234878516 awa-final-solution

America West Airlines: HRM 360An Airline in Transition

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Theme

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Main IssueHow effectively can America West Airlines use strategy and proper Human resource planning to bring operational and managerial efficiency, achieve customer satisfaction, bring structural improvements and increase market share while keeping the costs in control?

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SWOT Analysis

SWOT structure:

Statement

3 lines

Justification: 3 lines

Strengths:1. Lobbying skills to negotiate out of paying half the fine and also obtain

financial support from the government and creditors. S 52. Investment in IT infrastructure. S 53. AWA uses Delphi technique, Markov Analysis, management inventories,

replacement charts, and succession planning while forecasting demand & supply of labor. S 5

4. AWA maintains one of the lowest CASM (cost per available seat mile)5. The new management team led by Mr. Parker is qualified to turn the

company around.6. AWA new strategy for route structure is very effective.

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Weaknesses:1. AWA management philosophy to always pay less then the market

average is a weak strategy. W 5 2. Employee dissatisfaction to the point of protest. W 43. Poor customer service4. Lack of change management during personnel replacement.5. AWA has gained a bad reputation due to government fines and

magazine reviews.6. Failing to maximize shareholders profits for consecutive years.7. High Debt

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Opportunities:1. Discount carriers will gain 40% of the market by next year. O 42. Highly qualified employees are competing for secured jobs in the labor

market. O 53. Can affiliate with other low cost airlines to give better service to

customers through providing connecting flights.4. Good relations with the creditors can be used for further finance.

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Threats:1. Fall in demand due to economic and political catastrophes faced by the

industry. T 52. Many airlines are fighting over funds from the government. 3. Pessimistic view from analyst about the airline industry can affect share

prices.4. Many low-cost airlines are entering the point-to-point markets where

AWA has competitive advantage.5. Oil prices are ever rising.

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Human Resource Planning Model

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FORECASTINGFORECASTING DEMANDDEMAND

TechniquesTechniques

× Staffing tablesStaffing tables Markov analysisMarkov analysis

× Skills inventoriesSkills inventories•• Management Management inventoriesinventories•• Replacement Replacement chartscharts•• Succession Succession PlanningPlanning

TechniquesTechniques•• Trend analysisTrend analysis

× Managerial estimatesManagerial estimates•• Delphi techniqueDelphi technique

External ConsiderationsExternal Considerations

× Demographic changesDemographic changes•• Education of the Education of the workforceworkforce•• Labor MobilityLabor Mobility•• Government Government policiespolicies•• Unemployment Unemployment raterate

FORECASTING SUPPLYFORECASTING SUPPLY

BALANCING BALANCING SUPPLY ANDSUPPLY AND

DEMANDDEMANDConsiderationsConsiderations•• Product/service Product/service demanddemand•• TechnologyTechnology•• Financial Financial resourcesresources•• Absenteeism/turnoverAbsenteeism/turnover•• Organizational Organizational

(Shortage)(Shortage) RecruitmentRecruitment

•• Full-timeFull-time•• Part-timePart-time•• RecallsRecalls

(Surplus) Reductions(Surplus) Reductions•• LayoffsLayoffs•• TerminationsTerminations

× Demotions Demotions

× RetirementsRetirements


Forecasting demand Internal Considerations

Product/Service Demand

It is the level of demand that exists in the market for the product/service offered by an organization. If there is no demand in the market for the organizations product/service it is a big disadvantage. Strategies will have to be revisited and product adaptation may be required for success.

Justification: AWA’s discount carriers’ low-cost flights are in high demand after AWA’s reforming initiatives, although the airline industry as a whole is suffering. Discounters have 25% market share and are expected to capture 40% within next year.

Technology

It is the extent of investment a firm makes in technology to manage, improve or invent new processes, products or services. Technology makes processes more efficient and less time consuming. Technology also can reduce labor requirements.

Justification: AWA continued to invest in IT projects. AWA introduced Low Fare Finder online. To reduce check-in time, AWA automated airport check-in with self-service kiosks.

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Financial Resources

It is one of the most important components for a business. Without finance, no organization can run. There are financial institutions like banks that finance potential businesses. An organization has to have the skills to arrange the capital it needs.

Justification: AWA was the first to receive a government loan of $380 million because of their lobbying skills, which was later supplemented by a $429 million loan from a City Bank group. AWA also squeezed out $600 million form its 20 creditors.Absenteeism/Turnover

Employee absenteeism is the rate of employees being absent per month and employee turnover is the rate of employees leaving the organization per year. Both high absenteeism and high turnover reflects badly on the organization’s ability to keep employees satisfied.

Justification: AWA employees are paid about 45% less than competitors. The new contract signed in 2003 doesn’t increase salaries but it increases total compensation and benefits by approximately $30 million. Higher salaries from competitors’ means high turnover risk for AWA.

Organizational Growth

It refers to the growth potential of the organization in the industry. If the industry is saturated then the only way for an organization to increase market share is by capturing competitors’ share. Also an organization has growth if the industry has a high growth rate; the size of the pie increases for everyone.

Justification: AWA is concentrating on becoming a discount airline rather than the traditional hub and spoke, because the growth opportunities for discount airlines are looking brighter.

Management Philosophy

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It is the accumulation of guidelines, attitudes and beliefs that the management follows in running the organization. Management philosophy reflects in all managerial decisions and it affects the overall image of the organization.

Justification:AWA management philosophy is to always pay less then the market average. This is not a good strategy as it makes it difficult to retain experienced employees. Dissatisfied employees damaged AWA’s assets in the form of protest.

Techniques

Trend Analysis

It is the analysis of the trends in the industry over a period of time. Through trend analysis, a firm can figure out why the demand for their product/services have decreased/ increased? What may cause a shift in the industry? How to forecast upcoming industry shocks, etc.

Justification:Before the 9/11 incident, AWA was able to get preliminary approval for a $200 million loan, and after 9/11, when they started loosing $5 million daily, the loan got cancelled. They had to fire 1500 employees and lobby extensively for finance.

Managerial estimates

It constitutes collecting the opinions (judgments) of supervisors, department managers, experts, and/or others knowledgeable advisors about the organization’s future employment needs.

Justification: There is no information in the case that suggests that AWA utilizes managerial estimates.

Delphi Techniques

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It is an attempt to decrease the subjectivity of forecasts by soliciting and summarizing the judgments of a preselected group of individuals. The final forecast represents a composite group judgment.

Justification:The new management team led by Mr. W. Douglas Parker was the designated group of people to forecast the industry changes and act accordingly to bring AWA back to its former standards.

Forecasting supply

External Considerations

Demographic Changes

Demographics are affected when there is immigration of labor for better job opportunities or there is any unusual change in birth/death rate. Firms need to keep track of demographic changes to understand reasons behind labor surplus/shortage.

Justification:There is not much information in the case about demographic changes.

Education of the Workforce

It refers to the education levels of the workforce available; whether they are adequately educated for the available positions? whether they are skilled enough to do their jobs?, etc.

Justification:The airline industry is highly competitive and any terrorist attacks, natural disasters or other financial crisis can lead fall in flight demand and then to employee layoffs and terminations. Therefore the very best pilots, flight attendants, crews survive in this industry.

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Labor Mobility

It is the ease with which employees can shift jobs. If the industry is such that an employee can leave a company and join their rival company without any barriers, then it becomes imperative that the employer provide its employees with enough incentives to stay with the company.

Justification:A lot of the employees who were fired from AWA soon joined the competing airlines. Later on AWA rehired all of its fired employees including pilots when operations where improving.

Government Policies

Government policies regarding loans, interest rates, inflation control and other industry specific regulations can affect the profitability of a firm. Therefore, knowledge of government policies that may have relevance to the firm is crucial.

Justification:AWA had to prove that it is worth saving, and provide warrants worth 1/3 of its fully diluted common stock to convince the government to grant them $380 million loan. This deal left the company in huge debt.

Unemployment Rate

It is the ratio of potential labor in the market who currently are not employed by anyone. If unemployment rate is high, the employers’ bargaining power is higher.

Justification:After the 9/11 incident, many pilots, flight attendants, and crew members were fired because the airlines could not afford to pay their salaries during low flight demand. Terrorist attacks can drastically increase unemployment in airline industry.

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Techniques

Staffing Tables

These are graphic representations of all organizational jobs, along with the numbers of employees currently occupying those jobs and future (monthly or yearly) employment requirements.

Justification:There is no information in the case that suggests AWA has used staffing tables.

Markov Analysis

This analysis is a method for tracking the pattern of employee movements through various jobs.

Justification:Mr. Parker was a financial wizard who came up through AWA’s management ranks. During his tenure as CFO, Parker had restructured the airline’s schedule to increase business traffic while cutting back leisure destinations flights.

Skills Inventories

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It consists of files of personnel education, experience, interests, skills, etc., which allow managers to quickly match job openings with employee backgrounds.

Justification:There is no information in the case that suggests AWA has used skills inventories for each employee.

Management InventoriesIt is a summary of each employee’s education, experience, interests, skills, etc. For managers, it also includes managerial responsibilities, duties in current/previous positions, and management training.

Justification:AWA maintains management inventories. It has records of Mr. Parker’s managerial and financial skills and previous managerial history.

Replacement Charts

Replacement charts are listings of current jobholders in the company and persons who are potential replacements if an opening occurs. It is a visual representation of likely replacement employees for each position, including age, present performance rating, promotability status, relative strengths & weaknesses.

Justification:AWA does maintain replacement charts for its strategic position holders. Mr. William Franke replaced Mr. Edward Beauvais and Mr. Michael Conway. And then Mr. W. Douglas Parker replaced Mr. Franke as President.

Succession Planning

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It is the process of identifying, developing, and tracking key individuals for executive positions in the organization. It involves analyzing demand for managers/professionals, auditing existing executives, projecting future employee supply, aiding individual career planning/counseling, accelerate promotions, training & development, and planned strategic recruitment.

Justification:The new management team that Mr. Franke established shows that AWA was planning for this succession. The team is led by Mr. Parker who has been through management training through various managerial ranks.

Balancing supply and demand Shortage - Recruitment

Full time

Full time employees cost higher because they are entitled to benefits other than just basic salary.

Justification:There is a shortage of qualified and dedicated employees at AWA. For this reason they should employ full time employees and invest in employee-firm relationship building.

Part time

Part time employees are easier to hire and fire. They are not entitled to any employee benefits. Many employers prefer part time employees to reduce costs but part time employees don’t have the same level of loyalty as full time employees do.

Justification:

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Part time employees are cheaper to hire and that contributes to AWA’s goal of keeping costs down, but in the long term, employee loyalty and dedication is important. So, part time employees are not a good option for AWA.

Recalls

Employees who were laid off before can be recalled to join duty. Because of their former experience with the organization, it is better to employ them then to look for new employees in the market.

Justification:AWA has recalled 1500 employees, whom it fired after 9/11, including 179 pilots. As operations improved due to new management, all the fired employees were rehired.

Surplus - Reduction

Layoff

Lay offs usually occurs during bad economy or company budget cuts. Employees are fired on a temporary basis for 30 to 90 days maximum. They are paid 50%of their salary during that time; after the lay off period is over they are either called back to work or notified of termination.

Justification:Lay offs are a better option then termination because it gives the employees hope of joining job again. It also gives the employees some remuneration to fall back on while looking for another job.

Termination

Termination usually occurs when an employee goes against organization’s welfare or shows any misconduct at the office place. Inefficiency can also result in termination.

Justification:

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AWA tends to fire employees whenever there is an economic or political attack on the industry. It is damaging to employee relationships. It is not a good option.

Demotion

It is the opposite of promotion and is usually used as a punishment or a tactic to induce voluntary quits. An employer only uses demotion as a negative reinforcement when a particular employee is of very less importance to the firm.

Justification:There is no mention of any demotion at AWA.

Retirements

Retirements are the easiest to predict for a firm. Each country has a different retirement age. Many firms have a set retirement age. Employees may take early retirements too. Many firms try to fire their employees just before their retirement to avoid paying retirement benefits. This is a very unfair practice.

Justification:Mr. Edward Beauvais stepped down from his position after AWA filed for bankruptcy in 1991.

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Correlation between SWOT & HRPM

Human Resource Planning Model

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FORECASTINGFORECASTING DEMANDDEMAND

TechniquesTechniques•• Trend analysis Trend analysis T 5T 5

× Managerial estimatesManagerial estimates•• Delphi technique Delphi technique SS 44

BALANCING BALANCING SUPPLY ANDSUPPLY AND

DEMANDDEMANDConsiderationsConsiderations•• Product/service Product/service demand demand O 4O 4•• Technology Technology S 5S 5•• Financial Financial resources resources S 5S 5•• Absenteeism/turnover Absenteeism/turnover W 4W 4•• Organizational Organizational growth growth O 4O 4

(Shortage)(Shortage) RecruitmentRecruitment

•• Full-time Full-time O 3O 3•• Part-time Part-time W 3W 3•• Recalls Recalls S 5S 5


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TechniquesTechniques

× Staffing tablesStaffing tables Markov analysis Markov analysis S 5S 5

× Skills inventoriesSkills inventories•• Management Management inventories inventories S 3S 3•• Replacement Replacement charts charts S 5S 5•• Succession Succession

External ConsiderationsExternal Considerations

× Demographic changes Demographic changes•• Education of the Education of the workforce workforce O 3O 3•• Labor Mobility Labor Mobility W 4W 4•• Government Government policies policies T 3T 3•• Unemployment Unemployment rate rate O 3O 3

FORECASTING SUPPLYFORECASTING SUPPLY

(Surplus) Reductions(Surplus) Reductions•• Layoffs Layoffs W 5W 5•• Terminations Terminations W 5W 5

× Demotions Demotions

× Retirements Retirements


Recommendation & Implementation

1. American West Airline does not have an effective Human Resource Department.

To achieve efficient HR structure AWA must have strong HRPP along with effective personnel.

2. AWA customer service fails to meet the quality set up by the competitors.

To gain patrons trust, AWA must invest in building strong customer relationships by appointing specialized customer service officers.

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234878516 awa-final-solution

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