Introduction

Strategy in the civil aviation industry is

premised upon two fundamental drivers
that have been evolving
since deregulation of the US airline
industry in 1978: one, a growing global
concern for safety; and two,
everincreasing
consumer expectations of broad service
choice and service excellence. It is now
well-documented that
accidents and poor service quality are
primarily rooted in socio-technical
human factors, not technology per se.
Sub-optimization, or poor quality in
regards to management, decision-
making, teamwork, employee
motivation, or
communication can translate into loss of
customers, loss of market share, loss of
organization assets, and above all,
loss of life.
In such a safety-sensitive, customer
service-centric environment, the
traditional product-centered industrial
model of corporate structures and
industrial relations is inappropriate.
Human resource management (HRM)
expertise
is required now, more than ever, to
spearhead internal marketing strategies
in order to gain customer lock-on.
The primary focus of HRM strategy is
the manner in which the HR department
aligns general activities, policies and
procedures with the opportunity
imperatives of the organization. Such
relevant HRM expertise constitutes
nothing
less than a powerful strategic
opportunity.
Methodology
The original purpose of the audit’s
companion review of the literature was
to find other empirical studies of
the airline industry regarding HRM
practices, from an applied perspective,
with which to compare and contrast the
results of the audit presented later in this
article. None were found. This is
consistent with the findings of other
researchers.
M. L. Thomas (1997), author of the
book, A Portfolio Management
Approach to Strategic Airline Planning,
comments on the scarcity of research in
the area of airline management. “In
reviewing the literature on international
aviation, it is clear that researchers tend
to analyze the industry at a macro-level.
Although it has gained
much attention recently . . . the topic of
international commercial airline
management suffers from a lack of
theoretical
and empirical work, and the scarcity of
literature from a microeconomic
perspective.” According to J. Eaton
(2001), author of the book,
Globalization and Human Resource in
the Airline Industry, research is
particularly difficult
because “Airline managers are even
more secretive and defensive about
academic research than those in other
industries” (Eaton, 2001, p. ix).
For the purpose of this article, Human
Resources Management (HRM) refers to
the management of people
within the internal environment of
organizations. It comprises the activities,
policies, and practices involved in
planning, obtaining, developing,
utilizing, evaluating, maintaining, and
retaining the appropriate numbers and
skill
mix of employees to achieve the
organization’s objectives. (Appelbaum,
Syllabus, 2001). Empirical studies of
HRM practices in the airline industry
were not evident. As a result, the review
of literature became a study of popular
themes and contemporary problems in
the commercial aviation industry. The
research strategy was database
driven drawing upon business,
management, journalistic, academic, and
technological sources dating from 1995
onward.
A broad range of sources were consulted
with a view to aggregating the
fragmented material existing in an
attempt to construct a snapshot image of
key HRM themes found in, and
regarding, the commercial airline
industry.
This review is followed by a series of
select findings concerning the three
HRM audit categories that constitute the
focus of this essay: recruitment and
selection; organization development;
and, education, training and
development.
The audit results contain extensive data
on 13 airlines from nine countries from
around the globe. The audit was
conducted by 13 students/aviation
managers in the Global Aviation
Master’s of Business Administration
(GAMBA)
program at the John Molson School of
Business, Concordia University, and
Montreal, Quebec, Canada. In the article
below, a review of the literature is
presented followed by a select review of
the audit findings. The discussion
terminates with an analysis of the
findings, a discussion linking customer
satisfaction to HRM practices, and a
series
International Applied Business
Research Conference Acapulco,
Mexico 2003
3
of recommendations.
I. Review Of The HRM Literature:
HR Operational Activities:
Recruitment And Selection
The focus of applied aviation
psychologists and human factors
researchers is largely on pilots and
cockpit
crews. The selection of pilots historically
had been based almost exclusively on
flying skills. The aviation community
is now placing increasingly greater
emphasis on a pilot’s potential to work
well in a crew situation (Hedge et al,
2000). Research on the process used by
British Airways to select pilots, suggests
the “task of the current generation
of managers in the airline business,”
(Lowe, 1995) as beginning with the
selection and continued grooming of
professional
commercial pilots. Interpersonal skills,
and not just technical skills, are slowly
becoming viewed as critical
success factors for pilot performance and
safety. In another study by Goeters
(1995), it was found that nearly
half of the problem cases in a study of
193 pilots were rooted in difficulties with
interpersonal skills. In other words,
“measures of interpersonal
skills/aptitudes were good predictors of
whether or not a pilot became a problem
case”
(Monfries and Moore, 1996). Carriers
and the aviation community as a whole
are becoming increasingly aware of
the need for pilots to be competent in
crew resource management skills and
that “successful completion of a flight or
mission requires not only flying skills
but the ability to work well in a crew
situation.” (Hedge et al,
2000).Recruitment and selection,
obviously, are critical components of this
issue.
The airline industry is not only short of
skilled pilots, but of quality frontline
people as well. The problem
is described and quantified in an article
in Airline Business (1998), as follows:
“Like other service companies, airlines
are finding it increasingly difficult to
attract, retain, and afford quality
frontline people. The supply of quality
service sector people is decreasing as a
result of the end of the ‘baby boom’, a
lessening service ethic among young
people, and a shrinking supply of pilots
as countries downsize their air forces. At
the same time demand is increasing
as the service sector grows to an
increasing percentage of the world
economy (from 54% in 1970 to 60% in
1995) and more companies realize the
potential higher returns from improved
service” (McKinsey & Co.,1998, p.
16).
Good (1999,p. 46), citing a Fortune
Magazine survey of the world’s most
admired companies determined
that “the single most reliable predictor of
overall excellence is the ability to attract
and hold on to talented employees.”
Hiring right, suggests the American
Society for Training & Development in
their study of leading-edge companies,
is one of the things their choice of
Exemplary Practice Partners do in their
organizations (Managing Training
and Development, 2000, p.3).
Case studies of outstanding aviation and
airline organizations offer scattered but
rich sources of anecdotal
insights into the recruitment and hiring
practices of successful airlines. One
source offered very specific recruitment
and selection guidelines. In a survey
conducted by Business & Commercial
Aviation, hiring experts were asked for
their advice on how to hire the right
technician. B & CA’s summary (Benoff,
2001p. 65) includes helpful tips on
such issues as how to target job
announcement locations, what to look for
in a resume, how to assess the
applicant’s
work experience and career path, how to
prepare for the interview, and how to
conduct the interview and reference
checks (Benoff,2001 p. 65).
Falter wrote an entire dissertation on her
employer, Duncan Aviation a leader in
aviation service and maintenance
who has received #1 rating for the last 25
years in Professional Pilot magazine’s
annual survey for avionics
and maintenance. Falter(2000,p.107)
provided the following information
regarding the recruitment and hiring of
employees: within one week of hire, the
president of the company meets with all
new employees as part of their
orientation
and to learn about the new people. A
large percentage of new hires originated
from internal referrals—as
seen in 2000 when almost 50% of new
hires were referrals from employees
(Falter, 2000, p.117).
A far better known example of recruiting
and hiring policies is that of Southwest
Airlines. According to
Southwest’s V-P of the People
Department, Libby Sartain, the key to
recruitment and selection for frontline
positions
is to hire for attitude, not skills (Ellis,
2001, p. 48), “If we hire people who
don’t have the right attitude,
dispoInternational
Applied Business Research Conference
Acapulco, Mexico 2003
4
sition and behavioral characteristics to fit
into our culture, we will start to change
that culture. The recruiter’s primary
role is to make sure it’s a good cultural
fit” (Ellis, 2001, p.48). Each year,
Southwest’s 90,000 applicants go
through an “application process that
includes a personality test as well as
interviews by a recruiter, the candidate’s
potential supervisor and a peer
employee” (Ellis,2001, p. 48). Southwest
hires for attitudes and trains people for
specific skills because of the belief that
skills can be taught but attitudes cannot
be changed. Part of the interview
process involves testing for “a sense of
humor, ability to work with others, and
friendliness” (Czaplewski et al,
2001, p. 15). This in done in interviews
“where applicants tell jokes and role-
play a variety of situations to
demonstrate
teamwork and the capacity to act
spontaneously.” (Czaplewski et al, 2001,
p. 15) The lucky 4% who are
hired receive their orientation at the
University of People, Southwest’s in-
house training center (Ellis, p. 48).
Atlas Air Inc., a Boeing 747 cargo
aircraft operator with headquarters in
Golden, Colorado, understands the
importance of hiring for flexibility as a
key factor in its low-cost operating
success. Atlas has achieved high growth
rates without accidents and at lower
incremental personnel costs than many
established international airlines and
cargo carriers largely because of the
scheduling flexibility and high
productivity of its flight crew workers
(Good,
1999, pp. 11, 17, 203). One reason for
this flexibility may be found in what
appears to be the company’s practice of
hiring young crewmembers motivated by
the prospect of flying a Boeing 747
aircraft—the envy of many pilots.
Although
Atlas employees are paid less than half
the industry standard in wages
(compared to established union airlines),
“For many, Atlas Air is clearly the best
opportunity even without a favorable
change in compensation or
work rules.” (Good, 1999, p. 378)
Part of Southwest’s mandate to hire for
the right fit is its dedication to ensuring
employee diversity. According
to Sherry Phelps, director of
employment, Southwest tries to “mirror
the population at large…. The U.S.
census statistics are provided to all the
recruiters responsible for hiring in our
cities and they make a concerted effort
to make sure we have opportunities for
everyone and reflect the outside
population” (Hendersen, 1995, p. 41).
In addition to the concern over hiring the
right contact, or front line people, and
good pilots with both technical
and interpersonal skills, there is express
concern regarding the availability of
good management talent.
O’Toole (2001) refers to talented
management as a “scarce commodity”
that is likely to become even scarcer
unless
the industry invests more in its human
resources. “The internal supply of airline
executives will not, as it stands, be
enough to meet demand. In Europe,
recruitment activity at airports is
booming.” (O’Toole, 2001 p.106) In
another
article, O’Toole (2000{b}) cites the
observations of Michael Bell, who leads
the global aviation practice at the
executive
search consultancy, Spencer Stuart. Bell
believes that, “Regional airline
executives must craft and execute
robust business strategies, establish and
defend niches in competitive markets
and handle myriad operational issues
that arise in the larger carriers.”
(O’Toole, 2000 {b} p. 82) Because of
this, regional carriers offer management
talent
as good as that found in major carriers.
Recruiting practices however, have
become particularly focused concerning
some airlines’ astute observation
that diversity matters to customers and
should be part of the organization’s
hiring policy. Diversity is often
discussed
in lay and practitioner industry sources,
not from the point of view of equal and
fair treatment of employees,
but as a marketing method particularly in
discussions on recruitment. Hendersen
outlines the growth of both women
(International Society of Women Airline
Pilots) and black airline pilots
(Organization of Black Airline Pilots,
OBAP) associations challenging the old
status quo. “About 30 years ago, the U.S.
airline industry was an almost
100% white male bastion” (Hendersen,
1995, p. 37). Little information can be
found on the presence of women and
minorities in the American transport
industry, but airlines are learning how to
successfully court and embrace diversity.
At Southwest Airlines, a “leg up” is
given to women and minorities by
interviewing them ahead of other
candidates”
(Hendersen, 1995). At Southwest and
America West, where both organizations
claimed more than 50% of
their employees were female. Both
companies also have clear equal
employment directives. At America
West, a
corporate statement of commitment
regarding equal employment opportunity
and affirmative action is maintained
and updated annually in addition to a
separate “nondiscrimination in
employment policy that specifically
touches
upon harassment, including race, color,
religion, national origin, age disability,
veteran status, sex and in particular,
sexual harassment” (Hendersen,1995).
As mentioned earlier in the section on
recruitment, Southwest seeks to mirror
population statistics in its hiring
practices. United has also taken a stand
and has declared its commitment to
“providing opportunity for career
advancement to women and minorities
… [setting] aggressive affirmative-action
goals and strongly [promoting] equal
opportunity for all employees in the
areas of recruitment, hiring and
promoInternational
Applied Business Research Conference
Acapulco, Mexico 2003
5
tion…” (Hendersen, 1995).
Delta Airlines has also taken a number of
industry-leading initiatives to promote
the development of
women and black pilots in an industry
where only 5% of all pilots are women
and less than 1% is non-Caucasians
(Black Enterprise, 2001). In June 2001,
students began benefiting from Delta’s
commitment to spend $1.6 million
in pilot training scholarships in a joint
program with Western Michigan
University and the Organization of Black
Airline Pilots. Delta has also targeted
selected high schools around the US
where it provides financial assistance,
internships,
job shadowing, and facilities tours.
Employees provide program support by
serving as mentors in the
classrooms, sharing real-life experiences
with the D-TCA [Delta Technical Career
Academy] students. And, in another
collaborative effort with OBAP, 30 boys
and girls were brought to Ace Camp to
gain first-hand knowledge of
what it takes to be successful in the field
of aviation (Black Enterprise, 2001).
Strategy and Operational Activities:
Organizational Development
In an intensely competitive marketplace
where service innovations are so easily
replicated, a key strategic
variable that nobody can copy is an
airline’s culture. (Holloway, 1998, p.
272)
HRM functions as “a set of processes,
which—through the recruitment,
training, motivation, appraisal, reward,
and development of individuals, and
through the effective handling of
industrial relations—translates strategy
into action,” (Holloway, 1998,p. 269).
Such a definition welds the notion of
how an organization selects, interacts
with, evaluates, enriches, and
compensates employees with the culture
that is created and how employees, in
turn,
provide service to the organization’s
customers. Or, to paraphrase Seal and
Kleiner (1999), it is the management
style of the CEO, good communications,
good labor-management relations,
respectful treatment of employees,
incentive
programs, and hiring right that are the
keys to a healthy organization.
The airline industry, unfortunately, is not
in good health. Operational and
administrative functions, particularly
in customer service organizations, are
built upon three essential critical success
factors: management commitment,
customer focus, and employee
involvement (Laszlo, 1999). These are
not the norm in the airline industry that
is beset by communication problems.
Holloway (1998,p. 269) suggests,
“Communications need to encapsulate
what
an airline is doing in its markets, what
value it is adding, and why it would be
missed were it not in business. There
is little empirical evidence that this sort
of communication is yet widespread in
the industry.
Organization communications are largely
a product of an organization’s structure.
Old hierarchical command
and control structures must give way to
delayered organizations that improve
communications and bring management
closer to employees and customers. Jan
Carlzon of Scandinavian Airline Systems
(SAS), points out that
hierarchies create environments where
those higher up legitimate their roles
only “by issuing instructions, setting
controls and carefully monitoring
behavior” (Eaton, 2001, p. 130). This
style of leadership discourages initiative
among employees and ultimately
translates into sub-optimal performance
and lower customer satisfaction. The
movement towards the flattening of
organizations is indicative of a shift in
human resource management from
seeking
control over employees to gaining
commitment from employees. Herein
lies the foundation of organizational
development upon which high
performing organizations are based.
The latter is what occurs in high
performing organizations. Successful
well-run organizations are often
cited in the literature for actively shaping
their culture through their hiring
practices, orientation programs for new
employees, treatment of employees as
internal customers, and for paying
ongoing attention to the opinions of line
staff. When performed sincerely and
professionally, such efforts can define an
organization’s culture and translate
into lower costs of labor, improved
productivity, and an increased sense of
empowerment on the part of employees.
The case of Duncan Aviation offers an
excellent example. Duncan Aviation is a
leader in US aviation service and
maintenance and has received #1 rating
for the last 25 years in Professional Pilot
magazine’s annual survey for avionics
and maintenance (Falter, 2000, p.117).
At Duncan, management took employee
opinions seriously when the
results of a survey given to Duncan’s
employees provided important and
revealing feedback to the human
resource
specialist who conducted the research.
The survey clearly indicated “low morale
and low job satisfaction … across
International Applied Business
Research Conference Acapulco,
Mexico 2003
6
the company. Employees noted lack of
communication, lack of respect, pay
discrepancies, and distrust of
management
as areas of concern.” (Falter, 2000, p. 95)
The results of the study were
successfully used by Duncan
management
to launch three HR initiatives as part of
the company’s reorganization efforts.
One, the company created a
“viable company-wide pay schedule
based on accurate job descriptions” (after
having the employees complete a job
analysis questionnaire). Two, the vice-
president in charge of implementing the
structural changes was asked to resign
when he failed to “create strong
teamwork at the senior management
level” (individuals were found to be
scared and mistrustful of the vice-
president). And three, formalized on-
going employee-training programs were
implemented
that improved skill levels and
communication across the organization
and ameliorated the employees’
sense of empowerment (Falter, 2000,
p.96).
Southwest Airlines also closely monitors
the perceptions of its employees and
those of the unions. The attitude
at Southwest, according to Libby Sartain,
V-P of the People Department, is “if
we’re not getting feedback, we
won’t know what’s going on” (Ellis,
2001). SWA “constantly surveys its
employees and unions to identify their
perceptions and solicit ideas about how
to run the company” (Milliman, 1999).
As part of SWA’s internal marketing
strategy, employee focus groups are used
to generate new ideas and unions are
encouraged to research problems
and present solutions to SWA
management (Czaplewski et al, 2001, p.
17). Southwest is also particularly noted
for
the spiritual/family-like, employee-
centered values espoused and practiced
by management teams. According to
Milliman (1999), Southwest’s strong set
of values is a manifestation of
spirituality. These spiritual values
include
the following: one, a strong emphasis on
community, teamwork, and serving
others; two, employees feel like they
are part of a cause (i.e. an airline that
offers low airfares, frequent flights, and
personable service); and three,
employees
feel they are empowered and can really
make a change in their customers’ lives
and at work (Milliman,
1999). Treating employees well and
empowering them, is derived straight
from the airline’s mission and mission
statement. “…Above all, employees will
be provided the same concern, respect,
and caring attitude within the
organization
that they are expected to share externally
with every Southwest customer.” In
simple terms, the underlying
belief is the better employees are treated,
the better they will treat customers
(Czaplewski et al, 2001, p. 15).
Management at Duncan Aviation also
shares the belief that the way an
employee is treated will dictate the
quality of customer service: “… if our
employees aren’t happy, our customers
won’t be either. We keep our employees
happy through strong, caring and
consistent leadership; developing,
communicating, and staying true to our
solid mission; a forward-focused vision
which keeps our company strong and
competitive; and high values that we
live by on a daily basis.” (Falter, 2000,
p.5) Attention to detail, collective
decision-making, and open-mindedness
to
new ideas are typical hallmarks of
successful airlines (Shifrin, 2001, p. 74).
Image is another dimension of an
organization’s culture that can unify a
workforce. At Virgin Atlantic Airline,
innovative in-flight services and young
and enthusiastic customer contact staff
help to communicate the entertainment-
oriented and light-hearted corporate
image. Cultural rifts within airlines are
inherent to the global and
multi-faceted nature of the industry.
Different groups in an organization may
act as different tribes and result in
intertribal
conflict. “When the beliefs or behaviors
of one group are not congruent with the
thoughts or actions of a
different group… intergroup hostility,
rather than teamwork is usually the
outcome.” (Karlins et al, 1997, p. 324)
Singapore Airlines countered this
problem with its OASIS (Operational
Areas Seminar in Synergy) programmed.
In
a three-day long seminar, Singapore
brought pilots, cabin crew supervisors,
ground engineers and station managers/
traffic personnel together to “reduce
inter-group conflict and enhance inter-
group cooperation and effectiveness
between operational areas.” (Karlins et
al, 1997, p. 324). This is what
organizational development is intended
to accomplish.
The impact of an airlines’ management
culture on that organization’s safety
subculture is critical to airlines.
Statistics show that seventy percent of
accidents and incidents are caused by
crew errors. This number rises to
above 90% if human error at the
organization level is included (Amalberti
et al., 1998 p. 36). In reviewing the
literature,
a great deal of information was available
on safety and error management in
regards to incidents and accidents
occurring in flight. Management often
takes a hit in these reports for being a
significant contributing factor to
accidents arising from a chain of human
error activities. Just as the success of
high performing organizations is usually
attributed to the style and competence of
senior management (particularly the
CEO), so too are the safety culture
and environmental conditions. In
addition to management’s deficiencies,
the literature focuses on organization
structure as well as the failure of
communication that occurs between the
different cultures and subcultures within
International Applied Business
Research Conference Acapulco,
Mexico 2003
7
the aviation and airline industry.
The decision processes that led to the
Space Shuttle Challenger disaster most
dramatically exemplifies one
particular dimension of the dual issues of
managerial control and failed
communications. In his article titled,
“Why
Does the Pilot Sit at the Front?” author
David Weir (1996) warns against “rigid
barriers which inhibit communication”
in complex socio-technical systems.
Most managerial systems operate in a
degraded mode … so that minor failures
are in fact quite frequent
within complex systems… It is now well
understood that socio-technical systems
with especially rigid barriers
which inhibit communication are
inherently vulnerable to certain types of
failure. The Challenger explosion, the
sequence of events leading up to it and
the existence of failures of
comprehension between the engineers
and managers
responsible for making the final
decisions about whether to fly or not to
fly is an example of this (Weir, p. 5).
And finally, mergers and acquisitions,
which are an ever-present theme in the
airline industry, rarely take
place with prior due diligence being
given to HR factors. The result is that
few mergers in global aviation actually
work. In fact, two thirds of mergers and
acquisitions either destroy, or fail to
create, shareholder value. The most
oft cited reason is the failure of the
merging organizations to pay enough
attention to people factors in their due
diligence
and the subsequent failure to integrate
organization cultures, says consultant,
Michael Bell (O’Toole, 2000,
p.106). Examples of failed
consolidations are legion. Delta’s
absorption of Pan Am’s Atlantic
Division, US Air’s
difficulties with Piedmont, and
Northwest’s problems with Republic are
striking as they represent takeovers of
airlines
within the same country (Holloway,
1998, p. 272). Other examples include
Canadian Airlines takeover by Air
Can (having failed for a decade after
having absorbed CPAir and numerous
regional airlines) and American Airlines’
takeover of Reno Air. KLM and Alitalia
were clearly incompatible. Likewise,
Boeing 737 operators-
Piedmont and Can’s Pacific Western had
both operated as profitable companies
until consolidating—after which
they struggled to survive (O’Toole,
2001,p.106).
Successful organizations such as Duncan
Aviation, Southwest Airlines, and Delta
Airlines pay a
great deal of attention to organization
culture. These organizations plan and
continuously develop a safety
and customer-centric culture by creating
a learning oriented and nimble
workforce, with a sense of community,
and the ability to respond to customer
needs and change. As members of a
service industry, such
organizations employ an employee-
centered (employees should be
participative, empowered, committed
and motivated) strategy in order to be far
more customer-centric (aware of
customer perceived value and
customer perceived risk). In this context,
a strong emphasis is placed on
recruitment, selection, employee
empowerment, succession planning, a
hands-on management style and the
organizational development
function to address –culture. The next
closely related topic is education,
training and development.
Strategy and Operational Activities:
Education, Training and Development
One of the most striking features in the
literature is the contrast between the
unreserved importance allotted
to education, training and development
and the impoverished reality of the
provision of training and development in
the airline industry. Eaton (2001, p. 136),
suggests, “The stance taken by
management on training and
development
is a useful yardstick for judging the
quality of human resource management
in a company. The airline industry
annually
spends tens of billions of dollars to
acquire technology and training
professionals to use that technology. And
yet, the industry spends all too little on
“training staff how to compete and how
to both generate and retain a loyal
base of satisfied consumers.” (Holloway,
1998, p.307).
In the following discussion, the review
of the literature will pivot around the
lamentable state of the aviation
industry’s commitment to training and
development and how various star
airlines (Singapore Airlines, Southwest
Airlines, and Duncan Aviation) use
training to create a competitive edge.
The reasons training and development,
when properly executed, provide star
airlines with a competitive advantage
relate to issues of socialization and
empowerment and how treating
employees well translates into employees
treating customers well. Another
dimension
of training, as a competitive edge, has to
do with creating a learning environment
and how this translates into
employee and organization adaptability
to change, growth and profitability.
According to one Applied Human
Factors
working group (60 people), Company
Resource Management requires
systematic training that: (1) ensures that
International Applied Business
Research Conference Acapulco,
Mexico 2003
8
management at all levels is thoroughly
trained in human factor; (2) promotes an
organization culture that emphasizes
indoctrination training; (3) invests in the
tools and skills necessary to sustain an
effective curriculum of operationally
relevant human factors materials; (4)
utilizes material that facilitates domain
specific applications; and, (5)
establishes the metrics needed to
ascertain the effectiveness of training
and subsequent change (Johnston and
Marino,
1996).
According to the American Society for
Training and Development (ASTD),
seven out of the 2,500 organizations
in its database stand out for their
commitment to training. Southwest
Airlines is one of these seven. The
other six are Dow Chemical Company,
Edward Jones, Great Plains, Lens
Crafters Inc., Sears, Roebuck &Co., and
South African Breweries. The training
policies that make the seven companies
so outstanding are that: one, train
more employees and provide more hours
of training; two, spend less per
employee, but more as a percentage of
payroll
on training; three, rely more heavily on
learning technologies and less on
classroom training; four, spend a
higher percent of their training budgets
on technology; five, use more outside
training providers; six, spend less on
outside training providers; and seven,
engage more often in human
performance practices, such as
compensation,
work training, and human performance
management practices. (Managing
Training & Development, 2000)
Socialization into Southwest’s culture
begins with the new employees’ training
at the University of People—
Southwest’s in-house training center—
where 25,000 people a year receive
training (Bunz and Maes, 1998). In
addition to new employees receiving
training, managers and executives
undergo a two-day training session in
Dallas
in the Frontline Leadership program.
First-time supervisors attend The
Leading with Integrity Program; flight
attendants
attend the Customer-Care Training
Program; and, pilots and other
employees are kept trained in the most
current performance standards (Bunz and
Maes, 1998). Southwest also combines
learning and customer care in an
extremely effective way. Southwest
maintains some 45 employees, in two
departments, to respond to the 1,000
letters
received weekly from customers. Some
1,500 hours per week are spent
personalizing answers to each customer’s
letter (Bunz and Maes, 1998). Such a
policy provides an effective management
awareness, employee monitoring,
and customer feedback mechanism all in
one. With such a learning mechanism in
place, Southwest can correct
problems, adapt to change, and develop
new services rapidly. In a competitive
industry this provides a definite
advantage.
Singapore Airlines, renowned in the
industry for its customer service, also
invests heavily in training. Fifteen
percent of payroll goes to employee
training compared to only 1.5 percent
spent by U.S. airlines. Flight attendants
at Singapore Airlines are trained for four
months whereas the American industry
standard is four weeks (Mycek,
2000, p. 17). When the manager of
training at Singapore was asked how
Singapore adjusted employee training
during downturns in the economy, the
manager replied that, “The only thing
that distinguishes us is our culture, our
people. Why would we possibly cut that
out just because we have a temporary
economic downturn?” (Mycek,
2000, p. 17)
Duncan Aviation is another company
that invests in employee training. In
2000, Duncan employees averaged
40 hours of training at a total cost of
approximately $2 million. Training and
funding included the following:
the Karen Duncan Scholarships (up to 10
awarded annually—worth $8,000 each—
for continuing education); a tuition
assistance program for all employees;
some tuition programs paid in full; on-
going technical and skill training
for all employees; and, reimbursement of
flight training for all, even though flight
training is not required for most
jobs. In the next major section of this
article, select audit findings, with
corresponding tables and statistics in the
respective
appendices, are presented.
II. Overview Of HRM Audit Findings
An outstanding 100% of respondents
answered yes, when asked in the
organization development category
of the audit, if their organizations
believed in “providing quality customer
service to both internal and external
customers.”
It would seem from such a response that
internal marketing was an understood
and fully embraced principle
in all the airlines surveyed. Further
scrutiny of other indicators of internal
marketing—recruitment and selection,
organization development, and
education, training and development—
indicates the contrary. Instead, the
findings
of the audit indicate that the airlines
surveyed showed more concern and
expertise in calculating costs and
International Applied Business
Research Conference Acapulco,
Mexico 2003
9
communicating rules and regulations,
than they did in learning about, and from
employees (line, administrative, and
management). Communicating
information about the organization’s
mission and strategy and providing the
necessary
education and development to build a
stronger workforce were also not
strongly evidenced in the audit.
Select Audit Findings: Recruitment
and Selection
There was an overwhelming consensus
in the review of the literature that hiring
the right people was one of
the single most important issues in
human resource management. Audit
findings (see Appendix 1) do not
contradict
this but a number of discrepancies on
hiring practices appeared in the findings.
According to respondents, virtually
all of the airlines in the survey answered
yes to the question of whether their
organizations attempts to fill positions
internally before going to outside sources
(Q.6). In spite of the unanimous policy
of seeking internal candidates
first, less than half of the respondents
(Q.14) responded yes to there being a
policy regarding promotions (40.00%
answered no and the remaining13.33%
answered not applicable). Another
surprising finding was that less than half
of all those who interviewed candidates
received training in “the types of
questions and actions that are legal”
(Q.40), and even fewer (40%) received
training in interviewing techniques
(Q.41). On a more general note, the
highest ranking sources cited for seeking
external candidates (Q. 21) were
employee recommendations (73.33%),
followed by the Internet (71.43%), and
fairly close behind, newspaper ads
(66.67%). Interestingly, even though
employee recommendations were the
single highest source of external
candidates, less than half (40%) of the
respondents
responded yes to the question of there
being an employee referral program (Q.
22).
Select Audit Findings: Organization
Development
The overwhelming consensus in the
literature was that more than any other
organization characteristic, an
organization’s culture was the key to a
competitive advantage. However,
consistent with other findings indicating
low scores in the areas of
communication, gathering of
information, training and development,
and employee input,
the responses in the organization
development section of the audit clearly
signals problems in this area of
organization
life. While three-quarters (Q. 3) of
respondents said their organizations had
identified a desired culture, only
half (Q. 2) had a person in HR
continually monitoring trends and
techniques of organization development.
Not surprisingly,
less than half (40%) of the respondents
said there was a consistent culture
throughout their organizations,
and a shockingly low 20% said that their
organizations had attained the desired
culture! Opportunities to improve
organization development appear to by
bypassed by most organizations. Only
60% of the organizations in the audit
appear to provide training for the
improvement of team performance (Q.
40) and a mere 33.33% of respondents
said
training on change management was
offered (Q.47). Not surprisingly, only
one-third (Q. 20) of respondents said
their organizations carried out surveys or
analyses of organization culture and
effectiveness. What is surprising is
Recruitment and Selection—Obtaining
and evaluating qualified candidates
from internal and external sources for
positions throughout the
Organization. (McConnell)
Organization Development—
Improving communication and
understanding within the
Organization in order to produce
effective, functional management and
employee teams;
establishing or changing to a desired
culture; responding to changing
conditions; and analyzing
and influencing Organization personnel,
systems, structures, policies, and rewards
to ensure synergy and maximize internal
consistency. (McConnell)
International Applied Business
Research Conference Acapulco,
Mexico 2003
10
that in spite of all the above low scores,
100% of respondents said they believed
their organizations provided quality
customer service to both internal and
external customers (Q.37). The
enormous variance between this stated
belief
and the numerous indicators showing
otherwise, illustrates an alarming
disconnect between perception and
practice
in human resource management in these
airlines surveyed.
Select Audit Findings: Education,
Training and Development
In sharp contrast to the importance given
to training and development in the
literature, this is another area
that appears under valued in real world
application (Appendix 3). The efficacy
of training and development programs
does not appear to be well monitored.
Less than half of the audit’s respondents
said that training programs
have “clearly established and specific
behavioral objectives (Q.7),” and less
than half also said that the results of
training programs are “continually
monitored or evaluated” (Q.9). More
specifically, when asked how frequently
the subject matter of training programs
was reviewed for relevancy, respondents
indicated none of the airlines reviewed
their programs “at least once a year,” and
a mere 7 percent appear to review their
programs every one to
three years. An alarming 60% said they
reviewed such material only every three
to five years or when requested by
management (Q.12). On a more positive
note, the respondents indicated that
three-quarters of employees, and 100
percent of supervisors, identify specific
training needs of employees. However,
fewer than half of the respondents
said employees were made aware of
training programs (Q. 16) and only one
quarter said that their organizations
published a catalog of available
organization training programs (Q.31).
Even worse, of the one-quarter of airline
companies who do publish a catalog,
only 20% said the catalog was
distributed throughout the organization
(Q.32).
Summary and Discussion
The most obvious conclusion to be
drawn from the results of the audit is
how poorly understood the concept
of “internal marketing” is in the airline
industry. Airlines cannot offer optimal
service to external customers
because they don’t know their internal
customers very well. According to the
audit findings and the review of the
literature, airline administrators via the
literature and audit findings, appear to
show little awareness of, and interest
in, their own internal customers’
opinions and insights. Management also
tends not to communicate many types of
important information (with the
exception of rules and regulations) to
their internal customers (both supervisors
and
line personnel) and often do not provide
sufficient internal services that would
contribute to optimizing internal
customer
performance (e.g. training and
development). The reason for this lies in
the poor state of human resource
management in the airline industry.
Shareholders and managers should be
aware of these deficiencies.
In broad strokes, HRM weakness
gleaned from the three categories of
audit results are as follows. Overall
scores in the recruitment and selection
category were fairly good with the
notable exception that in spite of the fact
that employee recommendations were
the single greatest source for external
candidates, less than half of the
organizations
indicated having an employee referral
program in place. There was also a low
level of interest in surveying
employees for their opinions and
expectations. Organization development
(culture) appears to be in the sorriest
shape of all. Scores relating to
consistency of organization culture
throughout the organization, and level of
attainment
of desired culture, received surprisingly
low scores. Generally low scores were
found in the education, training
and development category--particularly
in regards to training in preparation for
another position or the provision
of information regarding available
training programs.
Education, Training, and
Development—Providing performance
skills training and
career development to employees,
utilizing both internal and external
resources, including
providing expertise to assess education,
training, and development needs and to
identify high-potential employees.
(McConnell)
International Applied Business
Research Conference Acapulco,
Mexico 2003
11
Customer Satisfaction and the Role of
HRM
While testing products and collecting
data is relatively straightforward for
companies involved in manufacturing
packaged goods the opposite is true in a
service business in which people buy an
experience. (Lovelock & Wright,
2002 p.64) In this context, customer
satisfaction, customer information and
customer perceived value becomes
critical. The US airline industry appears
to be in trouble on this front. In a study
by the Better Business Bureau,
data indicates that consumer complaints
“more than doubled between 1995 and
1999.”(Lovelock and Wright, 2002,
p.123). According to the American
Customer Satisfaction Index (ACSI),
compared to four other industries (banks,
stores, hotels, phone companies) between
1995 and 2000, airlines showed the
“sharpest deterioration in customer
satisfaction.” (Lovelock & Wright, pp.
123-124).
In an article titled, “Why Satisfied
Customers Defect,” researchers
examined data from a 1994 survey
conducted
by J. D. Power. In their large-scale
survey, Power gathered data from some
20,000 passengers who used the eight
largest domestic American airlines and
flew on 72 routes (Jones & Sasser, 1995,
p. 92). Jones and Sasser examined
the satisfaction-loyalty link by
comparing the degree of competitiveness
in 30 individual companies spread over
five
markets (local telephone, airlines,
hospitals, personal computers, and
automobiles). The data collected
indicates that
of the five markets, airline customers
ranked second highest in loyalty. In spite
of the relatively high degree of customer
loyalty in the airline market, carriers on
monopoly routes should take heed since
even frequent flyer points
will not stop dissatisfied customers from
switching over to new lower-priced
entrants (Jones and Sasser, 1995, p.
95).
The sources of a customer’s
dissatisfaction can be myriad. Numerous
interactions between a customer and a
service provider or machine are involved
in producing an experience in which a
customer will feel highly satisfied
(i.e. “delighted”). In addition to
interactions with humans and machines,
the customer’s experience is also subject
to
variables beyond an airline’s control.
The best way to manage such service
challenges, says Sir Colin Marshall, the
Chairman of British Airways, is by
“creating an organization that excels in
listening to its most valuable
customers….
In several key places in our organization,
we have created customer advocates: in
our brand-management organization,
in our marketplace performance unit, …
and in our customer relations
department.” On the lattermost
point, says Marshall, customer relations
have been “transformed from a defensive
complaint department into a department
of customer champions whose mission is
to retain customers” (Prokesch, 1995, p.
106).
A conceptual tool that can help an
organization to plan according to
customer perceived value is to liken
service delivery to a theatrical event. The
customers’ experience of the service
“consists of a series of events that
customers experience as a performance”
(Lovelock & Wright, 2002, p. 64). This
experience is most visibly affected
by an organization’s contact personnel
(actors) but can be equally affected by
back office staff (back stage) as well.
In response to the need to optimize work
performance by line and administrative
staff, service organizations are
slowly adopting the philosophy of
internal marketing. Broadly speaking,
internal marketing may be understood to
mean two interrelated concepts: one, that
“even employees and departments not
having direct contact with external
customers are still suppliers of
something which adds value for internal
customers, and thus indirectly for
external
customers as well”; and two, internal
marketing can be viewed as the use of
“traditional marketing techniques as
communications devices to involve and
motivate employees and gain their
commitment to the corporate purpose”
(Holloway,1998, p. 170).
The link between internal and external
marketing is “intimate”. The link is the
inextricable combination of
motivation, productivity, professionalism
and the ethics of employees. The themes
now appearing on service organizations’
internal discussions are that of “the role
of the customer, new internal role
models, new dimensions of
quality and new quality standards…”
(Normann, 2000, p.159). Improved
service delivery, not price wars, may be
the ticket out of the airline industry’s
competitive quagmire. The airline
industry’s competitive crisis in the US is
rooted in the turbulence arising largely
from deregulation in 1978. Airline
managements were not adequately
equipped with planning concepts,
philosophies, and human resource
processes to cope effectively with the
fundamental
changes that have taken place and that
will continue to take place in the
marketplace (Thomas, 1997, p.34).
As the above review of the literature
indicates, high performing airlines and
aviation organizations are those that
have implemented internal marketing
and servant leadership strategies as
leaders in effective HRM strategies.