Importance of People and Processes in Corporate Turnaround of BA and Nokia

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 Corporate Turnaround Practical Work

June 2011  |  Practical work number : 10731

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In a turnaround or transformation situation, making adjustments to the business model is more important than managing the people issues.

British Airways : 1970 - 1990

British Airways(BA) had come a long way from being referred  to as "Bloody Awful" in the 1970s and early 80s to be known as "Bloody Awesome" during the late 1980s and early 1990s. It was making pre-tax losses of nearly quarter billion Pounds in 1981 before turning around to generate profits of £350 million in the 1990.

BA was doing badly for a number of reasons. It had high staff numbers and the problem was compounded by the drop in the passenger growth because of the recession in 1981-82. Its fleet was aging and with high fuel and staffing costs, the fixed costs were very high. There existed two separated organisations within BA. This was because BA came into existence by the merger of two independent organisations BEA (British European Airways) and BOAC (British Overseas Airways Corporation). The employees did not think of themselves as unified and there was no focus on achieving synergies and economies of scale.  There was no common & definitive organisation culture. Profit motive was not the priority of the airline and it still had strong military and civil service attitude. It was investing in the latest technologies with extremely low efficiencies. As a result it had the lowest productivity in comparison the other 8 leading foreign airlines and lacked customer focus.

Clearly, BA as undergoing decline and its severity can be explained by the Weitzel and Jonsson model of Stages of Decline.

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Theory E and Theory O :  The Theory E and O are the two contrasting approaches used by leaders to carry out turnaround in the organisations. The theory E is the hard approach with focus on cutting down costs, restructuring and layoffs. Its primary attention is on creating shareholder value and immediate results. In contrast, the theory O approach concentrates on developing corporate culture and human capability and is characterised by slow results. Studies have shown that adopting only one of the two does not produce the most optimum results. Both the strategies have to be carefully combined and used ...

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