head office, to build a hotel in Heathrow scarcely for the cater.Bob Ayling set up many changes in the corporate strategy, but let us now see how his management style was different from his predecessors.1.2- A less people-oriented leadershipa) Before Ayling a severe but participative managementLord King decided to restart from scratch in 1981, when he became the chief executive of BA, and he transformed the airline with Lord Marshall in fifteen years into one of the best carriers in the world.The two leaders helped their employees to overturn the corner of privatisation in 1987 they achieved to manage the change slowly. They started to instil a customer service culture into the supply with two large training programs, and always involved their people in the improvement of the airline. Those participative management method s made people proud to forge for BA.Thus, Lord Marshall created a new human resources system, a kind of competency-based management, built on the promotion for the best employees. Therefore, they had a real willing to do always better, and their chief executive progressively replaced the State as a strict but kindly father in their collective mind.Lord King and Lord Marshall always did what they said they were regarded as strong leaders, but they knew how to inspire the whole staff with confidence and how to command their respect. Withthat support they could beg off that drastic maybe painful measures were the only style to improve BAs results and reputation.b) After Aylings coming a management centred on administrative and financial objectivesEveryone expected Robert Ayling to follow the footsteps of his predecessors. However, just before his taking over as chief executive, he all the way announced he would throw off for all fourth dimension the attributes and attitudes of p ublic sector. That simple first sentence is the symbol of the big change in BAs management in 1996 Bob Ayling thought that people were sprightly to accept all the constraints of a private company, in terms of adaptability and competitiveness.First we can notice that Bob Ayling didnt take so many precautions in his declarations for example he directly announced in September 1996 that BA would replace 5000 employees by new recruits, supposed(p) to be more efficient and flexible. He thought that internal training was not enough competences were out of the firm. Eventually some people felt apprehensive by this new vision.Then, Bob Ayling decided an unexpected relooking of the aircrafts. That was an important symbol of what he intended to do make BA forget its British identity, to become an international carrier. At the same time, one of the parts of Aylings Business Efficiency Plan concerned the freezing of wages. As he took that kind of decisions without consulting the employees and their unions, cabin staff, which had the dress of being well hardened, felt deceived and went on strike.During his reign, Bob Ayling was the only leader, he was supposed to flip the right solutions, he looked forward and his employees had to follow. He did not take care to them and seemed to believe that nobody could understand his long-term vision anyway.This new leadership did not include the human resources and the culture in the decisions it was an economic management.These major changes in BAs management had unexpected impacts let us explain the reasons of Aylings failure.2. A failure due to the negligence of three key factors culture, leadership and structure2.1- An unsuitable management to BAs culture and identityThere is no denying that culture is often neglected in the field of firms and business in general. However, culture has to be considered as a real success key in so far as people need to feel all right and involved to be efficient. If the happy chance between the firms culture (that is to say employees culture) and the top-managers vision is too deep, it leads to huge damages for either the firm, managers and employees as we are going to discover it in the case of BA.In the mid 1980s, BA was considered as a state-owned company with a dire reputation for customer service. Aylings two predecessors succeeded in turning it into a high-quality and cost-efficient company, voted from 1989 to 1996 worlds best airline in the independent Business Traveller survey (voted airline to be avoided at all costs in 1980). Focusing on merchandising and innovation / technology, both King and Marshall still put emphasis on human resources. They took care of people in the first place, involving and training employees (Putting People First and Managing People First), encouraging brains trusts and putting customers first. People were of course aware of that attention and were confident, loyal and devoted.In 1996, Bob Ayling stepped up as chief executive with ch allenging and radical changes in mind. The sentence mentioned above he pronounced in one of his first speeches meant that the very first thing Ayling did was to attack the firm culture and identity, thus disturbing and chocking people unwillingly.In June 1997, Ayling praised a striking new visual identity supposed to be based on marketplace research but that generated emotionally charged controversy. The change was radical symbols were simply scrapped (new design, new colours, new motto, denial of the psychological national belonging) as if it was realistic to start from scratch with new company identity and culture.As strikes immediately showed it, BAs culture was still one of a public sector company. Instead of trying to negotiate, Ayling harshly condemned strikers without taking in account this public sector company background. In spite of Aylings desire to eradicate Britishness from BA, employees and people in general (customers, the press, Margaret Thatcher) were not ready t o accept it. Strikes were also the result of incomprehension from employees were the new salary scheme (part and parcel of the efforts to reduce area costs) and the 60 million identity change coherent? Was it possible for employees to stay motivated and involved in BA under those conditions? Furthermore, 160 planes stayed with the Union flag instead of the new design in 1999 because BA lacked time to repaint it. The identity change was as a consequence first of all badly accepted and in addition badly implemented.However, Ayling began to understand after the strikes the high necessity of human resources as part of cultural background in a customer-facing business. He launched a campaign to raise staff moral in October 1997 and started to think about focusing on people on the front-line through interviews and speeches praising communication between management and staff. He built a hotel and developed a new concept for BAs headquarter (no permanent desk-space). Again, in 1999, an opin ion survey was sent to all employees, results were alarming, and Ayling introduced training and motivational programmes.We can not say if the improvement of BAs results in 1999-2000 was linked to those efforts from Ayling concerning people but there is no denying that it was a little late anywayPeople had indeed a heavy time with him, describing his management as a macho-management thats destroying peoples feeling for the airline, threatening and intimidating. His vision of change was so ambitious (doing better and better, never enough for him) that he broke the firm culture and identity, introducing fear into staffs feelings and breaking confidence that staff had always shown to management, in cutting jobs and financial bonus with no evident reason (for employees) or restructuring top-management. He moveed and modified too much symbols, values, norms, he disturbed employees in destroying their marks. Ayling justified himself in saying that he had a long-term vision and staff a d ay-to-day one, but he should at least have better explained and communicated around his decisions.It is however striking and surprising to notice that BAs culture and identity was about the same from BAs beginning to the start of Bob Aylings reign. Privatisation, higher competitiveness, globalisation do not seem to have modified anything. This can also explain why the gap between BAs culture and what Ayling wanted was so deep.His new identity implementation may not have been irrelevant but just inadequate.2.2- Bob Ayling an ambitious but self-centred leaderLord Marshall explained in March 2000 that the airlines strategy remained the right one but that Mr Ayling was the wrong man to execute it. We are going to study why below.Bob Ayling first stealt with BA in the early 1980s. He began working for the firm in 1985 as legal director, became group managing director in 1993 and chief executive in January 1996. He was well-waited and had a rather good reputation. Following King and Mar shall was quite challenging but he seemed to have strengths on his own such as strategic understanding, sharp mind, diplomatic skills or legal training.However, his first formalised act was to slim down the companys top executive team of 25 to 14. Again, in September 1999 this executive team was reduced from 14 to 6. Those measures were aimed at getting to a degree of unanimity quite fast. It can also be noticed that at the end of Aylings reign, there is no realistic successor to him. Those two facts mean above all in our mind that Ayling can be considered as a narcissistic and authoritarian leader who wants to keep as much power and decisions liberty as possible.It seems that he does and decides what he wants to without really thinking of all it involves and implies. As a consequence, he needs to change his mind often, and he forgets to focus on important things, he is distracted from the real job of keeping passengers on seats (his attention is for example consumed by trips betw een the UK, atomic number 63 and America to settle an alliance with American Airlines) which is not a good thing at all for his credibility.His credibility seems also to be affected by the gap between his speeches and his actions. He described for example his second objective for BA as improving customer service in a more demanding environment. Few months after this announcement, the Marketplace Performance Unit (responsible for generating information on customer preferences and perceptions) was scrapped. In 1997, a task group was created and responsible for missions including that of getting the bedrock of customer service right but basics are supposed to be mastered if customer service belongs to the four main objectives specified one year ago. The same illogical thing can be noticed concerning putting people first or not. Ayling pretends to put people first and a little bit later states he is going to put people first now.His credibility can also be damaged when he promises staf f, concerning the value of their BAs share, we are never going back to that price again and when three months later the share loses 14p. He should not make promises on something he does not master.A leader needs of course to make decisions but needs also to listen to people and especially staff. Ayling thinks he takes employees in account in building a new hotel, create an open concept in the new headquarter but is it really what employees want and need? Several opinion surveys are mentioned but analysis or corrective measures do not seem to be done and taken, which means that those surveys did not grab their targets and resulted in losing time, gold, frustrating staff and enabling managers to have good conscience.Ayling also wants people to do exactly what he wants them to People have got to be theyve got to do. Often worn thin, revealing an intensely ambitious and stubborn individual who is only happy when he gets his way. He is excessively exigent maybe with himself but also wi th others, he seems to be never satisfied and demands a constant improvement. Even when a good news is announced (BA second most admired company in Europe according to the Financial Time for example), Aylings ambition looms (he asks on the same days 5000 volunteers to leave the company), which reveals a huge lack of diplomatic skills.As a conclusion, we could say that Bob Ayling did not take enough people in account and that his vision was blurred by his ambition.2.3- A structure which does not square enough with the companyFirstly, actions on BAs structure did not correspond to Aylings strategy.Indeed, the second objective of Ayling for building on BAs existing success was to improve customer service. However, his actions on the structure did not match with this objective. For example, Ayling sold BAs in-flight catering operations, BAs ground fleet services, which were both significant aspects of BA customer service. By selling them, Ayling loosed any possibility of controlling the quality of this customer services. It was only after the strike of June 1997 that Ayling decided to set up a task force to ensure the airline gets the basics of customer service right. The words used clearly reflect a discrepancy with the initial objective. Thus, it appears that the structure did not emphasis enough the necessary development of customer service.Secondly, BAs structure did not favour employees effectiveness and involvement. As we already pointed it, BAs staff morale was at a time low. Employees needed to be motivated, to identify themselves to the company. The typically concentrate structure of BA (the tasks of BAs board were not divided into many units) did not foster employees motivation and employees feeling of identification to the firm. Consequently, the structure did not seem accommodate to BAs culture.In the same way, the centralized structure of BA did not square with environment and activitys field environment is characterized with an extreme sensitivity of airlines to economic cycles, which requires the necessity of reduction any risks the company could run, as well as a certain reactivity of the companies of this field. More and more demanding clients characterize the field of activity, what requires a non-negligible adaptability of the company to the market. In that context, BAs centralized structure did not facilitate the reduction of risks (compared to a more decentralized structure) and did not enable a great adaptability to the market. For these reasons, the structure did not match with the environment.Having analysed the reasons of Aylings management failure, we will now consider how Eddington should manage BA internal factors to implement the strategy.3. What should be Eddingtons main concerns for the future?It seems that Bob Ayling often tried to reach many objectives, which were not completely compatible. For example, he could not at the same time improve the level of service and constantly reduce costs.Now that he is go ne, his successor has to focus on his strategy and on a few objectives, so that he can reach all of them before defining new ones. That means he probably will have to define some priorities between all his targets. He will also have to make sure they really are well matched so that they do not cancel each other.Rod Eddington claims that he wants to concentrate on people in the front-line, and to work hard with each level of responsibility. He seems to be conscious that an airline is a very particular type of company, where quality of customer service is decisive. allow us see how he can work and which tools he can use to meet his objectives.3.1- Increase the level of service thanks to structure and cultureImproving quality of service means two things employing an obliging staff and making new fitting-outs in aircrafts.To achieve a high level of service, BA can use two main tools First of all, he can act on structure and organisation. BA could create for instance a merchandising depa rtment, which could play two roles studying clients satisfaction and dealing with complains and searching far in amount the likings of the customers to offer them what they expect. Thus, they will feel they really are BAs priority. Then, company culture could also help reaching objectives. If managers constantly praised the idea of the client king, everyone and especially front-line employees will take as an evidence that clients must be treated as stars. BA could also set up training programs so that everyone has the skills to deal with customers for instance languages trainings for front-line employees who have to be able to answer any question asked by a client, wherever he may come from.3.2- Maintain and improve internal cohesion through a better communicationAs Human Resources represent a precious asset for a company providing services, and especially for airlines for which the prestation is barely differentiating, BAs managers have decided to focus on their staff. Therefore, t hey will have to enhance internal cohesion, thanks to structure.Indeed, an internal communication department could be created in order to update and communicate to everyone decisions taken by the CEO and the executive committee. Thus, employees would maybe understand more easily where the company is going and would certainly feel more concerned with the objectives. We can not reach objectives that we are not aware of. Then BAs managers could use their speeches as a means to reach their objectives. If they let know while officially speaking (annual report, to journalists or directly to staff during trainings periods for example) that staffs well-being is on top of agenda, and if they prove to be themselves coherent in doing exactly what they promise, then they will probably enter a new era of social relationships.3.3- Go on improving rentability through organization and new valuesSince BA has to preserve its margins, it will have to go on speech money. But as one of Bob Aylings form er co-worker explains, all the easy savings are already achieved at the beginning of the year 2000 it means that there are not many possibilities to cut purely costs any more. Thus, the challenge consists in finding new ways of saving money that would not injure service quality. Here again, structure can be used a new service could be created, that would immediately adapt tickets prices to demand if many seats have been sold for a flight, then prices should maybe increase. However, if a little part of available seats has been sold, then the prices should decrease until all seats are sold. Such an initiative would avoid half-empty flights, and would eventually lead to savings. Then a work could be done on internal culture an economy-awareness could be implemented, encouraging everyone in the company to make savings. For instance, managers could show the example in booking middle-class hotels instead of four-stars ones when they have to travel. At last, BA could go on focusing on rent able activities, providing higher margins, as for instance North Routes and First Class flights.ConclusionBritish Airways needed a charismatic leader Bob Ayling was just an economic manager. He overestimated the ability of his people to change the way they considered their company and their implication in its evolution.Although he had got indisputable skills to deal with external constraints and to anticipate the environment evolutions, he forgot to take in account the importance of internal factors, such as the firm history and what it involved.Rod Eddingtons first reaction as he came over was to express his respect and his will to make BAs employees happy. It is very likely that the new chief executive had drawn the lessons of his predecessors experience, and that he wanted to start from new bases.Maybe he is the right man for the job