Human Resources Management

Case study on HRM under Competitive Environment

Frank Lorenzo & Texas Air

1. What part of external environment 1. What part of external environment changes the most for Texas Air? How did changes the most for Texas Air? How did

they change?they change?► External environment which has External environment which has

changed the most for Texas Air is changed the most for Texas Air is political environment.political environment.

► Implementation of Airlines Implementation of Airlines Deregulation Act of 1978Deregulation Act of 1978

► With the implementation of this act:With the implementation of this act: Fares and routes were deregulated and Fares and routes were deregulated and

thrown open to competition.thrown open to competition. There was drastic cut in air fares , There was drastic cut in air fares ,

increase in air passenger traffic and routeincrease in air passenger traffic and route Increase in competition among carriers Increase in competition among carriers

and creation of many new airlines.and creation of many new airlines.

These changes in the external These changes in the external environment has made it mandatory for environment has made it mandatory for

the airlines the airlines

► To cut costs and HR costs were To cut costs and HR costs were primary targets for cutting. primary targets for cutting.

► Unions were busted wherever Unions were busted wherever possible.possible.

► Flexible assignments of employees to Flexible assignments of employees to job.job.

► To increase productivity of it human To increase productivity of it human resources by attempting to get more resources by attempting to get more work and more hours of work out of work and more hours of work out of eacheach

2. Lorenzo had a reputation at Texas Air for 2. Lorenzo had a reputation at Texas Air for being ruthless with employees in order to cut being ruthless with employees in order to cut costs. When is such harsh treatment justified? costs. When is such harsh treatment justified? Do you feel it was justified in the Texas Air Do you feel it was justified in the Texas Air case, given the change in the external case, given the change in the external environment for air transport? Discuss our environment for air transport? Discuss our answer.answer.

► Harsh treatment to employee is never Harsh treatment to employee is never justified.justified.

► Instead the management can follow Instead the management can follow some other solutions to survivesome other solutions to survive

► It may be reiterated that in new It may be reiterated that in new economic environment, only those economic environment, only those companies which follow human resource companies which follow human resource development and welfare-oriented development and welfare-oriented policies will have healthy relations policies will have healthy relations

Dimensions Industrial Relations HRM

Psychological contract

Compliance Commitment

Behavioral references

Behavioral references

Values & mission

Relations Low trust, pluralist, Collective

High trust, unitarist,

Organization design Formal roles, hierarchy, Division of labor, Managerial control

Flexible roles, flat structure, teamwork, autonomy, self-control

HR Model by Guest

3. How would you judge whether Texas Air’s 3. How would you judge whether Texas Air’s new HR policies under deregulation were new HR policies under deregulation were

effective? What criteria would you use and why?effective? What criteria would you use and why?

► Effectiveness of HR activity can be Effectiveness of HR activity can be measured with following indicators viz.measured with following indicators viz. Customer ReactionsCustomer Reactions HR ImpactHR Impact Dollar Value of HR ProgramsDollar Value of HR Programs

► Regarding present case we can say Regarding present case we can say that Texas’s new HR policy was not that Texas’s new HR policy was not that effective as it was not satisfying to that effective as it was not satisfying to the customers i.e. employeethe customers i.e. employee

4. Do you agree that it takes an aggressive CEO 4. Do you agree that it takes an aggressive CEO such as Lorenzo to bring about real change in a such as Lorenzo to bring about real change in a firms HR or could this be done by the firm’s HR firms HR or could this be done by the firm’s HR

unit? Explain.unit? Explain.

►From the present context, it is From the present context, it is clear that the war between clear that the war between aggressive CEO and union is never aggressive CEO and union is never good for the health of the firm.good for the health of the firm.

►Such wars ultimately take the firm Such wars ultimately take the firm to death as in case of Easternto death as in case of Eastern

►Lorenzo’s experiment proved Lorenzo’s experiment proved profitable for some period but profitable for some period but ultimately proved to be a disaster.ultimately proved to be a disaster.

► The Sequence of HR strategic FormulationThe Sequence of HR strategic FormulationSource : Handbook of Strategic HRM ,Michael ArmstrongSource : Handbook of Strategic HRM ,Michael Armstrong

► Diagnose:• Why do these issues exist?Diagnose:• Why do these issues exist?• • What are the causes of the problems?What are the causes of the problems?• • What factors are influencing the situations (competition, What factors are influencing the situations (competition,

environmental, political etc.)?environmental, political etc.)?

► Conclusions & Recommendations:Conclusions & Recommendations:• • What are our conclusions from the analysis/diagnosis?What are our conclusions from the analysis/diagnosis?• • What alternative strategies are available?What alternative strategies are available?• • Which alternative is recommended and why?Which alternative is recommended and why?

► Analyze:• What’s happening?Analyze:• What’s happening?• • What’s good and not so good about it?What’s good and not so good about it?• • What are the issues?What are the issues?• • What are the problems?What are the problems?• • What’s the business need?What’s the business need?

Action Planning:• What actions do we need to Action Planning:• What actions do we need to take to implement the proposals? What take to implement the proposals? What problems may we meet and how will we problems may we meet and how will we overcome them?• Who takes the action and overcome them?• Who takes the action and when?when?

Resource Planning:• What resources will we Resource Planning:• What resources will we need (money, people, time)?• How will we need (money, people, time)?• How will we obtain these resources?• How do we convince obtain these resources?• How do we convince management that these resources are management that these resources are required?required?

Benefits:• What are the benefits to the Benefits:• What are the benefits to the organization of implementing these proposals?organization of implementing these proposals?• How do they benefit individual employees?• • How do they benefit individual employees?• How do they satisfy the business needs?How do they satisfy the business needs?

Extension: MAJOR ORGANIZATIONAL Extension: MAJOR ORGANIZATIONAL APPROACHESAPPROACHES

TO COMPETITIVENESSTO COMPETITIVENESS

►Business Process Improvement Business Process Improvement (Reengineering)(Reengineering)

►Total Quality Management Total Quality Management

►High-Involvement/High-High-Involvement/High-Performance Human Resource Performance Human Resource SystemsSystems

Thank you.Thank you.

►QUERIES IF ANY!!!!!!!QUERIES IF ANY!!!!!!!