One of the reasons you were recruited is your interest in strategic human resource management! You like a challenge, and one of the more significant challenges in this new job is the recent announcement at its shareholder’s meeting that Virgin Australia will sack 750 office workers as part of a plan to cut costs and pull the ailing airline out of its financial nosedive. The airline lost $315 million in the year ended June 30th.
The new CEO, Paul Scurrah, who in March 2019 was brought in to replace long-time boss John Borghetti, said that while he was "acutely aware" of the impact the job cuts would have on staff, the result showed the airline must improve its financial performance. "I regret the need to reduce the size of our workforce so quickly. However, today’s financial results tell us loud and clear that we need to reduce costs," he said.
"We need to make tough but important decisions that are in the long-term interests of the group."
Under Borghetti, the airline was obsessed with reacting to Qantas rather than developing its own strategy. When Scurrah was appointed, he immediately commenced work on developing a robust strategic plan to present to shareholders at the recent meeting. On top of the planned job cuts, it was announced that Virgin Australia would also overhaul its corporate structure, which Mr Scurrah said had grown "overly complex over time". The running of Virgin's three divisions - Virgin Australia, Virgin Australia Regional Airlines and Tigerair - will be combined into a single corporate team.
When you applied for the position, you read up on the airline, including accessing the Virgin Australia website for information on the organisation, including its history from its establishment as Virgin Blue in 2000
When you undertook your Master of Human Resource Management program, you were particularly interested in matching the business strategies of organisations to their internal resources and competitive capabilities. One academic article you found particularly helpful was an article by Buller and McEvoy, (2011), “Strategy, human resource management and performance: Sharpening line of sight”, Human Resource Management Review, Volume 22, Issue 1, March 2012, Pages 43-56 (this is available in the Reading Materials folder on Blackboard)
Your boss, the Group Executive, People, at Virgin Australia, has asked you to prepare a briefing paper for the HR management team, to assist them in developing a human resource plan that reflects the new business strategy. She specifically wants you to identify key issues in developing a HR plan for the airline.
Your task is to consider the issues and challenges for designing a successful strategic human resource plan, that meets your boss’ objectives.
Specifically, identify three issues it would be critical to address in developing such a plan, and explain why these would be necessary to ensure that the proposed HR plan supports Virgin Australia’s business strategy. In choosing these issues, you might consider questions like:
Present your findings in the form of a briefing paper for your boss. The briefing should comprise an introduction and the ‘scoping’ of the problem, and a brief statement of the main arguments of the paper. It should then provide substantive content on each of the three issues that reflects depth and breadth of research as well as practical understanding of the problem, and critical analysis of the issues in presenting solutions to the problems. A conclusion should draw together the identified issues, analysis and solutions.
In writing up this exercise, you may prefer to use another variation on this scenario. Any variation must be agreed in writing with your Course Co-ordinator before proceeding:
Length: 2000 words (+/- 10%). The word count is based on your introduction, body and conclusion, and does not include your title page, list of references at the end of your paper or any appendices.
Format: 12 point font; 1.5 line spacing (not single spacing, not double spacing); Times New Roman or Calibri Light font.
Paragraph format; No bullet points, no number lists – this is an essay, not a report and not a set of notes; no tables, charts, diagrams in the main body of your essay - put these in and appendix if you feel you need to use them.
The reference list should be presented as a separate page, and formatted using the APA 6th style.
GSBS6040 Human Resource Management Trimester 3, 2019
PBL Exercise 1: Case study
Human Resource Planning is one of the significant operational functions of an organisation. An organisation needs to delegate proper resources so that proper strategic human resource plans could be developed that are aligned with organisational strategic goals and ethical standards. However, often, HR managers face issues in developing strategic plans. Such issues are key areas that must be recognised and considered before making any strategic human resource plans that involve drastic but necessary changes. This is because if such issues are not analysed and resolved, the plans cannot be implemented properly. This essay identifies the 3 major issues in relation to Virgin Airlines case study and possible detail solutions. The case study details the current financial problems Virgin Australia is suffering through and cost reduction as a possible strategy through job cuts for dealing with the financial downturn.
Virgin Australia for suffering from revenue loss for 7 years at a run and $315 million in the last FY has announced 750 head office job cuts and merging three divisions Virgin Australia, Virgin Australia Regional Airlines and Tigerair to a single corporate unit in order to reduce operational and wage costs. This is a strategic decision made by the company’s CEO and requires an HRM plan to actualize this goal and resolve the financial problem of the company (Hatch, 2019).
Scope of the paper
This paper includes the scopes of identifying 3 key issues in relation to HRM planning associated with the proposed strategic changes, analysing those issues and presenting possible solutions to the identified issues. Further, the paper includes the scope of recommended strategic actions to implement the solutions.
Identification and analysis of the issues
Virgin Australia currently has some strategic management objectives which as reducing employee based by 750 heads from head office staffs, merging 3 management divisions to a single corporate unit and saving 75 million from its annual wage bill. With respect to HRM planning and implementation of those plans, 3 major issues can be identified and analysed that have a direct impact on these strategic objectives and outcome of HRM plan implementation.
Analysis of Issues identified
Inaccuracy and Uncertainties
With respect to the case problems in question, HRM planning would require forecasting demand and supply of human resources and projecting manpower needs over the period of at least 5 years. However, this is a risky process, and it is not possible to project these needs accurately as it requires forecasting market trends accurately and converting the same to action-driven strategies. Market trends associated with Human resources are based on macro and microeconomic environments of a country and company. These situations are influenced by global economic trends and uncertainties. Forecasting these trends over a long period is practically impossible as these trends change frequently (Noe, Hollenbeck, Gerhart, & Wright, 2017). For instance, while forecasts may show a possible surge in fuel price for next few months projects cannot be made accurately for 2-5 years as fuel price depends on a number of different global economic scenarios (Fukui & Miyoshi, 2017). As the surge of the fuel price is a major cause for job cuts, inaccuracies could be present with respect to future workforce needs, current cost estimations regarding cost savings resulting from job cuts.
On the other hand, as the organisation is planning to merge 3 different divisions, it would need to estimate the current need of workforce to execute organisational functions of the merged corporate units efficiently. Moreover, the HR manager would need to determine the efficiency level required to perform daily duties and analyse the gaps in performance level, and estimate costs associated with training the existing workforce. These are complex, and usually, data generated for these are not error-free. Another challenge is accurately estimating which personal to keep for the skills needed in future. Multiple people can come up as suitable, which can make decision-making very difficult (Stewart, & Brown, 2019). Another possibility is existing staff lacking the future needed skills for which they require training.
Another issue that can be identified in relation to this case is employee resistance. The major aspect of this HR planning is job cuts. This would likely result in 7.5% of the total organizational workforce being out of jobs. It is likely that employees would resist the proposed changes in job cuts and merging management divisions for fear of joblessness (Hatch, 2019). This has both economic and social impact on the countries workforce. People may feel wrongful termination has occurred. Terminated employees may subject the employers to lawsuits and legal proceedings on the grounds of wrongful termination (Collings, Wood, &Szamosi, 2018). This is a major factor because additional costs may incur for the company while the organisation is already trying to reduce internal costs. This may result in worsening of the existing situation than improving the business conditions.
Moreover, existing workforce and trade unions may also resist the proposed strategic changes because they may perceive that their existing workload would likely to increase while their wages are likely to remain constant resulting in loss of work-life balance. The resistance to change could be detrimental to HR planning as the impact of this resistance is likely to be a failure to implement the proposed changes and HR plans (Bratton, & Gold, 2017). Therefore, the issue of employee resistance should be considered as well for designing a successful strategic human resource plan.
Time and expenses
The proposed strategic HR plan involves manpower planning. This requires a significant period of time in relation to forecasting trends, collecting data regarding training and new recruitment needs, and planning for the process of change. This is both expensive and time-consuming. If enough time is not spared for these activities, inaccuracies inevitably result in forecasted supply and demand trends. The organisation in such cases is likely to lose its existing strengths and perform worse than before (Johnson, Lukaszewski& Stone, 2016).
On the other hand, the process requires huge budgetary allocation and expenses in relation to implementing the plans. For instance, when the organisation decides to cut jobs of 750 staff members, they would require to immediately clearoff all financial pending in terms of provident funds, gratuity, bonus, andsalary. For 750 employees, these expenses could be huge. Moreover, additional expenses would be involved in the actualisation of the merger process. While the HR plans for the strategic objectives do hold some financial merit in the long-term, in the short-term the possibility is that the company instead of saving costs would be losing money in the process which is detrimental considering the current financial situation of the company (Olson, Slater, Hult, & Olson, 2018).
Possible solution(s) and justification
While determining possible solutions to the issues identified, certain aspects need consideration. It is necessary to consider who should be responsible, and what should be the process, for redesigning the divisional management structure. The development of divisional management structure has been one of the top level strategies in corporate world (Ansoff et al. 2019). To answer this question, it is appropriate to say that the responsible person for these actions would involve the board of directors and the HRM department head. A strategic analysis of organisational structure and functions is required, and this requires expertise that comes from years of experience and knowledge suitable for people occupying this designation. In relation to the process of redesigning the divisional management structure, a systemic change management process is required to establish involving actions of merging divisions, selling out non-profitable functional units, determination of required resources (physical, financial and human) and deploying the resources estimated properly (Parth, 2017). Another consideration is making sure that that management retains the most skilled individuals in appropriate numbers or recruit if the needed skills are absent in the current workforce. This requires both times for determining the skills required and performance review process for identifying the appropriate workforce. A systematic approach should be taken for performance review, termination of unfit workforce stating clear reasons for termination relating to performance-related issues and organisational financial and budgetary concerns (Hg & Chatzkel, 2015). 3rd major consideration is preparing Virgin Australia in becoming more efficient and more innovative. This should consider employing only skilled and young workforce as young minds are more innovation and open to experimentation (Figueiredo et al. 2017). For the come to make a drastic turnaround, it needs to include innovated strategies, marketing and sales deals, advertising and branding measures to rebuild its reputation and increasing its customer base in non-performing areas. Lastly, examples of other organisations that have been successful in changing their business strategy and associated HR strategy should be considered. For instance, Qantas Airways have recently changed their business and HR strategy to turnaround from long term losses. What the company did in order to reduce internal costs by $2.1 billion and to increase revenue by 2017 was to reduce 15% of its workforce, simplifying its range of fleets by retiring older aircraft, simplifying maintenance procedure, consolidating maintenance centres, and reducing operational costs in every department (BCG, 2019). These strategic measures have been immensely profiting for Qantas.
Considering these aspects, the following solution, namely the line of sight framework, is detailed. A diagrammatic illustration of the framework is presented in appendix 1.
Line of Sight: To address and resolve the issues presented above, the line of sight framework can be used to for implementing specific strategies such as recruitment/ selection of skilled staffs, training and development of recruited staffs, providing appropriate compensations through performance appraisals in order to achieve desired outcomes (refer to appendix 1). This strategic framework solution like improving organisational capabilities and culture, addressing group level competencies, measuring performance for addressing HRM issues and developing HRM plans (Buller, & McEvoy, 2012). Using these strategic approaches based on SHRM principles, line of sight framework can address each of the issues associated to HR planning and resolve those within a specific timeline so that, devised HR plans can be implemented appropriately.
The briefing paper suggests that often, HR managers face issues in developing strategic plans. The paper suggests that these issues are key areas that must be recognised and considered prior to making any
strategic human resource plans that involve drastic but necessary changes because if such issues are not analysed and resolved, the plans cannot be implemented. The paper has identified three major issues in relation to the case study of Virgin Australia. In conclusion, the identified issues can be summarised as Inaccuracy and Uncertainties in relating to forecasting demand, employee resistance to change and time & expenses associated withthe implementation of HR plans. Upon consideration of major aspects of the case study and strategic organisational objectives, the line of site framework has been presented as a solution strategy for addressing and resolving the identified issues.
With respect to implementing the identified solution of Line of sight framework following action-driven recommendations can be identified.
In relation to the issue of inaccuracies and uncertainties, it is recommended that a strategic analysis of organisational structure and functions should be done using the expertise that comes from years of experience and knowledge suitable for people occupying designation like a board of directors, CEO and HRM departmental head. For redesigning the divisional management structure, based on accurate demand and forecasting a systemic change management process should be established thatinvolves actions of merging divisions, selling out non-profitable functional units, determination of required resources and deploying the resources estimated properly.
With respect to driving the change management process appropriately to deal with employee resistance, the managers should consider communicating to the employees and telling them why these changes are necessary and what circumstances have led to such decision-making. If due process is followed, the involved employee resistance can be reduced.
To deal with the issue of expense and time, the company can follow the example of Qantas and undertake actions such as simplifying its range of fleets, simplifying maintenance procedure, consolidating maintenance centres, and reducing operational costs in every department following an estimated timeline and Gantt chart.