CASE STUDY ASSESSMENT 2: QANTAS INTERNATIONAL 1. 0 INTRODUCTION All over the nation, news of Qantas’ restructuring of Qantas International (QI) has reached ears of many Australians and many have voiced out their concerns on the matter. Qantas International has been the weak link in the operations of Qantas group compared to its domestic, freight, low-cost carrier Jetstar and frequent flyer businesses. Qantas’ new strategy involves expanding its base of operations into the Asian region to capture the market share of a boom in airline activity.
With this new strategy, it plans to introduce job- cuts of 1000 employees mainly pilots and engineers. According to the two articles given, the Australian and International Pilots Association (APIA) and the Australian Licensed Aircraft Engineers Association (ALAEA) are pressuring Qantas’ Chief Executive Officer (CEO) Alan Joyce to abolish his downsizing policy. The unions and also the general public wants to keep jobs in Australia instead of having it outsourced to other countries which according to the CEO, will significantly reduce QI’s labour costs and increase their profitability. . 0 STRATEGIC CONTINGENCIES AFFECTING STRATEGIC CHOICES & HUMAN RESOURCE PLANNING 3. 1 Environmental factors affecting strategy The fast changing environment of the aviation industry plays a major role in QI’s restructuring. A number of events have caused QI to re-evaluate its strategies in order to adapt to its environment. The main factor in this case would be due to the economic instability experienced due to the recent Global Financial Crisis (GFC).
Various costs have risen over the past few years, significantly fuel and labour costs. As the price of fuel is not of QI’s control, labour costs will need to be reduced significantly to accommodate fuel costs. With the Asian economy growing extensively which results in more air travel within the region, QI has seen Asia as a region where they can expand their business into and gain a share of the growing market. New market opportunities will open up due to the growth trends of national/ international economies (Connor and Carson, 1982).
Another factor would be the technological advancements of aircraft design where the CEO claims that the new planes would need less transit checks/ maintenance done, therefore reducing the need for engineers. According to Connor and Carson (1983), technological change within an organization puts it ahead in innovation which has an impact on its product/ services and market development. 3. 2 The Asian Hub Strategy QI has unveiled its plan to penetrate the Asian aviation industry by relocating its hub to South- East Asia, either in Singapore or Malaysia.
This move is said to bolster Qantas’ reach for more destinations within Asia and also as a base for connecting Qantas flights from Australia to Europe. Along with this is a plan to form alliances with British Airways (BA) and Malaysia Airlines (MAS) so that they can share routes which will increase choices of destinations for Qantas’ customers. Nueno (1990) explained that alliances are agreements by different organizations with the same goal(s) and ambition(s) to share their common resources in order to achieve their goal(s), it occurs when an organization has very high ambitions but not enough resources.
With these alliances, Qantas will reduce the number of its pilots as the routes which are already operated by the respective airlines will be flown by their own pilots, not Qantas pilots. Due to this announcement, Qantas pilots are insecure about their jobs and that is what the APIA is fighting for. 3. 3 Strategic Alignment Currently, QI has a surplus of pilots and to avoid redundancy, pilots have been told take annual leaves to reduce their annual leave balances, therefore reducing the costs of pilot wages.
However, with the new alliances to be forged, the issue of downsizing pilots look imminent as it will reduce costs significantly which is part of QI’s strategy. The CEO has angered the ALAEA by stating that the current work being done by its engineers were inefficient and too expensive, contributing to its losses. As cost reduction is QI’s main strategy, downsizing its engineers seems like a good move as a new fleet of Airbus A-380s will be arriving which require less maintenance checks, thus, reducing maintenance costs.
Another strategy to be implemented as mentioned before will be relocating QI’s hub to Asia where has it has been known to provide employees at a much lower wage rate. Outsourcing has always been a great way to reduce operating costs. 3. 4 Human Resource Planning (HRP) The strategies outlined above has made it clear that QI is determined in reducing its labour costs by reducing the number of its most highly paid employees, the local pilots and engineers. By going into alliances, QI, BA and MAS will share their employees to service its shared routes, therefore, reducing the number of its staff required to service the route.
The allies will share the benefits while reducing their costs. Downsizing is the most logical option in order to fulfil this strategy and it has most probably been determined by the application of HRP. According to Stone (2010), HRP is a method of determining the quantity and quality of people needed by an organization in order to fulfil its goals. With relation to QI’s strategy of reducing costs, they opt to reduce the quantity of its employees which in turn will reduce costs. 3. 5. 1 Globalisation
Globalisation creates an almost borderless world where organisations from different nations can trade with each other without much hassle and with this gives rise to a phenomenon known as Business Process Outsourcing (BPO). BPO allows an organisation to increase its production capacity but will not be required to invest in assets, making it more flexible to manage its assets (Gilley and Rasheed, 2000). This is what QI wants to achieve with its plan to move its hub into Asia. 3. 5. 2 Academic Standards in Asia
Asia has grown tremendously over the years and is fast developing in to a major economic force challenging ‘The West’. More and more Asian countries have realized that education is the key in growing and more countries have invested heavily in providing tertiary level education facilities to their citizens. Marginson (2010) predicted that within a generation, the education level and research facilities of East- Asia and Singapore will reach that of Western Europe. This will ultimately give rise to more professional and skilled workers within that region.
QI intends to capitalise the future availability of more skilled employees in that region to provide cheaper and if not the same level of quality compared to its current workforce. 3. 0 MAINTAINING EMPLOYEE COMMITMENT & IMPLEMENTING HUMAN RESOURCE PLANNING 4. 5 Employee Commitment Commitment to an organization is a psychological attachment an employee feels towards its employer. Several types of commitments have been outlined by Meyer and Allen (1991), such as; Affective, Continuance and Normative.
Affective commitment occurs when the goals of the employee and its organization are the same, thus, the employee will want to stay with the organization. Continuance commitment arise among employees who perceive that it would costs more to lose the organization membership such as the loss of financial benefits or the relationships forged within the organization. Normative commitment is a commitment based on moral judgements where the employee feels obligated to be loyal as the organization might have spend its resources to provide training and helped them gain more knowledge and skills.
Qantas’ employees’ value their job highly as Qantas is seen as Australia’s icon and it represents “the spirit of Australia” to the world. National pride plays a major role in keeping employees committed. Employees want to help the company recover but they feel that outsourcing their jobs would not bring the same level of quality as what Qantas is known for. Customers are also worried about this move by the CEO as they want to be flown on a Qantas serviced aircraft by a trained Qantas pilot. With the insecurity of jobs among pilots and engineers increases employee motivation is decreasing. . 6 Employee Motivation Motivation is said to be the driving force behind a person’s actions in order to achieve their goals and commitments. Gardner and Lambert (1972) said that two types of motivation that a human experiences, Intrinsic and Extrinsic motivation. Intrinsic refers to the inner/ psychological drive of an employee when they enjoy or feel interested in the work that they perform. Extrinsic motivation appears by rewards of appraisals given to the employee by their peers or employers.
In workplaces, reward of bonuses or any financial gain can motivate employees. A theory worth looking into as described by Dessler (1991) is the Equity theory of Motivation where people assume that the amount of effort they put into their work deserves a just reward. In relation to the case study, Qantas’ employees believe that they have put in a lot of effort in maintaining the brand as an icon of comfort and safety, the plan to downsize however, shows that their employers do not recognise their commitment and opting for a cheaper solution in their strategy. 4. Downsizing Downsizing has been the norm of companies trying to bounce back from the aftermath of the GFC by reducing their costs. The permanent termination of employees helps improve the efficiency and effectiveness of the organization by making it more flexible due to the reduction of its bureaucratic structure (Phillips and Gully 2009). They further added that downsizing causes negative effects among employees such as; voluntary turnover of valuable employees, efficiency loss, a greater cost to hire and train new employees and lower morale and motivation.
Loss of employees also means that there will be a loss of knowledge and skills which is provided by the terminated employee. This theory is further supported by a study conducted by Litter and Innes (2001) on the effect downsizing has on the organizations skill base, where it has been concluded that downsizing is strongly related to deskilling. The skills provided by employees are intangible assets and contribute to the organization holding a competitive advantage. 4. 8 Implementing HRP
HRP aims to balance the quantity of employees with regards to the organisations strategy, which in this case means that a reduction of quantity is required. Instead of merely dismissing employees, HRP can be used to deploy the number of employees to perform different jobs which can increase its competitive advantage. According to Becker and Gerhart (1996), HR can be applied so as that they can create a competitive advantage or added value which is rare or un-imitable. Qantas has built a reputation of being among the safest airlines in the world but certain events have dented its reputation.
Therefore, it should put its available resources to improve the quality of its services in order to gain more customer confidence resulting it having an advantage among its rivals. 4. 0 CONCLUSION Qantas has developed a strategy to overcome the unprofitable International services from an entirely financial point of view which has instead caused a problem in its Human Resource Management. The current strategy indicates that in needs to reduce its workforce but now, it is facing opposition from the APIA and ALAEA who represent the voice of Qantas pilots and engineers who want to keep their jobs.
From the analysis of the case, other avenues can be taken by Qantas to resolve the dispute but still puts them on course in achieving its goal(s). Qantas should not terminate its workforce entirely but use them in different areas to improve its quality of service, therefore, creating competitive advantages which make them stand out from the crowd and gain more public acknowledgement. This might help them regain lost customers or open up new clientele which can improve its profitability rating. Customers have also said that they do not mind paying a bit more to keep the jobs of their fellow Australians.
Qantas needs to rethink is strategy by considering the human resource implications so that a synergy can be formulated to help the ‘Flying Kangaroo’ soar again. 5. 0 REFERENCES Becker, B. And B. Gerhart. 1996. The Impact of Human Resource Management on Organizational Performance: Progress and Prospects. Academy of Management Journal 39 (4): 779- 801. Ebcohost. http://web. ebscohost. com (accessed August 19, 2011) Connor, J. J. and W. M. Carson. 1982. Manpower Planning and Development: The Developing World. Boston: IHRDC. Dessler, G. 1991.
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