Organizational Performance at Jetstar Airways - Case Study Example

Organizational performance at Jetstar Airways By (Student) (Course) Instructor: Institution: Date: Introduction Organizational performance may be regarded as the actual output of an entity when measured against its goals and objectives as envisioned in its strategy (Hubbard, 2009). According to Bourne et al., (2013) performance was traditionally simply assessed by analysing the financial, market and shareholder achievements by an organisation. This means that a business was simply required to post good profits, acquire and retain a market share, and give a reasonable return to shareholders. However, today businesses are measured along various dimensions that encompass employee and customer satisfaction, social and environmental sustainability and innovativeness (Williams and Naumann, 2011). As noted by Chi and Gursoy (2009), it implies that, an organization can be financially sound but poorly rated in terms of customer satisfaction or sustainability record. Therefore, it is important to analyse internal factors particularly relating to human resource function that may impact organizational performance along the various dimensions. For instance, lack of proper job design, proper remuneration, motivation and flexible work hours may lower the quality of customer service in service-based industries. It is imperative that employees are involved extensively in addressing such problems in order to enhance organizational performance (Hernaus et al., 2008). This report will analyse the issue of poor customer service affecting Jetstar Airways PTY Ltd in Australia with a view of understanding how human resource failures have contributed to the inefficiency. The report will analyse current measures being implemented by management to solve the problem and suggest initiatives that may be equally effective. Organizational background Jetstar Airways is a wholly owned subsidiary of the Qantas Group. The company was established in 2003 by Qantas to serve the low-cost and leisure travellers’ market segment. Jetstar is located in Melbourne Australia and serves 19 domestic routes and 17 short and long-haul international destinations. Over the past several years, Jetstar has expanded significantly to establish its presence across Asia [Jet17]. Currently, through partnerships and joint ventures, the Jetstar group has country-based operations in Singapore, Vietnam, Japan and china. The company aims to dominate the low-cost segment in the Asia-pacific as the region’s economies continue to record impressive growth. According to the company, Jetstar branded carriers operate about 20,000 flights monthly to more than 75 destinations. 8.5% of travellers in and out of Australia use Jetstar branded carriers. Since it started offering its services in 2004, Jetstar group has carried more than 200 million passengers. Jetstar is a cooperating member of the Oneworld alliance that allows its access to a huge international market. In addition, Jetstar has co-sharing agreements with American Airlines, Emirates and Japan airlines [Jet171]. Jetstar’s has a fleet of 75 aircrafts that flew over 34 million customers in 2016. Qantas group sought to establish and implement a two-brand market strategy where Jetstar had to focus on the low-cost travellers while Qantas served the premium full-service travellers and long-haul destinations. Over the years, Jetstar has posted consistent growth in profitability and scale to become the third largest airline by domestic market share as of 2016 [Jet17]. Jetstar has benefited immensely from Qantas resources in funding its expansion plans and supporting its technical capacity. This has enabled the company to offer competitive prices in the domestic market in Australia (Ritson, 2009). Jetstar prices are on average 10% below the second lowest flight fares within the domestic market. This is partly due to the high-capacity airbus and Boeing carriers that Jetstar operates. Currently, Jetstar offers the business class and economy class services [Jet171]. In addition to flight services, Jetstar has partnered with a number of players in the car rental, hospitality, booking services to offer augmented products to its target market. For example, Jetstar customers that book AirBnB stay worth more than $250 get a $25 flight voucher. This is a mutually beneficial initiative as it benefits both the companies by combining tourism/travel with flight services. Jetstar also partners with car rental services to offer its customers access to affordable car hire services that cost as low as $21 [Jet172]. Evidently, the extensive scale and scope of Jetstar’s operations across different countries offers its 7000 employees exposure to a diverse, challenging and fulfilling work environment. Jetstar is guided by the employee development principles that dictate 70% on-the-job learning, 20% coaching and 10% through formal learning. Jetstar employees get to work in busy, involving and mostly cross-functional roles to deliver its performance. A team of Jetstar pilots and flight attendants, Source: Jetstar.com Due to the strong input by its workers, Jetstar has posted consistent year on year revenue growth [Jet173]. In 2016 $ 452 million in EBIT compared to $230 million in 2015. Notably, the parent company posted $512 million in 2016 despite its huge resources and established systems [Qan16]. Despite the strong financial state, Jetstar is yet to achieve unchallenged success in customer satisfaction as of December 2016, its on-time monthly performance for flights departing within 15 minutes of departure schedule stood at 65.9%. Jetstar customers have consistently complained about flight delays over the years since 2012 [Jet174]. As a result, Jetstar was ranked as the worst airline by 11 consumer groups that surveyed 11,000 passengers that used the services of 73 airlines in a single year [Els17]. Leading issues Jetstar’s Performance performance As of December 2016, Jetstar on-time monthly performance had dropped to 65.9% from a high of 84% in 2014 January [Jet174]. This is 18.1% drop in two years. It implies that Jetstar’s flights on-time departures within 15 minutes of scheduled time have dropped substantially. Jetstar on-time performance since 2014 2014 January 84% June 81% December 74.2% 2015 January 82.3% June 83.4% December 63.2% 2016 January 68.9% June 70.9% December 65.9% According to a federal government report, at least 2% of Jetstar’s scheduled flights were cancelled in 2016. Compared to all other domestic carriers, Jetstar was the worst performing airline in terms of on-time departures and arrivals. More than one in four Jetstar flights did not depart on time and delayed for not less than 15 minutes [Dep16]. This means that the company has not achieved the desired level of organizational performance in terms of having its customers satisfied by the quality of service they should receive. While operational challenges may be potential causative factors, employee issues such as burnout, low morale and lack of engagement should also be considered as key contributors to the delays. In addition, customers have raised complaints regarding poor treatment by Jetstar flights attendants [Els17]. Such problems are likely to damage the company’s reputations significantly over the long-term. Long working hours Due to the demanding nature of work schedules at Jetstar, employees mostly work long hours to ensure the airline is able to serve its more than 20,000 monthly customers. Jetstar has witnessed rapid expansion over the past decade to the extent that most of its employees have to work extra time to meet the operational and service quality targets [Jet17]. In 2015, Jetstar pilots issued strike warning to demand better working conditions and pay rise [OSu15]. In January 2017, Jetstar cancelled an international flight from Perth to Bali after an attendant called in sick at the last minute. Similar incidences of flight attendants failing to show up have affected Jetstar in the past [McN17]. According to a research conducted by Schaufeli et al., (2009), overworking employees increases the chances of them suffering burnout and stress that may lead to physiological or psychological problems. This happens because an employee is exhausted from working long hours and handling unexceptionally heavy workload that may lead to fatigue. Another survey conducted on Australian Railway Industry employees found that fatigue significantly lowered the body’s immunity thus increasing chances of illnesses (Dorrian et al ., 2011). Flight attendants’ absenteeism definitely affects the quality of service offered by Jetstar. It is important that the company evaluates the job design of its critical workers and explores various options such as increasing their numbers or minimizing the destinations to balance the workload. Without proper work planning, overworked employees at Jetstar will unintentionally ruin the quality of service the company offers due to exhaustion and burnout. Lack of fair remuneration and job security Jetstar has also over the past three years been implementing a cost-cutting strategy. This has affected staff recruitment, retention and remuneration greatly. For instance, in 2015, the company announced plans to shed off 5000 workers as part of cutting its costs. The remaining workforce had to accept 18-month wage freeze. In 2015, the Transport Workers Unions tried unsuccessfully to have Jetstar accept its demands that included 4% increase to wages, penalty rates and allowances. The company also rejected a demand that part-time workers get at least 30 hours per week. While the company rejected wage and benefits demands by its low-paid workers, its CEO, Jayne Hrdlicka received a $400,000 pay-rise to earn $4.3 million in 2016 (Mitchelson, 2017). Such high discrepancy between top earning executives and low-level workers creates a feeling of unfairness (Howard and Cordes, 2010). This may result in low morale and lack of commitment that lowers the quality of service offered. Pay is a primary source of motivation for workers struggling to support their lives in difficult economic times (Harvey and Turnbull, 2010). Workers also feel their jobs are not secure if the company constantly indicates its intentions to retrench some of them as a cost-cutting measure. Such poor working conditions result in stress among workers who may have little reason to perform optimally to support the company’s vision. It is important that the management pays fair wages to its employees across all levels and guarantees them of the security of their jobs to ensure they are motivated to work and raise service-quality standards (Su, 2011). Inadequate Employee engagement From 2015, unions representing Jetstar workers have constantly complained of management’s indifference to their pleas for negotiations [Ste15]. This means there is little employee engagement particularly in matters affecting their wellbeing at work. This may partly explain why employees call in sick in the last minute of scheduled flights. As suggested by Markos and Sridevi, (2010), it is critically important for managers to regularly involve employees in decision-making and operational planning to identify possible sources of problems such as burnout, absenteeism and low motivation. Employees are likely to commit to the goals and objectives of plans where their suggestions were considered. Moreover, employee engagement is the best approach of finding an appropriate work-life balance that can enhance their morale and satisfaction at work (Karatepe and Vatankhah, 2015). Measures that address the performance issue at Jetstar Jetstar has not appropriate steps towards reducing its employees’ workload and improving their work-life balance. In January 2017, an employee called in sick just when customers had boarded a plane and ready to take off. This problem had occurred again in January 2016 [McN17]. Evidently, fatigue and low morale could have contributed to illness in the employee in question. It is important for the company to critically analyse how much workload is just appropriate for its workers. Flight attendants and operators are critical to the success of any airline. Therefore, it is rational to ensure they have the best work load balance to enhance their productivity and performance. In 2015, Jetstar has entered into wage raise agreements with some of its workers’ unions including the Australian Federation of Air Pilots. The company also entered into a settlement with the Australian Services Union. The settlements raised workers pay and offered incentives for workers opting to work beyond the agreed hours [Ste15]. This means that employees will feel motivated to work by the improved pay. However, it is important to note that job security is also an effective source of motivation for employees. Employees who feel valued by a company are likely to show commitment (Su, 2011). Recommendations Workload should be distributed evenly among workers in critical flight maintenance and operations. Workers should be allowed adequate time to rest and embark on their tasks in the right frame of mind and physical state (Chen and Kao, 2012). The company can consider reducing the scope of activities that an employee is expected to achieve within a given time. This might result in increase in recruitment of flight attendants or reduction in routes that Jetstar covers. This is in line with Jetstar’s focus on driving customer advocacy though a customer-focused strategy [Qan16]. Apart from raising employees’ wages as per their performance, it is important that Jetstar enhances their level of commitment by working closely with their union representatives. Absenteeism is a sign of lack of commitment to a company’s strategic plan (Schaufeli et al., 2009). It is important that Jetstar explores appropriate agreements with workers unions to guarantee workers of their job security over a reasonable time. Jetstar should regularly engage its workers in decision-making, particularly in matters relating to operational planning and job design. Employees feel valued by an organization when their input and suggestions are allowed to influence key decisions that affect them. Moreover, employees are likely to commit to a company’s vision and strategic goals if they participate in setting, implementing and evaluating them in a process that is all-inclusive (Markos and Sridevi, 2010). By engaging its employees, Jetstar will be able to identify causes of poor quality service. A combined team of the management and employees will come up with solutions such as training, new job designs, flexible work hours and performance reward schemes. Apparently, employee engagement can be an appropriate solution to poor quality of service, flight delays and cancellation at Jetstar. Conclusion From the Jetstar information presented and the relevant literature reviewed in this report, it is evident that the company has not been successful at harnessing the full productivity of its workers to improve its overall performance. Jetstar was recently ranked as the worst airline by a survey involving more than 11 consumer groups. Customer complained mostly about delayed departures and arrivals and poor treatments by staff. Indeed, Jetstar’s on-time performance has dropped by 18.1% since 2014 to 65.9% in 2016. Overworked Jetstar employees who feel they do not get the remuneration they deserve may be contributing to these problems. Employees suffering from burnout are likely to fall ill or use the slightest excuse to be absent from work. Moreover, lack of motivation due to low pay and perceived unfairness may lower the quality of service that employees offer to customers. It will be important for Jetstar to engage employees in order to develop the right workload for them and come up with flexible work plans that benefit all the parties involved. Jetstar should as well pay employees commensurate with their contribution and performance in terms of revenue generation and strategic goals. References Bourne, M., Pavlov, A., Franco-Santos, M., Lucianetti, L. and Mura, M., 2013. Generating organisational performance: The contributing effects of performance measurement and human resource management practices. International journal of operations & production management, 33(11/12), pp.1599-1622. Chen, C.F. and Kao, Y.L., 2012. Investigating the antecedents and consequences of burnout and isolation among flight attendants. Tourism Management, 33(4), pp.868-874. Chi, C.G. and Gursoy, D., 2009. 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