Business Management and Change

Business Management at Qantas

  • Challenges  rising fuel prices, security, increasing competition and industrial relations issues
  • Had share of luck  collapse of Ansett on Sept 11 2001
  • Help of astute management and willingness to seize opportunities
  • CEO Feoff Dixon 2006 – Qantas needed guts and courage to think ahead, evolve it operations and admit if something wrong and change it

Application of Management Theories to Qantas

  • Evolved from ownership by Commonwealth Government between 1947 and 1995
  • Under gov. ownership and the domestic aviation duopoly between TASS and Ansett  classical-scientific management structure
  • Features:

 Hierarchical – various levels of power/authority

 Bureaucratic  rules, regulations and highly centralised decision making

 Multi-layered

 Long chain of command

 Division of task through specialisation/departmentalisation

 ‘Tops down’ channel of communication

 Little contact between workers and top management – autocratic

  • The Age “The Roo Gets Lean and Mean”  “Qantas was an icon, removed from the harsh realities of international competition.”
  • Domestic airline deregulated in 1991
  • 1995 Qantas privatised
  • Features:

 More competitive, efficient, profitable

 Pay all taxes and levies

 Make profit and pay dividend to shareholders

  • The Age “The Roo Gets Lean and Mean”  “industry experts, pilots, flight attendants, service staff and maintenance workers all agree that Qantas has dragged itself kicking and screaming into the 21st century”
  • Uses behavioural, political, systems and contingency

Behavioural

  • Emphasis on human resource management – channels of communication and flexible working initiatives – family life
  • Flatter organisational structure – 8 separate bus. units
  • Introduction of practices to motivate employees
  • Democratic style of management – input in decision making
  • Work teams and multi-skilling
  • Communication of goals, plans, and financial results

Political

  • Mangers using power/influence to achieve goals
  • E.g. Dixon lobbying gov. to protect Pacific routes, get tax concessions, relax foreign ownership rules
  • Recognition for negotiation and bargaining
  • Balance interest of competing stakeholder groups

System

  • Individual parts contribute to whole organisation
  • Changes in one area affect performance/impact other areas

Contingency

  • Flexible and adapted to suit changing circumstances
  • E.g. challenge of terrorism, Iraq war, SARS, changing market, fuel prices
  • Each require unique solution
  • Need modern approach  productive and efficient management structure

External Influences of Change

Economic Influences

  • Fluctuate – impact profitability
  • Strong Oz economy/ appreciation in dollar and growth in income  increase demand for travel
  • But low economic growth in Japan and America – reduced tourist travel
  • Increase in fuel prices in 2004 (30% of operating costs) – affect profitability

Changing Nature of Markets

  • 11/9/01 terrorist attacks, SARS epidemic 2003, Iraq war, changing customer taste
  • Increase in low cost international carriers e.g. Ryanair and South West Airlines
  • Need to review bus. model – finder efficiencies/opportunities for consolidation
  • Singapore and Emirates Airline – lobby gov. for access to Qantas Pacific Routes (cut profit by $44 million)
  • Increased competition from Asia and Middle East  have lower labour rates, low/not tax, cheaper financing , lower airport charges, favourable depreciation
  • High entry costs – increased market power
  • Demise of Ansett in 2001  restrained competition between Qantas and Virgin Blue

Legal and Political Influences

  • Changes in legislation  impact on Qantas:

 International airline industry – regulated – define how many flights and seats allowed between countries

 Subject to regulatory control of the Civil Aviation Safety Authority – need air operating licences

 Federal gov. – tax on air fares – departure tax ($38)

 Subject to economic regulation under ACCC and Trade Practices Act 1974 e.g. 2003 ACCC denied Qantas approval to buy 22.5% of stakes in Air New Zealand

 Under Qantas Sales Act 1992  restrict foreign investment in airline to 49%

 Countries it operates have different laws  affect contracts, dispute resolution, protection of intellectual property

 Federal gov. implemented new security measures on ramp/baggage areas

Technological Influences

  • Newer planes – greater capacity and more efficient
  • In-flight entertainment systems and seating make travel comfortable
  • Have Personal Computer power
  • However technology allowed for video conferencing and software  alternative to travel costs

Geographic Influences

  • Climate/natural heritage areas e.g. Great Barrier Reed
  • Long distances and remoteness of Oz – make it attractive
  • Qantas heavily tied to Asian Pacific region
  • 10 Asian countries Qantas services – make up more than a quarter of seats of international network
  • Asia accounts for 20% of world tourism and 25% by 2020

Social Influences

  • Changing tastes, fashion, culture
  • Operates in 39 countries – different languages, tastes, religions, business practices
  • Adapted e.g. in-flight menus, cabin crew fluent in foreign languages, training staff in cultural sensitivity

Internal Influences

E-Commerce, New Systems and Procedures

  • Develop its web site
  • Faster booking engine, customer access to alternative fares
  • Increased alternatives for customers searching for lowest price itineraries
  • Online demonstration for Qantas Quick self-service check in kiosk
  • Launched eQ – inventory management system
  • Upgraded security systems ($300 million in 3 yr) – failed bomb attack in Britain
  • Deploys Airflite Suite Systems to run long haul schedule planning

Structural Responses to Change

Outsourcing

  • IBM – datacentres, computing operations
  • Telstra – domestic voice, data and domestic services
  • Amadeus – reservation system
  • IT applicants support and maintenance to 2 Indian companies
  • Jetstar call centre operations to Sales Force
  • Maintenance jobs to Jet Connect
  • Established a based in London for 400 international flight attendants
  • Arno Franz director of outsourcing firm TPI: “Turning a fixed, allocated cost to a variable cost is what airlines are having to do to cope with globalisation and increasing pressure from deregulation”

Flat Business Structures

  • Fewer layers of middle management and widening of the span of control
  • More flexible and adaptable to change
  • August 2003 – plans to restructure company into 8 separate business units

Strategic Alliances and Networks

  • Benefits – expanded route networks and streamlined processes
  • Improve customer service, increase passenger volumes and reduce costs through economies of scale
  • Number of strategic alliances:

 Oneworld Alliance

 Separate bilateral alliances – British Airways, American Airways

 Established Jet Turbine Services

 Star Track Express – joint venture with Australia post

 Tasman Networks Agreement with Air New Zealand

 Singapore Airlines – joint venture regarding training and maintenance

 Launched Jetstar Asia – merged with Valuair

 Joint venture with SR Technics

Reasons for Resistance to Change

Financial Costs

  • Purchasing New Equipment

 New/more efficient aircraft

 Security measures e.g. passenger screening equipment/surveillance equipment

 Inflight entertainment

 Fit-outs e.g. sky beds

 Improved lounge facilities

 Information technology systems

  • Redundancy Payments

 Downsized staff – compulsory redundancy payments

 Rely on casual employees – reduce payments

 1245 in 2005/06

 1000 2007

  • Re-training

 10 000 retrained as new airline reservation system – Amadeus

 Retrained cabin crew for international bus class

 Developed security training for flight/cabin crew

 Expanded apprenticeship programme

 Created Qantas College Online – learning programme

  • Re-organising Plant Layout

 Increase capacity and efficiency

 Jetstar – looking for heavy maintenance base – Newcastle base cant accommodate larger planes

Inertia of Managers and Owners

  • Unenthusiastic response from managers
  • E.g. 1990’s deregulation of aviation industry and privatisation of Qantas

Cultural Incompatibility in Mergers and Takeovers

  • British Airways bout 25% of Qantas share – brought with it different bus culture based on strict commercial criteria – culture clash
  • 1997 sold 19.9% stake in Air New Zealand as couldn’t gain operational benefits – hostile attitude

Staffing

  • Reduced by 2000 and more casual staff hired
  • Current skills no longer needed
  • Retrain/learn new skills in IT
  • Disruption to existing work relations and patterns of behaviour
  • Resentment over not being consulted about proposed changes
  • Feelings of personal inadequacy and insecurity

Managing Change Effectively At Qantas

Identifying the need for change

  • Geoff Dixon:

 Identify need for change

 Highlight the changing market circumstances

 Changing customer requirements

 Competition from low cost airlines

 Deregulation of international routes

  • Says: “that Qantas cannot be satisfied with incremental change, it needs to make fundamental structural change on a much greater scale than it had in the past”

Setting Achievable goals

  • Set achievable goals and objectives
  • Devised after consultation with staff
  • Develop right flying models to generate strong returns
  • Establish competitive cost structures
  • Diversifying Group portfolio to grow earnings and mitigate risk

Creating a culture of change

  • Create supportive bus culture to promote change and reduce natural resistance to change
  • Managers assumed responsibility for change by taking on boards the role of change agents
  • Adopted number of roles:

 Catalyst

 Solution givers

 Process helpers

 Resources linkers

Use of Change Models

Force Field Analysis for Introducing Jetstar International

Driving Forces for Change / Restraining Forces Against Change
Profitability share in growth of leisure market segment / Start-up costs
Reduce risk of other low fills airline emerging / Historical few airlines able to manage a discount carrier without damaging its core operations
Low cost platform to negotiate industrial agreements / ‘Cannibalisation’ of Qantas’ routes
Success of Jetstar is stemming Virgin Blue’s market share / Industrial conflict with unions
Will have fewer restrictions than Oz airlines

Unfreeze/Change/Refreeze Model for Introducing a New Organisational Structure

Unfreeze / Change / Refreeze
Develop awareness of need to change / Examine alternative new organisational structures / Reinforce new management structure - own management, leadership, budget, profit targets
Establish forces supporting and resisting changing the org. structure / Choose the most appropriate organisational structure - 8 bus. units / Evaluate the change - adaptable and desired effect
Establish good relationship with stakeholders / Take actions to implement the new structure and communicate vision to stakeholders / Stabilise change at new level and provide reinforcement to last