A Tale of Two Airlines
A Tale of Two Airlines Case Study
BRITISH AIRWAYS
British Airways (BA) was the result of a merger in 1974 between British Overseas Airways Corporation (BOAC), which offered long haul flights, and British European Airways (BEA) that specializing in flights to continental Europe. In its early years, BA was very bureaucratic and rules-oriented. At that time, BA was reported to have had an introspective, inflexible culture where over-staffing was routine, hierarchy was all important and little attention was paid to customer service, employee opinion or profitability.
Substantial cultural differences continued post-merger. BOAC staff tended to look down on their BEA counterparts, believing they provided flights for ?tradesmen? whereas their own services were for ?gentlemen?. BEA employees on the other hand regarded the BOAC staff as snobs who had no real sense of the cut-throat world of commercial competition. The result was disastrous in terms of performance. In 1980, BA was voted the airline to avoid at all costs and, at the time, it was also the most unpunctual European carrier flying out of the United Kingdom.
When John King was appointed by Prime Minister Margaret Thatcher as BA Chairman in 1981, he saw a need for drastic action, not least because the company was suffering from huge financial losses. His ?survival plan? resulted in nearly 20,000 staff redundancies, closed routes and the disposal of BA?s cargo-only service.
When Colin Marshall took over as CEO in 1982, an operating surplus had been created for the first time since the merger. Marshall?s objective was to build on this by encouraging all BA staff to take responsibility for customer satisfaction, and also to develop a more holistic outlook on the company, bridging functional and cultural divides. An extended training initiative was developed. Marshall was quoted at the time as talking about ?designing? BA staff to deliver good service, just as BA already designed the seats on its planes, its inflight entertainment and the airport lounges to do the same.
The first of these training events was launched in 1983. Two days long, it was called ?Putting People First?, and was eventually attended by 40,000 staff. The course focused on encouraging effective personal relationships, the idea being that if staff felt good about themselves they would feel good about interacting with customers. A senior director was present for question and answer sessions at these events and Marshall himself frequently attended. Other programs followed, including ?Managing People First? for BA?s 1,400 managerial and supervisory staff, launched in 1985. Its objectives were to foster a more caring and trusting relationship between managers and their teams, and to improve communication and staff motivation. Another ‒ ?Day in the Life? ‒ was introduced in the same year to improve cooperation and break down barriers between BA?s various functions.
Other more tangible changes were also afoot, including privatisation in 1987 and a takeover of British Caledonian Airways in 1988. Both marked the progress BA had made towards becoming a market-oriented, customer-facing organization. The organization?s structure changed as Marshal revamped BA into 11 profit centres. This streamlined its bureaucracy and allowed for greater cross-functional communication and cohesion. Executives who he felt weren?t up to the changes were removed. Performance-related pay, linked to new BA values, was introduced. But the developments didn?t end there: in 1987, ?Awards for Excellence? were brought in to recognise high levels of performance among staff, and the suggestion scheme ?Brainwaves? was introduced.
In 1988 BA began to offer an in-house MBA in conjunction with Lancaster University; and the initiative ?Winning for Customers?, consisting of a training event to signal that every staff member makes a difference to the customer experience, and an associated course for supervisory and managerial staff, was launched in 1992.
All in all, this lengthy and expensive program seems to have transformed a loss-making public organization colloquially known as ?Bloody Awful? into a profitable private company, which won the Business Traveller ?World?s Best Airline? award seven years up to and including 1995. Indeed, former CEO Bob Ayling (who took over from Colin Marshall in 1996, when Marshall became Chairman) suggested in a BA magazine that the organization ?had been one of the greatest turnaround stories of the twentieth century. The image this airline has built for itself in the past 14 years has stood it in great stead? (Business Life, 1997, p. 45).
What happened later:
1993-1998: Richard Branson of Virgin Atlantic won a libel case against John King and Colin Marshall for claiming that Branson had lied when he had alleged that BA had engaged in ?dirty tricks?. Branson took more legal action in 1998.
1997: Bob Aylings?s revamp of BA as more cosmopolitan and less British provoked a public drubbing from Margaret Thatcher.
1998: The aftermath of a cabin crew strike in response to Bob Ayling?s cost-cutting Business Efficiency Program (BEP) cost BA GBP125 million.
1999: An internal survey, ?It?s Your Shout? revealed a cynical view of the management of BA by staff. 1,000 job cuts were announced.
2000: Bob Ayling was forced to resign after share prices ?nosedived?. 6,000 job losses were made public.
RYANAIR
Michael O?Leary is the CEO of the world?s most disliked airline, Ryanair. O?Leary, a former Dublin accountant, who has led the profitable budget airline for the past 20 plus years, believes that employees really value working in a highly controlled and fearful environment. Even customers are expected to be extremely compliant. O?Leary was quoted in the New York Times as stating: ?Will we give you a refund on a non-refundable ticket because your grandmother died? No! We?re not interested in your sob stories. Go away! Ryanair is based on a ?command and control? way of managing employees and customers, where lower level employees have little input into company decision making. . But there are highly successful airlines such as South-West that take a radically different approach. South-West attributes its success to the value it places on partnerships between staff, management and unions as a way to maintain highly efficient and customer-focused outcomes. According to Professor Greg Bamber, author of Up in the Air: How Airlines Can Improve Their Performance by Engaging Their Employees, companies such as Ryanair may not be sustainable in the long term. Why? It all comes down to organisational values. ?Once companies have developed a people-oriented culture based on values of mutual commitment and involvement, they can make and and implement decisions in a quicker timeframe,? said Professor Bamber. But the Ryanair approach to managing people is more common than you might think. While this approach may bring short-term gains for shareholders, it may not be beneficial in the long term, according to Quentin Jones, Director of Human Synergistics. Jones states that, during times of economic uncertainty and increased unemployment. Those firms that revert back [sic] to command and control management styles and threatening behaviours are sending confusing and mixed messages to employees. When this happens to employees (that is, their employers break their commitment to the espoused set of company values), employees are more likely to distance themselves from the company psychologically and emotionally.
Sources: Knights, D. and Willmott, H. (2012) Introducing Organizational Behaviour and Management, Cengage: 390-391. Robbins, S.P., Judge, T. A., Millett, B. and Boyle, M.(2011) Organisational Behaviour, Pearson: 106.
Questions
1. Compare the cultures of the four airlines mentioned in the case study.
2. What are the factors that led BA and Ryanair respectively to engineer and adopt their distinctive organisation cultures?
3. What is ?command and control? and how effective is it as a management style?
4. What are the causes of the cynicism of BA staff revealed in the internal opinion survey, ?It?s Your Shout?, in 1999?
5. How do you think Ryanair staff feel towards their employer?
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BRITISH AIRWAYS
British Airways (BA) was the result of a merger in 1974 between British Overseas Airways Corporation (BOAC), which offered long haul flights, and British European Airways (BEA) that specializing in flights to continental Europe. In its early years, BA was very bureaucratic and rules-oriented. At that time, BA was reported to have had an introspective, inflexible culture where over-staffing was routine, hierarchy was all important and little attention was paid to customer service, employee opinion or profitability.
Substantial cultural differences continued post-merger. BOAC staff tended to look down on their BEA counterparts, believing they provided flights for ?tradesmen? whereas their own services were for ?gentlemen?. BEA employees on the other hand regarded the BOAC staff as snobs who had no real sense of the cut-throat world of commercial competition. The result was disastrous in terms of performance. In 1980, BA was voted the airline to avoid at all costs and, at the time, it was also the most unpunctual European carrier flying out of the United Kingdom.
When John King was appointed by Prime Minister Margaret Thatcher as BA Chairman in 1981, he saw a need for drastic action, not least because the company was suffering from huge financial losses. His ?survival plan? resulted in nearly 20,000 staff redundancies, closed routes and the disposal of BA?s cargo-only service.
When Colin Marshall took over as CEO in 1982, an operating surplus had been created for the first time since the merger. Marshall?s objective was to build on this by encouraging all BA staff to take responsibility for customer satisfaction, and also to develop a more holistic outlook on the company, bridging functional and cultural divides. An extended training initiative was developed. Marshall was quoted at the time as talking about ?designing? BA staff to deliver good service, just as BA already designed the seats on its planes, its inflight entertainment and the airport lounges to do the same.
The first of these training events was launched in 1983. Two days long, it was called ?Putting People First?, and was eventually attended by 40,000 staff. The course focused on encouraging effective personal relationships, the idea being that if staff felt good about themselves they would feel good about interacting with customers. A senior director was present for question and answer sessions at these events and Marshall himself frequently attended. Other programs followed, including ?Managing People First? for BA?s 1,400 managerial and supervisory staff, launched in 1985. Its objectives were to foster a more caring and trusting relationship between managers and their teams, and to improve communication and staff motivation. Another ‒ ?Day in the Life? ‒ was introduced in the same year to improve cooperation and break down barriers between BA?s various functions.
Other more tangible changes were also afoot, including privatisation in 1987 and a takeover of British Caledonian Airways in 1988. Both marked the progress BA had made towards becoming a market-oriented, customer-facing organization. The organization?s structure changed as Marshal revamped BA into 11 profit centres. This streamlined its bureaucracy and allowed for greater cross-functional communication and cohesion. Executives who he felt weren?t up to the changes were removed. Performance-related pay, linked to new BA values, was introduced. But the developments didn?t end there: in 1987, ?Awards for Excellence? were brought in to recognise high levels of performance among staff, and the suggestion scheme ?Brainwaves? was introduced.
In 1988 BA began to offer an in-house MBA in conjunction with Lancaster University; and the initiative ?Winning for Customers?, consisting of a training event to signal that every staff member makes a difference to the customer experience, and an associated course for supervisory and managerial staff, was launched in 1992.
All in all, this lengthy and expensive program seems to have transformed a loss-making public organization colloquially known as ?Bloody Awful? into a profitable private company, which won the Business Traveller ?World?s Best Airline? award seven years up to and including 1995. Indeed, former CEO Bob Ayling (who took over from Colin Marshall in 1996, when Marshall became Chairman) suggested in a BA magazine that the organization ?had been one of the greatest turnaround stories of the twentieth century. The image this airline has built for itself in the past 14 years has stood it in great stead? (Business Life, 1997, p. 45).
What happened later:
1993-1998: Richard Branson of Virgin Atlantic won a libel case against John King and Colin Marshall for claiming that Branson had lied when he had alleged that BA had engaged in ?dirty tricks?. Branson took more legal action in 1998.
1997: Bob Aylings?s revamp of BA as more cosmopolitan and less British provoked a public drubbing from Margaret Thatcher.
1998: The aftermath of a cabin crew strike in response to Bob Ayling?s cost-cutting Business Efficiency Program (BEP) cost BA GBP125 million.
1999: An internal survey, ?It?s Your Shout? revealed a cynical view of the management of BA by staff. 1,000 job cuts were announced.
2000: Bob Ayling was forced to resign after share prices ?nosedived?. 6,000 job losses were made public.
RYANAIR
Michael O?Leary is the CEO of the world?s most disliked airline, Ryanair. O?Leary, a former Dublin accountant, who has led the profitable budget airline for the past 20 plus years, believes that employees really value working in a highly controlled and fearful environment. Even customers are expected to be extremely compliant. O?Leary was quoted in the New York Times as stating: ?Will we give you a refund on a non-refundable ticket because your grandmother died? No! We?re not interested in your sob stories. Go away! Ryanair is based on a ?command and control? way of managing employees and customers, where lower level employees have little input into company decision making. . But there are highly successful airlines such as South-West that take a radically different approach. South-West attributes its success to the value it places on partnerships between staff, management and unions as a way to maintain highly efficient and customer-focused outcomes. According to Professor Greg Bamber, author of Up in the Air: How Airlines Can Improve Their Performance by Engaging Their Employees, companies such as Ryanair may not be sustainable in the long term. Why? It all comes down to organisational values. ?Once companies have developed a people-oriented culture based on values of mutual commitment and involvement, they can make and and implement decisions in a quicker timeframe,? said Professor Bamber. But the Ryanair approach to managing people is more common than you might think. While this approach may bring short-term gains for shareholders, it may not be beneficial in the long term, according to Quentin Jones, Director of Human Synergistics. Jones states that, during times of economic uncertainty and increased unemployment. Those firms that revert back [sic] to command and control management styles and threatening behaviours are sending confusing and mixed messages to employees. When this happens to employees (that is, their employers break their commitment to the espoused set of company values), employees are more likely to distance themselves from the company psychologically and emotionally.
Sources: Knights, D. and Willmott, H. (2012) Introducing Organizational Behaviour and Management, Cengage: 390-391. Robbins, S.P., Judge, T. A., Millett, B. and Boyle, M.(2011) Organisational Behaviour, Pearson: 106.
Questions
1. Compare the cultures of the four airlines mentioned in the case study.
2. What are the factors that led BA and Ryanair respectively to engineer and adopt their distinctive organisation cultures?
3. What is ?command and control? and how effective is it as a management style?
4. What are the causes of the cynicism of BA staff revealed in the internal opinion survey, ?It?s Your Shout?, in 1999?
5. How do you think Ryanair staff feel towards their employer?
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