Managing in Multi-National Companies - Term Paper Example

Topic: Title: SBS TBS981 Intake D 2008 Managing in Multi-National Companies Your student name Your student number October 2008 Executive Summary The airline has been reeling under the global economic condition which has affected the growth rate and earning potential. The airline to avert this is looking for downsizing and also outsourcing some of the functions to other so that they are able to concentrate better on their core activities. This will help to improve their efficiency and will help to cut down the operational cost. The report highlights the different strategy that the airline can use to downsize which will also help to improve the outsourcing process. It also highlights how downsizing and outsourcing can help to improve the quality process thereby improving the service quality. The report also highlights the outcomes of downsizing covering both the positives and negatives. It also highlights the mechanism through which the airline will be able to deliver a mechanism to ensure that downsizing is effective. Thus, the report highlights the different ways which will help the airline use and ensure that downsizing gives the desired results and ensure efficiency for the airline. This will thus help the airline to see that operational efficiency is achieved. Table of Contents Executive Summary 2 Table of Contents 3 2 Introduction 4 2.1 Workforce Reduction 5 2.2 Organisational Redesign 5 2.3 Systemic Strategies 6 3. Downsizing, Outsourcing and Quality Improvement 6 3.1 Downsizing and Quality Improvement 6 4. Outcomes of downsizing and outsourcing 7 4.1 Positive Outcomes 8 Downsizing ensures that “the operation cost for the airline industry will fall” (Bacal, 2004) which will help them to face the global crisis in the short run but would loose valuable workforce in the long run. It is a seen phenomena that downsizing also “helps the stock prices to soar up in the long run thereby increasing value for the organisation”. (Atwood, Coke, Cooper & Loria, 1995) It is seen that downsizing helps to “improve the team oriented approach as a change in organisational design and restructuring facilitates scope for improvement”. (Atwood, Coke, Cooper & Loria, 1995) This will have an overall effect on the way the airline operates. It will bring a basic change in the framework the work is carried out and this will change the decision making process ensuring efficiency. 8 4.2 Negative Outcomes 8 5. Effective downsizing for airlines 9 6. Recommendations 11 7. Conclusion 12 8. References: 13 1 2 Introduction The airline industry has been hit hard by the recent global crisis. This has reduced the number of commuters and forced the airlines loose a lot of revenue. On account of such a global crisis the airline industry is forced to look at ways like downsizing the work force and looking for alternatives by outsourcing some of the functions which are not its core activities. Downsizing here is concerned with “reducing the number of employees which will help to reduce the operating cost”. (Smith, 2010) This will have a beneficial effect on the short run as the airline industry will be saved from the extra burden but in the long run the implication might hurt them. This calls for some strategic decision being taken so that the short and long term is accounted for. The airline needs to understand the repercussion this might have on the organisation. The management needs to look into the fact that downsizing and outsourcing will result in “a change in leadership style, some of the important functions being outsourced, loosing some of the valuable human force and an effect on the motivational level”. (Sridhar, 2004) The airline industry needs to develop a strategy which helps in proper outsourcing and also ensure that the downsizing process passes without any hiccups. The airline needs to understand that the global crisis is a short term state and the changes it will have on their working one normal business cycle resumes. Considering this factors the airline needs to devise a strategy which helps in successful implementation of activities and carve a path for future development. The airline needs to also look at the long term objective while designing their activity as it can involve a huge cost when the airline hires again especially when the economy recovers. The airline should ensure that the transformation should be smooth and should be easily acceptable by employees and others so that the motivation level doesn’t dip and performamce doesn’t get hampered due to this. 2. Strategy for Downsizing The airline while deciding to downsize the employee and outsource some of the functions can look for strategies which will help them deliver on the desired outcome. It will hep them to improve efficiency and also ensure that the workforce remains motivated and work together as a group. 2.1 Workforce Reduction The airline to reduce the operating cost needs to reduce the head count. This can be done by tactics such as “early retirement, transfer, out-placement, buy out package, golden parachute, attrition and firing”. (Atwood, Coke, Cooper & Loria, 1995) This is a top down method and helps to reduce the number of employees. It ensures that reduction in the number of employees bring down the cost of operation and ensure that the objective with which downsizing was done is achieved. 2.2 Organisational Redesign This is a medium term strategy and is aimed at “reducing the functions, hierarchical level, division, reducing some of the work by outsourcing and consolidating the work by reducing the working hour”. (Atwood, Coke, Cooper & Loria, 1995) This will work well for the airline as it will be able to ensure that the functions which don’t add much revenue is outsourced thereby improving focus and efficiency. It will also help to find the non core areas and differentiate those so that concentration and efforts can be laid on the important areas which will help to improve efficiency in the working. 2.3 Systemic Strategies This is a long term strategy and is aimed at “bringing a change both in the internal and external functioning by changing the culture, system of work and the attitude with which employee work”. (Atwood, Coke, Cooper & Loria, 1995) This will ensure that the overall changes are easily acceptable by the employees thereby ensuring that the motivation level is not hampered. These involve a lot many people other then the employee so the transformation will be dealt in a better way and ensure that acceptability becomes easier. 3. Downsizing, Outsourcing and Quality Improvement Downsizing the business operation and outsourcing some of the function will benefit the airlines immensely as it will be a tool if implemented properly help in improving the quality of service provided by the service carrier. It will help the airline to concentrate on customer satisfaction and this will result in quality improvement thereby improving the brand image of the airline. 3.1 Downsizing and Quality Improvement Downsizing the workforce helps to reduce the operating cost but the airline should ensure that “quality, customer satisfaction, employee empowerment, trusts and loyalty is not harmed”. (Atwood, Coke, Cooper & Loria, 1995) This will have an effect on the quality of service which is of prime importance in the service industry. Ensuring that the quality improves will ensures that the airline downsizes those units and functions which doesn’t add to the quality and ensure that other areas are not compromised. This will bring a change in the functioning and help to improve the efficiency. 3.2 Outsourcing and Quality Improvement Outsourcing is “relocation of the companies business process to another country where the company shifts there production, manufacturing, operation and accounting process”. (Stevens & Shi, 2009) The company looks to relocate to other locations to ensure that cost and production improves. Off shoring does help to solve the problem to a certain extent but doesn’t always benefit the organisation. It depends on the strategy and usage adopted by the business units. Still we see that business units have been following the principle of outsourcing and ensuring that growth pertains for the business units. Outsourcing thereby “looks at substituting foreign labour instead of the domestic ones”. (Penter & Pervan, 2009) This ensures that growth for the business unit is ascertained and cost is controlled at the same time quality is improved. Outsourcing will also help the airline to find a new place where it can expand its business in the future. Getting similar things at a lower cost will ensure that the airline is able to spend those on areas which will make travelling comfortable and fun and multiply the effect for each commuter. 4. Outcomes of downsizing and outsourcing Downsizing and outsourcing will affect the airline and will bring with itself a mix of both positive and negatives which will have different connotation for the business. The airline industry needs to watch out for the negatives outcomes and look to devise strategy to convert those into their strengths. 4.1 Positive Outcomes Downsizing ensures that “the operation cost for the airline industry will fall” (Bacal, 2004) which will help them to face the global crisis in the short run but would loose valuable workforce in the long run. It is a seen phenomena that downsizing also “helps the stock prices to soar up in the long run thereby increasing value for the organisation”. (Atwood, Coke, Cooper & Loria, 1995) It is seen that downsizing helps to “improve the team oriented approach as a change in organisational design and restructuring facilitates scope for improvement”. (Atwood, Coke, Cooper & Loria, 1995) This will have an overall effect on the way the airline operates. It will bring a basic change in the framework the work is carried out and this will change the decision making process ensuring efficiency. 4.2 Negative Outcomes Downsizing hampers the growth path as there is “loss of personal relationship between the employee and customers”. (Atwood, Coke, Cooper & Loria, 1995) This affects the motivation level and the fear of being fired looms large over the employees. This results in huge human cost. Lying of prospective employees “might be a set back for the employees thereby affecting their potential to grow”. (Atwood, Coke, Cooper & Loria, 1995) This mechanism doesn’t always solve the problem as the problem might be something else. This also forces the “resolving door syndrome to function as firing employees make the organisation look for new employee to fill those vacancies thereby magnifying cost and time required”. (Atwood, Coke, Cooper & Loria, 1995) This also reduces innovation and employees to secure themselves work upon what is assigned thereby hampering the growth potential the organisation has. This reduces the organisation coming with new and better ways to improve their performance thereby affecting the growth potential. 5. Effective downsizing for airlines To ensure that downsizing is effective and the overall morale of the employees doesn’t get hurt the airline needs to implement the downsizing strategy such that it involves all the levels and efficiency is ensured. The airline needs to follow the following to ensure successful implementation of downsizing takes place. The downsizing should be “from top bottom and bottom up as it will help to eliminate the unnecessary jobs and will improve consistency, vision, and foster innovation”. (Franco, 2009) This will foster and make the changes of downsizing easily acceptable. It will make the management find out areas which needs to be shelved and doing it throughout the organization will bind all the people together and make them realize that irrespective of the position performance matters. The downsizing process should be “universal across all boards so that it is easily acceptable by all”. (Atwood, Coke, Cooper & Loria, 1995) This will ensure implementation of cutback across the airline board and function thereby improving efficiency and making it manageable for the management to ensure that workforce meets the requirement in the future. It will make the employee realize that equity prevails which will motivate them and remain with the airline thereby improving productivity. The downsizing for airline should be such that “it involves the transition for employees who loose their jobs and also for the survivors”. (Atwood, Coke, Cooper & Loria, 1995) This will be ensured by providing training so that they are ready to accept it and don’t feel guilty as this will affect their motivational level and desire to work. This will create a positive impact and even employees who are removed will realize that performance is the criteria and the situation warrants for a change. Downsizing for the service provider should ensure that “targeted elements both inside and outside the organisation are targeted to reduce the excess cost and ensure a match between the two”. (Atwood, Coke, Cooper & Loria, 1995) This will help to ensure that the external sources don’t visualize it as a backward step. Thus, the airlines need to ensure that they follow a proper strategy so that the downsizing takes shape which will help the airline achieve the objective with which it was drafted and operational efficiency improves. 6. Recommendations The airline to ensure proper coordination of activity and proper downsizing and outsourcing needs to follow the following steps The airline needs to ensure that downsizing is done across “all departments and functions keeping in mind the long term objective” (Atwood, Coke, Cooper & Loria, 1995) so that the benefits multiply. This will help to create a positive mood and ensure that all employees remaining with the organisation work together at the same time realize that there is equity. The airline needs to ensure that “they outsource those activities which are not their core activities and while outsourcing ensures that those activities don’t affect the earning capacity”. (Stevens & Shi, 2009) This will help to the airline to ensure that the activities which are not very useful are shelved with. It will help the airline to concentrate on the core activity and by outsourcing the non core activities the airline can benefit greatly. The airline while downsizing should “keep a focus on the long term” (Atwood, Coke, Cooper & Loria, 1995) and see that they have sufficient work force who will be able to take responsible position thereby concentrating on succession planning. The airline industry should have this focus as this will lead to unnecessary expenses in the future when the airline looks towards hiring the prospective employees. Also ensuring that the correct talent will help the employees understand the values and principles which will help the airline to use the in-house employees to fill those vacancies. The airline industry should ensure that downsizing and outsourcing doesn’t “loose focus on customer satisfaction and quality” (Atwood, Coke, Cooper & Loria, 1995) as it is very important for the service provider to ensure that this falls high on the list of services. The airline should ensure that shelving their activities don’t affect their service as it will tarnish the brand image. 7. Conclusion The airline to implement successful downsizing and outsourcing should ensure that the basic framework for such is completed in all respect. The airline by following the recommendation can improve the process and ensure better efficiency. While doing so the airline needs to ensure that quality is not compromised. The airline needs to see that downsizing is implemented across all departments and functions so that acceptability is easy. The airline also needs to ensure that the motivation level of the employees doesn’t dip. This is a prerequisite for a service provider as employees have to deliver on quality. While outsourcing the airline needs to see that the functions and business which are not profitable and doesn’t affect the reputation of the company directly is outsourced. This will help to bring operational efficiency and give time to the management to concentrate on the important activities. The airline industry thus can use the tools of downsizing and outsourcing but should ensure that they should not go to the extreme point which involves more expenses. The airline should ascertain that as the economy recovers the demand for employees will rise and hiring again will involve a lot of cost. The airline needs to ensure the cost and benefit involved with it and then use it do decide the strategy which will reap them the maximum benefit. The airline thus, needs to see that downsizing is carried out effectively keeping in mind both the long and short term objective so that the organisation doesn’t falters on either. The airline can benefit from this and will help them to come out of the global condition the airline is facing and while doing so the long term objective should be kept in mind. 8. References: Atwood J, Coke E, Cooper C & Loria K, 1995, “Has downsizing gone too far”, University of North Florida, retrieved on May 10, 2010 from http://iopsych.org/downsize.htm Bascal R, 2004, “Downsizing: the long term effects”, Bascal & Associates, retrieved on May 10, 2010 from http://workhelp.org/joomla/content/view/163/51/ Franco G, 2009, “Training and development in an era of downsizing”, Journal of Management Research, Volume 9, Issue 1 Penter K & Pervan G, “Outsource business process outsourcing”, Business & Economics, Springer Link article, Australia, 2009 Sridhar B, 2004, “Dealing with the effects of downsizing”, The Hindu, retrieved on May 10, 2010 from http://www.hinduonnet.com/jobs/0401/2004011400220800.htm Smith S, 2010, “What is downsizing”, wise geek, retrieved on May 10, 2010 from http://www.wisegeek.com/what-is-downsizing.htm Stevens A & Shi E, “Union Response to outsourcing of call centres” The International Journal of Interdisciplinary Social Sciences, Volume 4, Issue 1, page 441-454, 2009 Read More