What lessons can be learned from the Terminal 5 case for other companies in order to avoid future national embarrassments of this kind'
Introduction to Terminal 5
We know that with opening of Heathrow Terminal 5(T5), the authorities and the passengers faced many problems.
Heathrow AirPort Terminal 5 (T5) opened on 27th March 2008. It was a £4.3bn building that took nearly two decades in the making. British Airway's (BA) and British Airport Authority (BAA) were the two Organizations involved in Constructing Terminal 5. Collin Matthews was the Chief Executive of BAA, and Willie Walsh was the Chief Executive of BA.
However on the very first day British Airways was forced to cancel more than 30 flights due to problems with the baggage, parking, security searches and building itself. The reasons can be attributed to improper Communication between management and staff, Lack of Training, Gaps in Leadership and Control and other technical problems. In this assignment I am going to discuss in detail about what went wrong in Terminal 5 and measures/recommendations which can be taken/given to avoid such mis happenings in future.
This report gives some of the key issues to discuss and implement in an organization and organizational structure and culture of BA and BAA, comparing with SEMCO Company, things that can be learned from SEMCO Management.
THE DECISION MAKING PROCESS IN TERMINAL 5
There were major drawbacks in the decision making process. The drawbacks are highlighted below:
No collective meetings: There was no committee which comprised of members both from senior and junior management to discuss the initial stages of operations. Generally before launch of any operations there is a review committee which discusses the pros and cons of the situation and plan accordingly.
Lack of Evaluation of Alternatives: The officials knew that there would be initial hiccups before the launch and it was advisable to scale down the operations. A four phased plan was chalked out however there was no implementation. In the discussions between the senior management there was no question raised on the plan of scaling down.
No contingency planning: There were major software issues with the airline's automated work allocation system, where duties were assigned electronically: The people who allocated the task were somewhere else and the people who operated were based in India. There were issues getting into car parks, which delayed the passenger's arrival at the terminal building, delayed getting through the central search area which is the security search for system for land side areas of the terminal to the air side. There was no alternative if the software failed. In the first few days of operation in T5 around 23,205 bags were misconnected.
Back to Vaid, who was equally scathing about the airline's automated work allocation system, where duties are assigned electronically: "The people who allocate the task are somewhere else and you do not see them ... They are probably somewhere in Delhi." From: The Independent: Simon Calder: What went wrong at T5.
No Planning of Strategies - The suppliers, communities and other stakeholders were never been informed. Management should have been concerned how the stakeholders react to changes in pricing ,elimination and adjustment of vendors ,services and personnel respectively. One situation was such that though the Government has expressed support for the construction of a third runway, but there was no attention paid to environmental protesters and local authorities.
CONTROL IN SEMCO - Why my formal employer still works for me by Ricardo Semler
SEMCO had a group of six so called counselors who took six months turns to act as acting CEO. The CEO's were not only involved in trying themselves to meet quarterly financial goals. The system was such that in case any mishappening happens, the blame was not passed to only one. They kept each other well informed by doing divisional weekly regular meetings and biweekly interdivisional meetings and all these meetings were open and optional.
Recommendation for Leading Organizational Change in TERMINAL 5
Kurt Lewin formulated the classic explanation of how to implement a change. He says "All behaviour in organizations was a product of two kinds of forces - those striving to maintain the status quo and those pushing for change. "" Implementing change thus includes of three steps - Unfreezing, Moving and Refreezing." Human Resource Management, Eight Edition, Gary Dessler , P.293. The various recommendations are:
- Terminal5 management can be divided into Construction management and Service management subsystems. Construction management deals with construction objective and Service management deals with service sector such as testing new technology, training, practical implementation of each service. There is coordination, communication between each subsystem
- A BA/BAA crisis management team should be formed to handle crisis situations. Well trained consultants should be hired to handle such situations.
- Weekly meetings should be organized to review the performance of the staff. Weekly one on one interaction with the manager and the staff will help tremendously.
- Decision making process should be planned well and discussed with all levels of the management before implementation.
3 Employment relations:
In terminal 5 project employee job satisfaction, motivation and commitment was not there for various reasons which were the reasons for negative result. Employment relation is one of the key accepts to discuss in an organization. "Employers and Management adopt a 'hard' or 'soft' approach to employment relation issues. In 'hard' approach human resource is treated as expense to be cut. In contrast, the 'soft' model treats employees as valued assets, as a source of competitive advantage to be nurtured, trained and improved." (Richard et al, 2008, p.322)
The main drawbacks of employee relations were:
No Institutionalization of employment rules: There was no network of formal and informal employment rules which provide both employers and employees with a series of interdependent, individual rights and obligations emphasizing the mutuality of their relationship and are aimed at reconciling any potential conflicts. These include union rules, collective agreements and negotiating and consultative procedures. Decisions were taken in an autocratic manner without any involvement.
Rustic employer and employee relation: Management is the authority system who is responsible for enterprise effectiveness, corporate efficiency and employee relations. In T5 case the management was more concerned with profits and efficiency in the market sector. They never paid attention to the fact that their employees were their first customers.
EMPLOYER EMPLOYEE RELATION IN SEMCO - Why my formal employer still works for me by Ricardo Semler
SEMCO in between had zero sales. They had rigorous discussions with their workers and ideas were taken and implemented until there was no idea left with anyone. Extent of workman benefit can be seen when the shop floor committee decided that 30% paycut will be done but on condition that profits would be increased by 15%, management takes a 40% salary cut and a union member co signs every cheque which the management signs.
Recommendation for Betterment of Employee Relations in TERMINAL 5:
- Abraham Maslow's "Need Hierarchy Theory". One of the most widely mentioned theories of motivation. Ascending from the lowest to the highest and he concluded that when one set of needs is satisfied, this kind of need ceases to be a motivator.
In BAA it was necessary to meet the employee's needs. The motivation would have come if full freedom was provided to the employees. There were lots of factors involved in this such as pay, working hours, overtime arrangements, holidays, training, promotion prospects and procedural issues related to rules and regulations determining decision-making at organizational, industrial and workplace levels.
- Introduction of some incentive schemes like employee of the month which would keep the employees motivated financially.
- Quarterly based meetings with the top officials can be arranged over the web conferencing which should highlight the strengths and weaknesses of the current process and the organization. If the employee is well aware of the organization he/ she develop a sense of belongingness for the organization.
- Introduction of third party agency to resolve conflict. These are state owned bodies which are created to influence the decisions of the primary and secondary parties in the employment relationship to ensure fair play or changes in the balance of power. The absence of such a body led to high handedness by the management and an array of controversies and wrong decisions
ROLE OF LEADERSHIP AND CONTROL:- The problems in leadership and control
Lack of precautionary measures: Precautions were not taken though the management had already been through such a situation earlier. Willie was aware that the opening of a new airport or terminal carries a significant degree of risk. He even knew the failure of many major openings such as Denver Airport, Kuala Lumpar's airport and Hong Kong international airport and the problems related to baggage handling system. BAA is such a large organization and they cannot afford to make mistakes because it involves money, market value, goodwill from the stakeholders.
Autocratic Leadership style: The leaders were dominating due to which there was lack of Communication and mutual understanding between CEO'S and Trade Union. The decisions were taken without any involvement of the line management and the Trade Unions had to obey them. Airport operators were seldom consulted properly by the BAA about the facilities they require; the facilities tend to be imposed without any prior consultation, whether or not they reflect what is actually required. If they had been permitted to examine the facilities at the terminal before the opening day, this disaster could have been avoided.
The man who can best explain may be Iggy Vaid, a senior shop steward for Unite at Heathrow. In 79 well-chosen words, he gave the committee his appraisal of the prevailing management style at British Airways:"I hate to say that about my own airline, but culturally the existing management structure is one where you cannot tell the emperor that he has no clothes; you have to say his clothes are beautiful. No supervisor or person can tell his or her boss that the system will not work. If you do you are not a team player; you are sidelined, so for that reason you say that it works and the emperor has beautiful clothes." From: The Independent: Simon Calder: What went wrong at T5.
Lack of foresightedness among the leaders: Though two big leaders were a part of the project but they failed to predict any shortcoming which might have happened. When the disaster happened only then they started analyzing the after effects which could have been avoided if they previously gave it a thought.
Low involvement of stakeholders - The suppliers, communities and other stakeholders were never been informed. Management should have been concerned how the stakeholders react to changes in pricing ,elimination and adjustment of vendors ,services and personnel respectively. One situation was such that though the Government has expressed support for the construction of a third runway, but there was no attention paid to environmental protesters and local authorities.
The Government has expressed support for the construction of a third runway, but a fierce campaign by environmental protesters and local authorities means that it surely remains years in the offing, if it's ever built at all. From: THE INDEPENDENT Terminal 5 fiasco: The new 'Heathrow hassle'
LEADERSHIP AND CONTROL IN SEMCO - Why my formal employer still works for me by Ricardo Semler
SEMCO Management system had a bottom level to top level management. It endeavors towards integrity, entireness and wholeness leading to uprightness and honesty. A company with these kind of integrity is amazingly different from a typical organization - and it teaches lesson to other organization. The management belief in its employees was tremendous. Instead of giving contracts out to strangers they decided to give the contract to their own employees. The organization followed a flat hierarchy ranging from factory floor flextime, self set salaries to rotating CEO ship.
Recommendation for Betterment of Leadership and Control in TERMINAL 5:
"Success depends increasingly on tapping into sources of good ideas, on figuring out whose collaboration is needed to act on those ideas and with working on both to produce results. In short, the new managerial work implies very different ways of obtaining and using power" Human Resource Management, Eight Edition,Gary Dessler , P.15.
- Increased information flow down the organization at both the levels.
- Start practicing job designs and job rotation.
- Involvement of subordinates in financial activities.
- Changes in leadership or management style towards a more participative approach.
- Decentralization of power is a must.
- Inter organization networking has failed between BA and BAA, which is an important factor for negative result of the project. Inter organization relation is very important. Cooperation and collaboration occurring among organizations and some of these include ,'strategic alliances', 'business networks', 'joint ventures', 'clusters' and 'linkages'.
TRAINING SITUATION IN TERMINAL 5:
"On the first day of operation alone, 36,584 passengers were frustrated by the 'Heathrow hassle' that Terminal 5 had been designed to eliminate." More than 600 flights were cancelled in the first 11 days, and "23,205 bags required manual sorting before being returned to their owners". The causes: "Insufficient communication between owner and operator, and poor staff training and system testing". From House of Transport Report Committee
In Terminal 5 not much training was given to baggage handlers. There was inadequate training to many workers on the programme. There were high levels of staff participation in, and completion of the training courses was very much essential. Currently, employees were taken to a hotel and shown some sort of film or slides and told this was what it looked like. They were then given familiarization training for three days to cover an area as big as Hyde Park. That was not sufficient at all. For that reason people were totally confused. Two days out of the three were devoted to putting them into a coach to show them x, y and z, and where to enter and exit and so on, but what was missing was hands on training as to where the spurs were, where the bags would come in and so on. For baggage in particular it was still a building site.
TRAINING SITUATION IN SEMCO - Why my formal employer still works for me by Ricardo Semler
In SEMCO an very innovative practice was followed. They have set aside a large room full of desks and computers to give everyone within their company and visitors to sit and plan and ask questions and solve problems. They called it the "Thinkodrome" . When SEMCO was going through a loss phase, they created a team of executives to teach cost control, pricing, maintenance and inventory management.
RECOMMENDATIONS FOR TRAINING PROGRAMME IN TERMINAL 5:
"Training is essentially a learning process. We should therefore start with a quick review of how people learn. First keep in mind that its easier for trainees to understand and remember material that is meaningful" Human Resource Management, Eight Edition, Gary Dessler, Pg. 253
- A minimum training of two months for the staff in all the technical issues which BAA has failed to do.
- Training should be more on customer oriented services like Baggage System, Car Parking and Security Searches. Investment is required to hire/arrange training sessions from highly skilled professionals
- Investments should also be made in Quality trainings like Six Sigma, ISO Certofications etc. Organizations like BAA should be 100% error free. When we talk about airport and such places, we are involving people's lives and also the security of things. We cant afford to make mistakes.
- On the job training will also play a major role because people learn more on the job.
- Another good idea would be to have backup teams. In that team choose those people from different department who have master in their work. So that they can easily handle the situation in times of need.
- Online training programmes could also be conducted in case it is difficult from point of location accessibility.
- Another very successful methodology of training is the apprenticeship training. It is a structured process by which operators/employees become skilled workers through a combination of classroom instruction and on the job training.
CONCLUSION: Organisational Culture in BA/BAA with Reference to SEMCO:
In a nut shell, the culture at SEMCO was very much different than that of BA/BAA as there were no power-packed job titles where as in BA/BAA it's just vice versa. In SEMCO, the managers themselves do their work sending fax, typing letters, photocopying, and making and receiving phone calls. Where as in BA/BAA for each and every section they had different employees to perform their own assigned job. In SEMCO there is no top level manager's participation. In BA/BAA they had very normal organisational culture where they implicit strict rules and regulations for the employees in terms of work and other internal and external facilities, where as in SEMCO there were no executive dining rooms, and parking was strictly first-come, first-served. In SEMCO Organizational profits were shared with the employees and the salaries were set by the employees themselves, where as in BA/BAA the salaries were being given as usual with general organisations as it's because it is a government aided projects. Behind this "maverick" organization was Ricardo Semler (Semler), the CEO of the company who referred to himself as the Chief Enzyme Officer. In BA/BAA there is no individual to make themselves to put effort to come forward to hold the responsibilities that made a major drawback and lead to a great disaster. If there was an innovative organizational culture in BA/BAA they might have eliminated the failure to a lower level.
- The Independent: Simon Calder: What went wrong at T5 - Case Study
- House of Commons Transport Committee Report
- Why my former employee still works for me? - Ricardo Semler - Case Study
- Chapter 8: Learning and Development. Introduction to Human Resource Management, 2000, p181-215, 35p; (AN 12062862)
- Richard et al, 2008
- Human Resource Management, Eight Edition, Gary Dessler