Organizational Behavior Human Resource Management of
THAI AIRWAYS INTERNATIONAL
THIS REPORT SUMMITED FOR ORGANISATION BEHAVIOR AND HRM MODULE
THE MASTER IN BUSINESS ADMINISTRATION WITH AVIATION MANGEMENT
Thai Airways International Public Company Limited, recognized as Thai national flag carrier, is one of leading Asian national carriers which has been approved its quality as an official 4-stared ranking Skytrax. THAI has recognized worldwide with unique service delivery “Touches of Thai”. In addition, THAI original base, Bangkok is one of the most fascinate destination for global tourists which are advantages for THAI in competitive airline industry.
Although THAI is in competitive positions with outstanding product and service, and THAIs original and core market in Thailand is presenting high demand of tourists, it disclosed loss 21 mBaht presenting result from management errors regarding politic dependency.
This report aims to demonstrate THAI performs its Strategic Human Resource Management and its real practical. Finding that THAI has systematic design of organization structures aligned with the Stock Exchange of Thailand (SET) regulation as a listing company. All corporate structures have been regulated formally, transparently and understandably.
However, according to this research, culture of organization is building most important factors leading to effective virtual corporative performance. Fluctuation of organization restructuring effects directive leadership and management control disorder.
Price (2007) defined corporate culture concept as behind and in parallel with the official system, there is the reality of action and power commonly described as the informal organization. The formal aspect of an organization is its official structure and public image visible in organization chart and annual reports. The informal organization is more elusive concept, describing the complex network of psychological and social relationships between its people.
THAI deems its human resource to be an important asset through which the company is able to achieve its objectives and thus its vision. To be able to achieve the company??™s vision and objectives, THAI seeks to recruit and employ knowledgeable, capable and experienced staff with the required qualifications and in line with its growth requirements.
However, impractical, THAI still remain family-based culture which creates discrimination and preference among colleagues. Therefore, HRM of THAI is not affective as presenting to public.
It is highly recommended that THAI should rigidly implement its policies as they have been designed and develop more independency to sustain in competitive market and overcome presently economics crisis.
Table of Contents
Company Background 4
Organizational Structures 5
Management Structures 7
Organizational Culture 9
Organizational Development 10
SWOT Analysis 12
Business Strategies 14
Human Resource Development and Management 16
1. Company Background
Thai Airways International Public Company Limited is the national carrier of the Kingdom of Thailand. It operates domestic, regional and intercontinental flights radiating from its home base in Bangkok to key destinations around the world and within Thailand.
Thai Airways International was founded in 1960 as a joint venture between Thailands domestic carrier, Thai Airways Company (TAC) and Scandinavian Airlines System (SAS) with SAS initially providing a 30% share capital and granted operations, managerial and marketing expertise, with training assistance aiming at building a fully independent national airline.
Thai nationals, through training and experience, were gradually able to assume full managerial responsibility and the number of expatriate staff duly reduced. After a 17-year capital participation partnership with SAS, the Thai Government bought out SAS remaining 15 % holding in 1977 and THAI became fully owned by the Thai people. Thai Airways International can now rightfully be called Thailands only national carrier which responsible for commercial aviation, both international and domestic.
In 1991, Thailand Cabinet approved a resolution enabling THAI to list its shares on the Stock Exchange of Thailand (SET). The main purposes in listing on the SET and offering shares to the public are to obtain the additional funds needed in keeping the airline competitive edge in the international market and to allow member of the general public and THAI employees to become shareholders in this national flag carrier of Thailand.
The listing of THAI shares was commenced by converting retained earnings into capital and increased its share capital upon the Cabinet approval. In 2003 THAI offered for sale the Companys 442.75 million ordinary shares, comprising 285 million capital increase ordinary shares and 157.75 million existing ordinary shares held by the Ministry of Finance upon the Cabinet approval. Proceeds generated by the sales will be used as investment in the Suvarnabhumi Airport project, and for upgrading in-flight services ranging from passenger seats to other amenities.
Since September 2004, the company has sold THAI shares to its employee through the Employee Securities Option Plan (ESOP) in a total of 13,896,150 shares at 15 Baht per share. The company will continue to sell its shares to those employees who are holding the warrants until the end of the plan in April 2007.
THAI Airways is now government-owned corporation which is fully paid up share capital amounts to 16,988,765,500 Baht (471 m$) as of 9 May 2005 or 46.23% and is 53.77% owned by the Ministry of Finance, the Thai Government. At the end of December 2007, consolidated total assets of the company amounted to 272,086 million Baht (7,886 m$). In its operations, THAI has achieved profitability every year for the last 40 consecutive years.
2. Organizational Structure
Structure is the pattern of relationships among positions in the organization. THAI has clearly allocated to departments as an organization charts bellows
THAI has typical structure of management and supervisory responsibility. Members Board of Directors perform their duties in compliance with legal and its objectives and to execute resolutions according to the Ordinary Shareholders??™ Meeting strategic direction defined. As such, the president is responsible for managing the company??™s operations and to achieve corporate objectives as set by the Board of Directors.
THAI is governed by THAI law and listed on The Stock Exchange of Thailand. Since 2004, it has undertaken to continue developing its communication with investors and to apply high standards of financial disclosure and corporate governance and to maintain rigorous internal control standards throughout the company. Audit Committee has been set up to ensure abidance with policies on good corporate governance as stipulated by the Ministry of Finance and the Stock Exchange of Thailand to increase shareholder and investor confidence.
Management functions are divided between Airline Business and Business Unit Executive Board. Thai Airways International performs as the single main operating company while each individual business units is managed by Business Units Executive Board which has authority and responsibilities to manage its individual unit strategies assigned by Board of Director.
THAI Business Units comprises 6 units which has their individual business unit level strategy under THAI mutual goal as follows
|Business Unit |business unit level strategy |
|1. THAI Cargo |Working closely with customers at home and abroad to implement fast, reliable and |
| |economical air cargo operations. |
|2. THAI Maintenance |Provides full range of maintenance services including certified Heavy Maintenance |
| |(D-checks) and complete aircraft overhaul. |
|3. THAI Catering |Deliver superb cuisine on all THAI over40 flights and endorsed by 48 other leading |
| |global Airlines. |
|4. THAI Ground Services |On par with global standards in combining modern, expedient service – all the while |
| |infusing Thai essence. |
|5. THAI Ground Support Equipment and Services |First choice supplier for “passenger” “cargo” technical services, ramp & ground support |
| |equipments, flight operations and catering for numerous airlines. |
|6. THAI Aviation Training |Comprehensive range of Aviation Training |
Organizational structures of THAI which based on the principles of good corporate governance are able to benchmark to international competitors. Also, chain of command, scope of authority and responsibilities and report lines have clearly set to present its best practice in strategies.
3. Management Structures
As disclosure in THAI Annual Report 2007, authority and responsibilities of each management structures comprises roles as compliance with corporate governance standard the following units:
3.1 Board of Directors
??? Define corporate level strategic direction as a result of shareholders meeting and execute resolutions.
??? Appoint a person as the President to run operations and the president must report to the BoD. However, the BoD has the power to nullify, rescind, modify or change in the proxy on behalf of the company.
??? Sign legal and binding contracts on the Company??™s behalf
3.3 Audit Committee
??? Ensure abidance with policies on good corporate governance as stipulated by the Ministry of Finance and the Stock Exchange of Thailand to increase shareholder and investor confidence
3.4 Independent Committee
??? Ensure that THAI meets the principles of good corporate governance as stipulated by the Ministry of Finance, the Stock Exchange of Thailand.
3.5 Good Corporate Governance Committee
??? Ensure integrity of the Company??™s operations with respect to the good corporate governance principles as stipulated by both the Ministry of Finance and the Stock Exchange of Thailand which is in line with international best practices.
3.6 Nomination, Remuneration and Human Resource Development Committee
??? Establish a selection and appointment process for the Company??™s Board members along with the Company??™s senior management and the Company??™s human resource development which is ethical and comply with the good corporate governance principles.
??? Determine the appropriate level of compensation for members of the Board of Directors, Sub-Committees, the Company??™s management and outsiders who have been commissioned to perform tasks on the Company??™s behalf.
??? Authority on obtaining documents and relevant persons to provide information in regards to assigned tasks and execute other matters as assigned by the Board of Directors.
3.7 Risk Management Committee
??? Ensure that the Company has a risk management system that not only conforms to the Ministry of Finance and the Stock Exchange of Thailand??™s good corporate governance guidelines and meeting international best practices, but also was established to ensure adherence to the stipulated guidelines as it forms part of the Company??™s annual performance assessment.
??? Manage the company??™s operations and to achieve corporate objectives as set by the Board of Directors.
??? Uphold company guidelines and has the authority to approve or enter into binding contracts on behalf of the company with regard to procurement or disposal of supplies.
??? Enter financial contracts and approve financial undertakings as per the guidelines approved by the Board of Directors.
3.9 The Executive Board
??? Ensure that the Company is run with maximum efficiency and to be able to meet the challenges of a dynamic operating environment while ensuring maximum benefit to the Company.
Nevertheless, due to the fact that THAI is government-owned company which of Finance is shareholders majority. In decade, Thailands government structure has undergone political instability which is not only impacted overall business activities in Thailand but also manipulate THAI Executive board. Therefore, THAI has historically struggled on political situation which lead instability of management team.
4. Organizational Culture
The culture of an organization is the set of values, beliefs, behaviors, customs, and attitudes that helps its members understand what the organization stands for, how it does things, and what it considers important(Griffin, 49).
Culture are human creation but, unlike, buildings, roads and other mater Organizational culture is the workplace environment which defined by all of life experiences by formulated from the interaction of the employees in the workplace. Organizational culture is defined by all of the life experiences, strengths, weaknesses, education, upbringing, and so forth of the employees. While executive leaders play a large role in defining organizational culture by their actions and leadership, all employees contribute to the organizational culture.
THAI defines “Teamwork” as its corporate culture. The team has mutual goal to delivery outstanding service to customers and maximize shareholders benefit. Recently, THAI has announced its developing new corporate culture with transparency in management, fairness under the principles of good corporate governance by as being foster focusing on teamwork, employees well-being, welcome new experiences and also being socially and environmentally responsible. In addition, THAI has restructured organization through elimination of redundant tasks to facilitate flexibility and effectiveness of operations and ongoing human resource development. These are key to improving THAI??™s development.
However, in practical, THAI role of cultural consensus has been develop for lengthy time and become deep-rooted in the organization. Kinship or family system is a dominant character of THAI organizational behavior. Implementing of corporate governance is still ambiguous. Also corruption is a major problem of the company.
Furthermore, as a government-owned company, THAI management strategies are directly depended on Thailand government direction. Instable political parties led a sophisticated system of human resource management as a frequency of restructuring in THAI Executive board. External factors become a major influence of the organizational structures confliction.
5. Organizational Development
Visions, mission statements and value appear to show that businesses have clear objectives. Traditionally, competitive market models portray the firm as single unit maximize profits (Price A 2007). They contribute companys ability to reach its goal by clarify the fundamental principals to guide employees actions and defines.
THAI has clearly announced both short-term plan and long-term plan which align with provide standard for future development and performance. It has clear set of vision, value that encourage it staffs to work towards accomplishing the customer satisfactions and corporate value as follows;
The First Choice Carrier with Touches of Thai.
To achieve the vision above, THAI has set mission as mandates to customer, stakeholders, employees and society as follows,
1. To offer domestic and international air travel and related services that are safe, convenient, and of quality to ensure customer satisfaction and trust.
2. To be committed to international standards of management efficiency, transparency, and integrity, and to achieve satisfactory operating results in order to maximize benefits for our shareholders.
3. To create a suitable working environment and offer appropriate salaries and wages as an incentive for staff to learn and work to the fullest of their potential and to take pride in their contribution to the companys success.
4. To be socially responsible, as the national airline.
As the national airline, the company represents the Kingdom of Thailand in protecting and augmenting the countrys aviation rights and participates in promoting and developing the tourism industry as means of generating additional income both in Thai baht and foreign currencies. The company also encourages its human resources to acquire new skills and attain international standards of professionalism. Thai Airways contributes to the advancement of all types of technology related to the worlds commercial aviation industry. Finally, the company aims to play a part in spreading awareness around the world of the uniqueness of Thai culture, its customs, and traditions.
THAI pledges to operate fairly and ethnically protecting its rightfully- earned profits and appreciating the importance of its staff as valuable resources and representatives of the company. All of our employees have a role to play in contributing to the companys success.
To achieve the goals above, the company has the following set of general business ethics as well as instructions and warnings specific to the various employee positions throughout the organization;
1. Treat all clients and business associates fairly and honestly and protect the interests of all our customers.
2. Be politically impartial for the sake of the nation and society.
3. Run our business on the basis of fair competition.
4. Support the efficient use of domestic resources while preserving natural resources and the environment.
6. SWOT Analysis
Organizations are formed to achieve certain goals. Therefore, overall business strategic thinking has been decided to focus on companys long-term objectives. Human resource strategies are derived from business goals. These will communicate to management team and employees to accept and believe in an organization goal.
SWOT analysis method is the simple way of analyzing business environment before determine its strategies within the organization. Based on external and internal factors, THAIs SWOT are found as follows;
6.1 Internal factors
??? THAI is recognizable brand for customer to create their loyalty as unique present of the country. Thai was also charged with flying the national flag and acting as an overseas ambassador for Thailand.
??? THAI is a firm company as Thailand government is holding more than 50 % of the stock. All THAI projects have been support by Thailand Ministry of finance. Also its close relationship with Thai government contribute to facile emerge in international business environment as being supported by the government.
??? THAI cabin crew provided outstanding performance in service as conduct its vision “Touches of Thai” to the customers. In 2006, THAI ahs awarded by Skytrax of Worlds Best Cabin Staff and The Best Airline in the World, while it was being placed second in the Airline of the Year category in 2007
??? The Board of Directors is not selected from individuals professional skills but the selection is more related to political party advocates. Consequently, THAI challenged managerial skill shortage and difficulty in sustainability growth.
??? Corruption in the organization is still irresolvable.
??? In-flight Entertainment System onboard is not updated in some routes as well as operating old aircraft.
??? Not only ticketing system is relying too much on agents, management and recruiting system is not up to standard. Most of the employees are selected from connections not from skills.
6.2 External Factors
??? Other than offering worldwide destinations, it is regard as on of the best stopover or transit for connecting to the final destination. It is also in one of Star Alliance network that is renown in the world competitive market.
??? The reason that Thailand is consider as an attracted destination another word, a strong base, this include destination within the country and outlook from other countries around the world. It is consider the must have destination for airline.
??? Thailand has been facing political crisis for years, instability of the government causes often restructuring in THAI, which led working style fluctuation among management team and subordinate staffs.
??? The slowdown in the tourist industry due to global economics crisis and Thai political protests caused major less passengers travelling with THAI.
??? The commercial airline industry has seen a dramatic increase in competition from increased flight frequency of traditional airlines, the use of Thailand as a platform for expansion in international traffic by foreign based airlines forming joint ventures within Thailand, the ongoing open skies policy and competition from new low cost carriers and increased frequency of existing low cost carriers that is transforming itself into a low cost network. The next phase of challenge being brought on is the launch of long-haul low cost airlines
??? Increasing cost of aviation fuel.
7. Business Strategies
THAI has developed a comprehensive strategic corporate plan in drastic changes environment of airline industry under its SWOT assessment to mitigate their effects crisis and ensure its long-term sustainability. At the core of the Company??™s operation is its vision to be ???The First Choice Carrier with Touches of Thai??? to ensure that the Company??™s operation increases overall shareholder value. Therefore, THAI aligned the balanced scorecard of each and every operating unit, division, department and business unit with that of the corporate balanced scorecard.
THAI has clear designed functional strategies and performance measures related to financial objectives, customer oriented policies and staff development goals have been established to ensure that everyone is united and working towards the same goals.
7.1 Financial Strategies
??? Increase passenger revenue and that of its business units by expanding its business into high potential areas and markets while maximizing the utilization of its assets
??? Improve its ability to be cost effectiveness which is underlying the long-term financial health
7.2 Customer Strategies
??? Provide passengers with the highest level of service on all destinations and a level of safety which is at par with international standards under its ???High Service Quality and Safety??? concept.
??? Ensure at least an 82.5% on time performance for international flights and 92.0% for domestic flights and ensure that its products remain competitive with its peers.
??? Remain among the top in world rankings and to maintain its market share of air travel traffic
7.3 Internal Process Strategies
??? Upgrade its products and services to meet customer demands, provide Smooth as Silk Travel Experience with Touches of Thai to increase its competitiveness against its peers. Ensuring such success will come from greater cooperation with Star Alliance, partner airlines and THAI??™s other business partners while reducing unnecessary processes and focus on the
??? Improve THAI??™s own network connectivity and operations by using the latest in information technology through speed of communication.
7.4 Learning and Growth Strategies
??? Improving organization structure to enable management efficiency, improving human resource management and improving teamwork and accountability.
??? Initiated performance-based pay system as well as procedures to fairly and transparently appraise employee performance To improve staff productivity.
??? Strengthening staff??™s skills is another strategy to promote staff professionalism driving the achievement of the Company??™s objectives while observing social and environmental responsibilities.
8. Human Resources Development and Management
Leadership is not only a quality that upper management and managers need to have, but instead it is a quality that all members of a business should develop (Chapin, 1) THAI??™s human resources development and management strategies are related to creating the highest level of customer satisfaction. In 2007, THAI undertook an assessment and restructuring of the organization to streamline operations and improve communications. Summarized human resource strategies can be described as follows;
THAI emphasized the enhancement of management in leadership skills and fostering team work.
8.2 Performance Management
A system of performance-based compensation has also been adopted while ongoing skills and knowledge development have been provided for staff at all levels to enhance and broaden their capabilities.
8.3 Reward Management
THAI ensures appropriate and equitable benefit for all employees while a review of the ongoing job valuation process. As well as it ensure integrity and appropriateness of each job position versus adequate support to execute assigned tasks.
THAI is not only concerned about the employee??™s productivity but also their health and ensures them a working environment that is conducive for learning and performing their duties.
8.4 Performance Management System
THAI is currently in the process of developing performance management system that measures individual performance with transparency and justice and determines the corresponding level of compensation. The system is expected to not only incentives star performers but also serve as a means to retain them but will also be used to set guidelines in the process of succession planning where qualified managerial staffs are well-prepared to ensure smooth transition and sustained growth.
The balanced scorecard is a strategic planning and management system? used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organizational performance against strategic goals
8.5 Development of personal specialism
THAI has implemented a Competency Model for competent personnel selection process. The selection criteria will serve as guideline for staff competency enhancement in career path development. General training courses and courses designed to correspond to in order to provide its staff a broad knowledge base and enhance management skills.
In addition, The Competency Computer – Based Testing (CCBT) system is being developed to assess the competency of each employee and serves to enhance planning and customizing training requirements enhancing individual??™s capability and benefitting the Company overall.
Moreover, for optimum efficiency and effectiveness in staff operations, ground services training emphasizes issues of safety, quality and security as the topics encompass legal guidelines, the Ministry of Transport??™s guidelines along with that of International Air Transport Association (IATA) and International Civil Aviation Organization (ICAO)??™s rules and regulations for management and executive level staff. An e-Learning software ???Tell-me-More??? has been launched to facilitate teaching of the 7 foreign languages for all departments. The e-Courseware and the e-Library are currently being developed for the library to become the information and news center.
Chandler, A. (1962), Strategy and Structure, MIT Press
Price, A (2007) Human Resoruce Management in aBusiness Context:3rd Edition, Thomson Learning
Thai Airways International Public Company Limited Annual Report 2007
Managing Director (Vice President Level)
Ground Support Equipment Service
(Vice President Level)
Cargo & Mail
Executive Vice President
Standards Assurance & Risk Management
Executive Vice President
Human Resources Development & Management
(Executive Vice President Level)
Corporation General Administration
Finance & Accounting
Executive Vice President
Executive Vice President
Corporate Planning & Information Technology service
Executive Vice President
Managing Director (Vice President Level)
Ground Customer Service
Managing Director (Vice President Level)
Executive Vice President
Office of the Internal Audit
Board of Directors
Business Units Executive Board