Strategic Human Resource Management In World Airline Industry

For over 15 years, there has been an ongoing research on HR strategies and competencies differentiating the business performance. Besides this, HR practitioners have focussed their attention on other important questions as well. Bratton and Gold (2007), for example, tries to question what policies and practices make up HR strategies. Is it possible to identify cluster of bundle of HR practices with different strategic competitive models? What is relationship between different clusters of HR practices and organizational performance? For companies looking for ways to gain a competitive advantage, the implication of HR strategic choices for company’s performance is certainly the key factor. Recently business strategy researchers turned their attention to internal attributes of top firms looking at growth and utilization of human resources. This essay will aim to demonstrate how Strategic Human Resource Management (SHRM) practices are getting implemented in world airline industry. It will establish a clear link between industry trends and strategic response.

According to Baney and Hesterly (2006), SHRM theories are based on a set of assumptions, and hypothesis about the way competition in any industry is likely to evolve; and how that evolution can be exploited to earn a profit. The greater the extent to which these assumptions and hypothesis accurately reflect, more likely is that an organisation will gain a competitive advantage from implementing those strategies. On contrary, if these assumptions and hypothesis turn to fail, then organisational strategies are not likely to be source of competitive advantage. Huang (1999) agrees stating that there is a close link between business strategy and HRM methods. He moreover assumes that companies that closely coordinate their business strategy and HRM activities achieve better performance than companies that do not. The international airline industry is currently following similar trends.

Practice of SHRM has outpaced academic work on human capital management. Yet data on how firms actually manage people to provide a source of competitive advantage are scarce (Becker and Huselid, 1999). HRM system that develops and maintains a firm’s strategic infrastructure must be considered an investment. HR system in high performance airline industries like British Airways, Cathay Pacific, Air France, Delta, etc. are characterised by employee security, selective hiring, decentralized decision making, extensive development, reduced status differentiation and information sharing. Ulrich and Brockbank (2005) have further classified the key HR practices into people; management, information and organisation (see Appendix 1 for further information). The company builds a line of sight from investors and customers to its management and employees through HR practices. Most of the airlines follow such type of practices.

In world airline industry, leading international carriers adopt different business level strategies to face competitive challenges. These broadly classify into two: Growth strategies and Generic competitive strategies (Harrison and Carron, 2001). Growth strategies mainly deal with internal and external growth of an organization with stability whereas; competitive strategies are concerned with cost leadership, differentiation and focus (Bratton and Gold, 2007). Miles and Snow (nd) classified business strategies as defender, prospector, and analyzer and proposed corresponded strategic human resource systems. Business-level strategy deals with decisions and actions pertaining to each business unit, the main objective of a business-level strategy being to make the unit more competitive in its marketplace (Bratton and Gold, 2007)

The competitive challenges in airline industry are arising from the various trends such as recession, privatisation, congestion, overcapacity, technology, etc. In response to these, major international airlines have adopted a range of strategies to maintain and create competitive advantage. These strategies (Botten and MacManus, 1999) fall into three main categories covering: competitive positioning strategies; marketing/customer orientated (HR) strategies, and cost control.

The competitiveness in world airlines is increasingly dependent on size, market share and geographical coverage. As per Botten and McManus (1999) report, British Airways gain most from globalisation and extended geographical route coverage. A considerable emphasis was been put on developing a strong global brand image, quality and customer service, with cost control measures being introduced to improve efficiency. A radically changed market policy covers its different market segments. British Airways implemented a range of new working practices and strategies (see appendix 2) in response to the challenges of market forces, growing competition, and the increased freedom for employers to reconstruct the employment relationship (Huang, 1999). Human resource management (HRM) principles and techniques are proposed to offer a key for securing these objectives. As cost efficiency increases, there is a substantial reduction in employment levels, new working practices, and wage and salary control. Consequently, there has been a substantial increase in productivity levels but decline in staff morale and motivation (Botten and McManus, 1999). This suggests that there was not been effective use of HR practices earlier. Huang (1999) seconded this and remarked firms practising HR strategies would not show better organizational performance. However, at present its major strengths are in International operations & Employee productivity, which they achieve by integrating their various mergers and alliances. British Airways weaknesses still lays in unfunded employee post retirement benefits and as a result, its profitability is declining.

On the other hand, Air France, which is Europe’s largest airline and the third largest in the world, is facing broader problems. The company is facing stronger competition in two major areas of operation, namely Europe and North American routes. The strategic responses to this challenge include operation of new routes in its already existing extensive route network. In addition to this, Air France has increased frequency of certain flights. There are few criticisms against Air France in terms of its service quality and HR strategies, but there is hardly any relevance in the group’s customer orientation that differentiates it from competitors (Botten and McManus, 1999). Air France has recently declared about their future strategy of investing heavily into customer service. This indicates company’s intention of implementing HR practices for such enhancements in future. Market conditions; however often enable firms to achieve considerable success by giving