British Airways: Flying into Storm

Case Study - British Airways: Flying into Storm (1996-2000)

This is a case on failed change management in British Airways (BA) during the years 1996-2000 where from posting its highest ever profit margin it slipped to its lowest ever share prices.

Q1. If we look at Kurt Lewin's Change model and compare it to the one in BA-

Several things went wrong during this time. The first would be the CEO's performance during this time. Bob Ayling was a lawyer who helped BA get privatized and later on joined the firm and moved up the ladder to become the CEO as a favorite of his predecessor of Lord King.

The things Ayling did right -

i. Identified the need to cut costs for becoming a better performing airlines

ii. Initiate the industry transforming alliance with American Airlines

iii. Held on to his stance despite strong oppositions showing a determined face of BA

iv. Rebrand BA to make it more attractive to international travelers

v. Later, modified BA's strategies as when problems cropped up

Before enumerating the things Ayling did wrong, one would like to wonder whether he was at all suited to job of heading BA. He had only worked in BA in strategic positions after his stint as lawyer. He had no formal management education and being a lawyer had a more hard-hitting attitude and not very people oriented which was reflected in his manner of work at BA.

The things Ayling did wrong were:

i. Implemented cost-cutting without taking into consideration the stakeholder' point of view. The employees' salary cuts will never lead to their better performance unless they are given any other incentive to perform better. Maybe he should have restricted their pay by putting more pay per performance quotient put into it.

ii. No communication of the organization vision to the employees which led to their disillusionment

iii. He missed out on the people touch points - both employee and customer wise. A fatal error in a service industry.

iv. He failed to create a competent rung of top management around him.

v. He should have had an acceptability test before rebranding BA. He grossly failed to understand the British sentiments and pride and alienated opinion leaders like Thatcher.

vi. He did not have a thorough understanding of marketing or HR and these aspects got sacrificed at the altar of cost-cutting.

Another factor that worked very much against Ayling was the presence of a strong competitor like Virgin Atlantic and a strong, charismatic and innovative leader like Richard Branson heading it.

Q2. If we look at the Managerial Grid by Blake and Mouton,

Ayling had:

* High concern for production

* Low concern for people

This makes him an Authoritarian manager. Indeed, if we look into the tactics he adopted in BA, they are mostly characterized by taking decisions which might not be stakeholder friendly but aimed at ensuring reducing costs to make BA a better managed company.

Q3. On 3 June 1997 the Transport and General Workers' Union (TGWU) representing 9,000 British Airways ground staff and BASSA, the cabin crew union (linked to the TGWU) representing a further 9,000 employees, began balloting members over whether to take industrial action. On 9 June,