Explain how the psychological contract can be integrated

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Reference no: EM131426983

ASSIGNMENT: ORGANISATIONAL BEHAVIOUR COURSEWORK

(Stage 2 Business students)

Assessment

Skyline International

You are a management consultant and Dean Osman has approached you on behalf of Skyline International for consultation and advice.

Attached is the Skyline Internationalcase study. You are required to write one essay, for the following:

1 - Explain how the psychological contract can be integrated in Skyline Internationalconsidering the significant amount of negative feedback from staff being faced by the organisation?

2 - Describe the types of communication mechanisms that can be adopted by Dean and the top management to help ensure better understanding and co-ordination not only between themselves, but also with employees?

3 - Considering the events that happened in Skyline International, discuss the importance of conducting appraisals and rewarding employee performance on a regular basis, besides providing possible solutions for retaining employees using above processes?

Needs to contain the following format.

• Introduction.

• Body (definitions of relevant terms to be provided, appropriate theories or concepts or models including diagrams to be integrated and applied to case with considerable level of logical reasoning and analysis).

• Conclusion with Recommendations and

• Bibliography / Reference list.

Total Word count is 3000 words.

The essay content should reflect logical and analytical application of theories or concepts or models to the case. More details on this will be discussed by the lecturer in the class.

An electronic file of the essay needs to be submitted via the Turnitin link for this module before the deadline of Week 7 Friday 17th March 2017, before 16.00hrs.of this semester. This deadline cannot be changed in any circumstance.

You must follow ICP In house style guidelines. The font should be of Times New Roman with size 12. Headings can be of size 14. Page margins should be of Top 2.54 cms, Bottom 2.54 cms, Left 2.54 cms and Right 2.54 cms. Line spacing should be 1.5 cms.

Important note to students:

Please see the case study and marking criteria at the end of this Case Study.

Skyline International

Skyline International is an airlines company set up by Dean Osman in 1994. The company started its operations initially from London to New York with four flights and then gradually extended its travel destinations to more than 48 countries with around 280 flights in its fleet as of August 2014. More than 50,000 employees including pilots, co-pilots, flight engineers, maintenance engineers, ground crew and other administrative staff work 365 days 24X7 across a range of shifts trying to achieve a balance between offering efficient and effective service to the customers and also to ensure the business is sustaining with healthy profit portfolio thereby satisfying the shareholders expectations.Even though the company started initially in 1994 with the capital invested by Dean who is originally a property developer, from the year 1999, it started sourcing majority of its finance from venture capitalists, banks and other investors to meet its financial needs. As the company has been performing well with a strong balance sheet and impressive track record, sourcing investment has never been a problem to Dean.

Majority of Skyline International fleet transports passengers between Europe and American destinations and the company has been performing well compared to its every previous year till 2007, but from 2008 it has noticed that the growth signs have been dwindling. It mainly started with the effect of global economic recession which has posed a great challenge not only to the airlines industry but also to many other industries across the whole world. Most of them have lost jobs in a number of companies and for majority of businesses the stakeholders (suppliers, customers, banks, employees etc.) and shareholders confidence levels have gone down. Skyline International fleet have been running only with 30-40% capacity and 60-70% of the seats are left empty. At this stage, many of the employees requested to Dean and Skyline International Board of Directors to lower the fares as this strategy is followed by most of its competitors as it would lead to atleast 60-70% of the seats being filled up, but the Head of Finance has not agreed for it saying that it will not be economically viable for the company. The Head of Marketing has also stated that, lowering the fares could affect the company reputation and credibility, and instead it would be better to opt for diverting the flights towards profitable destinations elsewhere in the world. The Head of Human Resources expressed to the Board that it probably would be a good idea to come up with some travel offers or schemes or packages for attracting more customers and also to help company in retaining its existing customers but his idea has not received any attention.

In the year 2009, Dean and his Board of Directors have taken a decision of giving up the not so profitable destinations within the Europe and American continents and diverting some of the fleet towards Asia and African continents. The company has again experienced good level of profits in various routes and kept on increasing its fleet size gradually to cover more destinations within South Asia, Asia Pacific and also made an entry into Middle East. The company has given tough competition to other flight operators within the airline industry during the period 2009-2012 in few countries but from 2012 it again started experiencing downside due to various challenges within the company and industry. Dean was always interested in long term growth of the company and therefore he wanted the company mainly to use the profits as reserves for further investments and business expansion. Ofcourse, due to this strategy, the company was able to cope up with losses during tough times and employees did not lose jobs. However, the employees of Skyline International are not happy with the company as they have felt that, the salary that they get is not worth for the level of hard work, loyalty and commitment they have been showing for all the years and also that there has not been any salary increase from many years. They have expressed their frustration that, the company is keeping all the profit but not sharing atleast a part of it for the welfare of employees.

Skyline International staff have been demanding pay rises, bonuses and other benefits with impressive package in line with other airline companies since 2007 but Dean and the Human resource department have been sending message to company employees that it has been facing lot of challenges and that a mutually agreeable decision will be taken at the right time. He also stated that, high fuel costs, airport taxes, maintenance costs, cut throat competition etc are few of the challenges continuously being faced by the industry. Added to this, the political situations and social unrest in various countries within the Middle East and few countries within Asia have further aggravated the problem. Crashes of other airline companies also affected the traveller's confidence. Balancing between costs and revenues for moving towards profit lines has posed a great challenge from 2012. Company debt levels have been increasing slowly as most of its fleet are not running in full capacity and in few cases with only 20% capacity utilisation and this has been the trend from the past two years.

Skyline International has always been a commercial airliner and had international travel as its main core area of business since it started in 1994. In June 2013, Dean and his Board of Directors have taken a decision to add low cost carriers to its fleet similar to the lines of Easy Jet, Ryanair etc. with the objective of using them for transporting passengers between important cities within a country and also to connect small countries wherever possible. This idea came up after the company marketing department researched that, this has been a very popular profit model within the industry. However, in order to purchase sufficient number of low cost carriers, the company is left with no option other than to sell off atleast 30% to 40% of its existing jumbo fleet which can result in considerable number of layoffs.

The Head of Finance considered that selling off part of its fleet is a good option as majority of its fleet is not running with full capacity anyway and that the HR expenses (staff salaries) can also go down as the low cost carrier shall operate as a separate business with different set of HR policies and some of the employees would be made redundant as well. The Head of Human Resources has requested Dean that employees need to be provided clear communication and enough information on the company situation, future strategy, the associated implications of company decisions on its employees including the measures that will be kept in place for their safe career within the company.

Dean sent an internal communication by email to all his employees in July 2013 that the company will be entering into the business of operating low cost carriers which will be operated by the same company but with a different name called Skyline Mini and that it can be a great opportunity for employees at Skyline International to join Skyline Mini. He further stated that, the company will be adding 12 mini flights to its fleet by May 2014 as a start and in the meantime all sorts of formalities will be looked into and that the HR department will be in touch with them. He also stated in his email, that it is a painful decision to take but it is necessary considering the developments.The words ‘painful decision' has created lot of uncertainty, frustration, disappointment and confusion among the employees as they have been expecting some good news which did not happen and were mostly worried that there could be layoffs and many of them could be made redundant.

The HR department sent an email in August 2013 which stated that, the Head of Operations received a message from airlines manufacturers that there could be delays in handover of new mini flights and that they can only come into business after January 2015. Also, that it needs to reduce the number of shifts and also keep off few employees to stay at home for some time as the company doesn't have much business at the moment and can't afford to pay them the same salaries. It further stated that, there will be performance appraisals and reviews shortly with scope for getting them involved in trainings for skills improvement and that they will be kept informed. In November 2013, employees received communication from HR with clear details on their performance appraisals schedules and that the final results will be informed in December 2013. However, employees are not informed about the procedure that the HR will follow for carrying out the performance appraisal and not even the criteria that could be adopted for measuring their performance. Also, there is no communication on what will happen for those who may not pass through the appraisal process.

In January 2014, HR department has provided through its internal communications newsletter, the details of employees who have to take leave from office and have been informed that they will be paid 25% of their current pay with no other additional benefits attached till further information is provided to them. Employees were also given an offer for voluntary retirement but the company stated that it is not compulsory for them to abide to it as they may wait and see the developments. However, with respect to voluntary retirement, the HR department hasn't given any clear guidelines on retirement package etc. Also, there is no information on training for the employees. Having noticed all the development, employees were very frustrated with the company communications and started experiencing lot of stress at the work place. They are deeply concerned that, there are no specific guidelines on what is going to happen in future and there is no clarity on how the employees for Skyline Mini are going to be recruited or selected, details on salary package, job roles etc. Employees informed the HR that, they are not happy with the way things are progressing in the company.

In March 2014, Dean said in an interview to a popular newspaper that, Skyline International will be merging with Jet speed Airways in next few months and will be formed into a new company, but Skyline Mini will still be operating as a separate company of his own. For one of the questions, he stated that, those employees who would be made redundant at Skyline International due to the merger may be absorbed into Skyline Mini subject to meeting the low cost carrier company's rules and regulations. Employees after going through the news have become very sceptical of the developments and thought that something is happening within the company without much information being provided to them and had doubts on whether they all will be absorbed into Skyline Mini.

In April 2014, the HR department has sent an email that all its functions will be outsourced and that an external organisation will be looking into recruitment, selection, training, performance appraisals, rewards and any other HR matters for Skyline Mini. This raised lot of concerns within the employees as they had no increase in pay since 2007 and from January 2014, most of them have been receiving only 25% of the basic pay and even now they are not clear if their job will continue for Skyline Mini and the employees union have handed over the strike notice.

The strike notice stated that, the company made lot of profit over a period of years but employees have not been given any pay rises or incentives from many years and now that the company has decided for merger with a strategy to fire a number of employees to keep up its profit lines. Also that, their motivational needs have never been taken care of and even the communications from company management are not clear in most cases. Moreover, the appraisal process is highly suspicious and used as a method to find reasons for firing the employees rather than being a constructive process to help them build their careers. They have demanded that, if the company decided to go for a merger, it should still keep all the employees, convert all temporary employees into permanent employees and award them decent pay package in par with any international airlines operating within the industry even though they may work for low cost carrier, the Skyline Mini. Finally, it stated that, all their pending arrears need to be paid within a months' time.

In May 2014, employees handed over another notice to the company that, the management will be given four weeks' time from the date of current notice to respond and action things within the set period. Otherwise, that they will go for an indefinite strike from June 2014. On the second day, Dean appointed a committee to negotiate with the employees but it failed to convince them after having lengthy talks for first two weeks. Having only two more weeks left, there have been reports in media that a range of events have led to this situation and the company needs to think carefully about the way forward.

Reference no: EM131426983

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