How National Institutions Limit Turnaround Strategies and Human Resource Management: A Comparative Study in the Airline Industry

Abstract

The influence of national institutions, particularly employee representation, on managers’ turnaround strategies remains largely unexplored in the literature. Therefore, this paper assesses the pressures that affected two European airline companies, British Airways (BA) and Iberia, and their turnaround responses in a context of economic crisis and austerity, particularly from the perspective of strategic human resource management (SHRM). Our case studies show that when national institutions grant a number of rights to employee representatives, an innovative HRM strategy enables the recovery strategy required to deal with internal sources of decline. In contrast, when national institutions provide fewer rights to employee representatives, there is room for company HRM strategy to challenge or resist institutional pressures. Our research focuses particularly on how coercive pressures exerted by employee representation, according to the legal framework governing labor relations, affect turnaround strategies.

High‐commitment HRM practices during the financial crisis in Portugal: Employees' and HR perspectives

“…They may also harm an organization's performance and its capacity to get out of the crisis. For example, in a comparative case study, Santana et al (2019) showed that a company that took longer to implement flexible and innovative HR practices, favoring instead retrenchment measures, nearly reached the verge of bankruptcy. Among the innovative practices the company finally implemented, we can find extensive training to foster cross-functionality.…”

“…Ever since, other crises have occurred—including the one we are currently experiencing following the COVID‐19 pandemic—and some authors have already warned that business cycles may become shorter (Reid & Burns, 2010). As such, decisions regarding which HR practices to adopt, the dependency of such decisions on the financial performance of a company, and the strategic reasons underlying the adoption, or absence, of certain HR practices constitute major issues (Czinkota & Ronkainen, 2009; Santana et al, 2019). How such issues are dealt with in times of a major contextual event—the onset of a crisis—is still largely unclear; yet, this is important since it has major consequences: for society, for example, by contributing to national unemployment; for organizations, for example, by influencing their profitability; and for the individual, for example, by influencing their career (Vassilopoulou et al, 2019).…”

Turnaround and human resource strategies during the COVID-19 crisis

“…They also emphasized the organizational impact of external challenges and internal actors, such as trade unions, managers, and workers. Indeed, in difficult times, national institutions, regulations, and trade unions exercise significant pressures that shape the HR measures adopted by organizations ( Santana et al, 2019a ; Sarina & Wright, 2015 ; Wilkinson et al, 2014 ) according to different national contexts.…”

Failure to implement a turnaround strategy at South African Airways: Reflections from strategic players

“…Instead, they come in and they are told: change everything. (P21) Santana et al (2019) acknowledge the possibility that 'national institutions' like governments may exert enormous pressure on companies' strategies, which may have the effect of constraining or delaying a turnaround. They envisage 'coercive pressure' being exerted either directly from a government or in the form of legislation.…”