Globalization and Human Resource Management in the Airline Industry

Jack Eaton

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351933100
• Edition: 2
• Topic: Technology & Engineering
• Subtopic: Aviation
• Index: Technology & Engineering

Globalization is a pervasive feature of recent industrial and commercial developments, not least in the airline business with concomitant effects on human resource management. This book focuses on the organization and human resource changes that have taken place in the international airline industry in recent years. It provides an extensive analysis of airline organization and external relations, airline organization and internal relations, changes in industrial relations and human resource management and also, the integration of human resource management and other management functions. The authoritative second edition of an already established work that covers both theory and practice, this book will be of great interest to managers in all areas of the airline industry, as well as to students of air transport and personnel/human resource management.

Part 1
Airline Organization and External Relations

1
Relations with customers

In 1987, shortly after privatization British Airways (BA) management proclaimed that it was now a ‘customer first’ company. Even amidst the welter of hype and public relations that has characterized the last years of the twentieth century, this was remarkable. Hasn’t the commercial maxim always been that the customer is always right? Why was there any need to state it?

The rationale was the management doctrine known as Total Quality Management (TQM). Here, ‘quality’ does not refer to excellence but to ‘fitness for use’, such that the product or service is fit to keep the customer satisfied. The service that airlines produce is ‘arrivals’ or happy landings. The ‘total’ in Total Quality Management refers to the objective of injecting customer relations into all stages of the production process to ensure that all staff are responsible for quality.

Oakland (1993) quotes an apposite example. A flight attendant has a trolley full of breakfasts to feed the early morning business passengers on the short domestic flight into an international airport. The first tray is returned with a complaint that the bread roll and jam are missing. The attendant’s composure disintegrates on discovering more trays with the roll and jam missing, necessitating a search for complete trays. This is clearly a problem of quality – but not in the attendant’s work; rather with a person in the organization whose job it is to assemble the breakfast trays. (It might not even be in the organization but with a catering contractor.)

Total Quality Management is an approach to improving the effectiveness and flexibility of business as a whole. Essentially, it is a way of organizing and involving the whole organization; every department, every activity, every single person at every level. For an organization to be fully effective, each part of it must work together, recognizing interdependence. TQM, according to Oakland, is a method for ridding people’s lives of wasted effort by involving everyone in the process of improvement; improving the effectiveness of work so that results can be achieved in less time. TQM is primarily to ensure that the management adopts a strategic view of quality – developing the ‘prevention is better than cure’ mentality.

Implications for human resource management in airlines

However, many people are in favour of goodness and against evil. Who will admit to being in favour of poor quality? What is important about TQM is how to implement it Managements that rely on exhortation of the workforce to ‘do this job right first time’ or ‘accept that quality is your responsibility’ will not only fail to achieve quality, but will create division and conflict Involvement of all members is needed for company-wide quality improvement.

It is pertinent to begin a study of human resource management with relations with customers and with TQM because the injection of market relations into all points in the production process is one of the aspirations of human resource management – as opposed to administrative-style personnel management If TQM is a strategy for performance management and human resource management purports to be strategic personnel management, then they are in tandem. All management is to some extent about control of employees. Human resource management has been characterized as entailing a move from control of employees by means of rules (the ‘Industrial Relations’ model) to control by gaining the commitment of employees.

Total Quality Management by means of empowering employees with responsibility for quality of production is one route to achieving this, but it is far from unproblematic and, actually, raises tensions and contradictions that are possibly inevitable. After all, why should subordinate employees be responsible for quality when they are not the primary stake-holders of a company? It may be a matter of corporate survival and thereby saving jobs, but this is somewhat different from empowerment. Potentially, empowerment may be compatible with the Japanese model of the firm as a collection of human resources (Odagiri, 1984). Making market demand immanent by introduction of internal markets, of chains of suppliers and internal customers is much less benevolent with the shareholder control model of the firm. For example, a study by Fuller and Smith (1991) showed systematic use of customer feedback mechanisms, including the employment of impostor customers, to control the behaviour of employees in contact with customers. It might be thought that this is fair enough but it also has shades of coercion. The American originators of TQM insisted that 85 per cent of faults are management’s responsibility. ‘Empowering’ employees with this responsibility begins to sound rather like totalitarian quality management.

Relations with customers in practice – the role of TQM

That everyone in the production process must try to satisfy customer needs that are not only external but also the next people in the production process is the hallmark of TQM. Concomitantly, it is the customer relations aspect of human resource management. How and when did it appear in air transport and how does it operate in practice? Raising such questions may provide a basis for assessing whether TQM in airlines is a way of giving employees more responsible autonomy and control over their working lives, or whether it is just another, more or less sophisticated way for senior management to gain more direct control over the subordinate employees. This is a key issue in human resource management and therefore a key theme of this book.

The end of the golden age

By the late 1970s it was arguable that the glamour and glory had departed from most air travel To some extent, it is a positional good in that it comprises social relations ‘subject to congestion or crowding through more extensive use’ (Hirsch, 1977:27). Everyone spoils it a bit for everyone else. Some time during the 1970s it became clear that there was over-capacity in the airline industry. The airlines, with market share and profits under threat, inaugurated strategies to achieve more ‘cost-efficient’ flying. Deregulation, begun under the Carter administration in the USA and continued under the Reagan administration, exacerbated the tendency. The airlines began using planes that could hold more people and fly longer hours without fuel stops. For flight crews this led to

longer work days and more work days bunched together. There was less time to relax and enjoy a central advantage of the work – personal travel. Like the aeroplane, the flight attendant was now kept in use as long as possible. (Hochschild, 1983:121)

With the deregulation of the airlines, the prices of tickets dropped and ‘discount’ customers boarded in even larger numbers. Consequently, in the 1980s, faced with increasing competition, airline managements attempted to intensify work through lay-offs and job cuts in order to have more done by fewer.

Before the speed-up, workers sustained the cheerful goodwill that good service requires. They did so for the most part proudly; they supported the transmutation. After the speed-up, when asked to make a personal human contact at inhuman speed, they cut back on emotional work and grew detached. (Hochschild, 1983:121)

On this view, TQM was necessary to reinforce customer care.

Relations with customers, prices and TQM

After the Airline Regulation Act 1978, many new US airlines were certified. There was a rapid increase in the number of carriers and fierce competition with the new entrants in particular seeking to expand market share. There were fare wars and the US industry operated at a loss between 1979 and 1987, a picture repeated for the industry globally during the post Gulf War recession and over-capacity of the 1990s. The fare wars stimulated air travel, but forced all airlines to cut operating costs.

People Express was founded in 1981. There was no corporate hierarchy and no rigid job specialization. Everyone was an owner-manager because every employee was required to buy 100 shares in the company. A pilot was a ‘flight manager’ and a flight attendant a ‘customer-service manager’. Everyone was ‘cross-utilized’. The flight manager might do inventory control and the customer-service manager might work at the ticket counter. The company also did away with the traditional standard services, such as free meals, free baggage handling and comfortable lounges. Consequently, the high employee motivation, low labour costs and elimination of ‘frills’ made it possible for People Express to offer very cheap fares that made flight travel more popular (Chen and Meindl, 1991:529).

At first it was successful, but its ultimate failure begins to point up the dilemmas that TQM attempts to answer. There were increasing passenger complaints about delayed flights, lost luggage and overbooking. The leadership became authoritarian and increasingly unable to tolerate dissent. As People Express encountered a more turbulent environment, its flatter hierarchy and its innovative human resources strategy began to dissipate, apart from the poor service and delays to customers. Employees were not allowed to question decisions any more, and fear pervaded the company. People Express became known as ‘People Distress’. Finally it was sold to Texas Air.

Fare wars and discounting were internationalized in the recession of the 1990s. It created a problem for corporate management of how and when to restore prices and profit margins. Price wars are high profile affairs as the combatants have to tell potential customers that they are cutting prices. In summer 1992 when US domestic airlines were scrapping for customers, they started offering a return fare New York-Los Angeles for just $199. Tens of thousands of travellers came to have the money illusion that $199 was the ‘right’ price, and anything else must be a rip-off. For the traveller this situation was a joy, for the airlines a nightmare. So another function of the emphasis on quality is to provide a rationale to restore prices and margins by creating the illusion of service.

It is true that Southwest managed to make money by offering a no-frills service on the People Express model. It became the seventh largest carrier in the USA by flying short routes, offering no meals, just peanuts and drinks, doing without a first class and not assigning seats. Gate agents issued reusable numbered plastic cards on a first-come, first-served basis. In general, however, the biggest carriers have to maintain international infrastructure, and fleets that preclude such an approach. Their only strategy is more intensive use of plant and planes. Compared to industry averages, Southwest had fewer employees per aircraft (79 against 131) and flew more passengers per employee. It also had low staff turnover and highly motivated employees. The ‘hands-on’ approach of chief executive, Herb Kelleher, no doubt contributed. Yet such a strategy has its limits – when competitors fight back and the environment becomes more turbulent, diminishing returns set in.

One technology that has helped in this respect is use of Computerized Reservation Systems (CRS). The CRS has dramatically altered the relationship between airlines and their customers. As will be explained more fully later, CRS, though generally perceived as a marketing tool, are more properly a means of production management in airlines. In the competitive environment, such yield-management systems enable data on passenger demand for each flight to be gathered and analysed and optimal fares to be extrapolated. Airlines using such techniques gain a competitive advantage. Management acquires real-time data on changing market trends, enabling it immediately to adopt capacity, schedules and prices in response to such trends. Here human resource management is seen in its resource aspect.

Human resource management in this sense tends towards human asset accounting – with employees open to being fully utilized throughout working hours, rather than sometimes being able to find breathing spaces or slack time as a result of half-filled planes or unexpected pauses in demand. Employees, as Gerald Mars (1982:182) put it, ‘attempt to stay loose in a tightening world’. It is increasingly difficult for them to do so. ‘Because work is more easily monitored and measured, the porosity between work and non-work diminishes’ (Winfield, 1991: 86) and ‘one is increasingly paid only for what one does’ (Winfield: 104).

The ‘human’ aspect of human resource management with respect to TQM necessitates more fully insinuating responsibility for customer service onto each employee. This is much more difficult to achieve, the main approach being to ‘empower’ the employee, so to speak, with such responsibility. If this is accepted, then workers will monitor each other’s performance. Although this sounds manipulative and can be just that, it does have some positive features. For one thing, on it may hinge sheer survival of part or all of the organization and consequently, employees’ jobs. Two case study examples that follow illustrate this.

For the first, the author is indebted to Heather Hopfle’s case study (1993) of British Airways. At the start of the 1980s BA was a joke. Drastic job cuts brought costs under control but customer service was seen as critical. Sir Colin Marshall, appointed Chief Executive in 1983, saw the need ‘to create some motivational vehicle with the employees to raise their morale and, in turn, customer service’ (Vbung, 1989: 3). He reckoned that staff would have to learn how to sell the airline and its services, which led to the campaign known as ‘Putting the Customer First’. This, in turn, led to a massive training programme called ‘Putting People First’ that aimed to provide an ‘emotional context’ for people to respond to and to change. Staff became actively involved in developing ideas for customer service. Customer First teams, using quality circle techniques, were formed in many BA departments. Quite suddenly, administrative procedures, formerly the task of personnel management, were devolved to line management.

The approach – a fashionable one at the time – was to present organizational change as necessitating a change in corporate culture. However, as Hopfle concluded, the reaction to the change was not all positive. Some staff found it difficult to reconcile the values promoted by the culture change with their own experiences in the workplace. There was some frustration and disillusionment as a result of the conflicts between caring values and profits and between espoused values and the need for workplace expediency. Some felt that their emotions were being played on in a rather manipulative way.

The second example is discussed more fully in the final chapter. In 1989 KLM cargo, based at Heathrow, was in serious financial difficulty, and the board at Schipol was contemplating its closure. Local management copied the teamworking concept from the Nissan plant in Sunderland. The results were remarkable in terms of productivity and employee involvement.

Teamworking is a ubiquitous feature of TQM. However, the potential incompatibility between teamworking and the individualistic practices often associated with human resource management, such as performance appraisal and performance-related pay, is often skated over. One management consultant almost revered by the Japanese who did not evade this tension was W. Edwards Deming. He also emphasized statistical process control as part of a systematic approach to quality improvement An idea of this type emanated from the airline industry itself. It is called Moments of Truth, and was propounded by Jan Carlzon, chief executive of Scandinavian Airlines. They are the moments when a customer first comes into contact with the people, systems, procedures or products of an organization and which consequently influence the judgement that the customer makes about the quality of that organization’s services or products.

According to Oakland (1993:233–34), in ‘moments of truth’ analysis,

the points of potential dissatisfaction are identified proactively, beginning with the assembly of process flow chart diagrams. Every small step taken by a customer in his/her dealings with the organisation’s people, products or services is recorded. It may be difficult or impossible to identify all the Moments of Truth but the systematic approach should lead to the minimisation of the number and severity of the expected failures.

Criticism of TQM

An important aspect of this book is the link that Carlzon purports to make between organizational strategy and tactics. In practice, the gimmicky title, ‘moments of truth’, and its popular usage with emphasis on the first 15-second encounter between a passenger and front-line staff may lead people to ignore the importance of this link.

In recent years, one organization after another has announced the establishment of customer care programmes, and many management consultants have joined the bandwagon. In many cases the results have been less than satisfactory – often because one or both of the following mistakes have been made.

First, only front-line contact staff have been the recipients of training. Carlzon makes it clear that if this occurs, the best efforts of front-line staff to satisfy customers may be blocked by back-room staff, the reason for this being that people in such positions, because of the measures used to assess their competence as well as their training and business experience, are seldom customer-oriented (let alone market-oriented). The result is, of course, demoralized contact staff and the possibility of the organization entering a vicious circle. (Blois, 1992:6)

Secondly, the link between tactics and strategy has not actually been made. Consequently, contact staff know little more than that they should be ‘nice’ to customers. However, the failure to have a clear and well-implemented strategy leaves such staff either with no understanding of how to operationalize that ‘niceness’ or, even if understanding how to behave, unable to act because of their organization’s bureaucratic systems.

The BA and KLM episodes reported above are apparently positive examples of TQM application. However, before being carried away by its benefits, it is necessary to remind ourselves of its corporate rationale to create an aura of ‘service’ in a production process that became intensified as demand expanded in the 1980s and then as airline competition intensified with deregulation and recession.

Hochschild, in her percipient study of the management of the emotional labour necessitated by in-flight service tellingly quotes the editors of an unofficial flight attendants’ newsletter, the ‘Pan Am Quipper’:

We deal in the illusion of good service. We want to make passengers think they are having a good time. It is dangerous to take any of the abuse seriously. It is dangerous to take the job too seriously. Quipper is about laughing it off.

This is not just bloody-mindedness or flippancy. The author of this book has direct experience of how an airline company’s objective to maximize plane capacity by filling every available seat and maximizing seating in the available space can potentially conflict with TQM – despite one of the objectives of TQM being to compensate for possible over-crowding. On a flight from London to Amsterdam, flight attendants were distributing lunch containers and serving drinks – a task that, together with clearing up would occupy most of the 50–55 minutes flying time. There was a blind passenger seated in the row behind me. In attemp...