Strategic Change At Malaysia Airlines: Challenges & Implementation

December 21, 2023/

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Human resource management in changing organizational contexts

Organizational change is an essential element in ensuring the holistic development and growth of a company. In a bid to retain a competitive edge, companies remain keen on research and innovation which in turn raise the necessity for adjustment of certain organizational systems to enhance the efficiency of processes (Anderson, 2013). Despite the vital place of change, it consistently meets a lot of resistance which could be associated with both the internal and external factors within an organization. This paper focuses on the strategic changes that have taken place at the Malaysia Airlines over the past decade. The discussion also outlines the challenges faced by the organization while implementing these changes. The arguments draw upon various diagnostic tools and change management models to outline how the strategic change plan has been achieved over the given period (Wood, 2014).

Overview of Malaysia airlines

Malaysia Airlines is one of the leading airline companies in the country with its headquarters in Kuala Lumpur. Since its inception, it has grown in leaps and bounds leading its international acclamation. MAS owns a number of subsidiaries whose operations focus on both local and international flights (Anderson & Anderson, 2011). As an indication of its good performance both in the national and international corporate environments, the airlines received numerous awards from the aviation industry effectively labeling it among the best airlines in Asia. These awards came in the years 2009, 2012 and 2013 (Weick, 2015). During this period, the organization did not only receive the best airline accolade from World Travel Awards but was also listed by Skytax as one of “The World’s 5-Star Airlines.” However, the emergence of competitors, poor management and lack of a decent organizational culture led to the company incurring a lot of losses while losing its profit margin.

In the early 2000s, there arose a good number of low cost carriers which mainly dominated the local market hence impact the market stability of Malaysia Airlines.

The graph above illustrates the projected drop in profit margin over a span of three years after the emergence of management problems at MAS buoyed by competition from rival airlines. Additionally, the rising fuels costs largely hindered the effective management of the organization’s flights especially the long distance courses which in the long run proved less profitable despite the fact that they were effective for the organization’s brand.

These challenges led to the establishment of a change plan aimed at rebranding, renationalizing and restructuring the company to restore its return on investment (Sturdy & Grey, 2013). The main strategy in the change model involved the introduction of a new CEO to oversee the overhauling of the traditional approaches replacing them with a new corporate culture and structure within the organization. The management was charged with the key mandate of identifying the root cause of the problems at the organization before recommending the most viable mitigation strategies. The change process involved the use of the cultural web and open systems model to establish the specific problems and recommend the change program (Ashforth & Kreiner, 2009). Social perspectives, economic issues and personal problems are some of the factors that resisted the change process

Impact of ERP Capability Implementation on Business Process Outcomes

This is a diagnostic tool which depends on a close loop of procedures which involves addressing the inputs, transformations and outputs in a close circle of events progress (Ashmos & Huber, 2008). The open system therefore involves the derivation of vital information regarding the organization before analyzing the obtained data to come up with the most appropriate mitigation strategies. This portion outlines the inputs, transformation and outputs as established from MAS case study.

The airlines initially enjoyed a proper share of the Asian market and other international destinations owing to the effectiveness of its services and quality of aircraft. The Engineering body was competent and the list of pilots was adept at their work (Stone, 2015). The airline also enjoyed minimal competition as not so many rival companies had been established by then. The emergence of low cost carriers had drastic impacts on the company’s market grip as it became more competitive. The steady rise in fuel prices due to the dynamic nature of economies in the corporate business arena made the long flights less profitable. This increased the rate of losses especially before the transition in leadership (Ashmos & Huber, 2008). The low cost carriers mainly operated in the local market which made denationalization one of the mitigation strategies at MAS. The change in leadership was limited by personal and environmental challenges which explain why in a span of 3 years, the company had three different CEOs.

In a bid to restore the company’s profitability, the company appointed a new CEO who was mandated to oversee the transformation process which majorly involved executing changes and corporate culture at Malaysia Airlines System. Fuel costs were identified among the main causes of losses at MAS (Robert, 2011). The new team also pointed out poor revenue management as the other potential reason behind the company’s poor financial performance. Furthermore, lack of brand presence in foreign markets, non-coordinated sales distributions and absence of strategic alliances were identified as the additional causes of the loss at MAS. The mitigation strategy would specifically be directed at addressing these challenges (Bhattacherjee, 2010). The proposed ideas involved cutting the long flights especially to America and Africa and shifting attention to developing the local market as a renationalization strategy. Reconstruction of the company’s corporate structure and repackaging the brand to a more attractive form were the other recommended transformational ideas.

The appointment of the new CEO was a better path towards recovery from unprofitability. Route rationalizing was used as a major strategy in this case. The Airlines reduced the number of local routes from 124 and pared them to 24. The long unprofitable routes were also cancelled (Collings & Wood, 2009). As a mitigation strategy, emphasis was laid on pricing, revenue management, distribution management, low season strategy, strategic alliance and scheduling of company networks. 2009 saw another transition in leadership which led to the appointment of a new CEO. High fuel costs continued to be a management problem and this led to one of the largest company losses in 2011 (Reagans & Zuckerman, 2011). For the next three years the company experienced a string of losses due to management challenges, lack of brand presence and considerable resistance to change by the organization’s employees. This led to the appointed of a new CEO to lead the renationalization and rebranding process

Dirty work and the challenge of constructing a positive identity

The cultural web is essential in identifying the difficulties that the organization experience while implementing the change (Creedy, 2014). The main approach at MAS is through transition in leadership with the core aim of enhancing the company’s corporate image and management levels. The strategies are aimed at uplifting the diminishing brand image and the organization’s market presence especially in the domestic market.

Stories — Symbols

Competent staff both in the cockpit and engineering sectors which has led to the company operating both in national and international arena for over 68 years without major accidents
The leadership approaches have been quite stable and the organizational culture at MAS has never been definite enough since its inception.
Malaysia Airlines prides in Airbus A350 and A380 on which first class is offered are used for the long flights especially to America and parts of Africa. Business class is offered on the Boeing 737-800 craft which has the company logo on its outer body.
The cabin crew and the pilot wear uniforms with the company’s logo and brand and have been effective which has enabled MAS to receive numerous awards in the past for being one of the best airlines in Asia despite the challenges
MAS has struggled to cut costs to cope with the emergence of low –cost carriers in the domestic market
Proper customer experience. The company has a golden lounge at the airport with bars hence also offering catering and hospitality services. The airplane inner designed comprise well fitted seats with power, USB ports and a preinstalled in flight entertainment system

Routines/rituals — Control systems

All staff are committed to quality service delivery as a strategy of maintaining the company’s core values. Company believes in corporate competitiveness hence constantly working on enhancing its brand in the international fonts
Much of the company communication entails mitigation strategies to cut operation costs and retain a competitive edge. Fuel costs are highly managed through regulation of flight networks and rationalizing routes
Customers expect entertainment both in the waiting lounge and during the flight. Strong engineering networks hence best quality aircraft bodies to minimize accidents and increase consumer comfort
Only competent and qualified staff is incorporated and are expected to deliver within the best quality standards. The staff have remained relatively open to change over the past decade

Organizational structure—Power Structures

Malaysia Airlines embraces a flat structure with the CEO and various departmental heads. The CEO oversees the general flow of operations
Each departmental head accountable for operations in their respective areas. The departmental heads assist the CEO in implementing ideas based on the company’s culture
Company relies on a shared value system. The leaders make major decisions on the purchase of fleet, rebranding strategies and strategic alliance
There is occasional review and evaluation of departmental performance.

Lewin’s Force Field Analysis

The challenges faced by the organization in its bid to implement the change can be emphasized by Lewin’s force field model summarized above. It comprises the driving forces managing the change and the resisting forces hindering its implementation (Patrick, 2010). The driving forces include changes in leadership approaches and decision making processes to enhance the corporate image at MAS. The other aspects include reduction of operation costs by cancelling the long flights and increasing the Airline’s competitive niche in the domestic market (Dean, 2009). However, poor revenue management, rising costs of fuels and employee resistance are among the hindering factors. Increased competition due to emergence of low cost carriers in addition to economic constraints experienced by MAS have also hindered the successful implementation of the change.

The change at MAS had drastic effects on the company’s key stakeholders especially the employees. The new CEO was to oversee the entire change process. One of the strategies involved reduction of number of flights owing to high fuel costs hence leading to reduction in the number of employees. Altering the flight networks also meant some of the staff members would be required to work in a different environment. These illustrations therefore reveal how the change affected the employees.

Time:	· The increased number of losses incurred especially between 2011 and 2013 in addition to the rising fuel costs increased the urgency for change. · In order to save the company from collapsing, the mitigation strategies were to be implemented as soon as possible with short term goals established
Scope:	· The change at MAS was massive and had an impact on the whole organization. · Transition in leadership meant the new leader came with a different approach hence influencing processes · The change strategies also involved introduction of new approaches which involved employee layoff since the number of international flights were substantially reduced.
Preservation:	· The flat structure of leadership was to be maintained · The company’s crop of engineers and pilots were to be retained · Malaysia’s quality service provision culture was to be maintained by the cabin and other staff
Diversity:	· A multicultural environment was inevitable as the organization due to its international scope of operation · The staff attitude towards certain leadership and change approaches were negative hence slowing down the implementation process
Capability:	· The organization appointed a qualified CEO with the required merit and attributes to oversee the implementation of the change · The underlying structures and the existing resources at MAS also facilitated the implementation process
Capacity:	· Loss of RM 2.52 billion in 2011 · Transition from unprofitability hindered by the limited resources · MAS had to restructure its flight networks by eliminating long unprofitable flights and investing more on the domestic market
Readiness for change:	· The financial struggles created an environment where all the employees and other stakeholders recognized the need for change
Power:	· The CEO wields much of the power and influences processes by manipulating decision making. · The power ought to be diversified to allow independence at the departmental level

The change Kaleidoscope above summarizes the necessary adjustments that may need to be made at Malaysia Airlines to enhance the effectiveness of the change. The CEO has the power and the needed attributes to oversee and drive the main process. However, this power needs to be diversified to other departments to enhance effectiveness (Grant & Marshak, 2011). The continued registration of losses, rising fuel costs and emergence of low cost carriers reveal the need for urgency (Mesly, 2017). The change’s scope covers the entire management and variation f a number of procedures. Rationalizing routes, reduction of subsidiaries and canceling of flights to far destinations are the aspects covered by the change. The company is to maintain its flat structure and the resources. The aircraft models are to be preserved with their interior quality enhance to improve consumer satisfaction. Malaysia Airliner’s operations in the international fonts imply a diversified workforce however the management has the capacity to deal with the whole issue (Hope, 2009). The people at the organization are however ready for the change despite the eminent resistance from some quarters.

Beneath and beyond organizational change management

The key features of the management’s approach in facilitating the change and their interrelatedness have been summarized in the map below

The sources of resistance to change could be disseminated into three main aspects of resistance namely affective, cognitive and behavioral. The paring of local flights at MAS from 113 to 24 in addition to the canceling of unprofitable international flights would mean a slice on the cabin crew to reduce the operation costs (Johnason, 2009). The job cuts in this case would be the leading source of resistance at MAS. As a mitigation strategy, proper communication on the need for change and the impending circumstances would be helpful in preparing employees.

Behavioral resistance would be caused by the social impacts that the restructuring plan at MAS would have on the employees. The plan to rationalize routes and change the flight networks in a bid to reduce operation costs would see a shift in the social environments of some of the employees (Johnson, 2010). They are likely to resist this change. Finally the 2.52 billion loss led MAS to embrace a transformational change model. One of the CEO had to resign citing personal factors hence both personal and economic issues are likely causes of resistance to change. The management ought to employ aggressive strategies to ensure the executives and employees have the right mind set necessary to propel the change process. The explanations are summarized below

Type of resistance	Source	Management
Affective	· Job cuts due to reduction in number of flights to reduce operation costs	· Prior communication to employees on the need for change
Behavioral	· Resistance caused the impacts that the transition would have on the social life and comfort of employee	· Educating and informing the staff on the need for flexibility to the social change associated with the transition
Cognitive	· Caused by personal and economic factors at MAS	· Need for creation of the right mindset among executives and employees through proper mitigation strategies

In order to enhance its brand presence, the management at incorporated the use of network cooperative strategy. This approach was mainly aimed at increasing the Airlines networks and attachments to the specific market areas which were deemed profitable and promising. The strategy was also meant to lay the right platform for the formulation of strategic alliances with other firms and stakeholders to aid in the reconstruction process. The strategy proved fruitful as it played a pivotal role in increasing MAS’s brand awareness among the customers both in the local and international market. The effort eventually led to an increase in the number of passengers with a 2% increase in one time performance recorded between 2016 and 2017

Unfreeze	Change	Refreeze
The CEO at MAS must communicate the need and urgency for the change by pointing out to the people within the organization the past predicaments and the impacts of these events on the performance of the organization The phase also prepares the workers for the consequences which may include social shifts and job cuts	· Establishment of positive mindset through effective communication · Analyzing the noted gaps and putting in place the right mitigation strategies · Clarifying the expectations and consequence of the change to employees	· Offering support to affected employees · Effective communication of developments to identify progress · Involving all key individuals in the decision making processes
The change vision is then implemented by pointing the specific areas of adjustment to retain market stability and profitability at MAS	· Highlighting the organization’s values to ensure the change strategy is aligned to them. · Creating new focus spots to envisage the organization’s future and hence motivate the people to work towards it.	· The change strategy should be effective enough in cultivating positive attitudes among employees
Developing a stable change culture and support from key stakeholders to deal with resistance to the implementation of change	· Identifying key individuals supportive to the change idea · Positively impacting the current employees to enhance the right mindset	· The key stakeholders need to be united to establish a stable change coalition · The coalition is to enhance the implementation of the successive phases of the strategic plan

Lewin’s model above details the procedures that involve the change implementation. As proposed by Lewin, the first stage involves unfreezing. In this phase, the need for change and its urgency is communicated to workers. It also prepares them for the outcomes. A change culture is also developed at this point (Ka¨rreman & Alvesson, 2011). The transformation phase involves clarifying the expected outcomes and analyzing the company values to ensure they are aligned to the change vision. Key stakeholders are identified as well. The refreeze phase involves incorporating the change idea into the MAS’s operations to cultivate it into the organization’s culture. This enhances continuity and sustainability.

Strategic Changes at Malaysia Airlines

In order to evaluate the effectiveness of the change strategy in enabling organizational improvements, the analysis can be based on a number of factors (Marquis, 2013). To begin with, the level of motivation among the staff members has increased tremendously since the implementation of the change. The quality of services provided by the cabin crew based on the numerous positive consumer feedbacks is an indication of the positive impacts of the change process (Klerck, 2009).

	Actual Q4 2017	Actual Q4 2016
Passengers (m)	3.4	3.8
Passenger Load Factor (%)	77.0%	80.9%
Passenger Yield (sen)	23.6	21.5
On-Time Performance (%)	73%	70%
Total RASK (sen)	22.1	21.6

There has been a steady increase in passenger yield since the loss in 2013 with a 2% increase noted between the 2016 and 2017 fiscal years. Additionally, there has been a recorded steady on time performance with the current value standing at 73%. This is an increase of 3% from the previous year’s value (Lorenzi, 2011). The company has also recorded an improvement in its revenue per available seat kilometer with an improvement of 2% recorded in comparison to last year’s value (Knippenberg, 2010).

In addition to the improvements outlined above, the performance of MAS after the implementation of the change strategy can be gauged by the numerous awards which the company has received between 2016 and 2017. In 2017, MAS received the Fast Travel Green Certificate from IATA. The organization also received the Travel Personality of the Year Award- Peter Bellew. It also received a Gold Award for Best Event given by Marketing Event Awards in 2017. In 2016, MAS received Best Airlines Meal Year 206 Award and a Bronze Award for Best Event. It also received the Best First Class and Joint Best First Class White in 2016.

Conclusion

The airlines profit for the years 2015 and 2016 were 40.1 and 73 million respectively. However this value shot to a whooping 237.1 million in 2017. It can therefore be concluded that the change has been successful in enabling Malaysia Airlines to achieve its performance improvement objectives (Lorenzi, 2010). The recommendations for Malaysia Airlines would mainly be anchored on the need for a stable corporate culture through effective management approaches. The organization needs to invest on more personnel to enhance research and innovation which would be necessary for improving the designs of the planes for proper consumer satisfaction. The management needs to consistently explore the various market options to consider establishing subsidiaries in locations with promising futures (Little, 2014). This would also enhance the organization’s competitive niche. Finally, the Airlines may need to invest more on staff empowerment and training to sustain the quality of services provided. This would lead to improved consumer experiences and a corresponding increase in return on investment.

Challenges Faced by Malaysia Airlines in Implementing Strategic Change

References

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