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British airways 260809


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Ayling, British Airways, Organizational behavior.

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British airways 260809

  1. 1. Flying into a Storm : British Airways
  2. 2. History <ul><ul><li>BA in 1981 was a Very Troubled Airline. Severe Losses (145 m. Pounds), Overstaffed, Poor Quality. Close to bankruptcy. </li></ul></ul><ul><ul><li>Voted airline to be avoided at all costs. Was most unpunctual Airline in Europe out of its own home base. </li></ul></ul><ul><ul><li>John King Appointed Chairman in 1981. Initiates Survival Plan. Radical Steps Include Reducing Staff From 52,000 to 43,000 in 9 months. Next to 35,000. Largely Voluntary. </li></ul></ul><ul><ul><li>Between 1981 and 1990, Total Transformation From ‘Bloody Awful to Bloody Marvelous’. Record Profits (245 m. Pounds) in 1990. </li></ul></ul>
  3. 3. History <ul><ul><li>British Airways directed its change efforts by focusing on customer service; King and Marshall found an airline that was in the ‘transportation business’ and was not customer oriented; responded by changing the culture of the organization; training program, Putting People First, for all staff with customer contact </li></ul></ul><ul><ul><li>Intensive management training for those supervising front-line employees. </li></ul></ul><ul><ul><li>Each employee went through “Putting people First” training between 1983- 86 </li></ul></ul><ul><ul><li>All managers went through “Managing People First” trainings. </li></ul></ul><ul><ul><li>They overhauled the human resource systems so that policies for hiring, compensating, appraising and promoting people were aligned with the new strategy and the training received. </li></ul></ul>
  4. 4. Riding High with Ayling <ul><li>Marshall step up as Chairman and Ayling was made the CEO in 1996. </li></ul><ul><li>Ayling Objectives for building an BA’s existing success : </li></ul><ul><ul><ul><li>To sustain BA as “the world’s favorite airline” </li></ul></ul></ul><ul><ul><ul><li>To continue to improve customer services in a more demanding environment. </li></ul></ul></ul><ul><ul><ul><li>To extend BA’s reach through alliances and marketing agreements </li></ul></ul></ul><ul><ul><ul><li>To improve further our management; to be the best managed company in the UK by the year 2000. </li></ul></ul></ul>
  5. 5. Riding High with Ayling <ul><li>Record profit of 585 pounds with Highest bonus payout in 1996. </li></ul><ul><li>Alliance with American Airlines. This would give two carriers joint control over 60% flights between US and UK. </li></ul><ul><li>In Sept 06, it was planned that 5000 volunteers will be asked to leave BA in coming 18 months. </li></ul><ul><li>Higher management focused on pay freezes, pay restructuring, early retirement and introduction of practices promoting greater efficiency. </li></ul><ul><li>Introduction of BEP – Business Efficiency Plan based on projections of deregulated competition. </li></ul>
  6. 6. Experiencing Turbulence <ul><li>Economic crisis hit Asia in 1997 which hit the airline industry resulting in capacity glut which resulted in drop in revenues. </li></ul><ul><li>Customer dissatisfaction. </li></ul><ul><li>Ayling started focusing on profits rather than people. </li></ul><ul><li>In June 1997, about 300 staff officially went on strike and 1500 called in sick, disrupting BA’s schedule for days. </li></ul><ul><li>Employee morale was all time low. </li></ul><ul><li>No investor revolt because of fragmented Share holders </li></ul>
  7. 7. Experiencing Turbulence <ul><li>Ayling pledged to the staff that he would be more “caring” and declared that people were back at the top of BA’s agenda. </li></ul><ul><li>Task force was setup called “ The way forward”. </li></ul><ul><li>BA announced plans to build a 28 million hotel at Heathrow just for staff. </li></ul><ul><li>Launch of Good people management framework with underlying message being “manage as you would like to be managed”. </li></ul>
  8. 8. Losing Altitude <ul><li>In May 1999, BA announced lowest annual profits in 6 years. </li></ul><ul><li>New strategy involved phasing out half of big Boeing 747s and replacing them with smaller 777s. </li></ul><ul><li>Paring down unprofitable routes. </li></ul><ul><li>In August 1999, BA announced second plan to trim overhead. </li></ul><ul><li>Tradition of innovation started with a concept of “Lounges in the Sky” </li></ul><ul><li>Investment in e-commerce to lift online sales. </li></ul><ul><li>In early Feb 2000, the results of third quarter was mixed. Turnover was up by 3.2% but there was an operating loss of 2million pounds. </li></ul><ul><li>Share prices went below 261p and now Ayling himself was gone. </li></ul>
  9. 9. What went wrong <ul><li>View 1 : </li></ul><ul><ul><li>Ayling suffered bad luck with the Asian crisis in 1998 and a strong pound throughout 1999 and early 2000. </li></ul></ul><ul><li>View 2 : </li></ul><ul><ul><li>Under him, the Airline has tried to fight on too many fronts. </li></ul></ul><ul><ul><li>Management has been distracted from real job of keeping passengers on seats. </li></ul></ul><ul><ul><li>He failed to take his staff with him. </li></ul></ul><ul><li>He irritated the British flying public by removing the U.K. flag from most BA tail fins. </li></ul><ul><li>As CEO Marshall had created a culture of employee and customer care that was widely admired even beyond the airline sector. That culture seemed to go away fairly quickly as service levels dropped and employees felt no longer cared for. </li></ul>
  10. 10. What should he have done differently ? <ul><li>Setting the priority (not opening too many fronts ). </li></ul><ul><li>Be more sensitive to Human aspect and job cuts. </li></ul><ul><li>During the tenure of Bob Ayling, BA had been too much outward focused and neglecting the inward focused aspect. </li></ul><ul><li>It became operations oriented, with low emphasis laid on employees moral. </li></ul><ul><li>Bob should have involved people in the process. change accomplished through people is far more effective than change forced upon them </li></ul><ul><li>Ayling should have focused on the following questions:- </li></ul><ul><li>1. Have the people helped to create the new product? 2. Are they constructively involved in deciding how to sell the product better? </li></ul>
  11. 11. What should he have done differently ? <ul><ul><ul><ul><ul><li>Creating a Vision for the future. </li></ul></ul></ul></ul></ul><ul><ul><li>Embodying the Desired Changes. </li></ul></ul><ul><ul><li>Communicating Through Symbols: e.g: </li></ul></ul><ul><ul><ul><ul><ul><li>Behavior: Iacocca’s $1 salary at Chrysler </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Programs: BA’s Putting People First program by Marshall. </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Single Element Focus: IBM and Customer Orientation Instituted by Lou Gerstner </li></ul></ul></ul>
  12. 12. What should he have done differently ? <ul><li>Start with where you want to end up </li></ul><ul><li>Select which expectation to change, which to honor, and which to defend </li></ul><ul><li>New CEO face the daunting challenges of multiple expectations </li></ul><ul><li>Recognize the uncertainties created by the facts of the transition at the top. </li></ul><ul><li>Focus on Few Themes </li></ul><ul><li>if everything is a priority ,then nothing is a priority </li></ul><ul><li>Focus on few themes and concentrating on them instead of covering several themes superficially </li></ul><ul><li>It must be able to mobilize large number of peoples </li></ul><ul><li>Themes may be Quality, Throughput ,performance oriented </li></ul>
  13. 13. Was he wrong person for the right strategy <ul><li>Companies need leaders with strengths and talents that are different from those of their previous CEO’s. This is not the case with Ayling. </li></ul><ul><li>His strategies were right but the execution was wrong. </li></ul>
  14. 14. <ul><li>Thank You </li></ul>