Change of Human Resource Management because of Globalization in the Airline Industry

Change of Human Resource Management because of Globalization in the Airline Industry

Abstract

Whereas other resources cannot be overlooked in any particular industry, the human resource management has become the most important driver of organizational success. In addition to operating, designing and repairing the technology, people also control the financial resources while managing other people in the firms. This paper offers a literature review on how human resource management (HRM) has changed because of globalization in the airline industry. The review first notes the importance of human resource management in organizations, changes noted in the HRM and the challenges faced by most firms when trying to deal with the changes. Clearly, due to globalization in the airline industry, most firms have had to fight to retain their employees and businesses by offering intensified training and compensation, realigning policies and changed organizational structures while initiating long-term human resource plans. In order to remain competitive, most researchers agree that global airlines will have to redefine key HRM areas including management development, HR planning, succession planning, expatriate management, performance management, compensation, diversity and equal opportunity and health and safety.

 

Key words: Globalization, Change, HRM, Airline Industry, Performance, Competition.

 

Change of Human Resource Management because of Globalization in the Airline Industry

Whereas other resources cannot be overlooked in any particular industry, the human resource management has become the most important driver of organizational success (Chew & Horwitz, 2004). In addition to operating, designing and repairing the technology, people also control the financial resources while managing other people in the firms. Compared with other resources in a firm, human resources tend to be the most unpredictable and often the largest ongoing cost factor in organizations (Appelbaum & Fewster, 2003; Mylon, Harzing & Mirza, 2006; Ozberk, Guler & Ata, 2011). Considering that human resources are also the most valuable assets, they must be managed ethically, equitably and effectively. Moreover, if organizational objectives are to be achieved, their personal and work needs must be satisfied (Nankervis, Compton, Baird & Coffey, 2011).

In the twenty first century, a number of developments have started transforming the nature of jobs and the workplaces where they are performed. These developments including technological development and globalization (Vijayalakshmi, 2012) have brought about new ways of operations in most industries including airline industry. Among other things, globalization has on the positive side broadened markets while fashioning new kinds of jobs, new forms of workplaces and more advanced approaches to all human resource management processes (Nankervis et al, 2011). Globalization has on the other hand contributed to the recent worldwide financial crisis and associated changes in human resource management strategies including major revisions to staffing, retrenchment, executive pay systems, performance management, rewards and career development programs and human resource development (Munoz, 2006). This paper offers a literature review on how human resource management (HRM) has changed because of globalization in the airline industry.

Why HRM

Human Resource Management (HRM) comprises of practices and policies involved in obtaining, planning, developing, maintaining, evaluating and retaining employees (Nankervis et al, 2011). The employees should in this case have the appropriate skills and be in appropriate numbers in order to achieve the set objectives. In recent years, attention has been paid to the importance of human resource management in determining the organization’s competitive advantage. Most researchers actually agree that human resources represent the only enduring source of competitive advantage available to most organizations (Mustafa, 2010; Schulte & Zhu, 2005; Vijayalakshmi, 2012; Kilinc, Oncu & Tasgit, 2012).

The increased attention has therefore been attributed to the increasing changes in organizations themselves and broader trends including globalization that lead to these changes. As a matter of fact, firms today are under intense pressure to be faster, better and more competitive emanating from deregulation, technological changes and globalization (Vijayalakshmi, 2012). Globalization in particular has changed the operations of most organizations including firms in the airline industry. Changes in the human resources management have therefore become important in order to deal with the operational changes resulting from globalization.

Changes in HRM

Ideally, the two main areas of HRM that most airlines have had to keep in check include the motivation of employees and leadership and the different HR practices including selection, recruitment, training, remuneration, performance and compensation (Nankervis et al, 2011). In a normal scenario, globalization in the hospitality and tourism industry is expected to provide an attractive and high-status working environment with competitive conditions and pay while translating to high demand in the labor force and benefits from low staff turnover. In the same industry, globalization can result to poor conditions, high staff turnover, low pay, problems in recruiting skills in some important areas, poor status, a high level of labor drawn from socially disadvantages groups and professionalism absenteeism.

Secondly, in global airline industries, HRM practices and policies are acting as mechanisms for coordination and control of international operations (Mylon et al, 2006). As a result, most firms tend to transfer their HRM practices of subsidiaries in the foreign countries.

Additionally, human resource has become the most important resource that a firm has and can use to create profit and value (Kilinc et al, 2012). This is more so in the globalization arena where individuals with specialized skills, knowledge and expertise are seen as the scarce strategic resource. Unlike other industries, airlines have to deal with both internal (the level of internalization of the firm and corporate strategy) and external (labor contracts, employment laws, labor markets and regulations) as some of the factors affecting HRM. The management of HRM in a strategic alliance has also become difficult considering that the alliances operate on an international scale while involving different national and firm cultures (Munoz, 2006).

Moreover, unlike other service industries, the commercial airline industry is extremely safety-sensitive, competitive and high technology oriented (Schulte & Zhu, 2005).  Employees, people, customers and not machines and products must be seen the point of the firms’ core competence. The implications surrounding the main operations are pervasive and vast hence affecting the organization’s strategies, culture, structure and other operational activities. In order to deal with the changes, Atlas Air management for instance believes in the connection between company performance and employee compensation (Appelbaum & Fewster, 2003). The company also attributes its personnel’s productivity and flexibility to the organization’s financial incentives based on performance instead of base wages.

Over the past few years, the labor market and the airline industry have also been deregulated while the HRM has taken up a more strategic approach towards the employment relationship (Nankervis et al, 2011). In order to respond to globalization and increase international competitiveness for instance, most governments have also introduced the structural efficiency principle into their existing labor laws to ensure that wage increases is accounted for market efficiency (Mustafa, 2010). Some governments including Austrian have also deregulated the labor market by giving employees and employers an opportunity to bargain directly without union involvement while allowing employees’ freedom of association (Munoz, 2006). Some firms have further introduced new methods of enterprise bargaining in the form of certified agreements and individual contracts hence reducing the need of unions.

Global competition has also placed enough pressure on operating costs. According to the International Workers’ Federation, heavy pressure on labor costs has resulted in increased workloads and unfavorable working conditions (Schulte & Zhu, 2005). As a result, some companies including Qantas have turned to retrenchment strategies and the use of annual leave to reduce staffing (Kilinc et al, 2012). Some companies have also considered a freeze on the hiring of new employees and conversion of full-time jobs to part-time employment. Low-cost carriers are also adjusting on boarding services to reduce costs through the use of internet marketing and operating through alternative airports (Mustafa, 2010). Some companies are also reducing labor by hiring multi-functional workers and providing a basic service level.

According to Schulte and Zhu (2005), globalization has also changed management attitudes towards employees and HRM’s unitary approach has made employees more interchangeable and dispensable than ever before. On the other hand, cutbacks and redundancies have become a concerning aspect of HRM policies for most airline firms since they reduce employees’ trust in management and organizational commitment (Fryxella, Butlerb & Choic, 2004).

Workforce diversity has also become an important part in most airline firms. With globalization, managers across airline industries have to deal with the increasing diversity of the workforce. As minority group members, women and older employees flood the workforce, most airline firms have been forced to realign their strategies that capitalize on employee diversity (Appelbaum & Fewster, 2003).

Generally, structural changes in most airline firms including organizational structure (system of communication, workflow, authority, planning, directing, controlling, motivating and leading) have been observed. Globalization has also changed the nature of jobs and work in the airline industry (Mustafa, 2010). The numbers of part-time and service industry jobs have increased in the airlines. The service jobs in turn will demand knowledge workers and new HRM methods to manage them well as well as have a new focus on human capital.

Some airline companies have also initiated long-term human resources plans to ensure that there is proper alignment of HR objectives and strategies with corporate objectives (Kilinc et al, 2012; Mylon et al, 2006). Some firms have also created centralized reporting relationships around the globe (Vijayalakshmi, 2012). In order to cater for all the employees in various parts of the world, some HR managers have developed global processes and policies for performance management, data management, development and education (Nankervis et al, 2011).

Globalization has also created a need to introduce standardized development, assessment and compensation practices in some airline companies. Some firms have also opted to tie regional accountability to performance management, cascade corporate vision, mission and core values to regional offices, introduced common programs for all companies in different regions, decentralized HR to be more responsive to local needs while rolling out standard programs and improved communications that are customized by the countries in question (Nankervis et al, 2011).

Whereas it is difficult to create a unifying and strong corporate culture when the offices are spread around the globe, some parent airline firms have been forced to come up with a corporate culture at all locations that is consistent with their goals and vision (Schulte & Zhu,  2005). This on the other hand is made more difficult bearing in mind the influence that the local cultures have on how firms/offices conduct their business. Generally however, this can be averted by creating a consistent corporate culture across locations while maintaining the expected balance between local cultural differences and a strong corporate culture.

Globalization has also forced airline companies to develop a work culture that is open and supportive, more tolerant and supportive of external locations while focusing more on customer services, quality, teamwork, productivity, work flexibility and employee involvement (Vijayalakshim, 2012). Globalization in the airline industry has also forced HRM and top executives to become more aware of the changing trend in organizational structure to flatter and flexible organizations and partnerships, acquisitions or mergers of corporations. Information and communication technologies have also been used to transform organizational structures and business processes, while breaking down geographical and organizational boundaries (Schulte & Zhu, 2005).

Globalization in airline industries has also forced the HRM to look into new ways of providing insights into the organization development needs of the new global operations as they move and realign themselves through different stages of the business life-cycle. As noted by Chew and Horwitz (2004) for instance, globalization and the growth of multinationals have increased convergence of managerial and HRM practices.

Human resource managers have also had to make changes to meet international standards including identifying outdated skills while tailoring other skills to meet specific needs through training (Ozberk et al, 2011). This is not forgetting the need to upgrade to the latest technology for delivery of human resource services while putting into considerations the local insights. HRM principles have also been forced to learn to work through global HRM networks across global operations while establishing the best HR practices. For instance, as noted in Kilinc et al, (2012), bigger airline companies in Europe, America and Asia-Pacific have had to put their core competencies in order as a way of controlling costs while keeping a flexible and dynamic organization structure that enhances quick decisions about commercial issues and their reputation in the market.

Challenges

Like other companies, airlines face a number of diverse risks in their dynamic business environment. While risks are an expected part of entrepreneurship and business life, risks, business systems and their activities are interrelated human factors (Appelbaum & Fewster, 2003). The human element on the other hand affects all operational and managerial systems and activities in a company. Consequently, managing human factors is an inseparable part of business management (Mustafa, 2010). In view of an airline’s operational and financial performance, the human element is both a critical aspect of aviation safety and airline management. Managing human factor-based risk within this complex global environment involves a well-planned risk management process, implementation of a proactive approach and preventive measures that include continuous human factor analysis, process improvement and training. This translates to improved risk awareness and risk culture (Flouris & Yilmaz 2012).

The issues of unseasoned replacements, scarce talent and competitive bidding for candidates are acknowledged as the environment of the future recruitment in global airlines. In his research on the impact of globalization on the travel industry, Munoz (2006) noted that international participants who do not have social skills and aptitude are likely to withdraw from the process and may prefer not to work abroad. For the airline to succeed in the globalization wave, employers must approach recruiting from a macro and micro-perspective (Vijayalakshmi, 2012). Employers must also become savvy communicators and targeted marketers and use an infrastructure that is technologically current.

Conclusion

HRM has today taken an important role as a change mover in the globalized airline industry. As a result of globalization in most industries, human resource management has experienced enormous changes. As a way of handling the requirement of competitive market and global business structure in the airline industry, some firms have opted to internalize, downsize, intensified training while undergoing other changes as a way of meeting the international standards and requirements.

In order to remain competitive, global airline’s human resource professionals must start thinking and acting strategically while being culturally aware. The HR department of any firm must develop a trend of constantly evaluating their current workforce by putting into consideration the global economic trend and the current local trend. The HRM must also consider current growth strategies and services that could possibly enhance future growth, competencies to be engaged to meet the expected growth and avenues of retaining and enhancing them.

In general, global airlines will have to redefine key HRM areas including management development, HR planning, succession planning, expatriate management, performance management, compensation, diversity and equal opportunity and health and safety. In order to keep in line with the local environments, human resource managers must also not forget communication processes, training and education, industrial relations, employment contracts and employee involvement.

 

  

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