Organizational performance management (OPM) in AirAsia: a case analysis

Author: Iloka Benneth Chiemelie
Published: 31-July-2019

1.     Introduction

The present business environment is increasingly characterized by advanced levels of globalization and dynamism, which has brought about a constantly changing global competition in the business world. Within this context of market developments and competitiveness, companies will need to be more proactive in order to address the challenging that they face as such threatens their overall sustainability. Therefore, it is important that these companies employ the strategies and measures that will bring about beneficial and revitalizing outcomes and such would ensure measuring their performance in order to contribute to their overall stability (Gabcanova, 2012). Organizational performance management (OPM) gives a company a clear picture of where they are presently relative to where they desire to be.

The focus of this paper will be on AirAsia. Created since 2001, the company has been operating based on the mission “to allow everyone to fly”. Since then, the company has been able to deliver world class services at low fare to over 500 million guests across the Asia Pacific region, demonstrating that offering low cost doesn’t imply that the company will have to reduce quality and air travel is something that shouldn’t be costly (AirAsia, n.d).

The influence that organizational performance has been having on companies (Folan and Browne, 2005) has emerged as an important and interest feature of empirical researches done in this area (Dess and Robinson, 1984; Garengo et al., 2005). In a bid to offer further proof on this interest, it was stated by Neely (1999) that 3,615 publications were made between 1994 and 1996 on this topic alone.

In view of this interest, this research is designed to analyze the present performance systems of organizational performance management (OPM) in AirAsia, highlighting potential issues with it and making necessary recommendations to that effect.  Thus, this paper is divided into three sections. The first section is the introduction and it shades light on the concept of organizational performance management (OPM) while also offering introduction on the company to be reviewed.

2.     Analysis of existing organizational performance management systems in AirAsia

Based on the discussions in the introduction, this section will analyze organizational performance management system in the company. Discussions on this are presented below.

The existing views on performance management consider it to be the holistic framework which connected the formulation of strategy, evaluation and implementation in the structure, culture, operating systems, and human resources practices of a company (Adler, 2011). It is the new term that is used to take a broader view on the management control systems of a company.

The implementation of performance management strategy in AirAsia is shaped by a number of unique business activities, and processes and systems geared towards managing the company’s performance. The most prominent of this strategy is how the company treats its employees, its cultures, and the manner employed by the company in branding and marketing its products to the customers. A discussion of each of these strategies is presented below.

The first is human resources, and AirAsia is a company that has genuine understanding of its human resources. The company recognizes that the people what the major resources required for the company to be successful. While the company is a low cost carrier, it still puts in necessary efforts to make sure that its employees are highly satisfied with high morale. This is based on their long standing philosophy of attracting the best personnel, according them necessary training, and retaining them (AirAsia, 2010b). in order to help the company in attaining this philosophy, it made the right move by creating a Corporate Culture Department in 2004. The believe in AirAsia is that every aspect of its business model should be made simply in order to ensure that its entire stakeholders understand their vision, philosophy and objectives (AirAsia, 2010b).

A centrepiece in the human resource practice of the company is the promotion of employee empowerment. The company is able to attain this through its open office layout and by operating a flat hierarchy and the reason is to make sure that employee empowerment is enhanced with cultural or social barrier reduced (Ahmed, 2010). In their system, the idea that is proposed by any person in the company can be implemented, with staffs encouraged to adopt face-to-face meetings, and all their managers have tweets and blogs used for sharing their overall experience in the company. All member of the AirAsia family address each other on their first-name, with the senior management commonly dressing down in order to reduce the perceived power of distance between them and the other employees in the company (AirAsia, 2010c).

AirAsia’s culture is the second pillar that underpins the company’s unique strategy. The main features of this culture include innovation, audacious sense of fund, openness, and youthfulness, as well as the attitude of never-say-die (Ahmad, 2010).  On this ground, this culture is supported and conditioned by the commitment of the airline to simply its work structure, make the performance management practices transparent, and ensure that the employees are empowered.

The creation and shaping of the company’s culture is aided by the Chief Executive Officer (CEO), Tony Fernandes. There is this inherent believe in him as a leader that the vision of the airline should be made concise and clear, its work practices should be streamlined and simplified, and that the employees should be respected and valued (AirAsia, 2010c). Therefore, there is a strong demand for transparency and encouragement of loyalty in the company. On the same note, the CEO is always willing to make himself accessing to the media and the investment community (Airlinetrends, 2012).

The third pillar that is used by the company to stand its unique strategy is featured in the manner in which AirAsia is branded and marketed to the public. This is in line with the Company’s “fun and trendy image”, and AirAsia leverages the internet as a tool that is used for further development and communication of its brand. Just like majority of the companies in this 21^st century, AirAsia has an official website and maintains numerous social media platforms, where it reaches to its customers on a 24/7 basis. When compared with some of its counterparts, it is clear that the company embraces the use of social networking tools the more, as its pages are frequently updated, sometimes in the middle of the night. There is another testament to the hip communication style that the company adopts, with the company being considered as the world’s best airline because it replies its tweets, offering responses to over 40% of the tweets that it receives.

When it comes to brand communication, the central aim of the airline is to ensure that widest level of publicity is attracted, making it possible to maximize the awareness of its brands from all over the world (Lim et al., 2009). There are three global sports icons being sponsored by the company as: Manchester United, Queens Park Rangers, and William’s Formula 1 racing team. Due to this strong sponsorship program, the company has its brand name visually displayed for millions of viewers across the world. There are different kinds of generous and philanthropic acts that the company has embarked on in recent years, with the result being AirAsia coined as the “people’s airline”. For instance, the 2010 record has it that $128 million was raised by the company for UNICEF; as an addition, the company created the “Donate loose change campaign” which is used for providing help to those having heart issues, and is also renowned for its campaigns for free-seats, as it over 1 million free seats on flights throughout its wide network (AirAsia, 2010b). Ultimately, the company has ended up setting the benchmark for corporate social responsibility high in both the aviation industry and across other industries.

As a summary, to ensure that AirAsia is able to rubber stamp its authority as the “people’s airline”, sustainable competitive edge in the company is developed through the combination of LCS operational practices (like high utilization of aircrafts, standardized fleet, easier self check-in services, and so on) and organizational performance management processes that influence human resources practices centred on the employees, an organizational culture that is supportive, and a consistent and clear communication of its brand to general public.

The likely future challenge that the company will face will come in the form of having to meet the demands of the consumption by combining the characteristics of LCS and FSC models, and this is being referred to as “the new world” carrier by experts in the industry. The prediction is that against the present two models being employed in the industry as LCS and FSC, airlines will not need to understand ways to combine the elements of cost leadership and differentiation together (Dostaler and Flouris, 2004).

A primary example was offered by Cooper (1995), who made use of the automobile industry by recounting on the collapse of the survival zone of the auto manufactures that occurred in the mid-1980s. This description placed emphasis on the fact that in the 1960s, the auto manufacturers were capable of choosing from a variety of unique strategies, and it strategies represented different trade-offs between the quality of products offered and the cost of such product. As the mid-1980s approaches, there was a change in the industry because the viable competitive space started to collapse, which made it impossible for the companies to choose from different strategies are they are now forced to pursue a single strategy in the form of head-to-head competition (and the researcher termed this as “confrontation strategy”). The impact of confrontation strategy is that it makes it impossible for one to create trade0offs between the quality of products and cost of the said product. Instead, it does bring about high minimum threshold for the company which covers both low cost and high quality. As such, when companies are not able to meet the demands of the customers based on the minimum threshold, they end up becoming uncompetitive and losing market share.

Clearly, the airline industry is starting to show signs of survival-zone collapse. This is because air travel is now an established service industry and there is now an increased reference to this industry as commodity services by experts (Lawson, 2005).  The competition in the industry is now being considered as very high with the experts now arguing that deregulation and the advent of the LCS competition and this competition is now even hyper in some regions (Adler, 2011). On the same note, airline passengers are now wielding substantial amount of power. This is based on the notion that passengers commonly make use of the internet when searching for the least possible fares, and the impact is that it has made revenue management, capacity management, and operational cost management crucial  (Rouse et al., 2010).

3.     Recommendation

Although the discussions have pointed out that the company has employed numerous organizational performance management measures towards sustaining its present position in the market, it was also made known that it is now faced with the challenge of combining the elements of LCS and FCS in order to ensure sustainable performance in the future. The reason for this is because the customers now have higher power and it is only through such combination that the companies in the aviation industry will be able to create sustainable long-term performance. Thus, it is recommended that the company should now start to differentiate its services from that of its competitors. The reason is because anybody can offer LCS, and some companies (including their local rival MAS through its FireFly services) have started to offer LCS. In the future, when the survival zone is eliminated, it would be extremely difficult, if not impossible for AirAsia to retain its market share. Therefore, it is important that the company start not to implement these measures as a weighted preparation against future potential occurrence.

4.     Conclusion

From the discussions above, it is now evidenced that organizational performance management (OPM) is an important tool in the business environment of today. This is because; the business setting is now highly competitive and innovative, making it much easier for companies to imitate each other in all sense. Therefore, what would represent as the difference between the sustainable and dying firms in the future is their ability to manage their performance. From the case of AirAsia, it is also demonstrated that even when a company seem to have everything sorted out, the company still need to forecast potential environment in the future and start positioning itself to such changes. This is the reason why it was recommended that while it is clear that AirAsia has implemented a number of measures to ensure it can sustain its position in the future.

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