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Managing Change at British Airways, An Introduction

Brief introduction to change management at British Airways by Edinburgh University Undergraduates. Presentation briefly covers history of the company and applies introductory concepts to major change events within the firm, concluding with points of interest for further research.

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Managing Change at British Airways, An Introduction

  1. 1. British Airways A Change Story Friday, 21 March 2014
  2. 2. Change at BA We Briefly chart the history of Change Management at British Airways by developing a timeline of key change events. We then apply introductory concepts of change management to the company’s history in order to draw out points of further interest. 2 Friday, 21 March 2014
  3. 3. Change Timeline 1974-2010 Formation ‘Offensive’ Consolidation Privatisation Expansion ‘Defensive’ Consolidation 3 Friday, 21 March 2014
  4. 4. Formation 1974 Originally a private company formed by merger of small UK airlines in 1935 Nationalised along with Imperial Airlines to form BOAC in 1939 1971 Civil Aviation Act officially merged BOAC and BEA on April 1st 1974 4 Friday, 21 March 2014
  5. 5. ‘Offensive’ Consolidation 1970s New company a huge mix of aircraft and corporate cultures Majority of 70s spent consolidating aircraft and staff inherited in the various mergers Concorde flights launched in 1976, initially a financial burden with few profitable routes until early 80s 5 Friday, 21 March 2014
  6. 6. Privatisation 1980s Beginning of privatisation with new chairman and CEO expressly given this mandate Major changes to fleet, brand and corporate culture transform BA into highly profitable global airline E.g. 23,000 jobs cut with generous payoffs for voluntary redundancies. Funded by taxpayer allowing the soon-to-be privatised firm to operate with large cost savings without directly incurring the costs. Floated on the LSE in 1987, the most successful of a number of privatisations initiated by the conservative government in this period 6 Friday, 21 March 2014
  7. 7. Expansion 1990s As #1 most profitable airline in the world, entered new markets by acquiring stakes in local airlines ( Australia, U.S, Germany, France etc.) Richard Branson’s Virgin Atlantic (1984) Emerges as a serious #2 competitor leading to bitter ongoing rivalry. E.g.1993 Virgin and Branson sued BA and King for Libel winning a total of £650K in awards Faced increasingly aggressive competition from new budget airlines Ryanair (1985) and EasyJet (1995) as industry is deregulated 7 Friday, 21 March 2014
  8. 8. ‘Defensive’ Consolidation 1990s-00s(1) Persistent Decline in profitability due to high oil prices, intense competition and clashes with unions over restructuring. Profits falling 50% in 1999 and share price falling from 760p to 150p after 9/11 attacks BA retreated from several markets and engage in flurry of capacity reduction and changes to management Expensive maintenance and safety made future Concorde flights untenable forcing BA to end service in 2003 8 Friday, 21 March 2014
  9. 9. ‘Defensive’ Consolidation 1990s-00s (2) Largest losses in firm history reported in 2009 and considerable opposition from unions to job cuts and employment contract amendments meant to claw back profits Merged with Spanish Iberia Airline to form ‘International Airlines Group’ in a move that was seen as largely defensive by observers. In-line with an industry-wide pattern of high concentration meant to help mitigate the effects of high fuel costs and intense competition with economies of scale. 9 Friday, 21 March 2014
  10. 10. Cultural Change in BA (1) Two main programs were implemented: Putting People First (PPF) and Managing People First (MPF) PPF attended by all 40,000 employees and aimed to restructure their attitudes by: 1.Challenging hierarchal and militaristic culture of BA • Employees instructed not to attend PPF meetings in uniform. • Employees allocated to cross-functional and cross-grade groups. 2.Encouraging staff to be more positive with themselves • Taught how to better handle stress, and how to set personal goals. • Lapel badges were made with the motto “We’re putting people first” inscribed on them to act as a constant visual reminder. Friday, 21 March 2014
  11. 11. Marshall showed great commitment to PPF program where he attended 95% courses. Ensured that all of the symbols of the new culture were in place. PPF paved the way to reformation of company policies and practices which carried on to the 1990’s such as: • Direct contact with staff considered crucial and down route briefings introduced to ensure no staff member neglected • Cabin crew assigned to ‘families’ that shared same work shifts to improve employee relations • The role of ‘Passenger group Co-ordinator’ introduced where staff were appointed based entirely on personal qualities Cultural Change in BA (2) Friday, 21 March 2014
  12. 12. MPF targeted managerial employees and aimed to change behaviours according to a list of factors constructed by consultants: • Clarity and helpfulness • Promoting achievement • Influencing through personal excellence and team-working • Care and trust Managerial incentives introduced where bonuses as high as 20% of base salary. Calculated on a 50:50 split between displaying desired behaviours and achieving goals. All programs paved the way to creating a corporate culture that focused on staff personal qualities and close relations amongst employees, which led to overall employee satisfaction, making all other changes occurring in BA more easily received by its employees. Other programs introduced to continue the effect of PPF and MPF such as ‘Winning For Customers’ and ‘To Be the Best’ which included confidence building exercises such as the ‘Love Bath’. Cultural Change in BA (3) Friday, 21 March 2014
  13. 13. Role of HR in BA Change Major change in 1987 – new mission statement: “to be the best and most successful company in the airline industry.” Aim to keep employees in the centre of HR planning. 2 Training programmes • “Putting People First” – align training to the company’s strategy. • “Managing People First” – to breakdown the strict behavioural boundaries. Friday, 21 March 2014
  14. 14. HR Models for Change Hard HRM Michigan Model Soft HRM Harvard Model Friday, 21 March 2014
  15. 15. Leadership Changes Inside British Airways (1) 1981 Sir John King - Chairman 1983 Colin Marshall - CEO • Transferring from transportation business to customer services business • Significant downsizing • ‘Lead from the front’ • Cost reductions • Increased profitability • Customer satisfaction • Perceptible increase in staff morale Friday, 21 March 2014
  16. 16. Leadership Changes Inside British Airways (2) 1996 Bob Ayling • Strategic alliance with American Airlines • Investment in Iberia • Low-cost carrier, Go 2000 Rod Eddington • "Future Size and Shape" • Decrease in turnover • Profit of £135m 2005 Willie Walsh • Reduced the numbers of managers • Increased productivity • International Airlines Group Friday, 21 March 2014
  17. 17. UNFREEZE First Four steps correspond with Lewin’s Change model. •Make sure employees are ready for change •Create an action plan •Decrease strengths of old values, attitudes, and behaviours Kotter’s (1996) Model Lewin’s (1951) Model Managing Employee Resistance (1) 1. Establish a sense of urgency 4. Communicate the Change Vision 3. Develop Vision and Strategy 2. Create the Guiding Coalition Friday, 21 March 2014
  18. 18. 6. Generate Short Term Wins 5. Empower Broad Based Action 7. Consolidate Gains and Make more Change CHANGE Execute the change Support Change Facilitation of training to reduce resistance Managing Employee Resistance (2) Friday, 21 March 2014
  19. 19. 8. Anchor New Approaches REFREEZE Reinforce the change through operating procedures and supporting mechanisms Monitor and adjust in response to problems Managing Employee Resistance (3) Friday, 21 March 2014
  20. 20. Conclusion Historically, change often forced upon BA externally. First by the need to privatise and later by intense competition BA’s HR department successfully adapted to the change of the privatisation process in 1987 by applying 2 formal HR models. Cultural programs introduced promoted employee satisfaction and hence, efficiency; however, cultural changes often neglected necessary structural changes The ability to effectively manage employee resistance was an essential part of transforming BA Friday, 21 March 2014
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