Organizational Change Assignment Analysing News Article on Virgin Australia Collapse
Task: Analyze the news article on Virgin Australia Collapse. To supplement the information in the news item, you should refer to the latest annual report and any other information available in the public domain, about the case study organization.
After analyzing the information from the sources above, prepare a business report on organizational change assignment addressing the following:
a) Outline key changes and reforms that have already been implemented by the case study organization.
b) Identify the changes and strategies that have been proposed for future implementation.
c) Discuss the key factors driving the need for change.
d) Identify human resource development strategies that have been implemented and/or proposed by the case study organization to overcome resistance to change.
e) With reference to concepts and theories learnt in this unit, assess the case study organization’s change management strategies and provide appropriate recommendations.
The concept of organizational change management is referred to as the specific framework devised to cater to the altering requirements and potential of the company. This type of framework is generally adopted to properly implement the radical changes within the organizational units including policies, environment, culture, employee roles, and responsibilities. The purpose of the business report is to develop a critical understanding regarding the collapse of Virgin Australia and provide enough evidence and information, in the context of the news article on the topic.
It can be said that the different components of organizational change management smoothen the progress of effective training, communication, and expectations of the workforce. In this report, some of the primary changes and reforms implemented by Virgin Australia will be outlined providing enough information for discussing the key factors driving the requirement for change. The change management strategies devised by the organization will be assessed and lastly, a set of recommendations will be suggested with a focus on its future sustainability.
2.0 Main Body
This section of the report will include the outlining of the key changes and reforms, identification of the future strategies and reforms proposed, an explanation of the primary factors driving the potential requirement for change, identification of the human resource strategies implemented by the management for dealing with the resistance to change. Lastly, some strategies concerned with implementing change will be analyzed that has helped the management in difficult times.
a) Implemented key changes and reforms.
The airline organization Virgin Australia is considered as the new company comprising of the Virgin Blue Airlines along with its various units including V Australia and Pacific Blue. This transformation has significantly played an important role under the “Game Change” program, led by the company CEO John Borghetti(Srisaeng et al., 2014). The best thing about the company was that it promised to generate money in future times like a technological start-up. The owner of the Virgin brand has been charging a licensing fee for those who must use the name and in 2015, it was reported to be over more than $10M annually(news.com.au, 2020).
The graph acknowledged in the new article demonstrates the immense amount of loan that the organization gathered and as per its 2020 Annual FY report, it claimed to have a payable interest on a total amount of $5.3 billion in loans. As a result of this, the organization incurred $700M to own a big part of its flyer program, known as Velocity. To fund the purchase, Virgin accumulated a huge amount of loans with the help of unsecured and untrustable bonds. The Virgin Group is presently under administration, and it acquires the Velocity i.e. not in administration(news.com.au, 2020).
The brand has shed a major part of its workforce as a unit of Paul Scurrah’s changes and reforms. Hence, the brand claimed cuts of an estimation of 750 but executed an estimation of 500 before it is going under administration(asianaviation.com, 2020). The most primary change is that the airline organization along with the Tigerair guests are now able to change their travelling date along with the time to a different destination, without a charge(Homsombatet al., 2014). The brand also communicated some essential information to eliminate any possible confusion and it is interesting to acknowledge, if any, other airlines provide the consumers something above than credit.
b) Proposed strategies and changes for future implementation
Virgin Australia is mainly known for evolving as more economical compared to some other companies, giving it a thought that the concerned government might assist the company. The organization could have stocked up its cash reserves for such future disasters, acknowledging that the airline industry frequently cycles via busts and changes(de Boer, 2018). Virgin Australia should have invested greatly in enhancing its service quality and improvising on its reputation as one of the worst airline carriers. The organization has also proposed some new initiatives and measures to regulate its security and health standards on all flights. The primary advice of the guests was that due to higher volumes of normal calls, only passengers with scheduled flights for departure in the next 2 days can get in touch with the airline’s social media department or Guest Contact Centre(Baptista et al., 2017).
The airline company maintains a workforce of 10,000 employees directly and promotes over 6000 jobs indirectly hence, developing a requirement for the organization to come back stronger and strengthen the Australian economy(news.com.au, 2020). The main strategy is to domestically, add the capacity to routes generating a strong revenue, while extensively trimming the lower-preferred routes. Additionally, these changes tend to maximize the benefits, enhance the utilization of the aircraftalong with the offering of a more appealing schedule for the concerned markets.
The main key to all the proposed and implemented changes is appealing to the potential business markets ultimately, reducing the dependability of the airline company on the leisure market and competitively take on Qantas in the business environment. It is very much important for its management to acknowledge the requirement for a significant increase in the revenue base and utilize its cost-competitive advantages in dominating the corporate segment(Lohmann & Trischler, 2017). For example, it can be said that the clearest aspect of the company's transformation to the consumers is its new brand name and product.
c) Key factors driving the need for change
It is said that effective change management includes a tactical approach that smoothens the progress of the comprehensive understanding of the business and corporate picture. In today's business world, there are said to be various major factors that are driving the requirement for change including commoditization, the digital revolution, social modernization, and globalization(Parmenter, 2015). During the lockdown period due to COVID-19, it can be said that the airline organization dealt with a complete blackout, and when it came to dealing with the implications and issues, the organization was stretched so hard that it snapped. The main advantage was that its significant leaders acknowledged the competitive dynamics in the concerned markets and this enabled the company to outperform in three critical dimensions related to performance.
The driving factor of commoditization termed as the unchangeable pressure forces the prices downward, to evolve as a competitive force driving the organizational change in Virgin Australia(Lee et al., 2015). The second factor i.e. digitization drove the trend towards larger-oriented commoditization, as the prices set by the airline company were so cheap that it became available at larger volumes by influencing digitized design and services system. This also might provide the organization with valuable opportunities to withdraw from specific markets that tend to be extravagant and relate its strategic positioning to generate higher profitability from routes(abc.net.au, 2020).
It is known that the concept of digital technology has turned to be more significant and hence, this provides the organization with enormous opportunities to communicate with its consumers and employees to a larger extent, integrating a trend with remarkable momentum and importance. The impact of globalization demonstrates that it has become very much important for Virgin Australia to properly acknowledge its present and future impacts of operations and optimize the growth opportunities(Duval &Macilree, 2019).
d) Identification of the HRM strategies implemented for mitigating resistance to change. case study
According to the financial reports of Virgin Australia, the company acquired $2.8B of planes and announced $2.3 billion as compensation for the various undertaken debts(news.com.au, 2020). It can be said that the organisation’s exit from administration will prove to be significant so, that it can come back again with a lower debt.It is said that the considered change is harder to implement in those specific cases where the population tends to be diverse and includes various groups of interest along with power centres. The notion of resistance is termed to be common in the implementation process of the change and due to the specific characteristics of change, there is a presence of a high degree of ambiguity and risk eventually, leading to a lack of active involvement and communication of precise information(Pick et al., 2015). In organizations including Virgin Australia, people resisted change due to their acknowledgement of the negative effects on their preferences; the uncertainty of the future sustainability derives a higher degree of dissatisfaction and discomfort.
For example, more than 10 parties have expressed keen interest in contributing to sustaining Virgin Australia, and finally, Deloitte was selected as administrators to structure the organizational structure accompanied by a loan of $5B and a failed cash flow as a result of the pandemic (news.com.au, 2020). The resistance to potential changes can be caused due to several factors including the miscommunicated understanding of the change, implications, low acceptance for change, and a specific belief that the change is not beneficial for the company(Cornescu & Adam, 2016). Additionally, the proposed change is possible if they are adapted in terms of the employees. According to the CEO of Virgin Australia Paul Scurrah, the organization didn't propose any redundancies, and hence, wages and salaries will be continued to paid along with the individuals accessing JobKeeper (news.com.au, 2020). The culture of the organization is mainly focused on promoting designation amidst the groups to maintain CPD (Continuous Professional Development) of the employees.
e) Organisation’s change management strategies, and provide appropriate recommendations.
Some of the change management strategies that the organization implemented to transform itself from a leisure airline to a dominant competitor of Qantas paid off potential benefits and advantages for the organization(Ho et al., 2014). The theories and concepts acknowledged from this unit has been incorporated in the discussion and in referred to the framework, McKinsey 7S model has really helped the organisation to communicate the aimed vision among its efficient workforce and implement the changes to appear financially strong. This type of change management framework enabled the company Virgin Australia to acknowledge its overall structure and requirements for change. The 7S included in the framework consists of shared values, staff, skills, strategy, systems, structure, and style. The organisation has applied this change management theory to develop the strategiesand successfully carry out the change. According to the Chief of Virgin Australia John Borghetti, the revenue base of the company had been branching out with acquiring 35 new businesses, and various government accounts for the latest business-class feature of the company, which increased the profitable revenue base by 81% (heraldsun.com.au, 2020). With the major competitor Qantas dominating the market with its A380 leisure cabins, Virgin Australia provided its consumers with luxurious seats, best interiors, sufficient leg space, and other modern amenities for the business passengers(news.com.au, 2020).
The organization's redesign of the fare composition included the introduction of the flexible and affordable fares in May last year, and an enhanced organizational network yielding an increase of 121% in high fares (McIlroy, 2020). Virgin Australia provided effective training to its business class staff including the latest designed uniforms, refined consumer service behaviour, and world-class waiting lounges and this paid off its impression to the potential consumers (Zhang et al., 2016). The main change management strategy that Virgin Australia possessed is the Velocity frequent flyers program and as it failed miserably, some actions are required to be undertaken to refurbish the incentives and rewards initiatives(Lohmann&Spasojevic, 2018).
In terms of recommendations, the primary one is motivating the human capital base to such an extent that the vision aimed by the CEO of Virgin Australia is attained, and, leading the implemented change tends to be more significant compared to managing the change. It is very much important for the company to make proper and beneficial investments as its financial base is already stretched out and this might lead the company to similar positions like Ansett, Impulse, and Compass. The organizational managers need to adhere to the time frame allocated for the various laps and constantly appraise the change process. Virgin Australia should attain coverage of more than 20% of the corporate traveller's market and 45% of the local market share. Another important recommendation is to enhance consumer service by considering feedbacks and reviews from potential consumers and analyzing the improvisation over time.
From the above discussions and explanations, it can be concluded that change is an essential part of a business organization and if it does not cater to the specific market demands, it might stop operating. Hence, it was essential for the airline company to undergo the outlined changes and reforms to ensure success in the aviation sector. It has been acknowledged that the process of change management should be well-devised, with a particular vision, a potential leader to guide the change and should create a sense of engagement by evaluating the organizational success at regular periods.
The process undergone by Virgin Australia was not an easy journey due to the various challenges and issues aroused on the way. However, it can be ensured that the airline is mainly committed to maintaining its leading position in the aviation industry over the long-term. Some recommendations were also provided to provide the learners with a critical understanding of change management within the organization.
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