managing change at british airways, an introduction

British Airways A Change Story

Friday, 21 March 2014

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.

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Change Timeline 1974-2010

Formation

‘Offensive’ Consolidation

Privatisation

Expansion

‘Defensive’ Consolidation

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Formation1974

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

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‘Offensive’ Consolidation1970s

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

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Privatisation1980s

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

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Expansion1990s

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

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‘Defensive’ Consolidation1990s-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

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‘Defensive’ Consolidation1990s-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.

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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.


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



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’.



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.


HR Models for ChangeHard HRM Michigan Model Soft HRM Harvard Model


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


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 £135m2005 Willie Walsh

• Reduced the numbers of managers

• Increased productivity

• International Airlines Group


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


6. Generate Short Term

Wins

5. Empower Broad Based

Action

7. Consolidate Gains and Make more

Change

CHANGEExecute the change

Support Change

Facilitation of training to reduce resistance



8. Anchor New Approaches

REFREEZE

Reinforce the change through operating procedures and supporting mechanisms

Monitor and adjust in response to problems



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


managing change at british airways, an introduction

Business

s new company

attacks ba

history of change management

change story

s beginning of privatisation

new culture

mpf ppf

staff personal qualities