Human Resource Ramifications Of Merging And Acquisition On Southwest Airlines (Essay Sample)

Human Resource Ramifications of Mergers in Southwest Airlines
Student Name:
Institution:
Human Resource Ramifications of Mergers in Southwest Airlines
Mergers and acquisitions (M&A) involve a major company acquiring a smaller company in terms of resources either in its industry or one that is in line with its mission. Southwest Airlines has been known to do a lot of acquisitions as it is normal in the airline industry. In the past, Southwest Airlines have had experience doing acquisitions for smaller companies such Muse Air in 1985, Morris Air in 1993 and ATA Airlines in 2008 (University of Pennsylvania, 2010). The current acquisition is the AirTran Airlines in 2010 and has acquired its current employees now with a combined figure of 43,000 employees.
From a human resource perspective, most mergers and acquisitions of companies have an uphill task of integrating the different cultures and strategies of both companies. Employees are at the center stage of the fiasco because of the different work processes and organizational culture encountered during the merger. An estimated 70 to 90 percent of all M&A fail to achieve their strategic and financial objectives and the failure is largely attributed to human resource related factors (Wickford, n.d). Companies face a myriad of ramifications in the merging of their businesses and the core issues to be addressed in the human resource challenges.
From a business perspective, the Southwest Airlines acquisition gives them to shop in larger airports and gives them access to over 83 airports where AirTran has a presence. The airline folding operations with AirTran cost an estimated $300 to $500 million as per the leadership of Southwest. They believe the merger will strengthen their competitive advantage in the industry to compete with world class players. However the merger is a big bet and tricky move for the airline, the post -merger challenge is bringing two different cultures into line (Silva, n.d). The Southwest Airlines has a particular approach to managing their employees. They put enormous effort into the selection and training of new employees and taking thousands of AirTran's workers into the system and hoping to work is quite a risky move. During the merging process, normal complex operations need to continue posing a challenge as not all people can be orientated.
Pay and Seniority Challenge
The major issue that sabotages mergers in the airline industry is the seniority scale; people who were captains will no longer be captains in the merged company. The vice is attributed to the seniority scale between airlines and unclear labor relations agreements. In the case of Southwest Airlines, their pilots earn 30% more pay than their counterparts in AirTran. The company may look to improve their pay, however, the challenge is the seniority issue because Southwest pilots outnumber the AirTran in a ratio of five to one, therefore, will look to push the AirTran pilots down the seniority levels. The situation can cause tension among the staff breaking the no- confrontational culture of Southwest employees (Lindenberger, n.d). The two companies do not operate with the same strategies as witnessed in the simple cost and fare structures they employ.
SWOT Analysis
Southwest Airlines merger presents a wave of strengths, weaknesses, opportunities and threats to the company in the human resource perspective.
Strengths
The company has a very strong organizational culture that it has been integrated into all the company's departments and workforce. It is derived from the mantra of A warrior spirit, a servants heart and fun-LUVing attitude (University of Pennsylvania, 2010). The culture aid the company towards its mission and goal for the industry. Work culture is an important reference when recruitment takes place.
The company is led by strong visionary leadership who can truly navigate the complexities of merging and acquisition of the company. The leaders in place have steered the company in times of other mergers that have happened in the past, they have the relevant experience to complete the merger successfully.
High reputation in the industry- Southwest Airlines has been listed as one of the most admired companies in the world by Fortune and one of the best places to work in Glassdoor 2013 Employees Choice Awards (University of Pennsylvania, 2010). Its reputation rubberstamps efficient top management the employees in the company.
Weaknesses
Weak HR strategy- the company does not have well-defined guidelines on how employees are integrated into the system in the event of companies merging. The strategy is not full proof as each acquisition presents with different complexities.
Lack of experience managing a large workforce- the after the merging of the company, the workforce will clock 43000 employees. The company deals with its employee's hands on therefore management of the big workforce needs a change of tact.
Opportunities
Integration of different employee talents- the company will benefit from talents of AirTran as they come with different capabilities. The workforce will foster innovation and creative abilities to drive the company’s goals and mission.
Competitive advantage- the company emergence will give it a competitive advantage in terms of the workforce as they will execute the company’s strategy (Lindenberger, n.d). Skilled workforce in the airline industry is a plus to the company because of the human resource shortage witnessed in the sector.
Threat
Employee turnover- merging of companies can cause shockwaves among employees. Several issues such as the battle for seniority among the employees can lead employees to opt for other companies. It can affect essential workforce in the company leading to a shortage of human resource.
Recommendations
Plan ahead: Companies merging have a central focus on the financial and legal implications of the emergence. They fail to take into consideration the human resource perspective both companies; they are dictated by different company cultures and its integration (Wickford, n.d). The management of Southwest Airlines should concentrate on understanding the cultures of both organizations and address it accordingly.
Involve employees in the process- Use of cross functional integration teams within the company is essential to help the current employees figure out the type of culture they are bound to work with them (Napier, 1989, p. 15). The teams can also work on the logistical details and acquisition agenda of the parent company.
Retain the best practices, policies, and systems- integrate systems and practices that are in line with the company's strategy. It will encourage employees of the merged company to warrant a space instead of a hostile takeover.
Harmonize compensation Plans and benefits- Southwest Airlines employees earn 30% more than the AirTran workers (Wickford, n.d). It is essential to bring the compensation into harmonized terms to for the employees for feel equally treated.
Recruitment and hiring are done with many factors are considered which include:
Budget constraints
Employee trends
Production levels
Sales Increase or decrease
In global expansion:
Laws and regulations
Employees work ethics and culture
Desired job competencies
Employee development
Country cultural values
Evaluation Metrics
Merging of organizations means expansion of company’s resources including its human resources. Different metric...