Organization culture has been defined in various quarters as the beliefs, attitudes, experiences and values of an organization. According to Ravasi & Schultz (2006), it is “a set of shared mental assumptions that guide interpretation and action in organizations by defining appropriate behavior for various situations (p.6).” However, there is no agreed universal definition for organization culture though certain aspects such as the fact that it is determined by history, socially constructed, holistic and averse to change, are agreeable across the board.
There are many outcomes in an organization that are related to its culture. These outcomes may be a direct or indirect consequence of the organization’s shared values, beliefs and attitudes. Normally, a healthy organizational culture has been associated with numerous benefits such as; increased motivation among employees, innovation, good customer service, teamwork and a strong commitment to organizational goals. However, it is worth noting that there exists little empirical evidence to link organizational culture to good organizational performance. Nevertheless, this has not deterred scholars and researchers from making references on the connection between the two.
An organization’s culture seems to affect almost every aspect of its business including task performance, goal setting, customer service and resource allocation. It is also associated with the way individuals in the organization react to various phenomena such as threats, risks and opportunities. Job satisfaction has been linked to the way in which individual employees fit into the organization’s culture. Poor culture is responsible for a number of negative outcomes such as high employee turnover, stress and burnout, low job satisfaction, low commitment to organizational goals and higher job strain. It has also been attributed to employee creativity, behavior and motivation though little evidence abounds to substantiate these claims. During recruitment, prospective employees often state that they prefer organizations which best suit their ideals which means that organizations with a strong culture are more likely to attract and retain more and better skilled employees (Adkins and Caldwell, 2004).
According to Johnson (1988), there are various elements that can be said to influence organizational culture. The first of this is what he refers to as the ‘paradigm’ which is actually the organization’s description of its mission, values and the totality of what it entails. The paradigm is drawn from the organization’s mission statement. The second element is the control system. These are monitoring mechanisms within the organization which are based on rules and individualism especially where the organization has a power culture. The third element is the power structure whereby the manner of decision making and the individuals who make these decisions play a role in determining the organization’s culture.
Symbols have also been stated to be quite influential especially they are signs of power, class or stature in the case of successful organizations. Another important cultural determinant is the organization’s daily routine and ritual which entails board meetings, managerial and staff meetings etc. which inculcate the culture into the subconscious. Lastly, stories and myths around the organization also play a huge role in developing a culture since they reflect the perceptions of the employees and managers about the company. However, it is important to note that all these elements coexist and are in no way mutually exclusive.
According to Schein (1992), cultures develop due the organization’s own adaptation to the external world and the subsequent integration of the resultant behavior internally. The assumption here is that there is evolutional growth in an organization and culture develops in order to help it flourish and survive external factors. Depending on whether the culture is positive or negative, the culture is bound to affect the organization’s competitive edge. Internal integration helps in reinforcing a working environment whereby employees socialize and pass down the culture subconsciously.
Schein suggests that based on the external adaptation and internal integration model, the factors that shape culture are ; the organization’s external environment, its industry, nature of its workforce, its size, use of technology and innovation, and finally, its ownership and history. The role of the individual in influencing culture is emphasized as being significant. Other contributory factors may include; the vision statement, recruitment of employees based on their suitability to the existing work culture, the founder of the organization, the values and goals at start up, the nature of leadership in terms of; reaction to crises and incidents, modeling of behavior, treatment of employees and allocation of resources. Of all the above factors, the legacy of the founders of the organization remains one of the most important shapers of the organization’s culture. This is because culture perpetuates itself even after there is a change in the workforce. It is the vision of the organization’s founder (s) that keeps it focused on its goals and culture through stories and myths passed down in time.
Relationship between organizational culture, safety and financial performance in the aviation industry
The aviation industry is unique due to its diverse needs. Unlike most other organizations, airlines have to worry about issues such as security, operational safety and customer satisfaction to an almost obsessive level. Carriers that have compromised on any of the three have found themselves in dire straits. According to Clarke (2006), an organization’s safety record is much related to its safety culture. This means that an airline that has a strong culture is likely to have a good safety record and a sound financial footing.
The International Civil Aviation Organization (ICAO, 1993) found that human error was the biggest threat to airline safety. This would mean that an airline’s culture would definitely play the biggest role in ensuring safety. This paper shall analyze the effect of an organization’s culture on its safety standards and financial performance. The analysis shall be based on two of Australia’s carriers, Qantas and Virgin Blue (VB).
This is Australia’s national carrier founded in 1920. Qantas is something close to a household name in the country due to its stature as a national brand and also its quality in terms of service delivery. Since its privatization in the 90s, the company has not looked back and its growth has been phenomenal. As a full service airline (FSA), the company’s growth has been spurred mainly by its sound management and organizational culture though the collapse of its rival has contributed towards its dominance. When it comes to premium service, Qantas is unmatched though it has lost much of its control in the low cost market due to the entry of Virgin Blue.
As described above, organizational culture is determined by multiple factors. These include; the organization’s external environment, its industry, nature of its workforce, its size, use of technology and innovation, and finally, its ownership and history. The above factors seem to be the key to Qantas’ organizational culture. First, its external environment has helped shape its culture due to its competitive nature, forcing Qantas to become more innovative and keener on safety and customer service. Secondly, its industry (aviation) is known for its upheavals related to employee rights, fuel prices, global effects etc. that make the industry very volatile. Qantas has had to focus its efforts towards putting in measures that would guarantee its survival in this unstable industry.
The third determinant factor in Qantas is its workforce. Qantas has invested so much in ensuring that it maintains a qualified workforce. Its employees have some of the best employment terms in the industry and they have given back by providing excellent service that has seen Qantas maintain its customer base and gain financially. Size has also played a huge role in influencing culture in Qantas since its control of the Australian aviation market has had the effect of reinforcing a confident and proud etiquette in its staff and managers. Innovation has also spurred growth at Qantas through the introduction of technology that has simplified air travel. Lastly, its ownership and history has had a big impact on its organizational culture. This is because Qantas is the only remaining national carrier. Its posturing as the ‘symbol of Australia’ has helped introduce a sense of pride and a culture of service and safety which has been the engine for the organization’s growth.
Aviation safety is considered to be a key component in the success of an airline and Qantas has definitely not lost focus of this fact. In actual fact, safety is what Qantas is mostly known for and when one asks about airline safety in Australia, he/she is likely to get an answer that has the word Qantas in it. This has been deeply ingrained in the personnel working at Qantas such that it is now part of the organization’s culture. The result has been that there has been no reported safety incident on a Qantas flight.
It is interesting to note that an organization’s culture runs both vertically and horizontally. Whether one asks the C.E.O or the stewards at Qantas about organizational goals, he/she is likely to get the same answer-safety is the goal. This culture has been also responsible for the profitability enjoyed by Qantas over the past years despite the financial turmoil affecting the airline sector globally. The organization’s record has not been under scrutiny due to public confidence and good performance for quite some time.
Recently though, there have been questions raised about the future performance of the company and its commitment to safety. Critics have pointed to the high level of debt in the company and the proposed $11 billion takeover by the Macquarie Bank as a pointer to tough times ahead. Additionally, a survey by the Australian Licensed Aircraft Engineers Association (ALAEA) has revealed that there have been complaints among Qantas personnel, especially the engineers in charge of safety, about increasing safety deficiencies. The survey revealed a shocking statistic that 75% of the personnel had been asked by their seniors ‘to cut corners’ on safety. This has been masked in the organization’s ‘can-do’ culture where staff have been pressured to come up with innovative ways to beat set safety measures and come up with cheap alternatives (Falconer, 2011).
In addition to the worries about a takeover of the airline, speculators have stated that the lack of serious safety incidents in Qantas and indeed in Australia is bound to reinforce a culture that the airline is immune to accidents. While this could mean that staff and customers are confident about safety, it could also lead to recklessness and laxity among staff which could be a recipe for calamity. Additionally, it is often hard to introduce improvement measures to an organization that seems to be working. This would mean that staff may form a culture of resisting change due to the success of the current methods of operation. Indeed this has been cited as one of the reasons why quality seems to be going down (according to consumer surveys) in the area of service delivery. Qantas has also seemed to be slow in adopting changes in the aviation sector especially compared with major Western airlines. The organization’s culture of self-belief may be bringing down the rate of adoption of these practices.
These and more concerns have caused a dent on the organization’s safety culture. This is evident from arising differences between junior staff in the safety department (referred to as the sharp end of the airline) and senior staff in administration (Falconer, 2011). Another cultural dent has been brought about by the entry of the innovative Virgin Blue (VB) which has carved a niche for itself in the Australian airline sector. VB has been growing phenomenally and its success in the lower end of the market has led to Qantas changing its strategy to invest heavily in its subsidiary JetStar in an attempt to prevent a VB monopoly on this market segment. This has had a significant effect on the firm’s financial performance since it opted to change its winning character to a ‘pincer movement’ which has caused it to allow VB dictate the pace of innovation.
While Qantas has significantly changed aspects of its culture so as to adapt to difficult economic times and tough competition, it still remains focused on its values which are safety and quality service delivery. Its staff is very skilled, efficient and motivated which explains why the airline is still thriving. Its complete dominance of the business segment of the market is proof that the company remains committed to quality service. The organization culture in Qantas of hiring skilled staff and properly training them has been solely responsible for ensuring safety. The company maintains a strict safety maintenance procedure that has become routine for its workers. Its work culture has also led to quality service which has translated into financial success (Virgin Blue, 2005).
Virgin Blue (VB)
VB began as an investment from the Virgin Group estimated to be around US $7.5 million at start up. The carrier was to target the low cost end of the aviation market especially the non-business (leisure) travel segment. At the time of entry, the two big airlines in operation in Australia were Qantas and Ansett. However, both were FSAs and thus they were not a major threat to the niche VB intended to carve. In 2001, Ansett collapsed opening up the aviation market. This left VB to compete with Qantas for the Ansett market share. At the time, a comparison of Qantas and VB’s travel costs showed a 3040% difference which meant that Qantas was seriously threatened by VB’s strategy. Eventually, VB was able to isolate a third of the market for itself within years.
VB’s main organizational culture determinant has been its founder, Richard Branson. The British Billionaires approach to the airline business through the establishment of innovative techniques while allowing managers sufficient autonomy has been a key source of VB’s success. Though the company is modeled on the low cost strategy of Southwest Airlines, it has excelled in innovation and service delivery. The organizational culture at VB is based on the notion of a dynamic, unique and stylish airline that is keen to attract a certain market share through affordable pricing, innovation and quality service delivery. The success of its parent group Virgin has spurred the company to come up with innovative ways to outdo its competitor, Qantas so as to maintain the reputation of the Virgin Brand.
. Using Johnson’s (1988) model on organizational culture, we can analyze VB’s culture and its causes. First, we look at the paradigm which was initially defined as “the organization’s description of its mission, values and the totality of what it entails”. Looking at VB’s mission statement, affordability and quality stand out as the key features. There is no doubt that VB has put its mission statement to the test judging from its pricing and service delivery. Next, we look at its control systems. Here, it is notable that the organizational chart shows that the departmental heads are in charge of controlling several areas. Due to the company’s recruitment of young talented and innovative managers, the control system in VB is one that is mutually agreed between employees and managers.
The power structure at VB seems to be very interesting. First, power is not concentrated on individuals but on teams. However, this has not prevented innovative leaders from making their impact felt at the organizational level. When it comes to symbols and their influence, VB staff is very proud when they have the Virgin logo in their sights. This is attributable to the unique culture at the airline which they refer to as the ‘Virgin Flair’ whereby individuals are expected to fit into the Virgin Brand and own it. The routines and rituals at VB have also played a substantial part in bringing about a good work ethic and team work culture.
Groups working together seem to share ‘family-like’ bonds which means that they remain focused on company goals as well as each others’ welfare. Lastly, stories and myths at the organization have also built the perception of excellence among employees. Most of these revolve around the founder, Branson and his vision on where the company should be in terms of innovation and competitiveness. All the above factors have worked together to produce a successful team culture that has driven VB’s competitiveness and financial growth.
Due to VB’s aggressive growth, Qantas decided to dedicate its recently acquired subsidiary, Impulse to compete with VB as Jetstar in the low cost market. However, VB’s organizational culture has proven to be the key to its success mainly due to the fact that it has stuck to its strategy of low cost travel with innovative design and quality service. Interestingly, VB recruits and trains staff to work in almost all departments such that even ground crews van work in the cockpit if need be. The fact that the airline has thrown out the rule book on airline management has seen it develop a highly innovative and dedicated staff who are very committed to the company. The staff motivation has been a key driver for success in terms of financial performance. In addition, VB has recruited and maintained the best personnel in the industry such that a good indicator of this.
Competitiveness-VB versus JetStar
When it comes to competitiveness brought about by a good organizational culture, there seems to be a major difference between VB and Qantas. First, the culture of Qantas has been that of avoiding risk, ensuring safety and ensuring that employees remain committed to the organization. Secondly, it has chosen to focus on the premium end of business serving a high class clientele and ensuring quality service delivery. On the other hand, VB has been mainly concerned with innovation and maintenance of good personnel yet ensuring that it provides affordable prices to its customers without compromising on safety and quality.
The VB model was borrowed from Southwest Airlines which is arguably the most innovative and successful low cost airline. This was after it was established that “the airlines that are clearly succeeding are those that have stuck to the consumer friendly southwest low fare model (CAPA, 2002).” The model seemed to work perfectly such that Qantas dedicated JetStar to compete with VB based on a model that adopted “the efficiency of Ryanair, the branding of easyJet, the innovation of JetBlue, and the customer service of SWA (Joyce, 2004).”
Competition between JetStar and VB has mainly been on the innovation front. However, VB seems to have an upper hand due to the fact that the company’s parent group does not interfere with its management unlike the wholly owned Jetstar that is fully reliant on Qantas which more reserved in its practices and service delivery. A good example of innovation competition was the introduction of ‘freestyle seating’ by JetStar while VB stuck to the method of allocating seats in advance. VB s strategy seemed to be more popular and JetStar had to revert to staggered boarding. Another failure by JetStar was its introduction of a strict 30 minutes flight ‘close out’ which unlike VB’s more flexible one was received negatively by customers (Creedy, 2004). Eventually, the company was forced to become more flexible.
Another difference between the two carriers is in recruitment and handling of employees. First, VB hires employees with a particular attitude which the company refers to as the ‘Virgin Flair’. The organization inculcates this culture through training, promotion of its values and compensation based on performance. Eventually, new employees get to learn the ‘Virgin Flair’ which involves safety, time management, performance, lowest cost base, quality service and a culture of togetherness (Highfield, 2005). In addition, VB has only recognized 3 trade unions thus cushioning itself from the politics that come with airline trade unions. Unlike VB, JetStar has struggled to establish an organizational culture mainly due to reliance on Qantas and the fact that over 400 staff who worked for Impulse were retained thus denying the company a feel of ‘freshness’ and novelty (Jetstar, 2004). This is why VB has had a competitive edge over JetStar.
From VB, Qantas and its subsidiary, Jetstar, it is apparent that an organizations culture is a huge driving force in ensuring safety, financial success and competitiveness. This is proven by the success of VB which can be associated to its innovative and amiable culture. Poor development of culture can also impact negatively on a company as in the case of JetStar which has been unable to compete with VB and has seen Qantas lose over a third of its market share.
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