THEORETICAL FRAMEWORK



THEORETICAL FRAMEWORK

❖ Research on the effects of downsizing on financial performance shows negative results due to issues related to:

• the way downsizing is implemented, and

• survivors management.

HR activities affect organizational performance (HR Outcomes: employee satisfaction, motivation, social climate between worker and management, employee trust/ commitment etc.) which in turn affects financial performance.

❖ Literacy reviewed for this paper includes studies on:

▪ Downsizing Implementation

▪ Survivors Management

▪ Impact of HR activities on HR outcomes and financial performance

▪ Airline pilots job

❖ Research Questions:

Was Alitalia downsizing implemented effectively?

Has the new management way of leading and managing change influenced the airline performance?

❖ Sampling Method: Non-probability sampling

❖ Alitalia CAI Survivor pilots were selected as the sample population.

Why pilots?

• Pilots play a central role in airline operations

• Airline pilots job peculiarities

• Pilots management has safety implications(1)

• Successful airlines manage their aircrews effectively

DOWNSIZING

Downsizing process was perceived as highly unfair. In particular, some of them believe that it was a politics-driven process and that the interests of the airline were not adequately considered. (3)

Major causes of grievance have been discovered to be: management failure to act in accordance with established agreements and criteria, laid off employees treatment, and lack of support to survivors to cope with negative emotions and attitudes that followed downsizing.

Last but not least, pilots do not feel that downsizing was effective in improving the airline performance; this may strengthen the belief that their colleagues’ sacrifice and their families’ suffering were useless.

Comments on the question regarding the application of established agreements/criteria provide a greater insight on the causes of dissatisfaction. All comments underline a general perception of Alitalia CAI Management as not acting in a business-like fashion and against the airline’s interest (and flight operations safety) which should be to strive to retain the best employees, in this case, the best pilots. In particular, some of them argued that downsizing process was not a business driven process, others that selection criteria were not communicated until the very end (which obviously increased employees uncertainty about their future) and that criteria were either partially applied or not applied at all by Alitalia CAI management (increasing anger and distrust towards the airline’s management).

Many reported unfairness in the way Alitalia CAI management’s applied selection criteria, since in selecting survivor pilots it ignored pilots’ seniority, experience, knowledge, and professionalism.

Pilots who used the additional space available to elaborate their answers regarding the support received by Alitalia CAI HR Department reported a total lack of support to them and to their laid off colleagues. Both the leadership and management did not show any interest in mitigating the negative effects of downsizing. No measures were taken to help survivors voice their concerns or to provide some kind of psychological support to handle the transition. Pilots felt that no one really cared about what they were going through, they and their families had to deal with the stress and anxiety generated by downsizing almost in complete isolation.

Pilots have experienced significant emotional and physical reactions following downsizing.

Half of them have experienced guilt for their laid off colleagues. The presence and the strength of negative feelings associated with the loss of their colleagues emerge from another question addressing whether surviving mass layoff has affected their morale and motivation. The large majority answered that it did. (4)

To a different degree downsizing has affected pilots’ health.

The airline pilot job places great emphasis on “being fit”, therefore, some pilots may have been reluctant to answer health-related questions. However, while only 32% said that surviving mass layoff has affected their health (43% do not have a say) about half of them said that they have experienced one or more of the indicated health behaviours (i.e.: depression, anxiety, change in eating habits, increased smoking or drinking, use of drugs, work-related injuries).

Most of those who used the additional space available indicated that they have experienced anxiety about the future, depression, and change in eating habits. Other health behaviours included high blood pressure, increased levels of stress and fatigue.

Pilots’ commitment has also been affected following downsizing and privatization.

With respect to their commitment to maintain high professional standards 35% said that it has changed (those who used the additional space available clearly indicated that it has decreased) but 48% said it did not change.

Answers to two more specific questions clarify commitment change direction. The numbers of hours pilot allocate to study have changed. Those using additional space available have indicated that they spend fewer hours on their manuals. Only two pilots indicated that the amount of hours allocated to study their manuals has increased but in response to an overload of management communications and official documentation updates, change in procedures due to the merger with the private airline Air One, and a need to compensate for the airline poor training standards.

Finally, 37% of pilots (a significant amount considering how sensitive this issue is in terms of an airline safety standards) have perceived external pressures as interfering with their decision making process “sometimes”, while 29% of them replied “often” or “many times”. Only 26% of them replied that they “never” or “rarely” did.

These findings should be further researched to understand whether the airline’s management interference and lower training standards are generating an erosion of flight safety margins and whether that is an indicator of a much broader change of the airline’s decades old safety culture.

EMPLOYEES/UNIONS MANAGEMENT RELATIONS

These results unequivocally indicate that the most serious problem affecting Alitalia CAI concerns employees/Unions Management relations.

Almost all of them perceive HR practices and policies as disrespectful of employees (i.e: workers’ rights, dignity, personal needs). They also feel that Human Resource Department does not care and is not responsive to issues important to them. Finally, HR Department communication style is perceived as neither transparent, nor timely or empathic. In general, pilots don’t feel that Alitalia CAI management cares about its people. (5)

The quality of Alitalia CAI Industrial Relations is also a source of dissatisfaction. Almost all pilots noted that the quality of relations between management and Unions are bad or very bad. These findings are confirmed by the number of strike declarations of Alitalia CAI employees since January 2009, the tone and the content of unions’ press releases, employees interventions on online forums, and some independent media reports.(6)

Pilots also don’t feel that their Unions are effectively representing their interest and protecting their jobs. This perception may be a consequence of Alitalia CAI inadequate involvement of Pilots Unions in decisions affecting them or flight safety.

COMMUNICATIONS OF GOALS AND STRATEGIES

This set of questions investigated pilots’ perception of Alitalia CAI leadership communication of goals and strategies. The overall evaluation highlights Alitalia CAI leadership inability to communicate effectively the airline’s goals and strategies to pilots or a misalignment between Management actions, HR activities and leadership goals and strategies.

In particular, pilots do not feel that Alitalia CAI leadership is responding to important internal issues, it has not made changes that are positive for them and they are not optimistic about the future of the airline. This lack of trust can be linked with the belief that Alitalia CAI leadership does not have a clear vision of the future (74%) and has not been able to clearly explain to pilots how its strategy differentiates the airline from the competition (63%) or to convince them that changes made are positive for the airline (49%). These outcomes may explain why only 21% feels that Alitalia CAI leadership is adequately responding to external issues (37% did not have a say!).

WORK ENVIRONMENT

The great majority of pilots are either dissatisfied or very dissatisfied with Alitalia CAI as a place to work; their low morale confirms this result.

In particular, they don’t feel that they can maintain a reasonable balance between work and family, or that Alitalia CAI Management values their efforts (only 11% are satisfied with the amount and frequency of informal praise and appreciation they receive from their supervisor). They have also experienced a loss of enthusiasm for their job: half of them feel that their job does not give them a feeling of personal accomplishment (30% did not have a say!). Other sources of dissatisfaction include the absence of meritocracy, a compensation not matching their responsibilities (compared to airlines in their reference group), and low job security.

The majority of pilots also feel that the morale of the people with whom they work is low and that there is not much team spirit. Less than half of them are satisfied with the professionalism of the people with whom they work (30% did not have a say!).

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CONCLUSIONS

Empirical and anecdotal evidence suggests that the financial, organizational, and social consequences of downsizing are largely negative. Therefore, if the main purpose of any downsizing endeavour is to make an organization more competitive compared to its rivals, management efforts should be aimed at finding alternatives or at least, when downsizing is inevitable, to put in place measures to minimize the impact.

In general, HR practices can mitigate the negative effects of downsizing by enabling the organization to show empathy and provide substantial support to laid off and surviving employees through a number of initiatives (e.g., psychological support, outplacement services, rehiring, family services, etc).

In the Alitalia case, instead of mitigating the devastating effects of downsizing for laid off and survivor pilots and their families, the new Management’s attitude and HR practices have contributed to destroy their trust, instil doubts about the process fairness, strengthen their emotional and physical reactions to mass layoff, and lower their commitment (7). This approach has set the stage for the development of poor quality relationships between employees/Unions and Management.

Survey results highlight Alitalia CAI Management inability to build effective relationships with its workforce, especially, its most highly qualified and valuable employees: its pilots. Alitalia CAI has also failed to establish healthy Industrial Relations, thus further limiting employees’ involvement in decisions affecting them. In this confrontational environment, pilots Unions cannot effectively represent their members’ interests (often overlapping with passengers’ interests) and protect their members’ jobs.

In addition, Alitalia CAI Leadership does not appear to be communicating the airline goals and strategies adequately. It could be that Alitalia CAI is communicating effectively but Management is not aligning actions and HR practices to the leadership goals and strategies thus undermining their credibility. Employees may have difficulties understanding how their efforts contribute to the airline’s goals and objectives with awful consequences on their morale and motivation.

All these factors combined have dramatically changed Alitalia work environment. Alitalia CAI is no longer considered a good place to work. Only 18% of pilots are proud to work for Alitalia CAI compared to 91% who were proud to work for its public version.

Indicators of Alitalia CAI deteriorated work environment include a widespread low morale, little recognition for employees’ efforts, poor work-life balance, lack of meritocracy, unfair compensation, lack of team spirit, and low job security. The overall job satisfaction is very low: only 17% of pilots are satisfied with their job and only 13% would recommend it to their daughters or sons.

Survey results showed that the way downsizing was implemented and survivors were/are managed has heavily affected organizational performance (HR outcomes) thus compromising the airline potential to improve its financial performance. In addition, the findings highlighted changes in the airline safety standards and safety culture which should be further researched.

Notes

1. An airline pilot primary task is “to fly the aircraft under his command from the departure airport to destination safely”. Factors affecting a pilot’s ability to perform his primary task, the quality of pilots employed, the commitment of pilots to exercise “good airmanship”, the active support received by airline management to operate their aircraft in a professional (safe) manner (i.e. aircrew training, safe operating procedures, and pilots’ operational decision making process) but most of all that pilots are able to exercise their professional skills free of commercial pressure (Paterson, 2008)

2. Alitalia CAI maintained the old Alitalia LAI logo, uniforms, and symbols, so this result may look worse if one consider that current employees’ sense of attachment may stem from the airline’s glorious past rather than its present identity.

3. A recently published Wikileaks cable from Ambassador Spogli, US Ambassador for Italy back in 2008, confirms pilots’ perceptions about their airline privatization process. Ambassador Spogli states: “The Alitalia saga is a sad reminder of how things work in Italy and of PM Berlusconi's rather weak adherence to some of the core principles of free-market capitalism. Berlusconi had the chance to let this be handled as a business matter, but he chose to politicize it. Under the guise of a rather quaint (and distinctly un-EU) desire to maintain the Italian-ness of the company, a group of wealthy Berlusconi cronies was enticed into taking over the healthy portions of Alitalia, leaving its debts to the Italian taxpayers. The rules of bankruptcy were changed in the middle of the game to meet the government's needs. Berlusconi pulled this one off, but his involvement probably cost the Italian taxpayers a lot of money. The way in which this deal was done -- cronies, political interference, preference for Italian buyers, custom-made laws -- provided the world with a clear reminder of Italy's investment climate shortcomings”. ()

4. Government designed social measures to protect laid off employees did not take into account pilots peculiarities. Thus those measures only delayed laid off pilots “professional death” and inability to sustain their families. These shortcomings certainly have affected survivor pilots’ feelings of guilt, morale and motivation.

5. Mr Yap Kim Wah, Vice President of Singapore Airline, of one of the world leading airlines, lists among the most important factors contributing to his airline success his people: “We have talented and good people; good industrial relations, good HR management, and we look after our staff well” (Wirtz & Johnston, 2001). The books “Up In The Air: How Airlines Can Improve Performance by Engaging Their Employees” and “The Southwest Airlines Way : Using the Power of Relationships to Achieve High Performance” explain how employees, if properly managed, can make the difference, in terms of firms financial performance (Gittel, 2003, 2009)

6. During the emergency in Japan last March, aircrews Unions had to intervene several times to ask Alitalia CAI Management to implement measures to protect its pilots and flight assistants from radiation exposure.

7. The effects on morale and motivation of the unprecedented denigration media campaign against pilots and flight assistants, Union busting, and the merger with the private airline AirOne, have not been considered for this study.

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