British Airways is the UK’s largest international scheduled carrier and also one of the leading global airlines. Some figures to better understand British Airways’ importance in the economic landscape, it connects to 300 destinations and carried in 2009/2010 nearly 32 million passengers. The revenue during the same exercise was GBP 8 billion with 238 aircrafts in service (British Airways Plc. 2010).
Two main events led British Airways to adopt its current strategy. The first is in 1987 the privatisation and the adoption of a new mission ‘To be the Best and Most Successful Company in the Airline Industry’. The second being the strategic turn-around in 1997 that lead to the definition of a new mission to address four key areas: the global economic climate, the competition, what customers and employees want (Analoui 2002).
Now that we have a better view on the company’s characteristics, we can develop the two folds of the question, critical evaluation of British Airways HR management and analysis of the fit between the organisation’s human resources and corporate strategies.
2. British Airways Human Resources (HR) strategy
a. Human Resources Management (HRM) models
There are many HRM models out there (Harvard, Michigan, etc…) but there are mainly three different approaches (Torrington, Hall and Taylor 2008) to achieve competitive advantage through HRM. The universalist approach described by Guest (1989) as a one size fits all i.e. derived from the best practices philosophy also supported by other academics e.g. Delery and Dory (1996), Pfeffer (1994) but some others are also questioning how easy it may be to shift focus of the organisation (Whipp 1992) and even to achieve the goals (Purcell 1991). The fit or contingency approach that can be found in Fombrun et al (1984) is based on both internal and external fit and focus on selection, appraisal, development and reward. This model has been criticised mainly because of its one-way relationship with organisational strategy. The resourced-based approach (Boxall 1996) is built on attributes of resources. To achieve competitive advantage, resources should be Valuable, Rare, Inimitable and Non-substitutable (VRIN).
b. British Airways HRM aspects
To define the HR model used by British Airways, we should first analyse the main aspects of its HR Management:
• creating motivation and commitment of all employees which continue to play a major part in the success of the company.
• some of HR measures are clearly designed to improve and support employees’ motivation (British Airways Plc. 2010).
• a remuneration scheme with profit sharing and encouraged share ownership, this is an effective way for employees to feel more involved in the company’s results (British Airways Plc. 2010),
• training and development are instrumental to ensure resources will be able not only to feel valued in the company but also will be able to enable business objectives achievement (British Airways Plc. 2010)
• diversity and inclusiveness is seen as a key aspect in the recruitment strategy, this includes genders, ethnicities, religions, etc… (British Airways Plc. 2010)
c. HRM model used by British Airways
The aspects depicted in the previous paragraph show that the internal resources are linked (KPIs, ownership, etc…) including the human resources. As described above we also realise that human values are in the middle of British Airways strategy. As quoted page 236 of the 4th edition of Managing Change (Burnes 2004), Hax and Majluf (1996 p. 10) state that: “The essence of the resource-based model … [is] that competitive advantage is created when resources and capabilities that are owned exclusively by the firm are applied to developing unique competencies. Moreover, the resulting advantage can be sustained due to the lack of substitution and imitation capabilities by the firm’s competitors.”
British Airways used a Resourced Based Model to achieve above average profitability by developing VRIN (Value, Rare, Inimitable, Non-substitutable) resources (Barney 1991). To substantiate this (Parker 1999), let us go back to the mid-nineties when the group started a portfolio analysis and defined the level of criticality of its operations. Based on this review, decision has been made to outsource resources (including human resources) that are not key to the core business. As other major corporations, they retained the strategic components (VRIN) and outsourced the routine activities. This decision helping the group to achieve outsourcing goals i.e. costs reduction, higher quality of services, agility and better focus on core business to meet the business objectives as defined in the introduction.
d. Limitations of the Resource-based model
There is no perfect model, or else there would only be one. But what are the ones of this model used by British Airways? Burnes (2004) mentions the lack of empirical support and also the complexity and ambiguousness of the resources definition. By design, the model is more focusing to the internal resources than on the external competition e.g. there is no link with the product markets, it may be difficult to find VRIN resources. There is also little evidence that many firms have adopted the model.
British Airways is implementing a model that, even if not perfect, should give a long-term competitive advantage against the competition by its resources heterogeneity and deployment of the key resources to increase the returns.
3. The fit between the organisation’s human resources and corporate strategies
a. British Airways strategies and objectives
As per the British Airways annual report 2009/2010, the company has defined five main strategic objectives to transform British Airways into the world’s leading global premium airline:
• Be the airline of choice for long haul premium customers.
• Deliver an outstanding service for customers at every touch point.
• Grow our presence in key global cities.
• Build on our leading position in London.
• Meet our customers’ needs and improve margins through new revenue streams.
To deliver these objectives five main streams have been developed to build the business plan i.e. the orientation of the company till 2012. These streams are colleagues, partnership, performance, excellence and customer. Each of them is measured since 2006 and allow a close monitoring of delivery. There is an HRM component in all streams to become the world’s leading premium airline.
b. Human Resources support to corporate strategies
We can indeed talk of a fit relationship between business and HR strategy. The fit model (Torrington, Hall and Taylor 2008) recognises the important of the human resources (employees) in the achievements of the company i.e. business objectives. Based on the 2009/2010 annual report, it is clearly stated “The Board sets the Company’s strategic aims, ensures that the necessary financial and human resources are in place for the Company to meet its objectives and reviews management performance”. This tells that we have a top-down approach from the board and that HR will have to respond to the business strategy by defining its own strategy to support the business goals. What does that mean in details for our five strategic business objectives?
In order to be the airline of choice for long haul premium customers, deep understanding of customers’ needs is key and so retaining experienced staff is important and hiring new resources with sharp specific skills will be at the heart of recruitment. On the other delivering an outstanding service, specific training as for instance service with style and also have a reward scheme. Thirdly to grow in key global cities, the strategy here will be to do this not only through under British Airways payroll employees but also use partnerships (expanding airlines network) to fill these new positions. For building on their leading position in London, it is important to centralise core processes and skilled employees in London to make this a sustainable position. To improve margins and develop new streams, a specific strategy will have to take place to develop actions in the group in order to get creativity and this including external resources too.
In summary, the company will keep building on the resources’ commitment by increasing awareness about customer service and making sure that this behaviour will be embedded in the company’s culture. There will be emphasis on the front-line leaders and this strategy will also be reflected in the reward scheme and a performance-related pay (British Airways Plc. 2010). Looking at the Explore our working world website (British Airways Plc. 2010), we can clearly see that HR developed positions or roles in order to be successful in achieving its business objectives.
British Airways did define clear strategic objectives and did adapt their HR management to support the delivery of its goals. Using the fit model (business objectives driving HR strategy) that puts employees in the centre is aligned with the HRM model, resourced-based, and therefore makes the whole coherent to achieve long-term competitive advantage to become the world’s leading global premium airline.
4. References and bibliography
ANALOUI, F., 2002. The Changing Patterns of Human Resource Management. Ashgate, Hampshire.
BARNEY, J., 1991. Firm resources and sustained competitive advantage. Journal of Management Vol. 17, No. 1, pp 99-120.
BOXALL, P.F. ,1996. The strategic HRM debate and the resource-based view of the firm, Human Resource Management Journal, Vol. 6, No. 3, pp. 59–75.
BRITISH AIRWAYS Plc., 2010. 2009/10 Annual Report and Accounts. (Chairman Martin Broughton). London: Likemind.
BRITISH AIRWAYS Plc., 2010. Explore Our Working World. [online]. Harmondsworth: British Airways Plc.. Available from: http://www.britishairwaysjobs.com/baweb1/ [Accessed 2 November 2010]
BURNES, B., 2004. Managing Change. 4th ed. London, UK: Prentice-Hall.
DELERY, J. and DOTY, D.H., 1996. Modes of Theorising in Strategic Human Resource Management: Tests of Universalistic, Contingency and Configurational Performance Predictions, Academy of Management Journal , Vol. 39, No. 4.
FOMBRUN, C., TICHY, N.M. and DEVANNA, M.A., 1984. Strategic Human Resource Management. New York: John Wiley and Sons.
GUEST, D., 1989. Personnel and HRM: Can you tell the difference?, Personnel Management (January).
PARKER, D., 1999. Privatization and Supply Chain Management: On the Effective Alignment of Purchasing and Supply after Privatization. New York, USA: Routledge.
PFEFFER, J., 1994. Competitive Advantage Through People . Boston: Harvard Business School Press.
PURCELL, J., 1991. The impact of corporate strategy on human resource management, in J. Storey (ed.) New Perspectives on Personnel Management. London: Routledge.
TORRINGTON, D., TAYLOR, S. and HALL, L., 2008. Human Resource Management, 7th ed. London, UK: Prentice-Hall.
WHIPP, R., 1992. Human resource management, competition and strategy: some productive tensions, in P. Blyton and P. Turnbull (eds) Reassessing Human Resource Management. California: Sage Publications.