Executive Summary
Stiff competition from rivals is a challenge for many aviation companies. To manage this problem, airlines have chosen to differentiate themselves on different platforms. Effective human resource management is one way that these companies have chosen to do so.
Through an elaborate secondary research study, this paper investigates the human resource practices of Emirates Airline as a sound model of effective human resource management in the competitive aviation industry. The goal of this paper is to present an applicable human resource framework that other airlines could use to improve their human resource competencies, as a strategy of overcoming increased competition in the aviation sector.
Introduction
Many researchers have emphasized the importance of adopting prudent human resource practices in building a good team of working professionals (Warner 38-43; Cento 8). According to Sims (10-15), human resource management (HRM) involves the recruitment and management of workers in an organization.
Relative to this assertion, Price says, “The focus of Human Resource Management is to attract, select, train, motivate and compensate employees, while making sure that they comply with employment and labor laws” (28). Based on this statement, Warner (38) says companies that do not have a proper set up of HRM are bound to suffer many operational problems.
Consequently, successful businesses are those that have good human resource practices, while unsuccessful ones do not pay attention to these practices. While this statement underscores the importance of HRM in business, it is difficult to understand its full scope without comprehending its effects on an organization.
This paper is a case study of the human resource practices of Emirates Airline. The company is a government-owned airline that operates under the Emirates Group (Murray 198). Its headquarters is in Dubai and it undertakes its operations from the city’s main airport. The airline is the biggest in the Middle East region (Murray 198-199).
In line with its dominant status, the company flies four out of the ten longest non-stop flights from the Middle East to other parts of the world (Murray 198-199). Comprehensively, Emirates Airline flies to more than 148 cities in more than 62 countries around the world (Murray 198-200). Experts attribute part of the company’s success to its HR strategy (Murray 198-199).
In fact, some of them suggest that other airlines should emulate its HR strategic plan. However, doing so requires an understanding of the tenets of its HR strategy. This is why this paper chooses to focus on this company. However, before doing so, it is crucial to understand the theoretical framework and models that underscore prudent HR management.
Literature Review
This section of the paper explores theories and models that underlie prudent human resource management. HRM models and theories are important in analyzing the human resource practices of multinational companies because they provide an analytical framework of doing so.
Furthermore, they help to establish the variables and relationships that we should research if we are to understand effective HR practices. There are many different models and theories in HRM. However, this section of the paper will focus on two HRM models and two theories that are relevant to the study focus.
The models are best practice and Patterson’s model and the theories are institutional theory and the resource-based view. The resource-based view will also double as the theoretical framework for this paper The following section of this paper describes the HRM models and theories.
HRM Models
The best practice model is a common framework in HR. Warner describes it “as HR methods and systems that have universal, additive, and positive effects on organizational performance” (38). This assertion means that an organization’s best practices should add to an existing one to develop an overall broader improvement in organizational performance.
The best practice model posits that there is a close relationship between organizational performance and human resource practices (Warner 39). In this relationship, proponents of the model argue that most organizations should have a strong commitment when adopting this model to benefit from this relationship (Sims 8-10).
Empirical research in this field reveals that there are several HR portfolios that are suitable for improving specific aspects of organizational performance, regardless of the market or organizational context (Sims 8-10). A key concept in this understanding is ”Universalism,” which presupposes that the adoption of universal best practices in an organization would lead to an overall improvement of organizational performance, regardless of the context of analysis (Warner 39).
Indeed, combinations of best practices are often mutually compatible. When applied, they should increase employee motivation, increase employee commitment, and create high levels of employee competence. Conversely, based on several years of applying this model, experts have found that the best practice model leads to low levels of employee absenteeism and high levels of organizational productivity (Sims 8-10).
Patterson’s HRM Model
The Patterson model established a link between prudent human resource practices and excellent organizational performance. The model suggests that prudent HRM practices could increase employee skills and abilities by promoting positive attitudes, increased innovation and increased motivation (Niche Consulting 5).
In this regard, employees would enjoy expanded responsibilities that would allow them to better use their skills and abilities. This strategy is useful in providing a framework for understanding high performance HRM practices and their usefulness in improving organizational performance. Patterson’s HRM model proposes a holistic understanding of HRM practices as outlined below
Figure One: Patterson’s HRM Model
Source: (Niche Consulting 5)
According to the diagram above, HRM competencies develop through efficient training, career development opportunities, performance management programs, employee retention programs, and the adoption of proper recruitment processes.
Collectively, these processes would help in identifying HR gaps that most companies could fill through succession planning, selection of appropriate employees for the completion of specific tasks and employee training (Niche Consulting 5). When these processes work together, it is easy to realize improved competencies that should guide the HR planning process and ultimately improve organizational performance.
HRM Theories
When companies started looking at workers as people and not factors of production, researchers developed many theories for maximizing employee productivity. The behavioral perspective, transaction cost theory, resource-based view, and institutional theories are some key products of their analysis. The following section of this paper discusses some of these theories
Resource-based View
The resource-based view is the theoretical foundation of this analysis. This theory argues that a firm’s internal resources provide the main basis for creating a competitive advantage in an organization. According to Murray (198), the value brought by employees to an organization stands at the core of this approach.
Here, the resource-based view gives organizations an opportunity to optimize the flexibility of assigning workplace tasks to reduce costs and maximize workplace productivity. By doing so, companies would find that human resource planning helps them build a competitive advantage by providing them with an opportunity to add value and uniqueness to their services, or products.
One limitation of the resource-based view is its tendency to ignore the industry bottom-line and instead focuses on organizational competencies as the main basis for developing a competitive advantage. Independent research studies have disputed this view by showing that a true competitive advantage emerges from a “right-sizing” strategy (Murray 198).
This strategy comes from the understanding that an organization should strive to maximize the output of its existing resources and optimize how the resources are used. In this regard, the true competitive advantage emerges from the differences in the use of organizational resources, as opposed to the differences in resources among firms.
Institutional Theory
Scholars developed the institutional theory in the early 1960 and applied it in different fields, including economics, political science and sociology (Cento 8). This theory highlights the importance of using rational myths, rules and norms to create a dominant structural framework for defining human behavior.
Some aspects of the institutional theory define how organizations develop these norms and structures for purposes of proper governance. They later disclose on how they fall to disuse. Human resource experts started recognizing the applicability of the institutional theory in the 1990s (Cento 8). Wright and McMahan (295) were among the first scholars to understand its importance in the discipline.
Later, Najeeb (25-30) also adopted tenets of the theory in his research. This theory assumes “a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Najeeb 26).
Relative to this assertion, an organization’s actions towards institutional pressures could determine its success or failure. According to Cento (8), the institutional theory postulates that organizations are bound to adopt similar behaviors when they face uniform external and rational factors.
Researchers understand this phenomenon as isomorphism (Wright and McMahan 295). Najeeb (25-30) defines it as a constraining force that forces organizations to act uniformly when subjected to the same force. Human resource experts have used this analysis to argue that a company’s human resource practices are subject to contextual forces (Wright and McMahan 295).
These organizations are supposed to adopt a set of human resource practices, which are desirable or appropriate within a contextual setting. Still, within the HRM field, the institutional theory highlights the effects of groups on workers’ performance. For example, employee perspectives about their work would mostly depend on how they perceive managerial treatment towards other workers (Wright and McMahan 295). This perception is crucial to predicting employee commitment.
Analysis and Discussion
Many challenges have characterized the global aviation sector. Key among them is increased competition and an uncertain global economy (Cento 10). Although Middle East-based aviation companies have weathered some of the effects of these challenges better than their western counterparts have done, undoubtedly, they still reel from the effects of an unpredictable business environment (Cento 10).
Competition has emerged as a key concern for these airlines. Cento (10) says that competition is an important factor in this industry because peers often want to compare their performance with one another. Many stakeholders in the sector promote competition in the form of prizes, service standards, and exemplary leadership.
In the same regard, employees compete with one another for prestigious positions and jobs offered by these airlines. The best airlines in the world promote competition among employees by encouraging them to attend educational conferences, seminars, and workshops (Cento 10). Underlying this review is Porter’s five-force analysis, which proposes five principles of competitive forces – ease of entry of new competitors, the intensity of competitive rivalry, the threat of substitute products, customer bargaining power, and supplier bargaining power.
Since most of these elements of competitive rivalry have dwindled in importance, the focus has shifted to employees and their skills in improving the competitive advantages of these airlines. Different companies have adopted different strategies to manage this problem.
While most of them have chosen to differentiate themselves based on cost saving measures, some of them have chosen to differentiate themselves by improving their human resource competencies. Indeed, the services offered by these companies are skilled, based on improved human resource practices.
Relative to this understanding, Wright and McMahan (298) say that human resource practices have become increasingly important in the running of these airlines. This section of the paper will demonstrate that this is true for Emirates Airline. To demonstrate this fact, it is important to study different tenets of the company’s HR plan.
Compensation and Rewards Systems
Emirates Airline gives its employees two types of rewards – financial and non-financial rewards. The criterion for analyzing employee performance depends on how employee performance aligns with the company objectives. Some of the financial rewards offered to its employees include a tax-free salary and ticket discounts that allow them to travel around the world with their families.
Usually the company accords the workers such a privilege at least once a year (Murray 198-199). The airline also has a reward system that strives to create sustainability in the market. This system includes promotions, training, and internal growth opportunities for the workers. It works under the principle that “a company gets what it rewards.” Using this principle, the airline sets specific and new targets for employees to meet. If they meet these targets, they get a bonus.
For example, the “On-time departure goal” was a cost-saving plan introduced by the airline’s management, which required that employees undertake security checks in less than 12 minutes. Under the same program, the pre-departure time was supposed to be less than seven minutes (Murray 198-199). Collectively, the airline wanted to make it easy for their customers to check-in and board in less than 20 minutes. If the employees managed to do so, they would receive a bonus.
Part of the motivation for adopting this strategy was to promote teamwork. Through the company’s compensation and rewards system, Emirates Airline attracts young employees and keeps its wages at a minimum. Other airlines that pay high salaries and huge pensions suffer from low growth because they do not capitalize on the advantages of adopting a flexible and robust compensation and reward system.
Career development and Educational programs
Emirates Airline has recognized the importance of self-development and the acquisition of knowledge and skills through the introduction of quality training and effective educational programs. All cadres of employees could access these career development and training programs. Training occurs through different methods, including classroom-based programs and e-learning.
Other training programs include practical assessments, simulations and project-based training programs (Murray 198-199). These programs are within a larger network of training facilities located in Dubai. Individual and group-based training occurs within these facilities. The network offers a one-stop shop for workers to access these programs and improve their skills in the same regard.
The training programs occur annually through the airline’s annual professional development course. The course usually targets employees who work in departments that need training and development. Such types of training could occur through seminars and conferences. The purpose of doing so is to make sure that the employees have updated skills and are abreast with the developments of the airline industry.
The emirate’s training program differs from other training programs in the airline industry because other airlines usually focus on building the moral fabric of their employees and motivate them in the same programs (Murray 198-200). Emirates airline adopts a different strategy of helping its employees to develop their skills.
The company does this to build employee confidence and to make them more independent, such that even when they leave the organization, they would apply the same skills in their future endeavors. For example, the airline has an ICDL training program for its cabin crew that imparts new knowledge to help the workers think broadly in their work.
This competence improves their job prospects not only within the airline, but also in other aspects of their lives. Besides choosing the best workforce for a job, it is the responsibility of the human resource team to develop their careers through career development and educational programs.
Using the same analytical scope, the HR team also has to outline the obligations and rights of the workers. A key function of the HR team is to find out the easiest and most appropriate way of introducing these career development and education programs based on the needs of their workers (Murray 198-200).
Employee Performance and Evaluation Systems
Performance management is an important aspect of human resource management because it makes sure that all the employees abide by specific regulations that should guarantee the quality of services they offer their clients. Emirates airline conducts performance appraisals annually. These appraisals provide the basis for allocating more responsibilities to employees.
Similarly, they provide the basis for improving employee remuneration. The performance appraisal is evaluative and developmental in nature. The evaluative part represents an understanding of employee performance within a specified time. The airline conducts such evaluations, based on a comparison of employee performance with the organization’s specified performance standards.
The developmental aspect of the employee performance criterion is a buildup of the evaluation process because managers use it to gauge whether an employee could take additional responsibilities or not. These developmental assessments draw a strong link with promotions and job reallocations.
The aim of undertaking this process is to identify additional training opportunities that the employees would need to improve their performance. The organization also collects feedback when the employees have passed through the evaluation systems.
Human Resource Planning and Managing a Diverse Workforce
Emirates Airlines recognizes the importance of having a culturally diverse workforce because it operates in different countries around the world. Its cultural diversity principle stems from the principle to uphold ethnic diversity. The airline boasts of recruiting employees from more than 83 nationalities (Murray 198-200).
This HR planning strategy stems from the company’s belief that talent is not nationally exclusive. The company’s employees come from diverse cultures, religions and ethnic groups. The diversity of the company’s workforce compliments Dubai’s cultural diversity because more than 80% of the workforce population is comprised of expatriates from other parts of the world (Murray 198-200).
Workforce planning and Recruitment
Workforce planning and recruitment focuses on recruiting employees for purposes of fulfilling organizational goals. A key function of this HR tenet is hiring and firing employees. It also outlines the type of compensation that employees could get after evaluating their performance. Emirate’s recruitment strategy is very specific because it only accords highly skilled employees the opportunity to work in the organization.
However, this strategy has not been widely successful because the highly skilled employees often resign from their jobs a year or so after working for the airline (Murray 198-200). This problem stems from the company’s low pay. Indeed, as Warner (38) observes, it is very difficult to convince managers at the airline to increase their employees’ pay because they believe low wages is the only competitive advantage they have over their rivals.
This is why Indian and Pakistani employees who work for the airline receive relatively lower wages than employees of a similar demographic who work for a rival airline (Murray 198-200). These insights explain why employee dissatisfaction and employee turnover is high in Emirates Airline. This analysis shows the importance of addressing this malfunction in the company’s workforce planning and recruitment strategy.
Discussion
The efficient management of human resources can align with a company’s competitive advantage and its internal organizational competencies to exploit external opportunities that would elevate it above its competition. An evaluation of the human resource practices of Emirates reveals that the airline has an exemplary record in the adoption of sound HR practices.
The HR practices adopted by Emirates Airline also highlight the principles of the resource-based view, which advocates for the use of a company’s internal competencies to gain a competitive advantage. For example, the airline subscribes to the philosophy that people are at the center of the development of an organization’s competitive advantage.
This philosophy emerges from the understanding that a firm’s internal resources are useful to its prosperity. This is why Emirates has consistently invested most of its resources towards employee training and staffing during periods of economic boom. Similarly, during these periods, it has invested many resources in developing employee involvement systems.
Given the need to justify the value of HR in a service-oriented industry, such as the aviation sector, the propensity for Emirates Airline to borrow concepts and theories from the broader strategy literature comes as no surprise in this analysis. However, two developments have emerged as interesting findings in this study. First, the popularity of the literature on the resource-based view is an interesting finding because the theoretical basis for its application is outside the HRM field.
Secondly, the application of the resource-based view of the strategic evaluation of Emirates Airline shows that there is a lot of untapped potential concerning the possible convergence of the fields of strategic management and strategic human resource management in the airline industry. Within the strategic focus of firm behavior, we find that this theoretical basis has elevated the importance of people in developing a company’s strategic direction.
Knowledge, dynamic capability, learning organizations, and leadership are some important concepts of strategic management that often lead to the creation of strategic advantage, which bring our attention to the intersection of strategy and the competitive advantage of firms. The findings of this paper also emphasize the importance of the best practice model of HR, which advocates for the application of a universal understanding of HR practices, regardless of the context.
This paper has demonstrated that other airlines should replicate Emirate’s HR practices throughout the airline sector because it has shown merit in improving the organization’s productivity. Therefore, this paper supports the best practice framework because it presupposes that there is a set of human resource practices, which are applicable and could lead to positive outcomes for the stakeholders.
Conclusion and Recommendations
Based on the insights highlighted in this paper, we find that Emirate’s human resource practices are effective in supporting the organization’s goals. The organization’s human resource skills improve the performance of the workers through the sound development and acquisition of human capital.
Emirates airline follows sound HR practices highlighted in the literature review section. Through various rules and regulations formulated by the company’s chairperson, the airline makes sure that all departments of the airline follow these practices. The employee recruitment process emerges as the most important aspect of Emirates HR performance because the company follows a strict guideline for recruiting employees.
While this paper recommends the replication of Emirate’s HR strategy, it is important to pack all these strategies together for purposes of balancing and harmonizing all tenets of the HR practice. This recommendation should also apply to other aspects of the HR field because it would create synergies among all the tenets of the practice. For example, there would be a proper balance between HR planning and recruitment functions.
Similarly, there would be a proper balance between career development and employee performance practices. Synergies would also emerge in the same fashion. Based on this understanding, it would be difficult to neglect aspects of the practice in favor of another. Instead, there would be a synchronized improvement of the larger HR practice.
Works Cited
Cento, Alessandro. The Airline Industry: Challenges in the 21st Century, New York, NY: Springer Science & Business Media, 2008. Print.
Murray, Kevin. The Language of Leaders: How Top CEOs Communicate to Inspire, Influence and Achieve Results, New York, NY: Kogan Page Publishers, 2011. Print.
Najeeb, Ali. Institutional Theory and Human Resource Management, Wollongong, Australia: THEORI, 2014. Print.
Niche Consulting. Human Resource Management. June. 2005. Web. December. 2015.
Price, Alan. Human Resource Management, London, UK: Cengage Learning, 2011. Print.
Sims, Ronald. Human Resource Management: Contemporary Issues, Challenges, and Opportunities, New York, NY: IAP, 2007. Print.
Warner, Malcolm. Whither Chinese HRM?: Paradigms, Models and Theories, London, UK: Routledge, 2014. Print.
Wright, Patrick & McMahan, Gary. “Theoretical Perspectives for Strategic Human Resource Management.” Journal of Management, 18.2 (1992): 295–320. Print.