Settlement of the power conflict between top management of Cathay and pilots Essay Example for Free

Settlement of the precedent conflict between top management of mainland China and pilots rise1. INTRODUCTION1.1 Background InformationSince 1993, chinaware peaceful course panaches Limited (Cathay) has experienced the threat of industrial exercises initiated by unions. On 1 July 2001, another(prenominal) industrial action was commenced, resulted in a three-month chaos in Hong Kongs tourist industriousness.Being the representatives of the pilots of Cathay, Mr Nigel Demery, the President of Hong Kong Aircrew Officers Association (HKAOA), informed Cathays top management that the pilots ref utilise to accept Cathays new gift proposal. Members of the HKAOA oblige decided to commence industrial actions to force Cathays top management to accept their demand. The event was followed by a sharp increase of pilots reporting mold leaves. Unlike previous industrial actions, Cathays top management held cockeyed to their original standpoint and dismissed 52 pilots and chartered addit ional aircraft to moderate the problem of pilots reporting sick and absence from work. However, the incident did not come to an abate. On the contrary, the problem escalated when HKAOA reacted by announcing support of the looted pilots by taking legal actions against Cathay for the raw dismissal.The pilots industrial action caused a financial passage of US$12.8 million to Cathay each day. In fact, this was not the first time for the pilots to use industrial actions as a mean to press the top management in accepting their demands. Three industrial actions adjudge been taken place since 1999. These frequent industrial actions have not only caused financial loss, but also harmed the comp eithers overall reputation. Table 1 provides a summary of the industrial actions that has been taken place since 1993.2. OBJECTIVES2.1 ObjectivesThe oldtimer objectives of this report include Settlement of the occasion conflict between top management of Cathay and pilots Moderate the power of p ilots in order to avoid or reduce industrial actions in future2.2 Analysis of the Existing positions of both partiesLuthans (1992, p.426) said that formal organizations are highly political and power is the name of the game. Managers and non-managers in an organization often manipulate power to accomplish goals. Cathays top management holds legitimate, reward and coercive power to perform various(a) specific tasks and decisions. Legitimating refers to an upward appeal, which adds incubus to an influence attempt by showing support from senior managers, rules or procedures.1 On the other hand, coercive power promoter the using of threats, intimidation and compulsion to gain compliance.2In the recent industrial action, the top management tried to utilize their legitimate and coercive power to gain pilots compliance. Apart from the effectiveness of this position-based power strategy, the use of coercive power always causes negative consequences such as weakening relationships.In cont rast, the pilots hold strong right power. Pilots have high-value expertise. Referring to the strategic contingencies model3 which think on individual power and how it is detected, the subunits that are approximately central to the flow of work in an organization acquires power. The major revenue of Cathay comes from passenger and payload services. It is impossible for an aircraft to operate without a pilot. The past industrial actions showed the strength of pilots expert power. Thus, the power conflict between top management and pilots must be colonized in the long run.Besides, Cathays pilots manipulated the coalition strategy to accomplish their goals. HKAOA is a typical coalition of pilots. At present, Cathay employs 1,500 pilots, more than 75% of the pilots are members of the HKAOA. Thus, each industrial action evoked by HKAOA has caused a signifi spatet impact on Cathays business and reputation.Given the fact that the majority of the habitual man was of the view that the pilots have been over-demanding and created much chaos to the tourist diligence in Hong Kong (According to the interview results as substantially as from the media), it is a right(a) opportunity for Cathay to take returns of the situation and to moderate the power of the unions.3. SOURCE OF INFORMATION3.1 Source of InformationThis report is based on both primary and secondary information from various means. This includes-? Interview with representatives of both Cathay and the HKAOA.? yearly Interim Reports of Cathay? Newspapers? Magazines and Journals? Cathay Pacific Airways Official Web Site4. FINDINGSOur findings are mainly based on the following sources-* Interview Findings* Financial data published in the Next Magazine as showed at Tables 1-5.* Review of Cathays existing policies and procedures as showed in accompaniment 1.4.1 Interview Findings4.1.1 Interviews with HKAOA (Interviewee Mr. Spurrier M.)? According to HKAOA, Cathay was intimidated by aggressive interviews by managers about delays? For other managers or employees acting on Cathays instructions had followed pilots into the cockpit to watch them doing line of achievement checks even though they did not possess the required qualifications to know what was necessary, as such, prosecutions for those people whitethorn be possible nether the safety law of Air Navigation Ordinance as intimidation risked distracting pilots from their jobs? The pay demand was reasonable to Cathay4.1.2. Interviews with Cathay Management (Interviewee Mr. Tang)? Many crews were being put under natural pressure to sign the HKAOAs lawyers letter? Cathays net recurring profits has already been forecasted to fall by 20% to 25% in 2001 due to the global sparing downturn? The pay demand of HKAOA was unacceptable4.1.3. Interviews with the Human Resources Department (Interviewee Mr. Chau)? Employees remuneration represented about 25% of Cathays Total Operating Expenses4.1.4. Interviews with a Cathay passengers (Intervie wee Mr. Lee)? The responder described the pilots pay demand as unreasonable while the economy was still recovering? He complained that the pilots threat of industrial action had thrown his pass plans into chaos and the pilots union was selfish especially during peak travel seasons4.1.5. Interview with Tourists Right Association? They said that industrial actions would not gain the support of the general public and would only injure Hong Kongs reputation and tourism industry? They claimed with anger that the pilots earned well in Hong Kong, but tried to endanger Hong Kong tourism industry4.1.6. Media Comments from the Next Magazine, Hong Kong? Analysts said it would be hard for the pilots to pressure Cathay into roistering changes because of the financial implications5. fig out ANALYSIS OF CATHAY5.1 SWOT AnalysisA SWOT psychoanalysis may help management to identify the come withs strengths and weaknesses against its major competitors in the industry and to explore the opportunit ies and threats for effective strategic planning purposes. The analysis has been summarized from our findings and observations by various means as mentioned in Section 4 of this report. The SWOT analysis is mainly based on our observation and analysis on the financial information provided in Cathays annual report and from that of the Next Magazine.5.1.1 Strengths? Strong management team such as the director of embodied development, Tony Tyler, has implemented tough policy? Code contribution agreements with a number of other international airlines to provide greater flexibility such as British Airways, Japan Airlines, Malaysia Airlines, reciprocal ohm African Airways. Swissair, THY Turkish Airlines? With the decisions do to cut schedules and bring in charter aircrafts, the level of flight disruptions and delays have been selectably reduced, and the effect on sickness levels have to reduce? With the prevention from regime regarding overseas airlines in carrying passengers in Hong Kong to other destinations, Cathay became a price maker5.1.2. Weaknesses? Existence of Tenure employment contracts strengthen pilots power? Contracts are issued to pilots fit in to HKAOAs instructions, for example, all newly recruited pilots must start from the entry post of a Junior Pilot regardless of his/her previous experience? Long history of gross profit margin to pilots for their industrial actions created wrong perception to pilots that industrial action was an effective way in request for a demand? Lack of topical anesthetic anaesthetic pilots as substitutes in time of strike? High cost of training a Cadet Pilot (approximately US$128K)? Huge amount of financial interest of about US$1.3 million a day and labor cost of US$2 million per day5.1.3. Opportunities? Prolonged industrial action created unnecessary anxiety to passengers and the public, resulting in the loss of confidence in pilots and its union? Insufficient coalition between the union and pilots as not all the pilots are get outing to participate in the industrial actions? As pilots were sacked, Cathay could recruit pilots at a lower cost? Intensive trainings were held in an Adelaide aviation training school? Only a 3-year contract for new recruitment could be signed? More better experienced pilots can be recruited with closure of airlines subsequent to the 911 tragedy in America.5.1.4. Threats? The corporate image was spoiled by the HKAOA strike? As flights were delayed or suspended, loyal customers have been lost, resulted in loss of competitiveness? Aviation market has been overt up for competition? Owing to the pilots expertise, substitutes would be extremely difficult in the case of sickness? The pilots are forced to sign a letter drafted by the HKAOAs lawyers to Cathay and were intimidated by having their names as non-signers on its website when they refused to sign? The unions source of income was supported by the membership fee from 80% of the 1,500 pilots at 1% of their income a nd was proposed to increase the contribution up to 5%6. PROBLEM-SHOOTING AND RECOMMENTDATIONS6.1 Problems Difficulties? The industrial action has been too powerful for the company to deal with. This was evidenced in the prolonged action that has caused square(p) damage to the tourism industry? High level of dependency on foreign pilots to carry their passengers? The HKAOA vowed no resolution to the Cathay dispute unless all the pilots who have been unfairly dismissed were reinstated.6.2 Recommendations and StrategiesOur recommendations are made to achieve 3 chief objectives-i) Strengthen the power of the companyii) Weaken the power of the pilotsiii) Building-up relations with the pilots6.2.1 Strengthen the power of the companyIn order to strengthen the power of Cathay, playing games go forth be a good tactic. Authority game can be used to resist the power of the pilot. History indicated that Cathay lost in 3 industrial actions (from 1993 to 2000), as the company did not resist th e power of the other party. Hence, the company original policy should be strictly adhered in order to win the game. In July 2001, Cathay proved that the Authority Game tactic was feasible with its firm adherence to its proposed pay, benefits and roistering package with up to 9% increment (Table 2 showed the salary package as proposed by Cathay). On the other hand, Cathay has publicly refused to consider negotiating with the pilots again unless they withdrew their industrial action.Besides, Cathay may consider using the coalition-building game to form alliance with other airlines, preferably nearby airlines. Coalition game is another power-base game to increase power through forming of alliances or coalitions with groups within the subunits of the company or groups outside the organization.4 Cathay can then enjoy immediate tending by chartering additional aircrafts and rebook passengers on other aligned airlines. This increases the flexibility for Cathay even if HKAOA imposes furthe r destructive actions. Moreover, all airlines should agree not to hire bad-listed pilots.Furthermore, Cathay can inform outsiders about the injustice and irresponsible actions of pilots via a whistle-blowing tactic. Firstly, they should let the public know the prospect and earnings of a qualified pilot, i.e. create a high-income earner image for the pilots (Table 3), during recruitment of cadet pilots. In general, the general public will not accept high-income earners taking industrial actions to fight for salary increment. Secondly, they may let the media know that more than 10,000 passengers were adversely affected by the industrial action in July 2001. Besides, joint efforts with the Government are required to show the frugal damage to Hong Kong during the industrial action.6.2.2. Weaken the power of the pilotsPolitical influences are a good way to conform the pilots to meet organizational value. This can be through by position-based influence strategies through pressure and thr eats in return for compliance. Besides, coercive power depends on fear.During the industrial action in July 2001, 52 pilots were sacked without any reasons. The action tended to show the firm position of Cathay and intimidated the pilots to accept the offer. Since Cathay could afford to pay sacked pilots a better than most package, as the Hong Kong labor laws offered the company with certain flexibility. This implies that further dismissal of pilots is possible.The enforcement of pressure and threat can be achieved by the issuance of written statement warning that lateness will not be tolerated as this would breach of the employment contracts, which may in turn lead to dismissal. Moreover, the announcement of cutting foreign-based pilots is a feasible alternative.Another way is to abolish the tenure employment so as to reduce pilots employment security. The new employment proposal is a three-year contract for newly employed pilots. transition of contract is subject to performance, i.e. diluting the portion of permanent pilots.Substitutability refers to the ability to engage other pilots to perform the job of the existing pilots.5 This implies that if Cathay has or can obtain alternative sources of pilots to perform the job done by the existing pilots, the pilots union can be diminished. Therefore, Cathay can consider hiring pilots from other airlines, who have been sacked during the redundancy programs, e.g. America Airline, Continental Airlines, etc.The reduction in the dependency on foreign pilots becomes the most important aspect of power which is a move of dependency. This is because the greater Cathays dependency on the foreign pilots, the greater the pilot unions power has over Cathay. It can be observed that in August 2001, 10 local pilots have completed their Cadet Pilot Programme at BAE SYSTEMS Flight Training in Adelaide, sulphur Australia. The 10 graduates brought the number of cadet pilots who have receive from Cathay Pacifics training programm e to almost 150 since its first launch in 1988.Cathays investment brings long-term commitment to develop Hong Kong aviation industries as well as reducing the dependency of the majority of the 90% overseas pilots. Obviously, foreign pilots are the source of power. Rule of thumb, if Cathay can have its own local pilot team, Cathay will not reply to hire the pilots from overseas. The sources of pilot unions will be diluted. Therefore, it is very important to speed-up the training of Cathays own local pilots team.6.2.3 formulate relations with the pilotsBuilding up better relationship with pilots is a long-term solution. This can be achieved through interpersonal influence. With the application of position-based influence strategies, Cathay can offer rewards or benefits in exchange/return for pilots compliance. Rewards can be anything that another person values which is the opposite of coercive power. In Cathays case, rewards can be monetary rewards, fringe benefits, favorable promoti on prospects, flexible shifts or flight territories. If the company can give someone something of positive value or annihilate something of negative value, the company will have reward power over that person.Emphasis should be made on the fact that Cathays pilots are still the most expensive pilots when comparing to other American and European Airlines. This has been achieved during all public announcement and negotiation (as shown in Table 4 and Table 5).Motivating the pilots is all important(p) to Cathays long-term success. It is important to build up common goals and values to obtain support or commitment with personal-centered strategies. These are strategies that rely on an individuals characteristics and abilities to nark expert and referent power bases, or inspirational appeals and consultation.6 One suggestion is that the pilot s remuneration package should split into basic salary and performance bonus, which relates to the company s annual profit.The outcome, consensus o r agreement can be achieved through Normalization. Normalization influence can gradually change the opinions and the behaviour of pilots by trilateral process and informational influence to achieve conformity.7 In fact, coercive and reward powers are counterparts of each other. If Cathay can remove the Unions powerful/dominant value from pilots or inflict negative values upon them, Cathay will have coercive power over them.As mentioned earlier, legitimate appeal can add metric weight unit over influence attempt by showing support of the senior management. Cathay may provide indication to the general public that the pilots are under intolerable pressure from Unions. First, it can be done through media to pronounce the number of calls that management had received complaints from pilots on managing Unions intimidation. Alternatively, it will be a good tactic for management to show care and understanding of pilots difficulties and to encourage them to follow the instructions from HKAO A by signing the lawyers letters back to Cathay.Lastly, ethical success will confront ethical dilemmas by the referent-powered management, like Mr. Tony Tyler. It is important that emphasis should be stress on Cathays pilots, Unions and the general public that the current package offered by Cathay is the best. The termination of industrial action is for the good benefits of pilots, passengers and the public instead of Cathay itself, which meets the utilitarian outcome. The packages offered allow the pilots an option to choose for their terms of package. The emphasis is on fairness, exemption of choice and individual rights. No strict rules for the pilots. In return, the dismissal of industrial action is expected from pilots. Message may be made to the general public with emphasis that Cathay has confidence over the pilots professionalism and legitimate power. They will be responsible for their actions. In addition, Cathay may show appreciation for those pilots who have fill in for t heir absent colleagues.7. SUMMARY7.1 SummarySince 1999, Cathay encountered threat from industrial strikes every few years (Table 1). Cathay compromised with HKAOA in the previous three strikes and gave in to the HKAOA industrial actions. This year, the fourth industrial action organized by HKAOA with an aim to fight for higher pilots salary increment and shorter working hours have caused Cathay loss of over millions of profits, not to mention the damage on its reputation and the loss of significant market share to major competitors. (Appendix 1 provides a summary of the imagination of Cathay and its traffic figures from June to November 2001)This report has examined the current power between Cathay and HKAOA and accordingly recommended Cathays management to take proper actions to counter HKAOAs industrial action and to end HKAOAs threats in future.We have interviewed both the Cathays management and HKAOAs representative and gathered necessary information from other public means. We then evaluated these information to perform a SWOT analysis and based on it defined the problems facing by Cathay in its current situation.In general, Cathay is facing a powerful union, which has a very strong bargaining power due to the pilots expertise power. Hence, we have recommended Cathay to deploy political games to strengthen the companys power and to weaken the power of the pilots. In addition, we have recommended management to build up a long-term co-operative relationship with the pilots after the power struggle. By doing so, we trust Cathay can end this industry actions in a reasonable period and to prevent the same problem happen again in future.8. REFERENCE BIBIOGRAPHY8.1 REFERENCEInterviewee Mr. Chau W., Director of Personnel, Cathay Pacific Airways Ltd.Interviewee Mr. Lee, passenger of Cathay Pacific Airways Ltd.Interviewee Mr. Spurrier M., Image Director of HKAOA.Interviewee Mr. Tang A., Director of Corporation Planning, Cathay Pacific Airways Ltd.Luthans F. (1992 ). Organization style 6th ed. Singapore McGraw-Hill.8.2 BIBIOGRAPHYAnnual Report 2001, Cathay Pacific Airways LimitedBotton V. Agencies, Cathay chaos may start today South China morning Post, 3rd July 2001.Botton V., Pilots put betrothal plan into action South China Morning Post, 4th July 2001.Botton V. Agencies, Cathay may ground all flights South China Morning Post, 22 family line 2001.Botton V., Cathay warns it may close foreign bases, South China Morning Post, 28 September 2001.Botton V., Secret Cathay peace talks fail South China Morning Post, 29 September 2001.Bowman J., Cathay turns screw on pilots South China Morning Post, 30th June 2001.Bowman J., Union denied access to Cathay mail boxes South China Morning Post, 3rd July 2001.Cheng A., Narrow nationalistic views clouding the Cathay issue South China Morning Post, nineteenth July 2001.Cheung C.F., Thousand stranded at airport South China Morning Post, 8th July 2001Cheung J., Dispute may open extra routes South China M orning Post, 8th July 2001Interim Report 2001, Cathay Pacific Airways LimitedIvancevich, J., Olekalns, M. Matheson, M. 2000, Organizational Behavior and Management, 1st Aust. Ed, Irwin, SydneyLai C.Y., Cathay Strike, Next Magazine, 28th June, 2001.Lai C.Y., Cathay vs HKAOA Next Magazine, twelfth July,2001.Lo J., Rostering and overtime remain key issue in Cathay negotiation South China Morning Post, 4th July 2001.Luthans, F., 1992, Organizational Behavior, McGraw-Hill, Singapore.Mintzberg H., 1983, Power in and virtually Organizations, Prentice-Hall, N.J., USA.Mullins, L., 1989, Management and Organizational Behavior, Pitman, Great BritainPfeffer J., 1981, Power in Organizations, Pitman Publishing, M.A. USA.Porter L.W., Lawler E.E., and Hackman J.R. 1975, Behavior in Organizations, McGraw-Hill, N.Y., USA.Kotter P. 1987, The Empowered Manager, Jossey-Bass, San Francisco, USA.Reuters, Airline job cuts hit Europe South China Morning Post, 21 September 2001Robbins S. P., 1994, Organiza tional behavior, 4th ed., Prentice Hall, N.J, USA.See http//www.cathaypacific.comTichy N.M., 1986, The Transformational Leader, N.Y., USA.1Ivancevich J, Olekalns M, Matteson M (2000), Organizational Behavior and Management, 1st Aust ed., McGraw-Hill, pg. 401.2 Ibid.3 Ibid, pg 393.4.Ivancevich J, Olekalns M, Matteson M (2000), Organizational Behavior and Management , 1st Aust ed. McGraw Hill, pg.403.5 Ivancevich J, Olekalns M, Matteson M (2000), Organizational Behavior and Management , 1st Aust ed. McGraw Hill, pg.395.6 Ivancevich J, Olekalns M, Matteson M (2000), Organizational Behavior and Management , 1st Aust ed. McGraw Hill, pg.401.7 Ivancevich J, Olekalns M, Matteson M (2000), Organizational Behavior and Management , 1st Aust ed. McGraw Hill, pg.397.