CULTURAL TURBULENCE: FROM ‘PEOPLE FIRST’ TO ‘MACHO MANAGEMENT’ AT BRITISH AIRWAYS IRENASample Page GRUGULIS, ADRIAN WILKINSON AND ASHLEA KELLNER
At the end of the 1970s and the start of the 1980s BA was performing disastrously. Its fleet was old, its productivity was below that of its competitors; it was beset by industrial disputes; and it was recording substantial losses (£140 million or some £200 a minute in 1981). Staff discontent was matched by customer dissatisfaction. By the mid-1990s this picture was reversed. Not only had BA become the world’s most profitable carrier, it was also voted the company that most graduates would like to work for (Blyton and Turnbull, 1998; Corke, 1986; Warhurst, 1995). Many attribute this turnaround to BA’s own cultural change, which remodelled staff attitudes and set customer care as the primary focus of activity. As Doyle (1999: 20) noted: In the 80s BA had been transformed from a disastrous loss-making state
enterprise . . . into the world’s largest and most profitable international airline. It was a triumph for management. . . Its success was the result of the process and strategy that management introduced. The process focused on creating a vision that would inspire the BA staff and gain their enthusiastic commitment.
A great deal of effort went into shaping BA’s culture. At the heart of this was the ‘Putting people first’ training programme launched by Colin Marshall, the chief executive, in 1983. It was attended by all employees by 1986 and aimed to revolutionise attitudes. Attendees were encouraged to take a more positive attitude to themselves, taught how to set personal goals and cope with stress, and instructed in confidence building and ‘getting what they wanted out of life’. The approach was self-consciously ‘indoctrinative’ (Bate, 1994: 195). As Colin Marshall said: We . . . have to design our people and their service attitude just as we design an aircraft seat, an in-flight entertainment programme or an airport lounge to meet the needs and preferences of our customers. (Cited in Barsoux and Manzoni, 1997: 14, emphasis added.) One impressive aspect of BA’s cultural change was the extent to which other employment policies and practices were changed to fit the ‘new’ culture and the continued emphasis on these practices and programmes throughout the 1980s and 1990s. Not only were team briefings and teamworking introduced, but these were developed and refined, with TQM, autonomous teamworking and multi-skilling introduced in many areas. Direct contact with all staff was considered so important that ‘down route’ briefings were developed to ensure that mobile and isolated staff were not neglected, and in 1996 BA became the first company to make daily television broadcasts to its staff (Colling, 1995). ‘Families’ of cabin crew were created to work the same shift patterns to provide mutual support, make cabin crew feel happier about their work environments and, as a result, facilitate the production of emotional labour (Barsoux and Manzoni, 1997).
The importance of emotional processes was also reflected in the new appraisal and reward systems such that work was judged on the way in which it was performed as well as against harder targets (Georgiades and Macdonnell, 1998; Höpfl, 1993). Managerial bonuses were calculated on a straight 50:50 split between exhibiting desired behaviours and achieving quantitative goals. Programmes encouraged staff input. Many HR decisions were devolved to line managers and, in the first few years of the programme at least, a commitment was made to job security.
Closely following these developments, a ‘Managing people first’ programme targeted managers and aimed to bring their behaviours into line with four factors focused on Clarity and ‘Helpfulness’, ‘Promoting Achievement’, ‘Influencing Through Personal Excellence’ and ‘Teamworking’ and ‘Care and Trust’ (Georgiades and Macdonnell, 1998). Other courses were developed to maintain the momentum created by ‘Putting people first’ and ‘Managing people first’ and, while each was different, they all shared a focus on shaping staff emotions. Twenty years after their launch, training still included a focus on understanding oneself and taking responsibility. In 1995, Bob Ayling, having newly taken over as chief executive, continued this active management of company culture and said of his staff: ‘I want them to feel inspired, I want them to feel optimistic, I want them to feel that this is a good place to be’ (‘Dangerous Company’, BBC2, April 2000). Such change was certainly impressive, but accounts neglect structural reasons for BA’s success (Anthony, 1994). The emphasis on putting people first and caring for one another had been preceded by a rule of fear. BA’s first response to its problems had been a series of redundancies with staff numbers reduced by 40 per cent between 1981 and 1983. The company also had a large share of slots at Heathrow Airport and faced little competition on many of its routes.
While staff numbers were cut, infrastructure was dramatically improved. BA invested in control systems, facilities and aircraft. Between 1980 and 1985 BA replaced over half its fleet (Colling, 1995). Computer reservations were introduced; a series of hub and spoke routes developed, and focused competitive pricing introduced (Blyton and Turnbull, 1996). The true extent of the company’s cultural transformation itself is open to question. While cultural change interventions seek to influence the thoughts, values, attitudes and norms of others, employees are not cultural dupes. Cooperation may reflect ambition or pride in work as much as (or instead of) a belief in the organisation itself. Despite the claims of the literature, the existence of ‘culture management’ does not ensure either that employees trust management, or that management trusts employees. So, in BA, ‘new’ practices varied in the extent that they were introduced in departments and conflict between employees and management did not cease. Nor was job security quite as robust as it seemed. Alliances, mergers and franchising agreements with other airlines already supported what was, in effect, ‘tiered’ terms and conditions, with employees based at Heathrow privileged over those elsewhere. This emphasis on part-time, seasonal and subcontracted work was extended to most operations. The engine overhaul plant was sold off, data-processing work was moved overseas, and job security for existing staff questioned (Blyton and Turnbull, 1996; Colling, 1995; Warhurst, 1995). In short, BA, while putting a great deal of effort into encouraging certain behaviours from staff, did not base its employment practices around the new culture in the way suggested. Their human resource management techniques were impressive, but not everyone benefited from them. Staff reactions to ‘culture change’ included enthusiasm and acceptance but also doubt, concern, opposition and open cynicism. Such individual reactions were mirrored by the collective representations and the persistence of disputes even at the height of the ‘cultural success’. The 1997 dispute By the end of the 1990s many of the factors that had provided the basis for the company’s success were under threat. Low-cost carriers were undercutting prices and alliances between rivals ensured that cross-national traffic would be less likely to transfer to BA. In response, Ayling claimed that BA needed a second revolution.
BA sought its own alliances, as well as proposing £1 billion of cost savings from within the organisation, with the aim of doubling profits by the year 2000. Much of this was to come from staff savings, including 5,000 voluntary redundancies, with staff to be replaced by new employees on lower pay (Blyton and Turnbull, 1998). Reducing costs was also extended to ‘core’ BA staff. In early 1997, BA attempted to change the structure of payments to cabin crew; existing employees would be ‘bought out’ of their allowances (petrol, overnight stay, etc.) by receiving a higher basic wage. BA offered a three-year guarantee that no crew would earn less under the new system but nothing beyond that, and it was clear that the measure was launched with the aim of saving money. When negotiations failed, the TGWU union threatened strike action. Despite 14 years of espoused policy of caring for one another and putting people first, the tactics deployed by BA’s management were described as bullying (The Economist, 10 July 1997). Members of cabin crew were warned not to strike and staff were told that anyone taking industrial action would be summarily sacked, then sued for damages. Any who simply stayed away would face disciplinary action, be denied promotion and lose pension rights and staff discounts for three years. The strike ballot had an 80 per cent turnout, with 73 per cent of employees voting in favour of strike action. The TGWU called a series of 72-hour strikes, with the first scheduled for July 1997. In response, temporary staff and an alternative workforce of ‘volunteer managers’ were given training to perform key tasks. On the eve of the first day of action cabin crew were contacted and warned that ‘they had a duty to cooperate with their employer’. These actions influenced the impact of the strike. On the first day of action fewer than 300 workers declared themselves officially on strike but more than 2,000 called in sick. Despite the company’s efforts, more than 70 per cent of flights were cancelled. It seemed that BA’s macho approach had ensured only that collective action took the form of collective illness. This made things worse for BA. Those employees who had called in sick tended to stay away longer than the 72-hour strike. Many employees stayed off for the full two weeks that their sick notes allowed and, throughout this period, services were cancelled and passengers turned away. When the General Secretary of the TGWU, announced that he had written to BA suggesting that they resume negotiations, BA agreed before even receiving the letter.
The TGWU promised to save £42 million over three years. Catering was sold off and sanctions against strikers were withdrawn. BA’s management fared less well, despite Bob Ayling’s claim that this agreement marked a ‘new beginning and spirit of cooperation’. The gulf between the managerial rhetoric on culture and official actions during the strike had a predictable effect on employee morale. The agreement itself fostered further dissent. By the end of 1997, 4,000 staff had left but 4,500 more were recruited, including 2,000 in 1998. By the terms of the agreement, these new staff members were employed on new contracts. As a result, cabin crew working on the same aircraft were (increasingly) on different pay scales. The impact of this on both labour relations and teamworking was problematic and problems were fuelled by suggestions that staff on new contracts were favoured by BA in promotion. Bob Ayling attempted to salvage the situation by placing more emphasis on managing the company’s culture. He addressed staff training sessions and held forums with groups of employees. This time there were few positive reactions. The strike cost BA £125 million; morale never entirely recovered and profits suffered. Between 1998 and 1999 they fell by 61 per cent and in 2000 British Airways announced losses of £244 million on its main business; the first loss since privatisation. These failures so coloured the public perception of the chief executive that even his attempts to refocus BA on to profitable routes and new products were not entirely welcomed. On 10 March 2000, Bob Ayling resigned as chief executive. Continuing turbulence The next decade was characterised by ongoing disputes and continued restructuring to reduce costs. New CEO Rod Eddington faced turmoil in the industry shortly after his appointment, following the terrorist attacks on 11 September 2001. Like other airlines, British Airways suffered heavily following the attacks and their initial response was to announce 1,800 job losses, followed shortly by a further cut of 5,200 positions (Upchurch, 2010). In fact, between 2000 and 2005 the company cut 14,000 jobs, 7,000 of which were reportedly because of falling demand (Bamber et al., 2009).
The next years saw a stream of ongoing industrial disputes and negative publicity for British Airways. In 2003, around 500 customer service employees went on strike at Heathrow Airport in protest against a new automated attendance monitoring system. Although staff returned after two days, disruptions continued as the company scrambled to reposition aircraft and crew and ultimately cost £40 million. Industrial action escalated the following year when 3,000 check-in staff threatened a 24-hour strike over a busy holiday weekend. Although the strike was averted, the threat still cost the company millions. In 2005 the ‘Gate Gourmet’ dispute hit British Airways with a further revenue loss of £40 million. When Gate Gourmet, the outsourced catering function formed in 1997, announced the dismissal of 670 of its 2,000 employees, 1,000 British Airways ground staff promptly followed with an illegal sympathy strike. The strike disrupted operations at Heathrow Airport for two days, saw 700 flights cancelled and caused chaos for over 100,000 passengers. Again, in 2007, flight attendants called a strike in reaction to proposed reduction in pay, pensions and sick leave. Although the strike was averted, the company’s stock fell by almost £100 million. Through the turbulence, British Airways continued to deliver the same rhetoric to employees that brought them success in the 1990s, which was cutting costs while simultaneously developing and valuing their workforce. One-third of senior management positions were shed in a bid to ‘remove duplication and complexity, provide greater accountability and reduce costs’, and also, likely, in a bid to change culture (British Airways Corporate Responsibility Report, 2006: 3).
This cost reduction measure was supported by a range of new programmes designed towards developing improvements through HRM. The 2008/09 Annual Report (p. 34) stated that ‘to create a really high performing business we need to build an inspiring and rewarding workplace where talented people can work to the best of their ability and meet our customer needs’. British Airways introduced a range of new policies and programmes and announced a renewed focus on providing extensive training. The ongoing unrest was creating a reputation of unreliability for customers. The management style demonstrated through these disputes was influenced by a traditional perspective, recognising the involvement of unions but supplemented with strategies designed to engage staff. Although management leaned towards a more aggressive approach in some instances such as the 1997 strikes, this style became increasingly predominant and was particularly evident in their reaction to the 2010 cabin crew strikes, a response to attempts by the company to restructure pay and working requirements for cabin crew. British Airways sought to create a ‘new fleet’ of cabin crew, with changes from seniority to performance-based pay and restructured lines of authority. In the face of staff resistance and the overwhelming majority in favour of industrial action, the company sought an injunction from the High Court to prevent the threatened 20-day strike. Following the injunction, management sought to locate and reprimand all employees who even alluded to supporting further strike action within the company.
In the following months, British Airways suspended and disciplined over 45 cabin crew who indicated support for industrial action. According to Upchurch (2010), an indication of support was deemed to include comments on social media outlets, posts on the union website forum, text messages to colleagues, and even overheard private discussions. However, it was the notifications of suspension and dismissal which were deemed to be particularly harsh and unreasonable: employees were marched out of meetings or met on the tarmac on disembarkation from their aircraft to be informed of their suspension (Upchurch, 2010). In its dealings with employees, British Airways have exhibited what has been termed as ‘macho-management’. In the 2010 dispute, management appeared to ignore traditional disciplinary methods and pursued a more aggressive stance. The use of disciplinary action based on evidence as weak as hearsay and overheard conversations was unprecedented and has been equated with ‘the worse aspects of the methods used by the Stalinist secret police’ (Upchurch, 2010: 7). In early 2015, allegations surfaced that information garnered by BA during the dispute may have come from in-house investigators improperly accessing employee emails and phone calls of cabin staff, and that the union was paid £1 million to stop them from suing the company for these actions. The main union for cabin crew also reported an increase in the use of bullying and harassment designed to isolate members and undermine the dispute. There appeared to be an emerging subculture of aggressive management coming from the top down, deliberately engineered to intimidate union members.
Recent years have seen BA report improved performance and profitability despite simmering employee unrest. In early 2011 BA completed a merger with ailing Spanish airline Iberia in a bid to cut costs and improve competitiveness in the face of tough economic times in the industry. By 2015 productivity improvements and massive downsizing of the workforce saw Iberia return to profitability, and combined with BA, the new ‘International Airlines Group’ forecast a £1.4 billion profit by the end of the year. Customer goodwill has continued to grow for BA and recent surveys place them as the number one company for brand strength in the UK – ahead of Apple, Google and the BBC (Superbrands Survey UK 2014–15). Meanwhile, distinctions between groups of cabin crew staff have continued to create tension and reinforce a divide both between employees and with management. Cabin crew joining BA after 2010 as part of the ‘mixed fleet’ arrangement were placed on revised contracts offering inferior salary and conditions to existing staff, echoing the problems of the late 1990s. In 2014 mixed fleet cabin crew were reportedly ready to strike when claims for pay increases – ongoing since the 2010 disputes – were rebuffed.
The union reported that scheduling of shifts combined with reduced pay rates has seen young crew members working for as little as £12,000 per year, less than crew members at competing low-cost airlines. The contrast between senior and junior staff has even been reflected in cabin crew uniforms, where senior crew are permitted to wear trousers on board while new female recruits must wear skirts, potentially creating undesirable subcultures within the cabin staff. In summary, British Airways have experienced a series of significant cultural shifts over the past three decades. In recent years, their management style moved from a sophisticated approach, where industrial action was avoided through high quality HR practices, to macho-management, where union involvement was avoided through threats and intimidation. It seems HRM has been applied on a piecemeal basis, with limited consideration of a long-term strategy or outcomes. The results appear to be the creation of a low-trust culture, with negative effects for staff satisfaction, morale, loyalty and commitment. Demoralised and resentful staff can be potentially disastrous to customer satisfaction. From an organisational perspective, the extreme cost-cutting methods witnessed over the last three decades have been essential for survival of the company. British Airways’ overall progress has been commendable, although there are improvements that could have been made to their management of employment relations and ultimately the firm’s performance. The approach to managing employment relations appears to be non-sustainable and counterproductive to producing the culture required to achieve long-term success.
Questions
1 Explain employee reactions to culture change initiatives in this case.
2 What lessons can managers learn from this case about managing culture?