Operating Enviroment and Stakeholder Analysis of British Airways - Example

BUSINESS CONTINUITY MANAGEMENT British Airways, UK 1. CRITICAL ANALYSIS OF OPERATING ENVIROMENT AND STAKEHOLDER ANALYSIS British Airways is the United Kingdom’s largest international scheduled airline with over 140 destinations worldwide. British Airways principal place of business is at Heathrow which is one the world’s renowned airport locations. The company is also providing air cargo services which are mostly in conjunction with their day-to-day passenger services. Together with code share and franchise partners, British Airways operates an extensive international scheduled airline route networks to more than 300 destinations around the globe. In the years 2008 and 2009, British Airways served around 33 million passengers and have earned approximately £9 billion in revenue which is higher than their earnings the previous year by 2.7%. Their cargo services have carried 777,000 tonnes of cargo to almost every destination in the world. Last year, the company had already 245 aircraft in service that include 12 Airbus A380 and 24 Boeing 787 aircraft (British Airways 2010, p.1). Since British Airways is a large company doing a global business, its stakeholders are generally customers, agents, suppliers, contractors, franchisees, joint venture partners, subsidiaries, labour unions, and government or regulatory authority officials (British Airways 2002, p.1-3). According to the British Airways management, their customers are at the heart of everything they do thus they are making sure they are offering excellent services to everyone who wishes to fly with the airline. The company also made it a point to get feedbacks from their customers to have a real understanding of their needs. For the company staff and other employees, the company is providing training programmes to improve and provide a more attentive and personal service to their customers. In 2009, the company had provided 215,000 days of trainings for cabin crew and ground staff. For building and other facilities, the company opened Terminal 5 to serve their customers better. Terminal 5 has a luxurious lounge complex that offers greatly improved facilities such as wine bars, spa treatments, delicious food, and upgraded communication facilities. The company’s aircraft fleet was also upgraded with new comfortable cabin layout with their Boeing 747s and introduced an all-premium 32-seat layout in Airbus A318 aircraft. The new Boeing 777 aircraft help the company reduce their carbon foot print since it has lower fuel burn. The improvement also includes mobile text and data services, on-demand in-flight entertainment system, and an online portal where customers can book and check-in online. The British Airways cargo services made some advancement by introducing the new ‘cool chain’ technology where customers can avail of express or prioritise services. This new services include airmail scanning and direct airport-to-door deliveries. British Airways also expanded their overseas branches including those countries that they do not even fly (British Airways 2009, p.1-5). In improving their relationship with valued customers, the company recognised the importance of having a good relationship with suppliers, partners, and alliances with other related services. The company are procuring goods and services using a strategic sourcing process and benchmarking principles in order to get the most value. In 2009, the company signed a major in-flight catering agreement with three suppliers to ensure high-quality airline catering. More importantly, British Airways believe that using two or more suppliers can minimise their exposure to supplier failure. Learning from past experiences, British Airways recognises the value of mitigating supplier risk thus it has now become a key priority. The establishment of a new and well-organised procurement team helps the company measure risk across most their critical suppliers that would have a serious impact on their ability to operate. Their business continuity plan enables the company to cover the risk of supply failures and monitor and review their effectiveness (British Airways 2009, p.1-5). Aside from customers, one of the most important stakeholders is its employees. This is because the whole operation requires a skilled and competent workforce. The company employs more than 40,000 people as of March 31, 2009 (British Airways 2010, p.31). In 1997, British Airways experienced a three day employee strike during the peak of summer travel season that almost paralysed 70 percent of the airline’s flight from London’s Heathrow airport (Domberger 1998, p.146). In March 27, 2010, another employee strike occurs resulting to cancelation of at least 133 flights departing from London while 97 arrival flights were also cancelled (Clark 2010, p.1). These incidents and resulting disruption reminds us the even a big and powerful company can be affected by a group of internal stakeholders. Clearly, customer satisfaction not involves continuous supply of goods and services but managing employees’ satisfaction in the workplace as well. The same argument goes to different stakeholders such as contractors, agents, subsidiaries, regulatory authority, and business partners which can cause some form of disruption. 2. CRITICAL ACTIVITIES AND ASSESSMENT OF MAXIMUM TOLERABLE PERIOD OF DISRUPTION British Airways is a big and widely connected company and as mentioned earlier, it is running not only its own immediate organization but many branches, franchisees, and subsidiaries. However, since the primary business of British Airways is passenger aircraft, many critical activities are involved in its day-to-day operation. Three of the most critical are its ground operation, in-flight service, aircraft operation and maintenance. Its ground operation includes managing a ground crew that supports pre-departure activities. The in-flight service on the other hand includes managing airline crew and customers in-flight satisfaction. Since the primary component of its business is passenger aircraft, its activities involved managing ground support such as maintenance staff, equipment, and other critical aircraft facilities. British Airways recognizes the importance of customer satisfaction in their business thus a lot of efforts are being made to improve their ground and in-flight services. For instance, the company is regularly upgrading their aircraft into a more modern and efficient units and adding more amenities, and destinations to ensure customer satisfaction. Moreover, as mentioned earlier, they contracted three reliable catering services to ensure continuity and quality of in-flight services. Disruptions may not come only from shortage of food supply or failure of suppliers and contractors to deliver their agreed services but from internal stakeholders such as employees. Since one of their critical activities is ground support and in-flight operation, the absence of employees due to strike and other circumstances may cause severe disruption. As mentioned earlier, these incidents did occur in the past and it resulted to operational difficulties and damaged reputation. It is therefore necessary that a business continuity plan consider the maximum tolerable period of disruption before any incident can affect the company’s operation and business reputation. For British Airways, this period may be determined by identifying the length of time before a certain disruption severely affects the normal operation. The management should at this point consider the business cycle, linked activities, resources that may be required, and the level of activity that should be performed in case of disruption (Hiles 2007, p.535). In flight operations, the most probable critical period is when an aircraft’s schedule flight is disrupted due to employee strike, failure of suppliers and contractors to deliver their services on time, mechanical failure, bad weather, and terrorist activity. The result of these disruptions with the exemption of the last two factors is generally mass refunds, a host of disappointed customers, and unnecessary financial losses. For this reason, British Airways should consider these situations in advance as well as the maximum allowable period of disruption in their recovery plan. Overall Recovery Objective 3. TIME RECOVERY OBJECTIVES It is critical for an airline company to resume its operation in the most possible time and for this reason they must set a specific time when operation should be resumed in case of disruption. Their recovery objective should be in tune with the maximum tolerable period presented above to ensure that the disruption could not severely affect the company reputation and stability. 4. CRITICAL DEPENDENCIES First and foremost, British Airways should realise that its contingency plan is based on the nature of the organisation, the different factors that supports the business operation, evaluation of the importance of these factors in sustainability, and the people that will be involved in handling the crisis (Hiles 2007, p.28). Critical dependencies that are identified between relevant stakeholders must be managed accordingly particularly when these dependencies are coming from external players such as suppliers, agents, and contractors (Kasse 2008, p.189). However, in the case of British Airways, its business continuity plan must specifically look over its internal stakeholders which as discussed earlier repeatedly caused disruption. Almost all dependencies according to Kasse (2008, p.189) must be monitored and tracked to ensure the delivery of products and services to customers. For instance, consult the labour unions on issues that can affect the well-being of employees. Regularly evaluate supplier capabilities or require them to have their own continuity plan. Critical Activities Critical Dependencies In-Flight Operation Pilot, co-pilot, and engineers Cabin Crew Aircraft inventory suppliers Maintenance contractors Technology Ground Support Ticketing Staff Security Personnel Technical Staff Customer/Passengers Suppliers Contractors Technology 4.1 People Critical dependencies involving people may include employees, suppliers, and contractors. The presence and efficiency of these people are vital to the success of the operation. For instance, employees particularly those that are involved in aircraft operation and customer assistance must be present at all times and performing in the best possible way they can. Similarly, suppliers and contractors must fulfill their responsibilities and deliver in a timely manner. The absence or failure of these critical dependencies can severely affect the operation of the company which may result to poor business financial performance in the near future due to decreasing patronage. 4.2 Building and other infrastructure Aside from the corporate building, British Airways place of operation is in the airport and nearby aircraft maintenance facilities. Any incident that may occur in these facilities (i.e. fire, explosion) may disrupt operation resulting to delayed flights. Similarly, poor maintenance of these facilities may result to unexpected failures resulting to disruption of services. 4.3 Vehicles Passenger aircrafts are the main source of income for British Airways and for this reason any grounded flight or accident can certainly greatly impact its finances. For instance, as what had happened before an employee strike or supplier and contractor failure can delay or completely cancel a scheduled flight. The impact is not only related to operation but to marketing since a lot of customers will be disappointed and distressed by the company’s faulty business strategies. If an accident occurs due to mechanical failure and incompetence, a much greater impact can be expected because airline accidents usually entail significant deaths. 4.4 Technology As mentioned earlier, British Airways introduced modern aircraft (Boeing 777s and others) to its fleet and most of these aircraft contains advance technology. Technology such as fly-by-wire, in-flight mobile services, electronic booking and checking, computer and databases plays a very important role in aircraft operation and the business in general. Any failure arising from these technologies can result to delays and disaster in some extreme cases. For instance, a failing booking and checking system can lead to wrong booking information, accounting, etc resulting to customer dissatisfaction. In the worst case, failure in the fly-by-wire system can lead to a major disaster. Continuity plan for technology failure is therefore essential to avoid the devastating business impact technology induced disaster. 5. STRATEGIES FOR MAINTAINING CRITICAL ACTIVITIES/DEPENDENCIES Critical activities a very important role in business operation thus an organisation like the British Airways should have a strategy to deal with any disruption to its critical activities. These may include considering the impact of stakeholders, customers, suppliers, contractors, structure, vehicles, technology. This well-thought and carefully planned strategy should be properly documented and contains clear and comprehensive details of processes required before, during, and after the crisis. For instance, if absence of two or more employees is considered, the company may adopt a policy of hiring employees with secondary skills that can be use in some part of the operation in case of disruption. This strategy can prevent gaps created by sick employees. In worst cases, this can also provide immediate temporary replacement to employees who suddenly resigned or died in an accident. Another approach is to plan and appoint successors to critical positions in the company that require unique or specialised skills. For instance, training and appointing a back-up computer operator from low ranking employees. This strategy will enable smooth transition and correct skills transfer. Another strategy is to hire the services of a manpower contractor offering similar expertise in case of disruption. This strategy can be very useful during an employee strike because operation can continue immediately during a disruption. Similarly, critical activities that are dependent on vehicles, structure, and technology can benefit from the back-up approach. For instance, the company can re-direct its operation to another pre-determined airport in case of fire or terrorist attack. The company can also benefit from a back-up emergency unit in case a certain aircraft suffers mechanical failure before departure. A back-up computer unit can also fill the gap when a certain computer fails. As discussed in the earlier section, British Airways contracted three catering services to ensure continuity of food supplies and services. This is a good example of a back-up approach where disruption can only affect a few hours of the operation. Another way to do this is to hire one catering service and require them to present their business continuity plan. The company can require them to submit a weekly report indicating the level of stocks and status of their own raw material suppliers. British Airways generally need to ensure that their business relationships with all stakeholders are stable and working according to their overall business objectives. 6. CRITICAL DEPENDENCY MONITORING ARRANGEMENTS British Airways should monitor and assess their critical dependencies in a well-arranged manner. For instance, it should defined the role of its individual stakeholders and constantly evaluate their effectiveness. For this reason, it is recommended that the organisation should put into practice a similar arrangement below. 7. PLAN INVOCATION ARRANGEMENTS As important as critical dependencies arrangements presented above, British Airways should also have plan invocation arrangements for specific critical activities disrupted. This simply means having a clear set of procedures in starting and executing the plan. These may contain a list of personnel involved and authorities within the organisation that will make-decisions and consequently approve or disapprove the invocation of the plan. The chart below shows the recommended plan invocation for British Airways. 8. GENERIC RESPONSE ARRANGEMENTS FOR MANAGING DISRUPTION Generic response arrangements may be required particularly in a company that deals with critical passenger transport by air. The nature of British Airways business requires a level of efficiency far beyond those transport businesses on land or sea. For instance, mechanical failure in aircraft particularly while high above the skies may not be that agreeable compared to car engine malfunction along the road. Moreover, air travel usually involves schedule flights that are strictly followed and any delay or complete cancellation of a flight means great harm and anxiety to customers particularly those that had missed their business meetings or important occasions. It is therefore necessary to have generic response arrangements to ensure that there will be some form of immediate response whenever an unexpected disruption occurs. 9. A MEDIA STRATEGY FOR INTERNAL AND EXTERNAL STAKEHOLDERS In relation to the generic response arrangements, British Airways must ensure that there is an existing and effective media strategy for internal and external stakeholders. Generally, a media officer or a spoke person in behalf of the company is being appointed during crisis to provide the information. The kind of information to be release to the media however must be approved by whoever is on top of the incident response team to ensure accuracy and validity of information. This kind of arrangement is usually being implemented to avoid misinformation that would consequently result to panic and anxieties. Under the incident commander, the following media strategy for internal and external stakeholder may be arranged. 10. PLAN DEVELOPMENT, REVIEW, AND TRAINING ARRANGEMENTS A developed plan should not be too complex and easily understandable by all people involved. The plan should contain specific and realistic information that can help easily promote business continuity concept in an organization. Primarily, the plan should specifically assign responsibilities for each individual involved. It should be reviewed and audited to ensure that it is up-to-date and relevant to the current situation facing the company. Everything relevant to the development and maintenance of the plan must be documented and preserved. It is important that every participant is well aware of the plan and familiar with their responsibilities during the crisis. This can achieve by providing the relevant training so these people can develop the necessary proficiencies they need. 11. ARRANGEMENTS FOR EMBEDDING THE PLAN INTO THE DAY TO DAY MANAGEMENT SYSTEMS AND ORGANISATION CULTURE Overall, the success of any BCP depends on the extent of understanding of the people that will implement the plan. For this reason, there must be a documentation that contains a clear definition of the scope the works involved, roles and responsibilities of people, resources that may be required, the level of skills acceptable, control, and the level of performance expected. This information must be embedded into the day-to-day roles and responsibilities, and should be always one of the important agenda in staff meetings. More importantly, top management must be committed and actively involved. 12. REFERENCE LIST British Airways, 2002, British Airways Standing Instructions, No.17, Issue No. 1, BA, available at https://www.britishairways.com/cms/global/pdfs /corporate_responsibility_report_2006/Basi17V1.pdf British Airways, 2009, The Way We Run Our Business: 2008/2009 Annual Report and Accounts, BA, UK British Airways, 2010, Corporate Responsibility Report: 2008/2009, BA, UK Clark N. 2010, More Flights Canceled in Second Day of British Airways Strike, New York Times, available at http://www.nytimes.com/2010/03/29/business/global/29air.html Domberger S. 1998, The contracting organization: a strategic guide to outsourcing, Oxford University Press, US Hiles A. 2007, The Definitive Handbook of Business Continuity Management, John Wiley and Sons, UK Kasse T., 2008, Practical Insight Into CMMI, Artech House, US Read More