Management Control Systems at Air India Essay

1. Introduction Air India, a national carrier is characterized with an urge to excel and enthusiasm started its operations on October 15, 1932. The merger of Air India and Indian, the country’s leader in the domestic sector, has helped the airline in emerging as a major force in the airline industry. 1.1 Domestic Operations On the domestic front, Air India operates to 47 stations, and 17 are connected to international destinations. The 172-seater Airbus A321 aircraft connects all major metros. The Regional operations provide coverage to all the metros and many smaller cities across the nation. 1.2 Services Apart from the basic services that an airline provides, Air India also offers – Frequent Flyer Programme- â€Å"Flying Returns†. Members of the Flying Returns Programme (FRP), can accrue mileage points while flying on Air India, Lufthansa and flights of Air India’s code share partners, and redeem them for award tickets or avail other facilities available with the service provider on Air India or Lufthansa. Star Alliance – Air India has joined Star Alliance in mid 2010. Star Alliance, is a leading global airline alliance of 21 top international carriers. Air India passes the benefits to its passengers by becoming a member like seamless transfers while travelling across the world, more frequent flyer mileage points, code-sharing leading to a wider choice of flights and access to lounge facilities worldwide. The Star Alliance network offers more than 17,000 daily flights to 916 destinations in 160 countries. Air India Express – Air India’s international budget airline, Air India Express, was launched in April 2005. Air India Express operates 200 weekly flights on its network between 17 Indian and 14 international stations. 2. Organization Structure 2.1 Current Structure Source: www.egyankosh.ac.in/bitstream/123456789/35931/1/Unit-29.pdf 2.2 Outgrowing the traditional model For airlines, the functional organizational model has worked well for decades. It helps by promoting deep technical expertise and economies of scale by grouping specialists together and focusing accountability for the direction and efficiency of all divisions on one person: the chief executive. Peripheral businesses and small customer segments got less attention from management, however, the mainstream passenger business received most of the attention. This functional model has been the best choice for some aviation groups, mainly those that outsource most of the support functions (such as catering and maintenance), lack the sophisticated information systems needed to manage more complex structures, or serve only a few homogeneous customer segments Yet many other carriers, like railroad and oil companies before them, have surpassed the traditional model. The rise of low-cost carriers is changing the nature of competition in the industry by letting some traditional airlines to expand into businesses that offer higher margins or require less capital than their core passenger operations. Functionally organized airlines often lack the flexibility to meet the varied needs of a diverse customer base—a problem that inhibits their ability to grow in ancillary businesses and in the fast-expanding market for budget travel. As the managers in a functional organization (with the exception of the CEO), aren’t responsible for profitability, costs can easily mismanaged. Moreover, labor agreements that cut across several parts of a company can lead to higher wages and benefits. This is because everyone from baggage handlers to the catering staff receives some of the same perks as the cockpit crew gets. To counter those shortcomings, aviation groups should analyze and take a hard look at the idea of implementing a new form of organization structured around separate business units, each with broad decision-making authority and responsibility for its own profitability. Such a decentralized structure resembles the classic business unit model of many diversified companies, retailers and banks, where individual units operate independently on a day-to-day basis and set their own strategic direction. For airlines, however, this structure must differ in one significant way: units operating as stand-alone businesses would quickly destroy the network value that comes, for example, from coordinating interconnecting flight schedules, efficiently allocating aircraft across a number of routes, and using the fare structure to maximize revenue throughout a large network. Airlines thus need a hybrid structure that reaps the benefits of independent business units while maintaining strong links among them. 3. Management Style And Culture 3.1 Attitude towards employees Air India is committed to provide its Employees a stable work environment with a scope of encouragement towards creativity and innovation to provide opportunity for learning and personal growth which helps the employees in improving their effectiveness. Above all, Employees are provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Air India customer. The management has created a culture where employees are treated as the valuable asset for the company. 3.2 Decision-making process * The procedure followed in decision making involves discussions among cross-section of departments and/or formal decisions by the Competent Authority on office notes in accordance with the Instrument of delegation of Financial and Administrative powers. * In respect of decision making on day to day basis at airports/stations, all the Duty Officers/Station Managers take spot decisions in accordance with the Instrument of delegation of Financial and Administrative powers and the established practices. * Decision making is by worker/management committees. * Employees are encouraged to be responsible and are given authority to make decisions. 3.3 Focus of Air India 1. Focus on relationships among the employees is the fundamental driver of leadership, culture, strategy, and coordination at Air India which allows them to coordinate more effectively across all functions. 2. Air India’s organizational competency is its ability to build and sustain relationships characterized by the following- * Shared goals: * Motivates individuals to move beyond what is best for their own narrow area of responsibility within their own function. * Motivates them to act in the best interests of the overall process of the organization and lessens competition between different functions within the organization * Shared knowledge: * Shared knowledge is about how the tasks of one person or group are related to all other tasks. * This enables the workforce to be more competent, efficient and coordinated than their competitors * Mutual respect: * Encourages all employees to value the contributions of their colleagues * Encourages all employees to consider the impact of their actions on others * Reinforces the tendency to act in the best interests of the overall work process 3.4 Credibility & Caring-Key to Air India’s Culture * At Air India, credibility and caring are the two critical ingredients of effective leadership. * Credibility and caring are the ability to inspire trust and the ability to inspire in employees the belief that their leaders care deeply about their well-being. * The top management team has gained the complete trust of managers in the field, and of frontline employees, by being forthright and consistent in their messages to employees. 3.5 Role of Supervisors * Air India supervisors are not obstacles to coordination among frontline employees, but play a valuable role in strengthening coordination through day-to-day coaching, counseling, and participation in frontline work, even baggage handling. * Supervisors go far beyond measuring performance and disciplining and focus on problem solving, advising, and providing support, encouragement, and recognition to individual subordinates. * Supervisors view their subordinates as internal customers who deserve help in doing their jobs better. 3.6 Role of Relational Competence * Teamwork at Air India is based on â€Å"relational competence†- the ability to relate effectively with others. * Relational competence is a critical ingredient of organizational success, though it tends to be undervalued in the world of work. * Other organizations usually underestimate the importance of relational competence, especially when it comes to people who perform highly skilled jobs. * Often excellent performers are hired, but they cannot integrate their work effectively with the work of others which results in undermining of the organization’s goals, which does not happen at Air India. 3.7 Official Language Implementation With respect to the internal culture of the company it continued to promote Hindi as official language. Various competitions like easy writing, debate, and quiz were organized during Hindi Pakhwara. In order to monitor progressive use of Hindi in the office, 57 Official Language Implementation Committees were constituted and meetings of these committees were held regularly. In order to facilitate officers/ employees in doing their official work in Hindi, seven Hindi Workshop training programmes were organized. NACIL’s In-house Magazine â€Å"Vimanika† was awarded second prize in the In-House Magazine Competition organized by Ministry Of Home Affairs, Department of Official Language. NACIL was conferred 2nd prize by a well known literary, Socio-cultural organization ‘Aashirwad’ for outstanding Hindi implementation in the category of Public Sector Undertakings (Large) of Government of India Mumbai. 4. Control Process of Air India The company has extensive internal control system which ensures optimal utilization and protection of resources, IT security, accurate reporting of financial transaction and compliance with applicable laws and regulations and internal policies and procedures. The internal control system is supplemented by extensive internal audit, regular reviews by management and well documented policies and guidelines to ensure reliability of financial and other records to prepare financial statements and other data. 4.1 Steps taken for effective control process/system in the organization * Air India has set up a special vigilance department headed by a vigilance officer whose main function is to initiate steps to curb corruption and malpractices in the organization. The prime functions to achieve this are as below: * Investigation of complaints against all categories of employees / travel agencies / handling agencies. * Monitor progress of action recommended by Vigilance against such employees. * Study and examine Systems & Procedures followed in various departments, identify corruption prone areas and suggest remedial measures to minimize scope for corruption or malpractices. * Organise, conduct surprise checks in sensitive & corruption prone areas. * Maintain Surveillance on employees of doubtful integrity * Ensure speedy processing of vigilance cases at all stages. * Ensure that there is no delay in the appointment of the Inquiring Officer, and that no tactics are adopted by the accused officer. These are few of the functions of the vigilance department to have proper check on instances pertaining to demand and acceptance of a BRIBE in any form or kind for providing any service. * SITA, to provide new Passenger Services System SITA, the aviation IT specialist, has been selected to provide Passenger Services System (PSS) to Air India on a turnkey basis. SITA’s Horizon platform provides PSS services to 140 airlines and will be used to deliver a single airline code in order to allow the seamless integration of Air India with Indian Airlines (as these two were merged under NACIL). SITA will also implement an efficient online booking engine, departure control system, and check-in and automated boarding control, baggage reconciliation system (BRS) and a frequent flyer programme. The booking engine will provide Air India full control over its own ticket distribution and drastically reduce costs.