Research Articles Base: Human Resource Management Of Airline Companies

How can the differences in the human resource management of airline companies be explained?

This essay will set out to answer the question: How can the differences in the human resource management of airline companies be explained? The essay will therefore be composed from two major parts. The first part will focus on the changes in the external environment, which influenced the HRM in the airline industry since late 1970s. Different approaches of HRM in the airline industry will be identified in the process. British Airways (BA) will be used as an example of “hard” and South West Airlines (SW) as an example of “soft” HRM approach. The second part will examine British Airways and South West Airlines methods of adaptation to the external pressures. Special emphasis will be made on how the management style adopted by BA and SW influences their HRM approach.   The need to understand the HRM approaches adopted by airline companies is even greater since airline industry is accounted among service industries. A clear linkage between the employee and customer satisfaction, in service industries, has been established since 1980s, when the term human resource management (HRM) started to replace the term personal management (Legge 2005, Graham and Bennett 1998). Since then authors point out that HRM should be incorporated in the business strategies of companies, as it could provide a market competitive advantage. The main characteristic of service industries is the importance of the “human factor” which delivers the customer service. Gilbert, Child and Bennett (2001) maintain that because airlines offer similar service, employees are a “single service-factor” that distinguishes them. However the way companies manage their HR can be subdivided in the views of managerial strategy, the “soft” and “hard” HRM approach (Truss et al 1997, Mabey, Salaman and Storey 1998, Legge 1995). Tayson and Fell (1986, in Legge 2005) describe the “hard” approach as viewing the employees as one of the expenses of doing business. On the other hand “soft” approach is defined as “treating employees as valued assets, where the stress is on generating their commitment trough communication, motivation and leadership” (Legge, 2005, p.106). To understand the reasons behind the HRM approaches adopted by airlines, the essay will start with a brief explanation of factors, which are argued to have the biggest influence on the industry.   Authors collectively agree that the internal and external environment in which companies operate, determine their HRM style (Legge 2005, Boyd 2001, Beer 1997, Laszlo 1999, and Gilbert, Child and Bennett, 2001). The factors of the external environment are asserted to be globalisation, fast changing markets and technology, sectoral deregulation, liberisation, privatisation, economic conditions and crisis events (Legge 2005, Boyd 2001, Beer 1997, Laszlo 1999, and Gilbert, Child and Bennett, 2001).   According to Som (2003) and Appelbaum and Fewster (2004) deregulation of the United States Airline industry in 1978 triggered a chain of events that led to the liberisation of markets throughout the world. The latter had two major effects. First and immediate one was the entrance of low cost airlines in the market. The second, more gradual effect was the result of increased competition pressures from the low cost airlines. Competition forced bigger nationally owned airline carriers to redevelop the corporate strategies and adopt new cost saving measures, which consequently drove the need for their privatisation (Beer 1997, Boyd 2001, and Holtbrügge, Wilson and Berg 2005). An assertion that can be made is that the time span between the US and EU airline industry deregulation played a vital role in determining the HRM style of airline companies. Blyton et al (2001) points out that before the deregulation airline market was stable, predictable and often State controlled. Because of the restrictions imposed by the State, companies did not need to cut costs or develop new products to compete on the market. The “monopoly” position of airlines meant market stability and the outcome was job security and good conditions of employment. That sharply changed for the European carriers with the deregulation of the EU market in 1997. BA tackled the problem of increased competition and consequently cost cutting by offering voluntary redundancy to 5,000 of their employees. However in the next six months it offered 5,000 new working positions, as a strategy of saving over a £1 billion by 2000 on lower starting salaries and benefits for the newly recruited employees (Boyd, 2001). Further personnel outsourcing finally resulted in a clash with trade unions and a strike that cost BA £125 million and ended with a low employee moral and lost of customers (Vedpuriswar and Ramachandran, 2003). Boyd (2001) also points out that BA are not the only EU company that decided to cut labour costs. Three other European airlines turned to the policy of recruiting under the “flag of convenience”, where staff does not need to fulfil the training requirements of EU laws, however can still operate UK flights under the “flag of convenience”. This consequently saves airlines additional money on training and pay for their employees. On the other hand the US airlines went trough the deregulation process almost 20 years earlier, when airline industry was less as developed. That made their competition adaptation process more gradual. The latter could result in adaptation of the “softer” HRM approaches of some companies. Legge (2005) also maintains that due to the cultural differences US companies are more likely to lean towards the “soft” and UK companies towards the “hard” HRM style. One of the US companies that did not seek their market competitive advantage in cutting labour cost, but in investing considerable amount of time and money in recruiting and training the employees, is the South West Airlines (SW) (Benchmark Communication Ltd. 2001, Laszlo 1999 and Brown 2003). SW maintains that self-motivation, work ethics and right attitude are a characteristic of an employee that will benefit the company on the long-term basis; therefore no expense should be spared on recruiting the right person for the right position (Benchmark Communication Ltd., 2001). It could be further asserted that recruiting the right personnel and training them should be of even grater importance for the BA, since SW are a low cost airline and their level of service is expected to be lower than BA’s.     In addition to service orientation of the industry and competition pressures among airlines, safety-sensitivity is argued to be the third factor that has a strong influence on the HRM of airline companies (Holtbrügge, Wilson and Berg, 2005). Crisis events, especially terrorist attacks in September 2001 raised the level of safety-sensitivity and resulted in a sharp 32 percent drop in the number of the passengers carried (WTO, 2006). Consequently many of the major US Airlines, such as United Airlines and US Airways went into Chapter 11 bankruptcy, which gave them the opportunity to reorganize and cut HR costs without negotiating with the trade unions (Brown, 2003). Although it must be mentioned that airlines outside US were not protected by such laws and had to find other drastic cost cutting measures. According to Howard (1998, in Boyd 2001) air companies could not do much to reduce the cost of fuel and new aircrafts, however were able to save on labour costs. Labour is asserted to account for between 25 and 40 percent of all operational costs of airlines and three quarters of its controllable costs (Aharoni, 2005).   As it was mentioned the crisis events, such as terrorist attacks, virus SARS and the Tsunami had a major impact on the airline industry and consequently the HRM styles of airline carriers. Because of the sharp drop in the revenue, airline companies further reduced the number of cabin crew to the minimum requirement, increased their working hours and put pressures on staff to overlook the safety hazards in order to speed up the turn around time of airplanes (Boyd 2001, Holtbrügge, Wilson and Berg 2005). Although the labour relationship between the BA employees and management improved from 1997 and the management started investing in training and working conditions with the “Putting People First” initiative, September 11th attacks forced the BA to once again adopt the “hard” HRM approach. BA cut 13,000 jobs or 23 percent of their workforce in years from 2001 to 2004 and eliminated the Christmas bonuses for their employees (Vedpuriswar and Ramachandran, 2003). It has to be pointed out that in 2004 BA still employed 159 employees per airplane. This number is extremely high in comparison to SW (84) and Ryanair (32) (Freiberg 1998, Bandeira 2004). On the basis of latter an assertion can be made that redundancies were necessary for the BA to adapt to the new competitive conditions on the market. However, BA management also further lowered the standard of working conditions for the remaining staff. In 2005 BA’s cost per employee was £35,330 and SW’s was £45,280 (calculated from Grossman 2005 and Rigby 2005). A conclusion that can be drawn is that BA either did not develop a long term plan which would anticipate a possibility of crisis events, and had therefore resort to drastic labour cost cutting measures, or has sought their competitive advantage in adopting the “hard” HRM approach.   Boyd (2001) maintains that economical and political environment provided airline companies with the freedom to adopt the” hard” HRM approach, however the example of SW proves that, with the efficient strategic management, companies are able to cut costs in other areas than labour and therefore retain the “soft” HRM style. SW was founded in Texas, USA and has with the exception of first year generated profit since its creation in 1971. Surprisingly not even crisis events on September 11th and SARS epidemic managed to seriously affect them. An argument that could be made is that their success is a result of “What if….?” scenarios, cost savings measures and product innovations (Laszlo 1999, Medved 2001, Milliman 1999 and Brown 2003). SW acknowledges that airline industry is a highly competitive and fast changing environment. Therefore to enable the company to respond to situations quickly and efficiently they work out many yearly scenarios of “What if….?” and incorporate them into their strategic and financial plans (Laszlo, 1999). Second characteristic of SW are their cost saving measures. They are saving money by flaying in and out of airports that are located close to the city centre. This strategy enables to retain clients that do not want to travel 45 minutes to an airport to board a flight that only takes 40 minutes. SW also developed a network of point-to-point flights, with 20 to 30 minutes turn-around time. No seating order helps to speed up the boarding time and helps shortening the time plane has to spend on the ground. They do not connect with other airlines; therefore do not need to spend extra money on waiting for connecting passengers. Company is flying to the less crowded airports, where it is less chance for delays and at the same time airport taxes are lower, which lowers the price of the airline tickets. They use only the Boeing 738 airplanes, which stay in the air 12h (competition 8,6h) and make over 7 flights daily. Using only one type of plane reduces the cost of maintenance and cost of staff training. The loyalty to the Boeing Company has ensured SW the bargaining power when negotiating for prices (Laszlo 1999, Medved 2001 and Appelbaum and Fewster 2004). The third way that SW retains its competitive advantage is with constant product innovation. They were the first air-company with their own Internet site and have started to sell paperless tickets, as one of the first bigger air companies, in 1995. SW was the first airline that did not serve food on the plane. Serving food in the waiting room in the airport has again saved turn-around time of airplanes, because they did not to be cleaned as thoroughly. SW also considers rail and train transport as competition. It is its policy to keep prices low even if the demand for certain routs increases. They are constantly investing in marketing, over 4 million people are subscribed to their weekly Internet publication “Click ‘N Save e-mails” (Laszlo 1999, Medved 2001, Milliman 1999 and Brown 2003). The management style and strategy adopted by the SW has enabled them to make long-term investments in their employees, with profit sharing, no redundancy policy, extensive training and career promotion opportunities (Benchmark Communication Ltd. 2001, Tsui and Wu 2005).   It has to be acknowledged that some of the above mentioned costs saving measures could only be adopted by the low cost airlines, because of the lower quality of service expected by customers, although other non-budget airlines developed other approaches to costs savings. One of the responses of airline carriers to competition pressures was forming of alliances, which helped the companies to retain competitive advantage and cut costs by sharing facilities and routs (Boyd 2001, Som 2003, Beer 1997, Laszlo 1999, and Gilbert, Child and Bennett, 2001). Boyd (2001) asserts that four major alliances that were formed in late 1990s now account for 46 percent of world market. If forming the alliances proved as a good marketing strategy, two-thirds of all merges and acquisitions in global aviation, majority of them in the US, failed because they did not succeed in integrating the organisational HR culture (Appelbaum and Fewster, 2004). This again demonstrates the importance of the HRM in the airline industry.   Another example of how a diversification of product could help airlines to increase their revenue is BA’s establishment of the low cost airline GO, in 1998. GO has made a net profit of £4,2 million in 2000, however BA decided to sell the company in June 2001 for £110 million to 3i. With the new leadership GO increased their net profit to £17 million and was sold in August 2002 to Easy Jet for £347 million. With this acquisition Easy Jet became the largest low coast airline in Europe (Bandiera, 2004), which further increased the price competition. An argument can be made that selling of GO was a bad management decision of BA. The revenue generated by GO could help cover the losses made as a result of unstable economical and political conditions and would therefore reduce the need for drastic cuts of labour costs adopted by BA.   To conclude, this essay has tried to identify the reasons behind the different HRM approaches adopted by airlines. The political, cultural and economical environments, in which airlines operate, have been identified as the external factors that influence companies HRM styles. Deregulation of air space has significantly increased the competition and resulted in a development of new, fast growing, low-cost carrier market. Time of the deregulation is argued to play a vital role in the differences of HRM styles adopted by airlines. Airline industry has since become a highly competitive environment, where cost savings are one of the prime concerns and a necessity for the survival of the airline companies. The need to cut costs has even increased after the sharp drop in the number of passengers carried, as a result of September 11th terrorist attacks and virus SARS. Many airline companies have adopted the “hard” HRM style to cut labour costs, which are asserted to contribute to up to one third of all expenditure of airline carriers. However example of SW has been made to demonstrate that with efficient management drastic labour cost saving measures could be avoided. It can be concluded that the differences in HRM approaches adopted by airlines are mainly a result of the company’s management style, which determines whether employees are treated as a valuable asset or a cost to the organization. Credit:ivythesis.typepad.com

How can the differences in the human resource management of airline companies be explained?

This essay will set out to answer the question: How can the differences in the human resource management of airline companies be explai...

Euroflite: a HR strategy report

Euroflite: a HR strategy report               Managing human resources within organizations is among the greatest challenge of every HR Manager. From the basic HR functions, the role of the manager to formulate and implement the most effective HR strategy is crucial as it is practically the same as having the best people to fit the needed job position. It is recognized that having an effective HR strategy leads to organizational effectiveness (Conway and Monks 2008). Entrekin (2005) recognizes HRM as a fundamental element in an organization’s life cycle. There is a need to manage people as organizational resources because they are considered as fuels of production and resource-based assets. While Western management theories indicate people as identical, replaceable, and disposable things (Elkin and Sharma, 2007), more and more contemporary organizations believe otherwise. This means that the formulation and implementation of the most appropriate HR strategy from recruitment and selection, pay and remuneration scheme, training and development, performance evaluation, and conflict and labor management is required.             This paper presents an HR strategy for Euroflite – among the leading low-cost, no frills airlines set up in the UK in recent years. In particular, it presents a strategy for the recruitment, selection and training of the additional staff required for the planned expansion while making appropriate distinction for different categories of jobs, supplementing the reward package to make it attractive to staff while offsetting the lower than industry average pay levels, and dealing with the union recognition claim at Manchester.     Recruitment, Selection and Training             As part of the initial yet possibly the most crucial HR function, recruitment and selection is part of the general management function of staffing and plays a major role in ensuring the implementation of strategies (David 2003). According to Sims (2002), recruitment is the process of discovering, developing, seeking and attracting individuals to fill actual and/or anticipated job vacancies and has three general purposes: to fulfill job vacancies, to acquire new skills, and to allow organizational growth. Sims (2002) identifies some factors that affect the recruiting efforts including organizational reputation, attractiveness of the job, cost of recruiting, recruiting goals, and recruiting philosophy. These factors are deemed essential in hiring the best individuals for the job. Selection, on the other hand, is the partner of recruitment and directed to the attainment and accomplishment of goals (Boxall and Purcell 2000). An effective selection process decreases the possibility of wasting financial resources in various HR activities such as repetitive training and documentation. The current conditions of the labor market necessitate organizations to undergo changes and utilize various job recruitment and selection methodologies (Butcher and Clarke 2003). Each organization has a distinctive recruitment and selection system, wherein the applicants are subjected to both the basic criteria of an employee and the specific criteria for the job description.             On the case of Euroflite, it is recommended that the existing recruitment and selection strategy is retained and added with additional features particularly on job analysis and pay systems. Euroflite’s plan for expansion is synonymous to having additional human resources. From the existing 1,000 employees working on principal airports of Stansted, Edinburgh and Manchester to around 2,000, the management must be able to undergo effective recruitment and selection process in order to save up staff costs or reduce its current staff costs. This is to be done by a careful job analysis. Job analysis is purposive because it is considered as framework for human resource decision making and strategic planning. In the recruitment and selection process, it is the stage of acquiring a competent and competitive workforce through identifying specific attributes suited for a particular position based on two identified levels: behavioral requirements or tasks and the knowledge, skills, abilities (KSAs) and other person attributes needed to perform the given tasks. The HR Department will be able to come up with a job posting characterized by specific information that provides descriptions and qualifications for a particular vacancy. In airline industry especially on the case of low-cost carriers, competition is intense and coping up with this means getting the highly competent and competitive people to work for the achievement of organizational goals. More so, job analysis is a distinct yet complementing mechanism that directs management on who to hire from the array of applicants to occupy that specified job position. The main steps in job analysis occur before and during or even after the initial HR functions. These steps, according to Chang and Kleiner (2002), include: identifying and isolating of component tasks in a job; examining how tasks are performed; identifying the main areas of responsibility; noting the prevailing working conditions in respect of the physical, social and financial aspects of the job; and identifying the personal demands which job makes on an individual incumbent. Applying the steps in job analysis in the most effective way possible is tantamount to stronger and more competent and competitive workforce. If the HRD is able to define the needed job position, it is ensured that the best applicants will be retained. Meanwhile, job analysis will also facilitate the identification of specific categories of jobs. To summarize the importance of job analysis to recruitment and selection process, it emphasizes on the principle that every work needs to be done (i.e. tasks and duties) requires specific kind of people possessing the key qualifications (KSAs or core competencies) to accomplish the work. On the aspect of pay systems, the HRD should provide competitive remuneration package for specific job categories. Job analysis is also used in this HR activity. It is considered that people work in their maximum level of effectiveness if they are motivated. Aside from the compensation, the HRD should present additional indirect compensations like insurance benefits, employee recognition programs, flexible work hours, and vacation benefits.             In terms of training, every organization is required to improve the KSAs and core competencies of their human resources. This is to arm them with the needed characteristics in response to unprecedented changes and needs of the industry. Hornsby and Kuratko (2005) assert that training and development activities can assist organizations to get a person with the right combination of skills and motivations who will work for the achievement of organizational goals. They further explained that this process includes three different types of activities namely: orienting the new employees; helping employees acquire new skills and helping the employees strengthen existing skills (Hornsby and Kuratko 2005, 152). Fraser and colleagues (2006) assumed that training consists of a mix of transferable and non-transferable skills. They noted the veracity of the frequent argument of experts that “training is a form of human capital investment” resulting to “a rate of return in the form of a higher marginal product of trained labor” (125). According to Sims (2002), the systematic process of training involves and not limited to a variety of planned programs designed to advance level of competence and performance among individuals, groups, and/or organization as whole. The scope of training initiatives vary and include operation, technical, sales, customer service, and various levels of leadership training (Sims 2002). On this case, Euroflite’s HRD should invest on coming up with training and development mechanisms that is focus on the needs of the organization like the ones mentioned above. Training and developing existing employees in Euroflite’s principal airports is also an option. They should be trained to be multi-taskers, thus, saving staff costs.             Recruitment, selection and training are crucial. Euroflite’s current HR strategy is adopted provided that it will pay particular attention to the provisions of job analysis and pay systems. On training and development, there is a need to create inclusive training programmes that will cater directly to the need of the whole business. It is also recommended that employees from principal airports of Stansted, Edinburgh and Manchester may be relocated to the planned locations. It is assumed that there are no significant differences in their job responsibilities. However, the management must be able to allocate sufficient financial resources for this strategic HR option.   Offering an Attracted Reward Package             It previously acknowledged that employees are motivated to work at their best if they are rewarded. According to the expectation theory, employees work if they are rewarded according to the work that they do and will help them to develop their capability, help them to work up to a higher level so that they can be better rewarded. Employees expect organizations to have compensation systems that they perceive as being fair and commensurate with their skills and expectations (Sims 2002). Euroflite’s current pay levels and grades are determined by management and the pay scales are common to staff across all of the company’s sites. On this case, the HRD must be able to analyze jobs using the principles of job analysis. As previously recommended, the HRD should provide competitive remuneration package for specific job categories. Aside from the usual compensation, the HRD should present additional indirect compensations like insurance benefits, employee recognition programs, flexible work hours, and vacation benefits to offset the lower than industry average pay levels. According to Holtbrügge and group (2006, 311), “airlines have to apply very different employment laws and taxation rules, industrial relation systems, labor market conditions, and employment contract designs.” For this reason, the standardization of pay systems and rewards package is mainly attributed to the role of the HR Manager with absolute approval from senior management considering the above factors. The process of determining supplemental reward package is based on the KSAs or core competencies such as innovation potential, flexibility, adaptability, openness to change, and trainability for future job skills as well as the job responsibilities of employees per category. Thus, performance management as among the key HR functions is also needed. The information that will be collected in the performance evaluation will be used as reliable and valid source or criteria on whether or not an employee is eligible to receive a reward package. However, it is argued that the HR Manager should pay particular attention on the different job categories existing within the organization as well as the pay systems in the whole industry.   Union Recognition Claim in Manchester             Labor relation in airline industry is becoming an object for restructuring over the past decades (Whitelegg 2003). On this particular aspect, Euroflite is subject to consultation and communication with the union and its members. The HR Manager is required to directly establish contact with the union and its members so as to know their concerns. If the management is unable to address the concerns of the union and its members, it may lead to conflict. Any organization is at risk when there is a conflict within its immediate environment. Conflict is a risk because employees have differing values and experience differing situations (Darling and Walker 2001) that will significantly affect the performance of organizational functions and the achievement of deliberate goals. It is not enough to attract and develop qualified workers but it is also important that the management must successfully nurture and manage long-term relationships with them. The practice of management relations is required.             A general meeting is suggested involving the relevant senior management authorities and union leaders. There is a clear agenda that focuses on the case of Manchester. The HRD should prepare a compelling and believable explanation on the rationale of the changes encountered by the ground staff at the airport. Explicating the new shift patterns is essential as the union and its members need to know the situations that affect them. It is expected that the union and its members will ask about the reduction of their earning from their shift allowances and might demand for supplemental reward package provided the changes that occurred in the operations. Euroflite failed to inform their employees about the changes that are currently implemented in its operations. Thus, this resulted to confusion among the employees. In this regard, the management particularly the HRD must design an effective communication and feedback mechanism between them and the union and its members.             Granted that all changes are deliberate, however, the union and its members who are mainly employees of the organization are entitle to be enlightened with what is happening inside and even outside the organization. it is assumed that the management will not openly share information to union and its members as some are classified and might endanger the welfare of the business and its overall operations. As an HR Manager, it is my role to communicate with the best of my given ability and the scope of my authority. I will encourage the union and its member to submit their formal documentations with regards to their claim for recognition. I will accept their documentations and study it before consulting the opinions of senior management. A general strategy to be recommended on labor unions is based on the traditional function of two-way communication and feedback mechanisms.     References   Boxall, P and Purcell, J (2000) ‘Strategic Human Resource Management: Where have we come from and where should we be going’, International Journal of Management Review, 2: 2, 183-185   Butcher, D and Clarke, M (2003) ‘Redefining Managerial Work: Smart Politics’, Management Decision, 41: 5, 477-487   Chang, I and Kleiner, BH (2002) ‘How to Conduct Job Analysis Effectively’, Management Research News, 25: 3, 73-81   Conway, E and Monks, K (2008, January) ‘HR practices and commitment to change: an employee-level analysis’, Human Resource Management Journal, 18: 1 72-89   Darling, JR and Walker, WB (2001) ‘Effective Conflict Management: Use of the Behavioral Style Model’, Leadership and Organization Development Journal, 22: 5, 230-242   David, FR (2003) Strategic management: Concepts and cases, Pearson Education Inc., New Jersey   Elkin, G, and Sharma, R (2007) ‘People, organisations and management: lessons for the industrialised world from the rest of the world’, Global Business and Economics Review, 9: 4, 395-416   Entrekin, L (2005) ‘Retaining core staff: The impact of human resource practices on organisational commitment’, Journal of Comparative International Management [online] (cited 21 April 2008) Available from http://www.allbusiness.com/management-companies-enterprises/1174466-1.html   Fraser, S, Storey, DJ and Westhead, P (2006) ‘Student Work Placements in Small Firms: Do They Pay-off or Shift Tastes?’ Small Business Economics, 26, 125-144   Holtbrügge, D, Wilson, S, and Berg, N (2006, November) ‘Human resource management at Star Alliance: Pressures for standardization and differentiation’, Journal of Air Transport Management, 12: 6, 306-312   Hornsby, J and Kuratko, D (2005) Frontline PR: a Handbook for the Emerging Manager, Thompson, Crawfordsville, IN   Sims, R (2002) Organizational Success through Effective Human Resources Management, Quorum, Westport, CT   Whitelegg, D (2003) ‘Touching Down: Labour, Globalisation and the Airline Industry’, Antipode, 35: 2, 244-263 Credit:ivythesis.typepad.com

Euroflite: a HR strategy report

Euroflite : a HR strategy report Managing human resources within organizations is among the greatest challenge of every HR...

Strategic HRM: Evaluating the Case of Euroflite

Strategic HRM: Evaluating the Case of Euroflite   A considerable number of companies have developed into an essential part of the period of global competition, increasing development, improved business paradigms, and corporate reorganization. The continuing transformation from the traditional industrial framework with its hierarchical companies to a worldwide, knowledge-founded financial system and intelligent corporations, altering ideas regarding the social contract involving employers and employees, an progressively more adaptable pool of talent and a body of workforce, necessitates human resource (HR) purposes to realign and relocate itself in the vicinity of these drivers. Changes in the nature of managerial work over the last years have a reflective and alarming impact on the roles of the HR managers within the new modes of organizational flexibility as well as leveling power of information technology. Generally, the emergence of HRM as a universal remedy for integrating business strategy and people management has exposed personnel practitioners to a fresh set of role challenges and managerial expectations that have stressed out the gaps between the HR language and reality. Further, the attempts to capture the changing environment of the HR personnel roles in response to major transformations in the workplace, the associated rise of HRM, and the competitive advantage of the whole organization through its manpower are few aspects that HR functions embark upon.             Managing human resources within organizations is among the greatest challenge of every HR Manager. From the basic HR functions, the role of the manager to formulate and implement the most effective HR strategy is crucial as it is practically the same as having the best people to fit the needed job position. It is recognized that having an effective HR strategy leads to organizational effectiveness (Conway and Monks 2008). Entrekin (2005) recognizes HRM as a fundamental element in an organization’s life cycle. There is a need to manage people as organizational resources because they are considered as fuels of production and resource-based assets. While Western management theories indicate people as identical, replaceable, and disposable things (Elkin and Sharma, 2007), more and more contemporary organizations believe otherwise. This means that the formulation and implementation of the most appropriate HR strategy from recruitment and selection, pay and remuneration scheme, training and development, performance evaluation, and conflict and labor management is required.             This paper will discuss Strategic Human Resource Management as applied to Euroflite – one of the leading low cost, no frills airlines set up in the United Kingdom. In particular it presents an analysis and evaluation of the Performance Management policies and practices being utilized in the company. Performance Management was chosen as the HRM area in which the evaluation will be conducted because the researcher believes that Performance Management is an important contributor to the success of the company and through performance management, the knowledge, skills and abilities of the employees are directed towards the achievement of the organizational goals.   Contributions of HRM to Organizational Success             Human resources management refers to the philosophy, policies, procedures, and practices related to the management of an organization’s employees. Human resources management is particularly concerned with all the activities that contribute to successfully attracting, developing, motivating, and maintaining a high performing workforce that results in organizational success (Sims, 2002, pp. 2-3). Human resources management (HRM) involves the establishment and execution of policies, programs, and procedures that influence the performance, capabilities, and loyalty of the employees of an organization. Through these policies and procedures, individuals are attracted, retained, motivated, and developed to perform the work of the organization. It is through these policies and procedures that the organization seeks to mold and shape the actions of its employees to operate successfully, comply with various public policies, provide satisfactory quality of employment, and improve its position in the marketplace through strengthened ability to compete and serve (Clardy 1996, p.1).             Human Resource Management is a source of an organization’s competitive advantage because: 1. It provides the right kinds of talent to the organization at the right time. HRM is expected to assure that a supply of qualified labor in a timely fashion (Clardy 1996, p.20). 2. It ensures that the organization is properly staffed. When done effectively, the staffing, recruitment, and selection process provides a flow of qualified individuals for filling open positions within the organization on a timely and efficient basis (Clardy 1996, p. 41). 3. Using appraisals, the employees are assesses and evaluated. Employee appraisals have very profound implications for both the employees and for the future success of the organization (Clardy 1996, p.58). 4. Using effective pay systems, the management can focus employees’ efforts toward desired organizational goals (Clardy 1996, p.79). 5. Ensures that the employees are properly skilled to perform their tasks and supports the organization’s growth through career development. The goal of training as part of the human resources management processes is to create cost-effective programs that build the skills to perform effectively (Clardy 1996, p.103).             According to Sims (2002), effective SHRM planning aids in creating a competitive advantage for an organization (p.30). SHRM planning when done correctly provides a number of direct and indirect benefits for an organization. <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	 	Identification of gaps between an organization’s current situation and 	desired future</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Explicit 	communication of organizational goals</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	 	Encouragement of proactive instead of reactive behavior</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Stimulation 	of critical thinking</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Creation of 	common bonds and a sense of shared values and expectations</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	 	Identification of the potential problems and opportunities </li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	HRM costs 	may be lower because management can anticipate imbalances before they become 	unmanageable and expensive</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	More time 	is available to locate talent because needs are anticipated and identified 	before the actual staffing is required</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Better 	opportunities exist to include women and minority groups in future growth 	plans.</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Development 	of managers can be better planned</li> </ul>   The Case of Euroflite             Euroflite is one of the leading low cost, no frills airlines in the United Kingdom. Recently, Euroflite plan to expand its operation in the United Kingdom, requiring it to recruit more staff to work on principal airports in Stansted. Edinburgh and Manchester. The company is expected to expand its employees from 1,000 to 2,000. The company’s plan to grow is faced with challenges, especially in the are of Human Resource Management. The management will need to redevelop and redesign its HRM practices in order to accommodate the company’s new size. One area that must be given particular attention is performance management.             Performance Management             Performance management helps organizations sustain or improve performance, promote greater consistency in performance evaluation, and provide high-quality feedback. Performance management helps organizations link evaluations to employee development and to a merit-based compensation plan. Moreover, it form a basis for coaching and counseling, permits individual input during the evaluation process, and allows for a blend of qualitative and quantitative expectations of job demands and factors that reveal how well the job is done (Gilley and Maycunich, 2000).             Performance management is an outgrowth of management controls whose purpose is to ensure that work is progressing according to the organization’s plans. Performance management according to Snell (1992) is the principal set of practices by which control is manifested in organizations. Control is defined as any process that is used to align the actions of individuals to the interests of the organization (cited in Gratton, et al, 1999 p. 60).             As part of the control process, the purpose of performance management is to make sure that employee goals, employee behaviors used to achieve those goals, and feedback of information about performance are linked to the organizational strategy (Sims, 2002a). Performance management systems also help organizations reduce turnover of highly skilled and experienced employees by providing environments conducive to growth and development and help eliminate outdated expectations for career opportunities. Performance management helps to motivate employees, who take responsibility for their own development and continue to add value, encourage employees and managers to support continuous learning, and help managers develop their employees. Performance management systems permit employees to understand the importance of keeping skills and abilities current and increase retention of experienced employees by providing career advancement. They enable employees to create meaningful development plans and match realities in the organization to recruiting promises (Gilley and Maycunich, 2000).   Performance Appraisal             Performance appraisal is the process by which an employee’s contribution to the organization during a specified period of tine is assessed (Sims, 2002b). Performance appraisal is integral to the successful operation of most organizations. During this process, employees are evaluated formally and informally to determine the nature of their contributions to the organization. Appraisal occurs during time periods and in meetings that are scheduled to produce reasoned consideration of contributions, but it also occurs informally as employee contributions are observed, or when an evaluation is brought to the attention of others (Dickinson, 1993).             Performance appraisal is treated as an evaluation and development tool, as well as a formal legal document. Appraisals review past performance – emphasizing positive accomplishments as well as deficiencies and drafting detailed plans for future development. The performance evaluation also serves a vital organizational need by providing the documentation necessary for any personnel action that might be taken against an employee (Sims, 2002b).   Evaluation of the Performance Management Policies and Practices at Euroflite             Euroflite uses a combination of performance appraisal tools in measuring the performance and identifying the strengths and weaknesses of each employee. The performance management system that is in place in Euroflite is aimed at ensuring that work is progressing according to the company’s plans and goals. The performance management system of Euroflite aims to achieve the following objectives: 1. Establish Performance Standards – in order to set expected performance levels, performance is used to establish performance standards. 2. Monitor Performance – the primary purpose of monitoring performance is to provide information on what is actually happening in the organization. 3. Take Necessary Corrective Action – corrective action can be taken after the actual performance has been assessed and compared with performance standards.   Evaluation of the Performance Appraisal at Euroflite             From the birth of the company, the management has been using Management by Objectives and Rating Scales to measure performance. Throughout the company’s years in operation, these performance appraisal tools have been useful in establishing performance standards, monitoring performance and identifying effective corrective actions for underperformance. However, because of the changes in the company’s goals and objectives, and because the management must adapt to the changes in the business environment, the performance appraisal system must be redesigned and redeveloped. Management by Objectives             Management by Objectives involves a joint determination by subordinate and superior of common goals, major areas of responsibility, and results expected; these measures are used as guides for operating the unit and assessing contributions of members (Miner, 2002). MBO is the best known of result-oriented methods of performance planning and review and, in some form; probably the most frequently used approach to performance planning and review. MBO is a target-setting or results-oriented approach to performance management. It recognizes that employees perform better when they have targets, and even better, when they have participated in setting those targets.   Evaluation             The strengths of MBO as a performance appraisal system are: <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	It 	increases the employee’s involvement in setting performance objectives and 	increases the motivation required to reach those objectives</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	It offers 	an objective, factual basis for measuring accomplishments</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	It is 	entirely job centered</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	It 	establishes the appraiser as a facilitator of performance rather than a 	critic of performance</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	It assures 	the organization that all employees are working toward a common purpose</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	It supports 	psychological concept that people will exercise self-direction and 	self-control in the accomplishment of organizational aims that they have 	participated in setting.</li> </ul>             Organizations that use MBO frequently report that they are very effective, highly motivating performance appraisal systems. MBO systems communicate to employees exactly what is expected of them, and provide clear behavioral benchmarks for performance. Developmental feedback is inherent in the entire MBO process, because the employees skills and abilities are taken into account at the front end when goals are initially set and along the way as progress toward the goals is measured. In an MBO system, goals are highly personalized and reflect the employee’s experience and training (Kulik 2004).   MBO as a performance appraisal tool has also some weaknesses. These include the following: <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	It is an 	organizational philosophy and can not operate at one organizational level 	without operating at all levels</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	MBO ca not 	be implemented at all organizational levels simultaneously, nor can it be 	implemented from the bottom up – it must begin at the very top of the 	organization and works its way down</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	It requires 	a total and sizable commitment of management support, interest, and time if 	it is to succeed</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	MBO is not 	applicable to all types of jobs. Individuals performing routine, repetitive, 	or machine-paced jobs are better appraised by another method</li> <li class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; line-height: 200%"> 	Employees 	require extensive training before they normally respond in a positive way to 	MBO (Caruth and Hadlogten 2001).</li> </ul>   Rating Scales             In addition to management by objectives, the company uses rating scales to measure performance and other work-related factors. Rating scales according to Rudman (2003) are readily adaptable to suit specific jobs and organizations, and there are virtually no limit to the aspects of person or performance that can be rated. In simple terms, rating scales require the reviewer to rate the employee’s performance in an absolute sense, not in comparison to other employees. Employees can be rated on virtually any trait or characteristic or dimension of performance or behavior. The characteristics to be assessed are chosen and each step on the scale is given a brief description in terms of quantity and quality.   Evaluation             The company uses a rating scale in appraising employee performance. The rating scale is among the widely used method of appraising the performance. The method is simple and easy to use. Rating scales according to Rudman (2003) are readily adaptable to suit specific jobs and organizations, and there are virtually no limit to the aspects of person or performance that can be rated. In simple terms, rating scales require the reviewer to rate the employee’s performance in an absolute sense, not in comparison to other employees. Employees can be rated on virtually any trait or characteristic or dimension of performance or behavior. The characteristics to be assessed are chosen and each step on the scale is given a brief description in terms of quantity and quality. Problems with Rating Scales             Rating scales are among the popular performance appraisal tools. They are easily to construct, use and understand. However, there are significant problems in using rating scales. 1. Ratings are sometimes subjective. 2. Not all the characteristics of a job are equally important and certain characteristics are more important for some jobs than for others. 3. Ratings can be given easily enough for individual characteristics or dimensions, but it is more difficult to turn into a valid or useful overall assessment.             The performance appraisal tool that the organization uses is simple and easy to understand which is good because performance appraisal should be like that. However, it also has limitations and weaknesses.   Performance Discussion             The company holds performance discussions at least once a year, particularly at the end of each year. The aim of the performance discussion is to review the employee’s performance and to encourage the employee to participate in the review process. The performance discussion is a one-to-one activity in which the employee meets with his manager to discuss the results of the performance appraisal. The aim of the company’s performance discussion is to involve employees in the assessment of their performance and incorporate their suggestions as to how that performance might be changed or improved.   Contributions of the Performance Management to Euroflite             The performance management system that is being used in Euroflite contributed to the overall success of the company. The performance management system has enabled the company to continuously improve employee and organizational performance. Performance management helps Euroflite reduce turnover of highly skilled or experienced employees by providing environments conducive to growth and development. Performance management helps motivate employees to take responsibility for their own development. Performance management permits employees to understand the urgency of keeping skills and abilities current and increase retention of experienced employees by providing career advancement.             The management believes that effective performance is key to productive, high-quality work groups and organization, and performance management is an excellent tool for maintaining and strengthening performance. Performance management allows the organization to obtain the highest quality work from employees, and allows employees to understand their performance and what they can do to improve it. Performance management facilitates and focuses communication of performance information between managers and employees and provides a method of assessing performance. Performance management helps employees improve their skills, abilities, competencies, or behaviors.       References Caruth, D. L. & Handlogten, G. D. (2001). Managing Compensation (And Understanding It Too): A Handbook for the Perplexed. Westport, CT: Quorum Books.   Conway, E and Monks, K (2008, January) ‘HR Practices and Commitment to Change: An Employee-level Analysis’, Human Resource Management Journal, 18: 1 72-89   Dickinson, T. (1993). Attitudes About Performance Appraisal. In J. Farr, H.             Schuler, & M. Smith (Eds.). Personnel Selection and Assessment: Individual and Organizational Perspectives (pp. 141-161). Hillsdale, NJ: Lawrence Erlbaum Associates.   Elkin, G, and Sharma, R (2007) ‘People, Organisations and Management: Lessons for the Industrialised World from the Rest of the World’, Global Business and Economics Review, 9: 4, 395-416   Entrekin, L (2005) ‘Retaining Core staff: The Impact of Human Resource Practices on Organisational Commitment’, Journal of Comparative International Management [online] (cited 16 December 2008) Available from http://www.allbusiness.com/management-companies-enterprises/1174466-1.html   Gilley, J. W. & Maycunich, A. (2000). Organizational Learning, Performance and Change: An Introduction to Strategic Human Resource Development. Cambridge, MA: Perseus Books.   Kulik, C. T. (2004). Human Resources for the Non-HR Manager. Mahwah NJ: Lawrence Erlbaum Associates.   Miner, J. (2002). Organizational Behavior: Foundations, Theories, and Analyses.             New York: Oxford University Press.   Sims, R. (2002b). Managing Organizational Behavior. Westport CT: Quorum Books.   Sims, R. (2002a). Organizational Success through Effective Human Resources Management. Westport CT: Quorum Books.   Rudman, R. (2003). Performance Planning and Review: Making Employee Appraisals Work. Crows Nest, NSW: Allen and Unwin.   Zwell, M. (2000). Creating a Culture of Competence. New York: Wiley.                                             Credit:ivythesis.typepad.com

Strategic HRM: Evaluating the Case of Euroflite

Strategic HRM: Evaluating the Case of Euroflite A considerable number of companies have developed into an essential part of the peri...