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Human Resource Management Strategy in the Saudi Airlines A Focus on Organizational Development

Prepared By
KHALED AL RAKKAH

HRM 512

Dr. ABDULAZIZ ABUMANSOUR

May, 2012

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1. Executive Summary

The

commercial

airline

service

industry

is

extremely

competitive, safety-sensitive and high technology, and Saudi Airlines is not an exception. People, employees and customers, not products and machines, must be the arena of the Saudi Airlines' core competence. The implications are vast and pervasive, affecting the organization's structure, strategy, culture and numerous operational activities. The conclusion, hence, shows that the industry as a whole continues to function as per a traditional, top down, highly divisionalized, industrial model of operations and governance. This model is manifestly inappropriate in such a highly knowledge-based service market as the airline industry. HRM expertise in general and organizational development in particular at Saudi Airlines are required now, more than ever, to spearhead the strategic development of a customer-centric, learning-oriented workforce that is capable of adapting quickly to the strategic goals and change imperatives facing the airline industry, and the Saudi Airlines Human Resources practices.

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TABLE OF CONTENTS

CONTENTS

1. 2. 3. 4. 5. 6.

Excusive Summary .... Introduction ...... Strategy Organization Development ..... Conclusion ........ Summary and Suggestions ........ Key Sources ......

2 4 5 13 15 18

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2. Introduction Strategy in the aviation and airline industries is premised on 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, ever-increasing consumer expectations of broad service choice and service excellence. Research has long shown that accidents and poor service quality are rooted primarily in sociotechnical human factors, not technology per se. Suboptimisation, or poor quality with regard 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. HRM expertise is required now, more than ever, to spearhead internal marketing strategies in order to gain customer loyalty. The primary area of strategy focus is the manner in which the HR department aligns activities, policies and procedures with the organizational development strategic imperatives of organization. the

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3. Strategy Organization Development In an intensely competitive marketplace, where service innovations are replicated so easily, a key strategic variable that nobody can copy is an airlines culture. 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. www.wikipedia.com Such a definition combines 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. Alternatively, to paraphrase the definition, it is the management style of the chief executive officer, good communications, good labormanagement relations, respectful treatment of employees, incentive programs and effective recruitment 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 on three essential critical success factors: management commitment, customer focus and employee involvement. These are not the norm in the airline industry, which is beset by communication problems.
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Communications need to encapsulate what an airline is doing in its markets, what value it is adding, and why it would be missed was 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. This style of leadership discourages initiative among employees and ultimately translates into suboptimal performance and lower customer satisfaction. The movement towards the flattening of organizations is indicative of a shift in HRM from seeking control over employees to gaining commitment from employees. This is the foundation of organizational development. 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
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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 Saudi Airlines offers an excellent example. Saudi Airlines is a leader in aviation services and has received top ratings for many years. At Saudi Airlines, management took employee opinions seriously when the results of a survey given to Saudi Airlines' employees provided important and revealing feedback to the HR specialist who conducted the research. The survey indicated: Low morale and low job satisfaction ... across the company. Employees noted lack of communication, lack of respect, pay discrepancies, and distrust of management as areas of concern. The results of the study were used effectively by Saudi Airlines management to launch three HR initiatives as part of the companys reorganization. One, the company created a viable company-wide pay schedule based on accurate job descriptions (after having the employees complete the vice-president a job analysis in charge of

questionnaire).

Two,

implementing the structural changes was asked to resign when he failed to create strong teamwork at the senior management
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level (individuals were found to be scared and mistrustful of the vice-president). 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. Saudi Airlines also monitors the perceptions of its employees and those of the unions closely. The attitude at Saudi Airlines, according to HR Department executives, is if were not getting feedback, we wont know whats going on. Saudia constantly surveys its employees and unions to identify their perceptions and solicit ideas about how to run the company. As part of Saudi Airlines' internal marketing strategy, employee focus groups are used to generate new ideas, and encouraged to research problems and present solutions to Saudi Airlines management. Saudi Airlines is particularly noted for the spiritual/family-like, employee-centred values espoused and practised by management teams. Accordingly Saudi Airlines' 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 that they are part of a cause (i.e. an airline that offers reasonable air fares, frequent flights and personable service); and three, employees feel empowered
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and can really make a change in their customers lives and at work. Treating employees well and empowering them is derived straight from the airlines mission statement: to be a world class airline with a distinctive Saudi character, that is customer driven and caring employer, Saudi Arabian airlines is committed to providing top quality service and endeavors to achieve total customer satisfaction. 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 Saudi Airlines customer.

In simple terms, the underlying belief is that the better employees are treated, the better they will treat customers. Management at Saudi Airlines also shares the belief that the way that an employee is treated will dictate the quality of customer service employees arent happy, customers wont be either. Saudi Airlines keeps employees happy through strong, caring and consistent leadership; developing, communicating, and staying true to solid mission; a forward-focused vision which keeps the company strong and competitive; and high values that every employees live by on a daily basis.

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Attention to detail, collective decision-making and an openmindedness to new ideas are typical hallmarks of successful airlines. Image is another dimension of an organization's culture that can unify a workforce. At Saudi Airlines, in-flight services and young and enthusiastic customer contact staff help to communicate the entertainment-oriented and lighthearted corporate image. Cultural rifts within airlines are inherent to the global and multifaceted 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. Saudi Airlines countered this problem with its Operational Areas Seminar program. In a three-day seminar, Saudi Airlines brought pilots, cabin crew supervisors, ground engineers and station managers, and traffic personnel together to reduce intergroup conflict and enhance intergroup cooperation and effectiveness between operational areas. This is what

organizational development is intended to accomplish. The impact of an airlines culture on that organization's safety subculture is critical to airlines. In fact culture has long been
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recognized as a determinant of any carriers safety subculture. The decision process that led to the Space Shuttle Challenger disaster in 1986 has become the aviation worlds most dramatic example of decision-making gone wrong. 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 are actually successful. In fact, twothirds of mergers and acquisitions either destroy, or fail to create, 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.11 There are many examples of failed consolidations in other Airlines which prevent the Saudi Airlines from doing so. For example, Deltas absorption of Pan Ams Atlantic Division, US Airs difficulties with Piedmont, and Northwests problems with Republic are striking as they represent takeovers of airlines within the same country. Other examples include Canadian Airlines takeover by Air Can (having failed for a decade after absorbing CPAir and numerous regional airlines); likewise, Boeing 737 operators Piedmont and Canadas Pacific Western had both operated as profitable companies until consolidating, after which they struggled to survive.
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Successful organizations such as Saudi Airlines pays a great deal of attention to organization culture. Hence, Saudi Airlines plans and develops a safety and customer-centric culture continuously by creating a learning-oriented and lively workforce with a sense of community and the ability to respond to customer needs and change. As a member of a service industry, Saudi Airlines employs an employee-centred strategy (employees should be participative, empowered, committed and motivated) 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.

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4. Conclusion As a conclusion five themes emerge from the review of Saudi Airlines thriving practices in HRM: 1. Management style in successful Saudi Airlines is far more hands-on and communicative than the command and control style more typical of the industry. 2. The culture of the Saudi Airlines makes internal marketing operational, empowers employees, is customer-centric and focuses on teamwork and quality. 3. Management personnel at the Saudi Airlines possess excellent interpersonal skills, which are accessible and approachable and recognize employee performance. At the industry level, there appears to be a shortage of talented managers that possess more than the required technical skills. 4. The Saudi Airlines emphasizes two-way communications and employee input into operational matters. 5. A commitment to training and development unquestionably distinguishes high-performing Saudi Airlines from its less successful local counterpart.

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To sum up, several questions should be asked to reach an effective HRM: Is there an individual within the HR department accountable for
coordinating the Saudi Airlines development activities of the Saudi Airlines?

Does an individual within the HR department continually review

current trends and techniques of Saudi Airlines development?

Is training provided for managers and supervisors in Saudi

Airlines effective?

Does the Saudi Airlines believe in providing quality customer

service to both internal and external customers?

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5. Summary and Recommendations Although Saudi Airlines is trying to do its best to satisfy its employees first, the obvious conclusion is how poorly understood the concept of internal marketing in the airline industry. Saudi Airlines should recognize that it cannot offer optimal service to external customers unless they know their internal customers very well. Saudi Airlines administrators appear to show less awareness of (or real 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 (for example training and development). The reason for this lies in the poor state of HRM in the airline industry in general; thus, Saudi Airlines managers should be aware of these deficiencies. Broadly speaking, HRM weaknesses suggest that organization culture is not in a very good shape, since the consistency of Saudi Airlines organization culture throughout the organization and level of attainment of desired culture were surprisingly not high.

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Unless Saudi Airlines administrators begin conducting HRM audits in their own organizations, it will remain crippled by endless price wars and shortsighted cost-cutting binges. Saudi Airlines administrators must make the connection between what their external customers value and how and why employees provide that value and more. The bridge linking customer value to employee performance is HRM.

To this end, the following five recommendations are offered. 1. Saudi Airlines administrators should conduct audits of their respective organizations in order to ascertain the gaps between what they thought their airlines were doing and what they actually were doing. In other words, an audit constitutes both a reality check and a baseline from which to plan for the future. 2. National and international regulatory bodies in civil aviation should collaborate on formulating an airline-specific HRM audit that could be readily adapted and used by Saudi Airlines and other future local carriers. An opportunity exists here for researchers in the field of HRM to conduct additional audits in the airline industry. 3. The recommendation is that Saudi Airlines appoints a person whose responsibility is to conduct timely employee opinion surveys on the following subjects: organization culture, organization leadership, employee relations, and benefits
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preferences. The results of the surveys should also be communicated to all employees. 4. The emphasis placed on communicating rules and regulations and performance improvement and disciplinary procedures should be equalled or surpassed by the clear and on-going communication to all employees of the organization's mission, strategy and desired culture, for example 5. Training and organizational development should be greatly expanded on. The most notable area is that of management training for managers and supervisors. In general, however, greater education and training are required in such areas as teamwork, change management, interviewing techniques, cultural diversity, communication skills and socialization into the organization's culture via organizational development.

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6. Key Sources 1. S Holloway (1998), Changing Planes: A Strategic Management Perspective on an Industry in Transition. 2. J Seal and B H Kleiner, Managing Human Behaviour in the Airline Industry, Management Research News, vol. 22, no. 2/3 (1999). 3. Khalid Elessa, Training in SAUDIA, Saudi Airlines Internal Audit (unpublished), (2006) 4. C Shifrin, Still Delivering, Airline Business, 74 (April 2001), Lexis-Nexis, Reed Elsevier. 5. K OToole, Buyer Beware of the Human Element, Airline Business (July 2000), Lexis-Nexis, Reed Elsevier. 6. K OToole, Time to Invest in Human Assets, Airline Business (April 2001), Lexis-Nexis, Reed Elsevier. 7. The Saudi Airlines Official Website: www.saudiairlines.com 8. Wikipedia, the free encyclopedia: www.wikipedia.org

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