JetBlue Airways Case Study

JetBlue Airways: Starting from Scratch Case Study Analysis This case illustrates how an entrepreneurial venture can use human resource management – and specifically a values-centered approach to management – as a source of competitive advantage - JetBlue Airways Case Study introduction. The major challenge faced by Ann Roades is to grow this people-intensive organization at a rapid rate, while retaining high standards for employee selection, and while building a strong organizational culture. Strengths

Weaknesses
Clear niche
JFK – protected slots
Political protection
Efficient
Quick turnaround at the gate;
Paperless
Low fares
Better product that Southwest
Wider seats
Less waiting in line
Strong top management team
Experienced
Cohesive
Smart
Well-funded
Flexible workforce

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Serious competition if they threaten major carriers
Potential competition with SWA as SWA grows
Though industry for start-ups
Difficult to hire quickly at high standards
No structures for building team and participation as they grow Lack of standardization in HR policies could be source of inequity, division Flight attendants turnover could create high training costs, poor service

Jet Blue Strategy:
Low cost, low price
JFK – under-served markets and beachhead for protected revenues stream Increase demand through low fares
High asset utilization
High productivity (people)
People who might not otherwise fly (eg vacation), cost-conscious. Dangers of rapid growth:
Can they hire the right “type” of people who fit?
Will the growth lead to fragmentation such that they lose their focus and emphasis on people? Management spread too thin – lose touch with people
Loss of common vision leads to fragmentation among employee groups If they don’t grow, competition will fill desirable routes Major airlines may be able to crush them
Key Success Factors
What are the key success factors?
What do they have to execute on these?
What are the HR practices that make these work?
High asset utilization
High people productivity
Committed work force
Management values and vision – senior management must be visible, credible Grow at a socially sustainable rate (maintaining the culture) Select the right people
Select the correct routes (don’t compete with the majors)
Remain union free
Values
Selection
Orientation
Reward system
Performance management
Needs to be added: training, continued socialization (need for specific customer-focused courses), leadership development and stress management; middle-layer management

Leadership and Values in Entrepreneurial Ventures – is the job attractive?
Pilot
Yes
No
New company
Stock options
Planning rapid growth
Could make lots of money
Paperless, fewer administrative headaches
Faster to occupy the “left seat” – be a captain
No security over the long run
Could lose a lot under new management
No voice – pilots like to have a voice
Tiger teams are too ad hoc, controlled by management
Flight Attendant
Yes
No
Attractive for the right type of person
Plenty of money, easy job, then move to next stage in life
Fun place to work
These are assumptions flight attendants have been battling for decades Will not want to leave after five years – will want to work fewer hours without losing job

Why is JetBlue’s top management team so committed to being non-union? Control
Flexibility
See unions as taking control away
Want to start from scratch and do it their own way – not subject to negotiation with unions Holds company together
Critical for execution of key success factors
You can’t have true teamwork with unions
Unions constrain management choice
Unions enforce standardization and may decrease flexibility
Reduces administrative overhead

Are they right?
Yes
No
Unions reduce service quality and productivity
Unions may increase differentiation among employee groups and decrease common vision Will not be sustainable but they can increase the value of the IPO by staying non-union until then Southwest proves that you can have great teamwork with unionization Unions create unity and equity through standardization

Unions provide consistency that helps to improve the operation Unions create a structure for participation and teamwork, particularly as firms grow Unions protect people who show integrity (eg mechanic who refused to sign off).

High wages for front-line employees (flight crew, maintenance and airport personnel) are associated with reduced rates of service failure and high levels of labor productivity. Union representation (number of employee groups represented by unions) is associated with higher levels of aircraft productivity and improved financial results. Shared governance (significant equity ownership or board representation for front-line employees) is associated with reduced rates of service failure and higher levels of aircraft and labor productivity, and improved financial results. High levels of conflict (measured as numbers of arbitrations, mediations and strikes) are associated with increased service failure, reduced productivity and reduced financial results.

Value-Based Human Resources Practices
Safe, fun environment, for crew members and customers
The company hasn’t still developed all the formal HR practices typically seen in a larger firm. Will they be able to keep a small company feeling while expanding? Staying focused on people, and keeping the company union free (“not having a union creates a team environment”) Values (safety, caring, integrity, fun and passion) represent the bedrock for the development of human resources policies and practices and management style. Two-way communication – Feedback

360 degree performance management process
More formal training and development processes to be introducedsafe (no drugs & alcohol) and customer-oriented.mportance of their performance anyone could be Avoid a culture of blame for delays
Tiger teams – communication with front-line employees; their role is to solve problems that emerge in any area of the company – the worst complainers are picked to get together, solve the problem and bring recommendations Pilots can communicate new ideas and concerns using their e-mail and laptops, to Al Spain (president of flight operations). Selecting the best people

Targeted selection process to identify employees who were most likely to fit. The 5 values are translated into specific desirable and undesirable behaviors and questions are then asked with respect to applicant’s past behavior. Multiple interviewers were used and the interviewers had to come to a consensus decision (not an average) before anyone could be hired. Cultural fit is extremely important

Employees should be productive, safe (no drugs & alcohol) and customer-oriented. Fair compensation / benefits programs that meet/exceed the industry standard Medical benefits
Personal time off
Double pay for working on holidays
Pay increases are not associated with seniority – being an air hostess is associated with a short term job. Training
Huge investment in pilot’s training (qualification for A320) – finding people who fitted the organization was critical Initial orientation for employees: included talks by the top managers /BoD (Barger, Neeleman and Roades) to show them the importance of their performance and to talk about company’s aspirations. Autonomy – people are judged based on how their decisions fit with the values Power language – all employees are referred as crew members, and supervisors as coaches. Customer is always capitalized to signal de importance of customers. Supervisors as coaches rather than bosses

Barger visits each of the company’s 20 locations at least once a quarter The
supervisor is seen as an important component of communicating with the front-line, although there is still no training for this role Customized Employment Packages – tailor jobs, pay and benefit packages to the distinct needs of different employee groups, ensuring overall equity and treatment. Discourage unions (they are accustomed to standardization). Flight attendants: three distinct job options (one-year employment contracts with medical coverage and 500€ of additional pay); job-sharing offered to two people (to seek work-family balance) and a standard full-time flight attendant position (if they work up to 70 hours/month, 20€ per hour; and 30€ per hour if more than that). Customer service / ramp workers: are paid 1€ more than the highest salary, plus shift differentials; medical, 401K, profit-sharing benefits and double pay on holidays. Pilots: 20 days off per year; salary equal to the industry average; stock options (planning for retirement) Skilled top-management team – veterans of the airline industry

Top Management Team
Thomas Kelly: executive vice-president and general counsel
David Neeleman: founder, chairman and CEO
David Barger: president and chief operating officer
John Owens: chief financial officer
Ann Rhoades: executive vice-president for human resources. Charged with achieving a rapid growth while building values-based, high commitment organizational culture Al Spain: vice president of flight operations at the company

Some theoretical concepts:
High performance work systems: an array of different and highly complementary HR practices, having in mind achieving three dimensions: • Employees work for best interests of organization, based on deep understanding of those interests • Employee flexibility – functional flexibility

• Employees use their own judgment and contribute with ideas and information needed to achieve improvement

HR Practices associated with HPWS
• Employee security
• Emphasis on egalitarianism/equity
• Team production
• Premium compensation and incentive compensation
• Extensive training
• Job rotation
• Open information and open channels of communication
• Rigorous screening of employees, namely based on cultural fit

OBJECTIVES OF THE HRM FUNCTION
• Efficiently employing workforce skills and abilities
• Providing well trained and well motivated employees
• Increasing employees’ job satisfaction and self-actualization • Achieving quality of work life
• Communicating HRM policies to all employees
• Maintaining ethical policies and socially responsible behavior • Managing change

Internal Sources: Include actual employees
 Promotions from within
 Internal transfers
 Referrals
Recruitment methods:
 Job posting – intranet
 Career planning
 Referrals

External Sources: Include external candidates
 Walk-Ins
 Universities / Schools
 Professional Associations
 Job Centers
 Recruitment companies
 “Head Hunters” / “Executive Search Firms”
Recruitment methods:
 Advertisements
 Company presentations / social events
 Internet
 Internships / summer jobs
 Job fairs
 Open houses
 Hot lines (telephone interviews!!)

PERSONALITY TESTS
To measure personality or temperament.
Ex: Rorschach , Personality inventories
 KNOWLEDGE TESTS
To measure candidates’ knowledge in specific areas or topics. Ex: Accounting test, Reasoning test for a consultant.
 PERFORMANCE TESTS
To measure candidates’ ability to perform certain tasks or significant parts of job. Ex: Flight simulator for a pilot, Word processing for a secretary

INTERVIEWS
Number of participants:
Individual or collective
Format:
Structured
Unstructured
Mixed
“Problem solving”
Under pressure / Stress

Selection methods:
Probationary period: hire the worker for some probationary period. In practice, a fixed term contract. Useful when companies need to hire employees whose credentials are hard to ascertain. Problems: • training costs and replacement costs

• “rat race” effect – effort concentrated on probationary period and reduced
later • politicking Use when?
• only time on the job will inform employer regarding employee performance. Ex: Hiring university professors • self-selection mechanism, to discourage unfit applicants from applying.

Credentials – relying on employees having obtained some credentials before the job offer. • information and communication play important roles
• workers are highly interdependent
• monitoring is difficult
• external evaluations of the workforce competence are important • training is intensive
• rapid social and technological change

For managers:
Leadership tests
• Data on past history
• Work samples
• In-Basket
• Business games
• Assessment Center

Non-compensatory strategy (multiple cutoff or multiple hurdle (fail-pass)); compensatory strategy; combined strategy

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