British Airways Case Analysis

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British Airways, in 1996, faced an uncertain future as the competitive airline landscape was in a state of flux with smaller low-cost airlines invading the market and larger airlines setting up prudent alliances to stay profitable (Barsoux). CEO Bob Ayling announced a new program designed to cut operating costs to compete within the new economic arena. Employees naturally expected that part of the “Business Efficiency Program” was a significant reduction in staffing and benefits, which led to a bitter divide between British Airways and its workforce. The resulting strike, however, was not the actual problem that warrants discussion; the problem is how British Airways arrived at a strike and how the opposing sides treated each other throughout the negotiation process. The aspects that fueled the negative negotiation process were numerous, but focusing on two overarching themes helps explain the problem: psychological contracts without mutuality and procedural injustice. Employees described the pre-strike conditions as “fair,” “well rewarded,” and “happy,” which are examples of a relational psychological contract (Barsoux). Employees that feel they are bound by a relational contract with their employer are fiercely loyal and usually selfless, in that they feel a need to help other employees when they are able. It is exceedingly clear that British Airways set stock in the hybrid contract model, where there is no restriction on an employees’ commitment, but there are strict performance and renegotiation demands (Rousseau). A key feature in this form of psychological contract is the anticipation of renegotiation as the competitive landscape changes for the employer; an event the union seemed unprepared for. This dichotomy prevents the most important factor of a psychological contract: mutuality. Mutuality is the understanding that both parties (in this case,

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