Submitted By MUHAMMAD BABUR FARRUKH 7441932 STRATEGIC HUMAN RESOURCE MANAGEMENT MASTERS OF MANAGEMENT SWINBURNE UNIVERSITY OF TEFCHNOLOGY

1. EXECUTIVE SUMMARY PIA is the national flag carrier of Pakistan. Since its conception in 1955, it has gone from strength to strength. However, stagnation started to set-in in the late 70s. At this point in time PIA is struggling on all fronts, but not all issues are within their control. This report, basically, focuses on the issues that are within their control. For quite a while, PIA and its upper management have been focusing on expanding its fleet and engineering prowess, all the time neglecting the real problem at hand; the restructuring of the HR department and all the issues related to it. This report will focus on these problems; analyze them and present possible solutions, if any, for them.

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TABLE OF CONTENTS Page

1. Executive Summary 2. Introduction 3. Methods of Investigation 4. Problem Description
o Over recruitment and the potential corruption o Monopolistic Centralized System o Nepotism & Political involvement during recruitment & demotivation o Importing Upper Management

1 3 4 5
5 6 6 6

5. Solutions
o Implementation of an HR Management Tool o Introduction of ESS to ease the work load on HR o Transparency in Recruitment and Selection Process o Increase the motivation of the employees

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7 7 8 8

6. Conclusion 7. Personal Reflection 8. References 9. Web Links

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You can't be a real country unless you have a beer and an airline - it helps if you have some kind of a football team, or some nuclear weapons, but at the very least you need an airline Frank Zappa (American Composer, Guitarist and Song Writer, 1940-1993) 2. Introduction Pakistan International Airlines Corporation (also referred to as PIAC), is the national flag carrier of Pakistan and the national airline operating passenger and cargo services around the world. Its main hubs are Jinnah International Airport, Karachi, the Allama Iqbal International Airport, Lahore and the Islamabad International Airport, Islamabad/Rawalpindi. It also serves regional airports, including Peshawar International Airport, Faisalabad International Airport and Multan International Airport that connect to the main hubs and have direct flights to the Middle East. It has been ranked as a 3-star airline by Skytrax. PIA was also one of the first airlines to provide in-flight entertainment. The origin of PIA can traced to the days when Pakistan was still a concept, an idea, yet to take shape. Once this idea was realized, in 1946, Muhammad Ali Jinnah, also known as Quaid-e-Azam (Founder of the Nation), realized the need of an airline network. For this, he called upon the help of Mirza Ahmad Ispahani, an experienced industrialist. The end result was the formation of Orient Airways, registered in Calcutta, on October 23 1946. In February 1947, three airplanes were bought from a company in Texas, and in May of that year, the airline was granted a license to fly. Services were started in June from Calcutta to Akyab and Rangoon (now known as Sittwe and Yangon in Burma). This was the first post war airline flight by a South Asian registered airline company. Pakistan inherited Orient Airways, at creation. Hence, their primary goal became to start relief flights to the new nation. With Pakistan being split into two wings, Orient Airways moved operations to Karachi, where it began the most important route, from Karachi to Dhaka, capitals of West and East Pakistan (now known as Bangladesh) respectively. In addition, their domestic route in West Pakistan was established, from Karachi to Lahore to Peshawar, and from Karachi to Quetta to Lahore. Orient Airways was quite instrumental during the partition and its aftermath. The fact though remained that Orient was a private company, with a small setup, low cost infrastructure and limited resources. Furthermore the DC-3s of Orient Airways did not permit non-stop flights from Karachi to Dhaka. The government, therefore, proposed Orient to merge with a new national airline that they were planning. On 11 March 1955, they merged, becoming Pakistan International Airlines Corporation. The same year, PIA started its first international service, from Karachi to London Heathrow Airport in London, United Kingdom, via Cairo International Airport in Cairo, Egypt and Leonardo Da Vinci International Airport in Fiumicino, Italy. The Aircrafts acquired by continued operating the domestic services in Pakistan.
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It is interesting to note that the merger was more of a take over, with PIAC taking point over Orient Airways controls and assets. With a large budget, new airplanes and the government backing them, all PIAC needed were experienced crewmen. Orient provided them with the cabin crews, the engineering staff as well as small established operating bases in some cities. Most of the higher officials, from Orient Airways, were shown the door, with reasons such as transparency, going in a new direction, wanting a change, new organization new management being cited. PIA prized asset is their Training Centre at Karachi which is fully equipped to impart comprehensive instructions in all major fields of airline industry - flying, engineering, marketing, management etc. Courses are conducted in conformity with the industry requirements and the standards laid down by the Regularity Bodies within and outside the country - Civil Aviation Authority (CAA) of the United Kingdom, the Federal Aviation Administration (FAA) of the United States and the International Civil Aviation Organization (ICAO). Their main competitors in airlines are Bhoja Air, Air Blue and Shaheen Air International. In courier service they have DHL Cargo, Pakistan Royal Air Cargo, Star Air and TCS Couriers as their main competitors. Due to fierce competition, rising oil prices, international aviation industry regulations, restrictions imposed by some countries and some internal factors such as poor human resource infrastructure, issues of over recruitment, de-motivated employees, mismanagement of resources both in case of manpower and other resources, corruption and lack of accountability PIA is facing a deep financial crisis. Early in the 1990s, the Government was considering, selling the airlines to the private sector in order to cut their losses. It was announced in the media but it was never implemented. However non-core businesses such as catering units, ground handling, along with the engineering department were slowly carved out of the infrastructure of the airlines and operate as individual companies. In spite of all this, PIA still has a presence in both the international and domestic market. It is still up there, amongst the best. This can be extracted by Michael O Learys, CEO Ryan Air, statement:PIA is one airline I would really want to head up as a challenge 3. Method of Investigation: Most of the data has been gathered from primary and secondary sources. Secondary data is mostly collected via research on internet through various search engines such as Google, msn, answers etc. Information relating to the companies background has been extracted from PIAs website. A few high level former employees were interviewed, although their identity will be kept anonymous since they still hold PIA at heart and would prefer their feedback to be taken as constructive criticism.

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4. Problem Description: Md. Akter-uz-zamans (2005) research reveals that practice of proper Strategic Human Resource Management (SHRM) is almost non-existent in most of the local companies in Pakistan. PIA is no exception. The problems for Pakistan International Airlines include: Over recruitment and the potential corruption: Pakistan International Airlines is a large organization with over 19,000 employees (March 2007). They recruited 237 people in 2011, 1179 in 2010, while 684 appointments were made in 2009 and 56 in 2008. Around 1854 regular appointments were made, while 317 employees were recruited on a contractual basis, between 2008 and 2011 (CAPA). As many as 870 people were recruited as human resources assistants, junior instructors, cargo assistants and reservations ticket assistants. Its fleet comprises of 43 planes, out of which only 33 are operational. According to a report in The Express Tribune, PIA has more employees per aircraft ratio than any other airline in the world at present; 525:1. In comparison, the industry average is between 150-250 people. This drives the cost of the company further. The Human Resource Department of PIA comes under the Administration unit and is at the heart of all operations. The entire office procedure of this department revolves around the filing system. In office terminology, it connotes a device for holding papers for reference. All papers, regarding employees (past or present), transactions, quotes from suppliers, payroll are kept in separate files for future referencing or correspondence, at a centralized storage space in Islamabad. Such extensive paper work for each task has left the HR dep artment under staffed and over worked. Added to this is the fact that Federal and State Legislation dictates that every company in Pakistan has to retain personnel records and other employee information, business transaction data as well as any other data deemed important by the state for a minimum of 3 years. Seeing as PIAs filing system is in place, a large storage space is required. A dedicated team is needed to manage said storage space. Special training and offices have to be provided for this team, which means dedicating some of the precious resources for this task. The process of updating employee records or retrieving documents from the storage reserves is a time consuming procedure. While new employees are being hired on short or long term contracts, but due to the amount of backlog, some files of former employees remain open, resulting in the huge workforce as has previously mentioned. Some cases have already been reported where a chain of employees took advantage of this crippled system, by re-directing the salaries of former employees whose files had not been closed due to the work backlog. Another damaging example that resulted from the poor infrastructure, technology wise, of the HR system is the 2001 incident where 10 out of the 43 airplanes were grounded for want of spare parts. The HR being pressured from all sides were unable to place orders. PIA, as a result, sustained heavy primarily because two of the ten were handling the Pakistan-to-USA route, which is one of the more productive flights for PIA, revenue wise.
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 Monopolistic Centralized System: One of the biggest challenges holding PIA back is its centralized system for policies, strategies and law. All these are designed by the upper management. Other levels of management are not included during the policy or decision making with regards to strategies or any other thing for that matter, even though they have a better and hands-on approach. Nepotism and Political involvement during recruitment and demotivation of employees: Pakistan International Airlines being a semi-government organization is falling victim to strong influence of politicians and government officials during recruitment and postings. Prime examples, according to the media, are that of Mr. Tariq Kirmani, previously at Pakistan State Oil (PSO), who was appointed chairman PIA due to being a friend of the Prime Minister. Similarly Mr. Kirmani appointed his own friend, Mr. Zafar Khan, previously working at PTCL, Director MIS at a heavy salary. He also appointed Mr Ahmad Saeed who was from the Service Industry. What could they contribute to the organization with no such knowledge? Selection and recruitment is not done on merit. Current deputy managing director is another example of this. A pilot by profession, now deputy managing director, he still flies some hours a week to keep his license active. Even at junior level positions, influence from politicians and higher up is a lot. A perfect fit would have to be rejected in order to accommodate the whims of senior officers who, in turn, are pressured from their seniors. PIA, being a government owned entity, requires government funding to support itself. If they cater for these political appointments they are more prone to invest in the company, helping them address some of the issues; kind of like You scratch my back, I scratch yours. There have been rumors of people being relieved from their position in order to accommodate these people. According to Esen (2004), latest research on job satisfaction show a surge in the importance employees place on feeling safe in the workplace. This has become a top issue for employees, but many employers and HR professionals alike. Even without this awareness, current events and increasing concern about security overall are likely to lead to demotivation amongst employees. This, the pay scale, the controversies and PIAs reluctance to improve the HR system has led to employees getting disillusioned and demotivated. Importing Upper Management: Most of the upper management is usually acquired form other companies. The main issue is that most of them do not come from the same industry. The previous chairman of PIA, Mr. Tariq Kirmani, came from PSO (Pakistan State Oil), while the one before him came from the banking industry. Without the know-how of an industry it is very hard to come in and make an impact. Chances are high for them to make mistakes, which in an industry such is this could end up cost the firm millions. Sale of Roosevelt hotel in Dubai is a clear example of it. The hotel was a valuable asset and valued at about 1 billion but it was sold only in 40
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millions. The sale of PIAs kitchen center in Karachi is another example of this. It was generating great revenues for the company but was sold confidentially. 5. Solutions: Implementation of an HR Management Tool: There is a dire need for new technology to be introduced into the Administration department of PIA in order to make it more competitive. The most suitable solution would be Enterprise Resource Planning system (ERP). It integrates internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. Its main purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization. It can run on a variety of computer hardware and network configurations, typically employing a database as a repository for information. Its implementation opens many possibilities for PIA, as ERP suppliers provide in-house training for companies. The firm also has the option of out sourcing this part to the business if they feel that training for a new system will put their employees under more pressure. Although, ERP is expensive to implement, it is a one time expense, and has the capability to serve the firm was an extended period of time. There are cheaper options such as OrangeHRM, HR Data Manager, HR Acuity On-Demand, HrMecca, BALANCEaap, HR Pulse and Conrep available in the market but they are not able to provide the kind of after sales service which companies like SAP can provide. It would help PIA with its over staffing issue, lessen corruption to some extent and stop catastrophes such as the Nose Repair Airplanes from happening again. Introduction of ESS to ease the work load on HR: Stone (2002), in his book, states that the focus of human resource management is on managing people with the employer employee relationship. It specially, involves the productive use of people in achieving the organizations strategic business objectives and satisfaction of individual employee needs. PIAs Human Resource department already has too many responsibilities as it is. Implementation of a new system is not enough. With a company having such a large employee bank it is best to implement the Employee Self Service scheme (ESS). The software for ESS is part of the ERP software. ESS will basically enable employees to access and update their own records from time to time, relieving Human Resource personnel of this trivial matter. Random checks can be made from time to time, with strong punishment being handed to those who falsify data.

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 Transparency in Recruitment and Selection Process: It is vital for the CEO and the HR manager to collaborate in order to select the best fit for the company. The HR department should make every new employee sign a full disclosure form which would help the company keep a close check on favourism or any foul play. Although some political appointments could be allowed, PIA should make sure that the recruit should match the requirements of the job. Nepotism should be discouraged with peoples competence and enthusiasm given priority over everything else, people who actually want to work for this prestigious firm. It will inject some energy into the department as well as raise the moral of the employees. Increase the motivation of the employees: Human Capital an emerging theory for HRD is that employees are human capital who can be treated as assets because they have high economic value in technological world, the assets of human beings are their knowledge and skills which will depreciate as new technology emerges. Employers need to invest in their human capital by providing Human Resource Development (HRD) programs in the form of staff development and continuing education. Odiorne (1984) writes that: "human capital economics is a system of inputs processes outputs and adjustments which individuals firms government agencies institutions and societies make towards the increases of potential and performance which the individual human or humans as groups may contribute to society the economy specific employers or themselves. Several changes can be made within the organization to increase the motivation of its employees. The two factor theory by Herzberg (1964) can be implemented to solve most of the motivation issues with PIA. The need to avoid unpleasantness is satisfied by hygiene factors in the environments (e.g. pay, conditions, leadership style, and company administration). The need for personal growth is satisfied by motivator factors in the job itself (e.g. challenge, learning, responsibility, recognition, achievement). The managements task is simple; control hygiene factors (to minimize dissatisfaction) and offer motivator factors (for positive performance). By implementing this strategy, PIA can address two of the problems that have already been discussed; the monopolistic centralized system and the importing of upper management. The leadership would be much more respected and appreciated if they include the management chain in the loop about important decisions regarding the company. Also the company should look to promote from within to the upper management, giving employees more motivation to work hard and succeed.

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6. Conclusions: HR is the heart of an organization. In spite of all the issues discussed above, PIA is still running its operations efficiently. They have one of the biggest fleet and the biggest workforce in the world. For an airline representing a nation they need to lead by example. If they are able to overcome most of the issues discussed in this report, sky is the limit for them. 7. My Personal Reflection: I took up PIA as my focus of research since it is one of the companies I envisioned myself working for. It has always been a source of pride for the nation, for their ambassadors to be showing such a strong front. However, up close, all is not well within the organization. It has been suffering huge losses in the recent past, scandals being blown out of proportion by the media and some horrendous mistakes in terms of high level appointments and the resulting problems. Even with a workforce as big as PIAs, a firm will struggle unless its infrastructure is sound. The problem for them was the lack of next generation technology in their administrative unit, political influence during the hiring process, demotivation of employees due to the accumulation of various factors and corruption. While doing this research, I got into close contact with PIAs Administrative department, able to better understand how it functions, responsibilities held by their HR department and about their methods of storing data, which I found to be surprisingly outdated. PIA has a top-bottom approach, which I now understand is not always good, especially in their case. A vital lesson for me to take from this report would be that their needs to be communication amongst all levels of management. The upper management just cant make a decision and expect rest to follow it. There must be a proper forum on which feedback should be taken from every level of management, if only for the sake of them feeling involved in the decision making. What I learned from this is that it is a vital factor and if feedback is taken from the employees they will feel a sense of belonging to the firm, thus increasing their motivation. HR departments main duties are to manage the employees of a firm to the best of their abilities. Another important lesson that I have learned while analyzing PIA, is that one should, as an HR manager, plan ahead. One should keep a list of employees who are considered better assets than others and could be considered for promotion if one becomes available. This is another way to increase the level of motivation amongst the employees. I also learned the importance of KPIs (Key Performance Indicators), which should be SMART, specific, measurable, attainable/achievable, realistic, time bound and will help to measure a department's performance and help improve it further. I have also come to understand how; transparency is of the utmost importance, when it comes to hiring or recruiting new employees. Communication channels should be open for easy access, which is the only way transparency can be achieved.
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I recommended two theories from Herzberg and Ordiorne, both well known theorists in the HR industry, for PIA to implement. During researching for possible results, I understood one of the most vital things there are for any HR manager; implement multiple strategies, or, if possible, infuse two or more strategies together. Some strategies concentrate on a single aspect of resource management so its a good idea to use another strategy in parallel which concentrates on a separate aspect of HRM. In short, I have learned a lot relating to Strategic Human Resource Management; will I ever be given a chance to implement it? That remains to be seen.

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References
1. 2. 3. 4. ------, Pakistan Hopes to Double Airline Services Revenue, Aviation Week & Space Technology, August 25, 1975, pp. 71. ------, Taking a New Flight Path, Financial Times (London), January 10, 1984. ------, The plight of PIA, Published in The Express Tribune, June 27, 2011, http://tribune.com.pk/story/196721/the-plight-of-pia/ viewed on 7 June 2012, 16:25 -----, The woes continue for loss-making Pakistan International Airlines, CAPA - Aviation Analysis, November 9, 2011, http://www.centreforaviation.com/analysis/the-woes-continue-for-loss- makingfor-pakistan-international-airlines-62235, Viewed on 7 June 2012, 16:50 ------, PIA's 10 Aircraft Grounded for Want of Spares, Business Recorder, July 14, 2001. ------, With Foreign Carriers Shying Away from Pakistan, Heavy Responsibility Falls on Pakistan International Airlines, Business Recorder, October 9, 2001. Aftab, Mohammed, PIA Braced for Harsher Climate, Financial Times (London), January 14, 1986. Bokhari, Farhan, Ailing Pakistani Airline Looks for Uplift, Financial Times (London), Companies & Finance Sec., April 12, 2001, pp. 31. Bidgoli, Hossein, 2004. The Internet Encyclopaedia, Vol 1, John Wiley & Sons, Inc. pp. 707 Books, Cathay Pacific to Help Pakistan International Airlines Beat Indian Ban, Business Recorder, January 9, 2002. Coleman, Herbert J., Capacity Boost Spurs Pakistani Carrier, Aviation Week & Space Technology, July 21, 1975, pp. 32. Davies, R.E.G., Airlines of Pakistan, Airlines of Asia since 1920, London: Putnam Aeronautical McLean, Virginia: Paladwr Press, 1997, pp. 63-83. Eseb, E. 2004, April. SHRM/CNN Job Satisfaction Series: Job Satisfaction Survey Report 2004. Alexandria, VA: Society for Human Resource Management. Herzberg. F, 1964. The Motivation-Hygiene Concept and Problems of Manpower, Personnel Administration, pp. 37. Hill, Leonard, Jump Starting PIA, Air Transport World, July 1997, pp. 169. Khomne, Ranjit, PIA Chief Heads Back Home, The Times of India, December 31, 2001. KhosrowPuor, Mehdi. 2006. Emerging Trends and Challenges in Information Technology Management. Idea Group, Inc. pp. 865 Mirza, Iqbal, PIA Chief Unfolds 10-Year Plan to Make Airline Financially Stable, Business Recorder, September 23, 2001. Odiorne, G.S., 1984. Strategic Management of Human Resources. San Francisco; London: JosseyBass. Enver, Jamall, Over Meddling Led to Pakistan International Airline's Decline, Business Recorder, October 31, 2001. Pak Steel, PIA dropped from privatisation list, The News, Jang Newspapers Published 18-02-2009, assessed 07-06-2012 Pakistan Drops Restrictions, Pursues International Flights, Aviation Week & Space Technology, April 12, 1993, pp. 28. Pakistan International Airlines: Eager to Establish Direct Air Links with Korea, Business Korea, August 1992, pp. 47. Pakistan International Airlines Suffered Losses Worth Rs11 Billion in 2000, Business Recorder, August 15, 2000. Page 11 | P A K I S T A N I N T E R N A T I O N A L A I R L I N E S ( P I A )

5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24.

25. Pakistan New Entrants Line Up Against Barriers, Air finances Journal, May 1994, pp. 16. 26. PIA privatisation, Flight International Magazine, January 01, 1997. 27. PIA Invests in Automation, Outsources other activities, Aviation Week & Space Technology, August 10, 1992, pp. 38. 28. PIA Management Urged to Help Rescue Airline, Business Recorder, July 19, 2001. 29. Proctor, Paul, and Irtaza Malik, Liberalization Spurs New Pakistan Airlines, Aviation Week & Space Technology, April 12, 1993, pp. 38. 30. Proctor, Paul, PIA Moves to Capture Growth in Central Asian Business, Aviation Week & Space Technology, August 10, 1992, pp. 38. 31. Rao, N. Vasuki, India, Pakistan Ban Over flights, Journal of Commerce--JoC Online, January 2, 2002. 32. Rs51.8bn Budget Approved for PIA, DAWN Internet Edition, December 13, 2001. 33. Sheilds, Mureell G., 2001. E-Business and ERP: Rapid Implementation and Project Planning. John Wiley and Sons, Inc. pp. 9-10. 34. Stone, R.J., 2002. Human Resource Management, 4th Edition. John Wiley and Sons, Australia, pp. 4. 35. Syed, F., Officials say PIA on a Crash Course. The Express Tribune, June 20, 2010. 36. Vandyk, Anthony, Growing Pains, Air Transport World, March 1995, pp. 83. 37. Westlake, Michael, Local Turbulence: PIA Aims for Partial Privatisation, Far Eastern Economic Review, January 18, 1990, pp. 39

Web Links and contacts

http://www.piac.com.pk/ http://www.hrdatamanager.com/ http://www.orangehrm.com/ Mr Mumtaz Shareef (air traffic controller) 0333-7762877 Mr Muhammad Nasir (HR Co-ordinator) 0331-2286999

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