Babeldyne Consulting Making Sense out of Nonsense Career Development Proposal John L Mahaffey 22 January 2015 This Page Left Blank 2 ABSTRACT This following paper is a sample career development plan for displaced employees of Air Canada, the national airline of Canada. The task is to provide recommendations for a career development plan to support 280 middle managers being made redundant through lay offs and an unknown number of senior employees being offered early retirement. The paper will review the Air Canada workforce and explore workforce reduction options. Career development planning will include a workforce audit for each position, followed by career development options targeted at employees who are being laid off or departing under the early retirement scheme. The paper will conclude with a series of recommendations for the company based on the research and emerging practices in the field. This paper is submitted in partial fulfilment of the requirements for 804-CRCC - Career Counselling in the 21st Century. The final word count for this paper is 14,038. 3 This Page Left Blank 4 CONTENTS Introduction ............................................................................................................................................. 7 Problem ................................................................................................................................................... 7 Task ......................................................................................................................................................... 8 Client Description - Air Canada.............................................................................................................. 8 Force Reduction - Options .................................................................................................................... 10 Employee Termination (Lay Offs) .................................................................................................... 11 Costs Associated with Lay Offs .................................................................................................... 11 Effects on Remaining Employees ................................................................................................. 11 Early Retirement ............................................................................................................................... 12 Cost Savings.................................................................................................................................. 12 Delay Layoffs................................................................................................................................ 12 Employee Advancement ............................................................................................................... 13 Work Force Reductions – Airline Industry ........................................................................................... 13 Air Canada – Redundancies via Lay-off ........................................................................................... 14 Air Canada - Early Retirement.......................................................................................................... 15 Employee Demographics – Air Canada ................................................................................................ 16 Operations Employees ...................................................................................................................... 16 Pilot ............................................................................................................................................... 17 Flight Attendant ............................................................................................................................ 17 Flight Dispatcher ........................................................................................................................... 17 Aircraft Maintenance/Mechanic ................................................................................................... 18 Airport and Cargo Ground Services.............................................................................................. 18 Non Operational Employees ............................................................................................................. 19 Customer Service .......................................................................................................................... 19 Building and Facility Maintenance ............................................................................................... 19 Administrative Employees ............................................................................................................ 19 Career Development Plan ..................................................................................................................... 20 Career Development Plans - Content ............................................................................................ 20 Transition counselling ................................................................................................................... 21 Career Development Plans - Cost ................................................................................................. 21 Career Development Planning – Criteria for Success ................................................................... 22 Air Canada - Work force Audit......................................................................................................... 24 Career Development Plans - Operations Employees ........................................................................ 25 5 Work Force Audit and Career Development - Pilot...................................................................... 26 Work Force Audit and Career Development - Flight Attendant ................................................... 27 Work Force Audit and Career Development - Flight Dispatcher ................................................. 28 Work Force Audit and Career Development - Aircraft Maintenance/Mechanic .......................... 28 Work Force Audit and Career Development - Airport and Cargo Ground Services .................... 29 Career development Plan - Non Operational Employees ................................................................. 30 Work Force Audit and Career Development - Customer Service ................................................. 30 Work Force Audit and Career Development - Building and Facility Maintenance ...................... 31 Work Force Audit and Career Development - Administrative Employees .................................. 32 Recommendation .................................................................................................................................. 33 Recommendation Air Canada - Career Development Plan............................................................... 33 Estimated Cost - Air Canada - Career Development Plan ................................................................ 34 Assessment Criteria - Air Canada - Career Development Plan ........................................................ 34 Options - Air Canada - Career Development Plan ............................................................................ 35 Conclusion ............................................................................................................................................ 35 6 CAREER DEVELOPMENT PLAN – AIR CANADA DISPLACED EMPLOYEES INTRODUCTION Much like their human creators, the life cycle of a company includes birth, growth, deterioration and death. During periods of growth they increase their work force, capital spending for equipment and property and open new products and service lines within current and emerging markets. But like all life cycles, there is a period of deterioration. In some cases deterioration due to loss of market share to competition; in others deterioration is due to economic forces outside of the company’s control (e.g. recession). In all cases however, the company must act to mitigate the effects of deterioration or the company will suffer greater damage up to and including bankruptcy (death). There are many ways a company can address a deteriorating market. If there are funds available they can inject resources into emerging services or products. These new lines can absorb company resources being made redundant due to the deteriorating market. Another common strategy used by companies under threat is the expansion of available funds through reduction in operating costs. Reduction in operating costs is achieved through the removal of capital assets and personnel. Capital assets are owned assets contributing to a company’s ability to generate profit. They are normally not sold in the regular course of a business's operations for cash and are often used as collateral for financing of growth and modernization. Capital assets include land, buildings, machinery and equipment. In most cases, these assets are liquidated only as a last resort [Investopedia, 2012]. Because capital assets are generally liquidated as a last resort, companies seeking to raise funds or reduce costs quickly turn toe personnel reductions. Personnel reductions may take the form of reduction in hours and overtime, employee lay-offs, early retirements and forced retirements. Each option has its advantages and disadvantages, for the company and the work force. This paper illustrates issues associated with a planned reduction in personnel. The company being studied is Air Canada, Canada’s national air carrier. The strategies employed include targeted layoffs and early retirements. The following paragraphs will describe the problem, issues associated with lay-offs and early retirement, issues associated with Air Canada’s work force. The paper will conclude with recommended options mitigating personnel and company issues associated with the personnel reduction. PROBLEM In fiscal year 2010 Air Canada made 370,000 Canadian Dollars (CAD) in profit for the year [Air Canada, 2010]. By third quarter 2011, Air Canada reported losses for the year at 189 million CAD [Air Canada, 2011]. 2011 has been a difficult year for the airline industry in general. Operating costs continue to climb, especially for fuel while revenues decline post recession. In the case of Air Canada, airline operating costs for fiscal year 2011 have increased more than 600 million CAD over 2010 [Air Canada, 2011]. Despite being partially owned by the Canadian Government, Air Canada must still operate as a publicly held company. This means the company must compete within the airline industry and make a profit in order to distribute dividends and maintain stock value. In order to mitigate increasing fiscal loss, Air Canada has engaged in a number of cost reduction strategies. As noted in the 7 introduction above, companies seeking to cut costs quickly often look to reductions in personnel. To this end, Air Canada has determined the need to reduce its workforce by terminating 280 middle managers and offering older employees an early retirement packages. TASK The primary task is to provide Air Canada with a Career Development Proposal to address the needs of both the early retirees and the laid off employees. The proposal should provide a road map for the re-employment or settlement of employees while remaining fiscally responsible. The Carer Development Proposal will be one of several potential initiatives Air Canada management will explore. CLIENT DESCRIPTION - AIR CANADA As at December 31, 2010, Air Canada operated a mainline fleet of 205 aircraft comprised of Airbus, Boeing and Embraer wide and narrow body aircraft. Further Jazz airlines, a subsidiary of Air Canada, operated 123 more Bombardier regional aircraft. In 2011 Air Canada served over 32 million customers annually and provides direct passenger service to over 170 destinations on five continents [Air Canada.com, 2012]. Air Canada also operates Air Canada Jetz, providing charter air travel for to professional sports teams, executives and other specialty functions; Air Canada Vacations providing vacation and Air Canada Cargo, providing cargo services worldwide [Air Canada.com, 2012]. To the general public an airline like Air Canada is the aircraft, the pilots, flight attendants and customer service, or put more succinctly, the “front office” or face of the company. In truth, Air Canada like many airlines is actually a transportation company. The aircraft and their crews and the customer service staff are simply part of the overall company. Air Canada operates Air Canada Jetz, providing charter air travel for to professional sports teams, executives and other specialty functions; Air Canada Vacations providing vacation and Air Canada Cargo, providing cargo services worldwide [Air Canada.com, 2012]. Finally, Air Canada Training provides extensive training facilities, simulators and instruction for a wide variety of airlines including Aeromexico, Air Jamaica, LAN (Chile), Shell and Mexicana among others. Aircraft type rating is offered for Boeing, Airbus and Embraer aircraft. Training courses are offered for safety awareness, accident investigation, instructor upgrade and crew resource management [Air Canada Training.com, 2012]. As noted earlier, the visual portion of an airline is the pilots, flight attendants and customer service representatives. These are the personnel having the most contact with the public. However, the vast majority of an airline goes unseen by the public. These include aircraft maintenance, flight dispatchers and crew schedulers, facilities maintenance, cargo services and administrative and management personnel. Air Canada has identified the following sub-categories for its personnel:  Pilots 8      Flight Attendants Customer Service (airport and call centre) Building and Facility Maintenance Airport and Cargo Ground Services Aircraft Maintenance These categories are important because each requires specific qualifications, training, licensing and management. Career development plans will be very different for each category. For example, pilots require several recognized licenses in addition to a type rating for the specific aircraft they operate. Further, within the flight crew, the captain and first officer require different minimum qualifications and training. The captain of a Boeing 777 must be trained specifically for the aircraft (type rating) in addition to the leadership position he or she holds in the aircraft. Each pilot must also maintain currency in certain aspects of flight (e.g. landings, take offs, emergency procedures) and are evaluated on an annual basis. Flight dispatchers, like pilots require initial training on flight operations and are licensed by the national aviation authority. Like pilots, they must be evaluated on an annual basis in order to maintain currency. Aircraft maintenance personnel must hold an airframe and powerplant (A&P) license as a minimum, but require further training on specific aircraft types (e.g. Airbus A-320), engines (e.g. CFM-56-5B engines) and avionics (FMS-6000 Flight Management System). Flight attendants require initial training and currency training for the specific aircraft they fly on. Cargo handlers need training on specific equipment including operation of aircraft doors and cargo systems, operation of specialized cargo handing equipment and vehicles and flight line drivers licensing. Customer service representatives require training on current computer applications for ticketing, airport, airline and national security procedures and guidelines and airline policies for travel, ticketing, payment and incentives. Building and facility maintenance are required to operate and repair lighting, environmental systems (e.g. air conditioning), plumbing, information technology, telecommunications and emergency systems (e.g. fire sprinklers). Each of these sub-categories represent the operations end of the airline; the ability to safely and efficiently get passengers and cargo to and from the aircraft and the aircraft to and from their destinations. Management and administrative personnel operate both within and outside of these groups. The chief pilot is both management and a pilot. Each of the sub-categories detailed above is lead by several managers, normally functionally assigned. For example, there is likely an engine maintenance shop manager, chief dispatcher, customer service manager and building manager. In most cases, each of these managers have either been promoted into their positions from within the organization or hired from the outside based on their experience. These management personnel are a critical part of the organization, providing both expertise and opportunities for advancement among their peers. Within an airline there are a number of other managers, not specifically dealing with daily operations but rather the overall operation and development of the company. These managers work in areas such as finance, marketing, investor relations, public relations, security, standards compliancy, 9 legal support and planning. While these managers may come from within the ranks, often they are hired from outside based on their specific expertise. Accountants, lawyers, public relations specialists and security personnel are often interchangeable within disparate organizations. A chartered public accountant1 for Air Canada can provide the same service for VIA Rail Canada or the Canadian National Defence. In many cases, these “non-operational managers” are hired for their expertise and require little training before they can take up their positions within the organization. The reduction in specific training results in an overall reduction in investment for the non-operational managers and makes their replacement attractive when compared to the thousands of dollars required to train pilots, dispatchers, flight attendants, aircraft maintenance, cargo handlers and facilities maintenance personnel. This ability to move quickly into and out of an organization also makes non-operational managers theoretically easy to reduce and replace. Note the term theoretically. Unless these individuals have been hired on defined duration contracts, with defined duties they are likely to feel as much a part of the airline as the operational managers and employees. Many of these managers and their teams have invested years of service to the airline and may not take to termination or forced retirement easily. Further, many of these employees were hired for specific expertise that may actually be difficult to replace in the short term. Lawyers skilled in international aviation law may be difficult to find. With shortage comes cost. The law of supply and demand pertains to human resources management as well. The cost of a hiring a new lawyer may exceed the cost of retaining the current incumbent. This in turn results in a false savings. Air Canada may save 150,000 CAD in 2011 by terminating its international aviation lawyer then have to re-hire another similarly educated lawyer for 175,000 CAD in 2012. Add to this the time required for the new hire to become familiar with current procedures, protocols and cases, the cost of the termination might go even higher. In this case, exploration of options other than termination might have saved the company significant costs. FORCE REDUCTION - OPTIONS Air Canada intends to lay-off 280 middle management positions and offer early retirement to older employees. Using these criteria the report will examine the two primary categories of employees, operational and non-operational with regard to training and qualification, portability of employment and options for re-employment. These results will be used to further examine issues, requirements and opportunities associated with those employees who are terminated (e.g. laid off) and those who terminate voluntarily through early retirement options. The report will further provide a Career Development Plan developed for employees being terminated or taking early retirement. This report will conclude with a series of recommendations that will address both the company’s and the employees’ needs with regard to the upcoming personnel reduction. 1 In Canada a Chartered Public Accountant carries the same qualification as a Certified Public Accountant in the USA. 10 Employee Termination (Lay Offs) Access to support during the layoffs reduces negative impacts and can reduce the amount of time required to become reemployed. Companies can provide financial support, career and personal counselling as well as career development. Costs Associated with Lay Offs Financially, severance may be directed in accordance with local labour laws. Counselling should include personality and skills testing. Personal counselling should assist the employee with feelings of loss and/or failure. Career development should include personality and skills testing, resume preparation, network development and interview skills. The level of support is dependent on available resources. It is important to emphasize the positive even while acknowledging the negative aspects of being laid off. Counsellors should work both individually explore options for re-employment and to prepare financial and career development plans based on personality and skills testing coupled with employee assessments and personal desires. This individual assistance will provide the laid off employee with a stronger sense of their value to the former organization. At the group level, counsellors can provide a more macro view of potential careers and opportunities. They can also discuss issues and requirements common to all laid off employees. These issues include financial planning (e.g. pension rights, severance packages, insurance), career development planning (e.g. networking, interviewing skills, resume writing) and legal rights (unemployment compensation, appeal processes, rights of re-employment). The company must ensure their employees are fully informed of their rights and their options. Otherwise the company may face the possibility protracted and expensive legal battles. Effects on Remaining Employees Laid off employees need to understand and acknowledge the nature and reasons for their termination. They need to know that it was not their fault individually. That their situation is largely due to issues not in their control. This is not a hard and fast rule. When companies lay off personnel, the general concept has always been thought to be “last in first out. In other words, the most junior employees are laid off before the more senior employees. This is not an axiom however as layoffs may be targeted to specific sectors of the company. For example, Air Canada has decided to lay off 280 middle management employees. Their sectors have not yet been identified but highly skilled employees such as pilots and mechanics may be spared because of the cost of replacement. Less skilled employees such as cargo handlers, customer service agents and administrative support are easier to train and therefore less costly to replace. While the laid off employees obviously receive the most attention, the company needs to remember the effect on those who remain. Guilt, fear and anger are common emotions for surviving employees. Many have seen their colleagues lose their jobs in what may seem like an arbitrary and frightening way. As a result, company efficiency may be doubly affected by the lost employees and the commensurate reduction in efficiency among remaining employees due to poor morale. Companies should view this support as critical to maintaining the morale and loyalty of remaining employees. 11 Company leadership should remain visible and accessible prior to during and after the reduction period. The company should have a well-defined plan, detailing short and long term direction in accordance with organizational vision, goals and objectives. It is important that remaining employees feel like part of a team; all working towards common goals and objectives. During this period, counsellors should consider a series of team building exercises and events, emphasizing the value and importance of all members of the organization. Early Retirement One method to rapidly reduce personnel is to offer early retirement plans to senior staff. Force reduction in the form of early retirement offers both tangible and intangible benefits. These benefits include cost savings, deferred terminations and the promotion of employee and customer goodwill. Cost Savings The first benefit is in the form of cost savings [Sergay, 2012]. Based on current trends, senior employees usually make the highest salaries are subject to the most generous benefits packages. In some cases, one senior employee may be the equivalent of three junior staff in total costs. Fewer companies now offer defined benefit pension schemes and lucrative medical insurance for their employees. The current trend is the use of 401K or employee controlled programs with certain levels of contribution matching by the company. This allows more mobility for the employee as he or she can move the 401K plan from company to company. The company is also no longer responsible for ensuring defined pension plans are fully funded, especially in the face of economic recession and increased completion within the market sector. However, many companies still have employees on defined benefit programs. Those liabilities remain and will increase as long as the employee remains with the company. There may be significant savings in the early retirement of older employees, setting their retirement plans and reducing these costs over time. Delay Layoffs Labour is often the most expensive and most important asset a company counts. Even highly automated companies require educated and motivated employees to operate and employ the services and products created by the systems. Each employee is viewed as an asset, having been invested in with training, seniority and trust. Replacing them is difficult, requiring further investment in new personnel. Moreover, personnel being laid off normally are not replaced. This in turn places a larger burden on remaining employees to accomplish the tasks employees lost to reduction in staff. Many companies delay layoffs as long as possible using early retirement plan provides a way to delay layoffs while achieving cost savings. By reducing layoffs, the company can better allocate resources to essential operations and business areas [Sergay, 2012]. By doing so, the company can identify shortfalls in staffing and begin developing new requirements when financially able. 12 Employee Advancement As companies continue to adopt advances in technology as well as processes such as just in time supply chains, the number of jobs required to produce goods a services is reduced. Many companies now use automated processes to manage inventory, compile information and perform rudimentary administrative functions [Sergay, 2012]. Few workers still receive a personal check signed by the comptroller, or fill orders by hand or maintain large inventories of supplies in large warehouses. These functions have all been automated, making the company more efficiently both in production and in delivery. For the company’s workforce the down side to this revolution is the loss of the more menial positions within the company. Warehousemen, secretaries and accounting clerks are among the many workers now replaced by automation. But with every problem comes a potential opportunity. This revolution in automation creates emerging needs for talent with the skill sets required to manage these new processes and systems. Employees who cannot obtain the required skill sets will likely find themselves out of a job. If the company can reduce staff and costs via early retirement or selective buy-outs, it can retrain staff with cost savings, thereby benefitting both the retirees and current employees. WORK FORCE REDUCTIONS – AIRLINE INDUSTRY Work force reductions are a common method for organizations to rapidly cut costs and boost available funds. They are common events in government as well as public and private companies and organizations. In some cases, these events emerge quickly due to a sudden change in the environment. In the five months following the attacks on the World Trade Centre on Sep 11, 2001 (911), the travel industry as a whole lost 237,000 jobs [Guardian, 2002]. Of those lost, 155,000 were directly associated with airlines [Herbst, 2009]. Within the airline industry, this phenomenon is not unique to the post 9-11period. Since the Airline Deregulation Act of 1978, the industry has undergone a significant consolidation. Many famous older airlines have either merged with other airlines or have gone bankrupt, leaving the industry altogether. Legendary companies such as PanAm, Braniff, Eastern and Transworld Airways (TWA) have disappeared. As the legends died or were merged, a new category of airlines emerged. These start-ups offered cheaper fares over new and traditional route-maps. With these start-ups came new jobs as well. Pilots, flight attendants, mechanics and baggage handlers moved from stable, long term legacy companies to dynamic, emerging companies, often paying less than their previous positions. In evolutionary terms, this is the survival of the fittest. But there was a problem; new companies have a high failure rate. There are many reasons for this, including poor business plans, under capitalization, unanticipated costs (e.g. fuel) and bad luck. Like the legacy companies before them, these start-up companies were subject to the same market and environmental conditions. As a result, many of today’s airline workers have worked for several companies over many years. For this reason, airline employment can be regarded as cyclical and somewhat unpredictable, especially with regard to long term career planning. 13 How then does this affect the employees of Air Canada specifically, those engaged in operational and non-operational positions? Quite simply, one category of employee is tied very closely to airline industry at the operational level and the other is not. Operational employees remain by the nature of their skills and expertise, dependent upon the airline industry. Pilots, flight attendants, aircraft mechanics, cargo handlers and flight dispatchers must find other airlines or aviation related companies in order to use their skills and expertise. Further, the cost of re-training on new aircraft, equipment and procedures represents a significant investment for both the employee and the gaining company. In essence, operational employees are trapped within the aviation industry and are therefore not regarded as portable. Non-operational employees by the nature of their skills and expertise are independent of the airline industry. Customer service, administrative assistants, accountants, facilities maintenance workers and others may export their skills to other companies not even remotely related to the aviation or airline industry. An administrative assistant for an airline could easily adapt to being an administrative assistant for a legal firm. The cost of re-training is minimized as many of the same systems and equipment (e.g. computers with Microsoft office) are used in multiple industries. The primary issue associated with non-operational employees moving from one position to another lies with changes in local procedures. Depending on the level of change, this training may require as simple as reading local procedures or as complex as attending an off-site seminar. Nonoperational employees are therefore largely free of the aviation industry and are therefore regarded as portable. Air Canada – Redundancies via Lay-off As previously noted, lay-offs are normally the option of last resort [Sergay, 2012]. In the case of Air Canada the employees to be terminated will be laid off in order to reduce costs. The costs associated with salary, medical and dental insurance, pension and retirement fund contribution represent a considerable monthly expense that in theory can be recouped almost immediately. There are however, costs associated with termination of employment due to financial reasons. Employees terminated for violations or poor performance are terminated for cause. Termination for financial reasons (e.g. Lay off) is not categorizes as “for cause.” Canadian labour law requires employers to pay termination pay for employees not terminated for cause. Termination pay is defined as a lump sum payment equal to the regular wages for a regular work week that an employee would have earned during the notice period had notice been given [law-faqs.org, 2010]. Under Canadian Labour Law notice is defined as the following [law-faqs.org, 2010]:  One week notice for employment of three months or more, but less than two years  Two weeks notice for employment of two years or more, but less than four years;  Four weeks notice for employment of four years or more, but less than six years;  Five weeks notice for employment of six years or more, but less than eight years;  Six weeks notice for employment of eight years or more, but less than ten years;  Eight weeks notice for employment of ten years or more 14 Lay-offs are also difficult on both the employee and the company with regard to change and uncertainty. Morale suffers when employees are concerned about their jobs, both in the long and short-term. Morale is a critical component in the efficient operation of an organization. When employees fear for their positions, there may be some short term increase in production. In the long term however, poor employee morale will result in increased costs due to increased absence and reduced efficiency. These issues are directly related to the concept of employee loyalty. Employee loyalty is critical to the long term operation of an organization but is not a given. Loyalty is a “two way street,” requiring commitment from both management and employees. If employees do not recognize commitment from their management, they are not likely to commit to the success of the company, especially during periods of difficulty. Like other companies Air Canada require commitment from their employees while maintaining a profitable business model. Maintaining employee morale and loyalty during lay-offs requires transparency and communication between management and the work force. Bad news is best heard directly from the company’s leadership as opposed to the rumour mill. Further, it is important to involve employee labour representatives both union and non-union in the decision making process. Ultimately the decision will remain with management, but employee response will be far more acceptable and less litigious if employees believe their voices were heard. Air Canada - Early Retirement Air Canada has not released the number of offers allowed for their early retirement program, nor have they provided details of early retirement packages. This leads the researcher to conjecture on the scope, requirements and resources available for the early retirement program. However, there are some standard notes to follow. First, early retirements provide a less draconian option for workforce reduction. In all cases, it is always best for employees to choose to leave rather than being forces to leave. Early retirement offers that opportunity. There are however, issues associated with early retirement. The first issue is cost. While early retirees leave the productive workforce, they do not leave the books. The company remains liable for pay and benefits as long as the retiree lives. Furthermore, while the retiree is being paid, he or she is not providing direct support to the company’s operations. This can become a drag on the company’s finances during periods of financial distress. For example, the General Motors retirement program was regarded as one of the most generous in the nation. As the number of retirees grew, the costs grew commensurately, especially with regard to their medical insurance plan. When the company declared bankruptcy, these plans had to be renegotiated leaving retirees with fewer benefits at higher costs. Within the aviation industry a number of airlines have declared bankruptcy thereby voiding much of their responsibilities for pension plans and medical benefits. These plans were taken over by the US Government through the Pension Benefit Guarantee Corporation (PBGC). Under the PBGC retirees were offered a much lower pension and reduced benefits. This brings down morale significantly among both retirees and current employees. If they do not feel their retirement is safe, they are not likely to take the opportunity leave early. 15 The second issue is loss of expertise. It is often said, that given an incentive to leave, the best and brightest do so. Early retirement and other severance incentive programs often attract the best employees as they are normally best prepared to find new employment and better positions. This is an example of law of unintended consequences. The law of unintended consequences states that, for any willed action, there are consequences which occur which were not intended [Merten, 1936]. In this case, the company by offering early retirement has provided an incentive for the most capable and most experienced employees to depart, in some cases for rival companies. Companies planning early retirement must complete a detailed audit of their work force with regard to expertise, value and cost of replacement. Once the positions have been evaluated, they should be rank ordered as to what the company can either replace quickly or can do without. For example, Air Canada may decide not to offer early retirement to senior pilots but will offer early retirement to senior flight attendants. EMPLOYEE DEMOGRAPHICS – AIR CANADA The following paragraphs identify and describe issues associated with two primary categories of Air Canada personnel, operational and non-operational employees. Within each category several positions will be described. Each position will be discussed with regard to value and cost as well as portability. The value of a given position is closely related to the amount and type of training and experience required to provide a fully capable employee. Pilots require significant training over flight attendants and cargo handlers. As a result, the company must carefully weigh any loss of high value employees in order to ensure proper and efficient operation after the work force reduction. Portability is defined as the employees ability to move from one position to another both within and outside of the airline industry. Positions associated with high levels of portability should in theory, have less difficulty in moving to another position. This is especially true for positions that are dependent on airline and aviation related companies. Portability is only marginally related to value and expense. An airline captain being laid off may have real difficulty finding a new position at the same level of responsibility and pay. A secretary on the other hand may find new positions easily, even though the level of training and expertise is much lower. Operations Employees Operations employees are specifically trained for their positions. Pilots normally have several thousand hours of flight time in various environmental conditions (e.g. night, overwater) and aircraft categories (e.g. single engine, multiple engine). Pilots are also trained and certified by position. Pilots are certified as captains, first pilots (co-pilots), instructors and evaluators. Airlines still flying aircraft with three-flight crew also certify a second pilot or flight engineer2. Finally, pilots are type rated against the aircraft they fly for their employer3. The Air Canada fleet includes Airbus, Boeing and Embraer wide-body, narrow-body and regional aircraft4. 2 The Air Canada fleet is exclusively manned by two aircrew. Type rating refers to specialized qualification for the operation of a position on a given aircraft. Pilots are type rated as captain, 737-500 or first officer, A-320. Type rating is granted by authorized training facilities in accordance with national and ICAO requirements. 4 Wide body refers to aircraft with two or more aisles, Narrow body refers to aircraft with 1 aisle and regional refers smaller, single aisle aircraft generally flying shorter routes [Businessdirectory.com, 2012]. 3 16 Pilot In general terms the pilot job is highly portable. There are many commercial pilots with thousands of hours of flight time on multiple types of aircraft flying for multiple airlines. The issue is the cost of training required to be competitive for advertised positions. The minimum aviation related requirements for a new first officer form Air Canada include 1500 hours of fixed wing flight time, a Canadian Airline Transport Pilot (commercial) licence with current instrument rating and multi engine endorsement. This is the minimum requirement; to be competitive candidates should also have jet and/or glass cockpit experience, a university degree and previous commercial or military flight experience [Air Canada.com, 2012]. The initial cost of training is very high. Once trained however, pilots can and often do transfer between airlines and aircraft. Dragonair, a Hong Kong based airline is popular among expatriate pilots looking to move to new positions due to downsizing of their current companies. However, first officer minimums for the company are much more stringent. In addition to the commercial pilot licence listed above, minimum flight time is 3000 hours with at least 500 jet or 1000 multi-engine turboprop hours as a captain [Dragonair, 2012]. Company preference is for first pilots already rated in the Airbus A320 and A330 aircraft. So while pilot positions are portable, they require significant additional skills and certifications to be competitive. One other issue not mentioned in the previous discussion is the importance of seniority. Within the airline industry operational employees of all kinds are subject to very strict seniority rules. Pilots, flight attendants, flight dispatchers, cargo handlers and mechanics are all subject seniority placement for flight assignments, shift work and vacation. When operations employees move from one company to another, they normally start at the bottom of the roster. As such, any changes must factor in the loss of these non-monetary but significant benefits. Flight Attendant Most travellers are aware of Flight Attendant duties in serving passengers meals, drinks, etc. However, the primary function of a flight attendant is flight safety. The customer service is simply an additional albeit very visible task. Flight attendants require less training as a rule; however they must be capable of serving aboard the specific aircraft they are flying with. In order to function effectively, flight attendants must have knowledge of the safety features and life support systems of each assigned aircraft. Unlike the pilot position, the flight attendant job is portable at the higher levels. Flight attendants can move from one airline to another however, most positions require initial entry and retraining. Further, because there are generally more applicants than opportunities, most positions require citizenship or authorization to work in the airline’s country of origin. Those flight attendant positions not set aside for entry level usually require specialized skills such as foreign language fluency. Flight Dispatcher 17 Flight dispatchers plan, release and monitor the aircraft from pre-flight to post-flight. They are responsible for weather planning, cargo and passenger load planning, fuelling and pre-flight of the aircraft prior to crew arrival. During the flight, dispatchers monitor in-flight systems, fuel consumption, weather and update pilots on changes and hazards both en-route and prior to arrival. During emergency situations, the dispatcher provides communication and coordination between the aircrew, maintenance, national aviation authorities and corporate headquarters. Like pilots, flight dispatchers are licensed by their respective national aviation authorities (e.g. Federal Aviation Authority [FAA]). Licensing requires formal training and certification much in the same manner as pilots. Dispatchers must be aware of the systems, flight characteristics and emergency procedures for each aircraft they plan, release and monitor. They must also maintain real time knowledge of cargo, passenger and fuel loads to compute centre of gravity and endurance. Flight dispatchers normally work in airline operations centres, using banks of radios, satellite communications, computers and new feeds. These centres rival military operations centres in their complexity and capability and usually handle all flights for a given airline, world-wide. For example, the Delta operations centre in Atlanta GA, USA handles aircraft arriving and departing from Washington DC, USA, Mumbay IND, Tokyo JAP and Johannesburg RSA simultaneously. As a result, flight dispatch is not a particularly portable position. In order to work for American Airlines a flight dispatcher must move to Fort Worth TX, USA, for United Airlines, Chicago ILL, USA and for Air Canada, Toronto CAN. Finally, many airlines grow their dispatchers from within. This means direct entry into a dispatcher position is unlikely significantly reducing portability. Aircraft Maintenance/Mechanic Aircraft mechanics are responsible for maintenance, repair, and trouble shooting of airline owned and leased aircraft. Aircraft mechanics are required to be trained and certified in accordance with national aviation authority guidelines (e.g. Federal Aviation Administration [FAA]). Most mechanics receive their training through military service through an approved aviation technical school Air Canada.com, 2012]. Aircraft mechanics are normally also specialised as to the system or equipment they maintain. For example, there are specialist mechanics for avionics, navigation systems, communications systems (radios and satellite communications), life support (oxygen, pressurization), engines, landing gear, airframe as well electrical and hydraulic systems. Like other craftsmen, aircraft mechanics must start at the entry or apprentice level. As they progress in experience and receive supplemental training, they become journeymen and finally master mechanics. Within Air Canada, this process generally takes at least four years Air Canada.com, 2012]. Experienced aircraft mechanics are a highly sought after commodity within the aviation industry. This makes the position highly portable. Airport and Cargo Ground Services 18 Station Attendants (baggage handlers) work on the flight line, handling baggage and freight, moving cargo between the aircraft and the airport baggage distribution system. Cargo and ground services personnel also service, reposition and marshal the aircraft between flights. To accomplish their tasks, they are required to operate a variety of complex vehicles and cargo loading equipment in all weather conditions. Air Canada hires a number Station Attendants as part time employees, especially at non-hub locations where few flights take place on a daily basis [Air Canada.com, 2012]. For many airlines the station attendant position is often an entry-level position. Many airlines current middle and senior management started as baggage handlers and customer service representatives. The position does require licensing for specific types of vehicles, loading equipment and aircraft systems (e.g. fuelling). Several tasks also require training. Towing aircraft, marshalling incoming and departing aircraft and operating on-board systems such as access doors, fuelling and grounding and de-icing are critical to aircraft safety and operation. Non Operational Employees Non-operational employees are generally do not work directly with the movement, maintenance and operation of the aircraft. These are the company employees and are found in virtually all industries. Their importance to the organization should be acknowledged however, since without them, the company would not be able to pay its bills, market or sell its services and/or maintain its buildings and non-aviation equipment. Customer Service Customer service representatives provide check in, ticketing, information and assistance to airline customers [Air Canada.com, 2012]. They are often the first employees the general public meet when they arrive at the airport or call for tickets and information. As a result, they are often referred to as ambassadors or representatives of the airline and are an important component of the customer service mission. At Air Canada, customer service representatives are characterized as either airport and call centre agents [Air Canada.com, 2012]. Customer service representatives, work in a fast-paced environment and interact with the public both in person and on the telephone. Customer service representatives must also be able to solve problems rapidly, with little supervision. This requires extensive knowledge of airline procedures and policies as well as extensive training in the company’s computer applications. Building and Facility Maintenance Building and facility maintenance employees include stock keeper, millwright, automobile technician, electrician, plumber stationary and plant operator. They are responsible for the general care and operation of the physical company. Duties include but are not limited to shipping, warehousing, aircraft parts storage and issue, operation and maintenance of motorized equipment and vehicles, inspection of aircraft and non-aircraft materials as well as maintenance of physical plant including electrical, plumbing and structural systems. Administrative Employees 19 Administrative employees are highly diverse and are responsible for the overall operation of the company. Their position include but are not limited to finance, management, marketing, legal affairs, consumer affairs and human recourses. Administrative positions are necessary to all companies regardless of the industry. While recruiters for Air Canada have specific knowledge of the airline industry and its regulations, the same principles of recruitment apply to other industries as well. As a result, the Air Canada recruiters could if required take up positions to other industries given the right training prior to seeking their posts. Almost all other administrative positions fall into this category. Secretaries, marketing teams and financial analysts can very easily move from one industry to another given basic training in the new company’s processes and products. One would assume then that administrative positions are highly portable. This is true to the extent the market has administrative positions available for new hires. CAREER DEVELOPMENT PLAN Career development deals with the relationship of individuals to their careers in relation to their organizations [Merchant, 2012]. Careers by definition are individual, the sum of careers in an organization makes provides an environment for the advancement of individuals within that organization. A career development plan, provides defines the roadmap required to navigate the organizational career environment. A career development plan is simply a list of the employees’ long and short -term goals for current and future careers. Career development plans assist employees in achieving their goals or in the case of redundancies, to find reemployment. A properly researched and honest career development plan allows employees to set realistic expectations for career growth by suggesting milestones and identifying areas development to meet career requirements [Trueba, 2012]. In all cases, the company should ensure both employees made redundant though lay offs and early retirements have a coherent career development plan, providing employment support, personal counselling and financial planning. The goal should be to ensure employees wishing to remain in the work force to be re-employed within 90 days. This is an important issue as the longer an employee goes unemployed, the harder it is for them to become reemployed. There are three critical steps to building a viable career plan. These steps include an understanding of the current situation, analysis of overlaps and gaps in the current situation development of a written plan based on that analysis [Brosco, Scherer, 2003]. While career development planning for terminated and retired employees may be different at the execution level, the overall objective is the same, transition to another position, either within the same career field or in a wholly new career field. The following paragraphs describe issues associated with employees who have been terminated by being laid off and retired early. Career Development Plans - Content Career development plans normally start with some degree of career counselling. This includes at a minimum skills and personality testing coupled with review of current and emerging opportunities within the targeted industry. Career counselling services supporting reemployment include [UCLA, 2012]:  Receive an individual assessment 20      Update resume and cover letter Polish interviewing skills Review successful job search strategies Identify campus tools and resources Create a career development plan Personality and skills testing is another critical element to the career planning process. Potential employees should undergo testing to determine their desires and their capabilities. Testing results will be used to develop a realistic and accurate career plan for employees to follow. The Myers Brigs Type Indicator (MBTI) is highly recommended for determining the initial employee personality types and personal desires. Aptitude testing may be employed to gauge an employees aptitudes for certain types of jobs. These tests are commonly used to down select applicants for highly skilled positions such as aviation. Skills testing may be used to gauge an employee’s level of knowledge and skills for specific positions (e.g. aircraft mechanic). These tests are critical to the placement of employees within a new or current organization. For example, an apprentice aircraft mechanic specialized in avionics would not be capable of filling a master mechanic position specializing in airframe. The results gleaned from these tests forms the basis for the development of the employee’s career development plan. Once testing and interviews are complete the next step is to create an actual plan, complete with performance milestones, scheduled training requirements and feedback. Employees will use the plan to schedule training, inventory and report skills and monitor their own progress. Some companies offer career planning via online resources. These programs have a number of advantages over traditional paper plans. The first is the ability to modify and update the plan. As the employee updates their plan, they receive immediate feedback. Their milestones and skills inventory move commensurate with their progress. This can then be sued to update resumes and/or potential employers. If the employee is still with the company, their progress can be flagged to their immediate supervisor and to human relations for personnel records updates and potential promotion or retention. Transition counselling Employees subject to redundancy are also under heavy personal and financial stress. For this reason, career counselling should also provide some degree of personal and financial counselling for the individuals involved. Finally, redundancy effect on the organization as a whole should not be ignored. As noted earlier, remaining employees will suffer from a number of emotions related to the event. If not addressed, these issues have the potential to reduce efficiency and morale within the organization long after redundancies have been completed. Career Development Plans - Cost The actual cost of a career development plan extends beyond direct cost of procurement. There are also indirect or intangible costs associated with employees, both redundant and remaining. 21 For employees directly affected by redundancies, career development planning identifies opportunities and individual requirements for reemployment. Realistic planning enables redundant and retired employees to evaluate potential opportunities with regard to the current job market as well as the skills and educated required for the new positions. Using this information the employees can further develop a coherent plan for training and job search. By offering career planning and counselling, the company shows its commitment to their work force, including those being made redundant. This in turn will reduce the company’s exposure to potential litigation over redundancies. Further, employees who have successfully transitioned to other positions in the work force may be re-hired for new and emerging positions within the company. For remaining employees career development planning offers two benefits. First it demonstrates the company’s commitment to their employees. This generates goodwill having the knock on effect of improving morale and efficiency. Second, it identifies remaining employees’ opportunities for advancement as well as any gaps in their skills or experience. Using this information, remaining employees can prepare plans for enhancing their skills and expertise for retention and/or advancement in the future. While the procurement cost of career development planning may be significant, the intangible costs may well exceed any benefit derived from the initial redundancies. As a result, companies like Air Canada should figure these costs into their procurement decision. Career Development Planning – Criteria for Success For employees facing redundancy, a career development plan’s ultimate measure of success is simply reemployment at a position of similar responsibility and compensation. More importantly, the longer an employee stays unemployed the less attractive they are to potential employers. The Bureau of Labour Statistics defines the long-term unemployed as those who have been out of work for longer than 27 weeks (six months) [Woody, 2011]. Employers often prefer not to hire the long term unemployed for various reasons. These include the atrophy of work skills, lack of current industry knowledge and an inability to re-integrate into daily work schedules. While these reasons may seem unfair, there is certainly some truth to the reports. For this reason, employees facing redundancy should attempt to become reemployed as soon as possible, even if there is little financial incentive to do so. For Air Canada, each employee faces a different set of hurdles in their quest for a new position. Some highly portable positions (e.g. secretaries, tradesmen, etc) will find work easily even if at a lower level of responsibility and compensation. Those with lower portability will take longer (captain, flight dispatcher, marketer). The career plan and its criteria therefore, cannot be fully one size fits all. As a rule, the success criteria for the career development plan should viewed in two parts. The first is the number of affected employees who wither participated in the program or decided to opt out on their own volition. This criteria is directly associated with the company itself. The second criteria should be the time required to find reemployment. This criteria is directly associated with the individual employee as they will be responsible for finding a new position after the redundancy. However, the company still has a stake in criteria as a measure of the program’s 22 success. If few employees are reemployed after the target date, then the program may not be meeting their needs. As a general rule and in keeping with Bureau of Labour statistics, recommended success criteria are detailed in Table 1 and 2 Below: Table 1 Career Development Planning Criteria (Percentage Participation in Company Offered Career Development Planning) Percentage Participation (includes those employees purposely opting out) 90-100 % Excellent 70-89% Satisfactory 60-69% Marginal <59% Poor Table 2 Career Development Planning Criteria (Days Unemployed) Position Operational Employees Check Captain Instructor Captain Captain First Officer Purser Flight Attendant Flight Dispatcher Aircraft Mechanic - Master Aircraft Mechanic - Journeyman Aircraft Mechanic - Apprentice Cargo Handler and Ramp Agent- Lead Cargo Handler and Ramp Agent Customer Service Agent - Supervisor Customer Service Agent Call Centre Agent - Supervisor Call Centre Agent Buildings and Facilities - Manager Buildings and Facilities - Custodian Buildings and Facilities – Vehicle Mechanic Buildings and Facilities – Trades (Electrician, Plumber) Buildings and Facilities - Landscaping Buildings and Facilities – General Labour Administrative - Manager Administrative – Human Resources Administrative – Admin Assistant Administrative – Legal Administrative – Finance - Controller Excellent Satisfactory Marginal Poor 01-90 Days 01-60 Days 01-60 Days 01-30 Days 01-60 Days 01-60 Days 01-90 Days 01-30 Days 01-30 Days 01-30 Days 01-30 Days 01-30 Days 90-120 Days 60-90 Days 60-90 Days 30-60 Days 60-90 Days 60-90 Days 90-120 Days 30-60 Days 30-60 Days 30-60 Days 30-60 Days 30-60 Days 120-180 Days 90-120 Days 90-120 Days 60-90 Days 90-120 Days 90-120 Days 120-180 Days 60-90 Days 60-90 Days 60-90 Days 60-90 Days 60-90 Days >180 Days >120 Days >120 Days >90 Days >120 Days >120 Days >180 Days >90 Days >90 Days >90 Days >90 Days >90 Days 01-60 Days 01-30 Days 01-30 Days 01-30 Days 01-30 Days 01-60 Days 01-30 Days 01-30 Days 60-90 Days 30-60 Days 30-60 Days 30-60 Days 30-60 Days 60-90 Days 30-60 Days 30-60 Days 90-120 Days 60-90 Days 60-90 Days 60-90 Days 60-90 Days 90-120 Days 60-90 Days 60-90 Days >120 Days >90 Days >90 Days >90 Days >90 Days >120 Days >90 Days >90 Days 01-60 Days 01-60 Days 01-60 Days 01-90 Days 01-60 Days 01-60 Days 01-30 Days 60-90 Days 60-90 Days 60-90 Days 90-120 Days 60-90 Days 60-90 Days 30-60 Days 90-120 Days 90-120 Days 90-120 Days 120-180 Days 90-120 Days 90-120 Days 60-90 Days >120 Days >120 Days >120 Days >180 Days >120 Days >120 Days >90 Days 23 Position Administrative – Finance - Analyst Administrative - Marketing Administrative – Public Relations Excellent 01-60 Days 01-60 Days 01-60 Days Satisfactory 60-90 Days 60-90 Days 60-90 Days Marginal 90-120 Days 90-120 Days 90-120 Days Poor >120 Days >120 Days >120 Days Air Canada - Work force Audit In order to assist in the development of various career development plans, a work force audit is required. The audit results of the audit coupled with anecdotal information on the categories and individual positions will provide the basis for discussion of potential issues and opportunities available to personnel affected by redundancies. Table 3 below presents a tabular view of four elements used in the audit of a company’s work force. In this case management is exploring the level of training, availability of similarly experienced employees, replacement cost for each position and the portability of the position. Training requirements defines the level and type of training required to perform the position. For example, the training required to replace a Check Captain would be extremely high in comparison to a line cargo handler. Availability is derived from the number of similarly qualified personnel currently available in the company. The higher the availability the less impact there will be on the company after the workforce reduction. These numbers are useful for gauging the impact of force reductions in certain areas (e.g. flight attendants). It should be noted that categories should be examined for like qualification. Management may wish to reduce building and facilities personnel because there is reporting a large number population of these positions. This may be a false argument as the actual population is widely diverse within the category. There may be a excess resources among custodians and a severe shortage among plumbers and electricians. Simply reducing building and facilities personnel without regard to their deeper qualifications could severely hamper daily operations for the company. Replacement cost is simply the estimated cost incurred in replacing an individual crew position. These costs consist of salaries and bonuses commensurate with industry standards, training requirements and relocation costs if offered. Review of the data may reveal some unexpected results. For example replacement of an Instructor Captain may be cheaper than hiring a new Captain as the promotion would likely come from within the company and could potentially be handled as an extra duty. Portability is derived from outside of the company. A position’s degree of portability is directly related to the market for that position outside of the industry. Those positions with high levels of portability can easily move from one company to another outside of the industry. Positions with medium level portability can move also move within the industry but as whole when one company within an industry is suffering, most others are as well. Portability is not however an indication of cost. Secretarial positions are highly portable while Captain (pilot) positions are not. Companies may use portability as a criteria to select positions for reduction for two reasons. First, is the perceived ability of employees being laid off or retired to become re-employed quickly. Second, portability generally denotes a higher pool of candidates when 24 the company begins hiring again. By choosing positions that are highly portable, the company can reduce the pain associated with the reduction and recover more quickly when the financial environment allows. Table 3 Workforce Audit – Air Canada Position Operational Employees Check Captain Instructor Captain Captain First Officer Purser Flight Attendant Flight Dispatcher Aircraft Mechanic - Master Aircraft Mechanic - Journeyman Aircraft Mechanic - Apprentice Cargo Handler and Ramp Agent- Lead Cargo Handler and Ramp Agent Non-operational Employees Customer Service Agent - Supervisor Customer Service Agent Call Centre Agent - Supervisor Call Centre Agent Buildings and Facilities - Manager Buildings and Facilities - Custodian Buildings and Facilities – Vehicle Mechanic Buildings and Facilities – Trades (Electrician, Plumber) Buildings and Facilities - Landscaping Buildings and Facilities – General Labour Administrative - Manager Administrative – Human Resources Administrative – Admin Assistant Administrative – Legal Administrative – Finance - Controller Administrative – Finance - Analyst Administrative - Marketing Administrative – Public Relations Training Reqmts Availability Replacement Cost Portability High High High High Medium Medium High High Medium Low Low Low Low Low Low Medium Low Medium Low Low Medium High Medium Medium High High High High Medium Medium High High Medium Low Low Low Low Low Low High Low Medium Low High High Medium Low Low Low Low Low Low Medium Low Medium Medium Medium High Medium Medium Low High Medium Medium Medium Medium Low Low Medium Low Medium Medium Low Low Medium Medium Medium High High High Low Low Medium Medium Low High High Medium Medium Medium Medium High Low Medium Medium Low Low Medium Medium Medium Low Low Medium Medium Low High High Medium Medium Medium Medium Medium Medium Medium High High High Medium Medium Medium Career Development Plans - Operations Employees As noted earlier in the document, operations employees are specifically hired and trained for their positions. Pilots, flight attendants, dispatchers, mechanics and airport and cargo ground services deal directly with the aircraft and their operations. This means these positions have very narrow and detailed requirements. Career Development for these positions is therefore very specific as to the opportunities for advancement, replacement cost and portability of skills. The following individual 25 work force audits provide recommendations for redundancy, early retirement and reemployment of employees resident in these positions. Work Force Audit and Career Development - Pilot Pilot jobs are generally highly portable at the entry level. Most pilots generally progress from first pilot to captain and then to instructor and check captain in the same company. As a result, “horizontal5” transfers of experienced pilots is rare but not unheard of. A number of national and start-up airlines hire experienced and type rated captains for defined duration contracts. In the mean, these positions are largely temporary and do not support long term careers. Pilots are also one of the most valuable positions for an airline such as Air Canada. The amount of training invested to type rate and qualify a pilot increases their overall value to the company. That being said, pilots are specialists and are normally not assigned to non-operational duties. For this reason many airlines facing financial hardships routinely furlough pilots usually based on seniority. The term furlough is often used in the airline industry with regard to temporary work force reduction. Employees being furloughed often times remain with the company in an unpaid status. This is common in cyclical industries such as the airline industry. In the case of a furlough, the employee has some expectation of re-employment with the company in the future. Further, employees who are furloughed may also be subject to Air Canada policies regarding other employment. For example, furloughed American Airlines pilots could not accept flying positions with other aviation companies even when the furlough appeared to be open ended. In this way, airlines can maintain a stable of available talent if and when the economic situation allows. Table 3 depicts the value, training and replacement costs as well as the portability of various pilot positions. Note that experienced pilots (captains, instructor captain and check captain) are generally medium to low in numbers, expensive to replace but have a low level of portability. This means the company can more easily lay off a first pilot over a captain. Further the first pilot will likely have more opportunities to become re-hired more rapidly than a pilot of higher experience and training. With regard to early retirement, the mandated retirement age for Air Canada pilots in accordance with Canadian Aviation Administration (CAA) rules is 60 years [Flypast60.com, 2012]. The maximum age limit is fairly standard across the aviation industry though the USA and Canada are in the prcess of changing the maximum age to 65 years [Flypast60.com, 2012]. This means experienced pilots (e.g. captains) will have not only greater difficulty finding positions at the same level of pay and benefits, but will have less time to build seniority prior to forced retirement. Early retirement therefore will likely be considered only by those very high experienced pilots who may be close to maximum age at the time of the offer. Early retirements should therefore be targeted to captains aged 57-59. One benefit of early retirement will be employee advancement. As previously described, pilots are subject to strict seniority rankings. As higher ranked pilots depart 5 Horizontal transfer describes the movement from one job to a similar position in rank, payment, responsibility and benefits [Merchant, 2012] 26 from the work force, lower ranked pilots move into their positions. This in turn provides a boost to morale for pilots remaining with the company. Air Canada should set the number of pilots based on recent requirements coupled with future operational projections. Once the number of segments (flights) are determined, the number of pilots required can be derived. Once that number is derived, the company should primarily the youngest and less senior pilots to be laid off. The company can and should consider furlough as an option for these younger pilots. This will allow Air Canada to more rapidly strengthen their required pilot population if and when the economic situation requires. Early retirement should be made an option for those highly experienced pilots who are prepared and willing to retire. In order to stem the experience lost due to early retirements, the air Canada should consider offering part time positions as instructors and mentors. By doing so, the company maintains access to highly qualified employees and enhances morale of remaining employees at a lower overall price. For those not able to willing to accept re-employment with Air Canada, support similar to laid off employees should be offered. Work Force Audit and Career Development - Flight Attendant Flight attendants are normally hired at the entry level for the airline they are employed by. Most major airlines have in house training programs, detailing company procedures and processes in addition to aircraft configuration, flight safety and customer service. As a result, there does not appear to be a great deal of portability for flight attendants attempting a horizontal move between airline companies. Furthermore, unlike pilots flight attendants are assigned only to passenger flights. Pilots can fly with cargo carriers, specialist aviation companies (e.g. military support – target towing) and become flight instructors. Unfortunately flight attendants have very few options outside of their own airline (see Table 3). There are limited opportunities for flight attendants to take positions with corporate aviation and with international and start-up airlines. Like pilots however, these positions are largely temporary and are not good candidates for long term careers. Unlike pilots, flight attendants are not subject to maximum age rules. However, long hours standing and moving about in an enclosed area, reaching across passengers can be physically taxing for older employees. Most experienced flight attendants become pursers; that is the lead flight attendant aboard a flight. These positions are even less portable as flight attendants, like pilots are subject to strict seniority rules. As a result, flight attendants may have great difficulty in finding similar employment after they have been laid off or furloughed. As flight attendants are aircrew, the decision to reduce their work force is similar to the same process for pilots. As with pilots, flight attendants may be furloughed in lieu of lay offs if the company anticipates a return to positive economic conditions. As with the pilot work force Air Canada should set the number of flight attendants based on recent requirements coupled with future operational projections. Once the number of segments (flights) are determined, the number of flight attendants required can be derived. Once that number is derived, the company should primarily the youngest and less senior flight attendants to be laid off. 27 Early retirement should be made an option for those highly experienced flight attendants who are prepared and willing to retire. In order to stem the experience lost due to early retirements, Air Canada may consider offering part time positions as instructors and mentors. By doing so, the company maintains access to highly qualified employees and enhances morale of remaining employees at a lower overall price. For those not able to willing to accept re-employment with Air Canada, support similar to laid off employees should be offered. Work Force Audit and Career Development - Flight Dispatcher Flight dispatchers are in many ways, ground based pilots. The plan, release and monitor aircraft from pre-flight to post-flight and are subject to many of the same training requirements as the pilot force. Like flight attendants, dispatchers are normally grown from within. Many dispatchers started their careers as ramp agents, cargo handlers, customer service representatives and mechanics. Since there is no maximum age limit, a large number of dispatchers are former pilots, many of whom reached their maximum age or were grounded for physical issues. As a result, dispatcher positions are not especially portable (see Table 3). Most airlines maintain enough dispatchers to efficiently operate their operations. This does not mean the ratio of dispatcher to flight is one to one. Dispatchers routinely plan, launch, monitor and recover multiple flights simultaneously. As a result, there is often little or no extra capacity among the dispatcher positions within an airline. This means barring a sudden loss of significant market share, most airlines will maintain their dispatcher work force. If however, the airline needs to reduce dispatchers, the same processes for pilot and flight attendant should be applied. Because similar dispatcher positions are difficult to find, the offer of early retirement is the best option. Dispatchers being laid off or placed on furlough prior to retirement will likely have to look outside of the airline industry to find employment. It should be noted that as dispatchers normally came from within the company, they may be offered opportunities of reemployment at previous positions. These include cargo handlers, ramp agents, customer service representatives, etc. Normally these positions pay significantly less than the dispatcher position but could provide an opportunity to keep the expertise in house while waiting for more positive economic conditions. By offering reemployment at a lower paying position, the company also improves morale of remaining employees and offers options to the employee designated for redundancy. Work Force Audit and Career Development - Aircraft Maintenance/Mechanic Aircraft mechanics are critical elements in the safe and efficient operation of an airline. Like pilots and dispatchers, aircraft mechanics are trained and certified in accordance with national aviation authority guidelines (e.g. CAA). They are further specialised in the systems and/or equipment they maintain. As a result, they must be considered for redundancy by specialty not as a monolithic group. Mechanics are subject to both seniority rules and qualification grading by expertise. Mechanics move through the various levels of qualification starting as apprentice, then journeyman and finally master. On the whole their positions are fairly portable, allowing movement from one airline to another depending on the type of aircraft and systems required to maintain. 28 Mechanics also have significant opportunities to move to many aviation related companies including cargo carriers, specialist carriers, maintenance companies and even aerospace corporations. This is especially true for journeyman and master mechanics. Apprentices are also fairly mobile but are less in demand due to their lack of experience (see Table 3). As with dispatchers, the mechanic work force is not set and one mechanic to one aircraft. Mechanics routinely work on numerous aircraft depending on their qualification and speciality. AS a result, any redundancies must take into account the loss of maintenance capability on a specific system or aircraft. Some airlines may reduce mechanics who are superficially assigned to aircraft of systems being taken out of service. Air Canada on the other hand has a fairly young fleet, having retired several older Boeing and Airbus aircraft over the last four years. As a result, the company may not have this option. With regard to redundancies, mechanics do have a high degree of portability and can be trained fairly quickly on current and emerging systems and aircraft. The main loss of capability is in the level of expertise. For this reason, redundancies in the form of lay offs should be limited to more junior apprentice employees. Early retirement may be offered to older employees based on the current and emerging needs for specific systems and aircraft. Like pilots, retired mechanics may be offered reemployment part time as instructors or mentors for the current work force. By providing this option the company retains substantial expertise at a lower cost. Further, current employees will likely appreciate the way in which their former managers and leaders have been treated during the redundancy. This goodwill is highly important among employees being retained in an uncertain economic environment. Work Force Audit and Career Development - Airport and Cargo Ground Services Ramp agents, station attendants (baggage handlers) and other cargo handlers ensure baggage and cargo is moved from the aircraft to the terminal and back. They are also responsible for the repositioning, fuelling and servicing of the aircraft between flights. For many airlines these are permanent employees. Air Canada on the other hand, hires many of their airport and cargo service personnel as part time employees, especially at non-hub locations where few flights take place on a daily basis Air Canada.com, 2012]. This denotes an expectation of employees moving to other full time positions within the company. Many dispatchers, customer service agents and administrative personnel have started their careers in airport and cargo service positions. Having said this, the company still must ensure current employees meet training and licensing for specific types of vehicles, loading equipment and aircraft systems (e.g. fuelling). This means the employees cannot be readily replaced without some degree of training and/or experience. This does not relieve the company from providing a minimum of support for redundant employees within this area. First, while the company may be authorised to simply lay off the employees, sudden termination would send a rather draconian and somewhat unsettling message though the remaining work force. Second, many of the airlines middle management within the administrative and customer service areas come from airport and cargo services. These employees 29 then are the seed corn from which a number of important positions grow. By terminating employment with little or no support, the company risks alienating the very work force they hope to cultivate. In general, airport and cargo service positions have a high degree of portability both inside and outside of the aviation industry (see Table 3). Employees in these fields can easily move between airlines, work for cargo air carriers, speciality air carriers, airport authorities and aerospace corporations. The nature of their duties and their associated licenses (e.g. commercial driver’s permits) further enabled them to find employment in virtually all transportation industries including maritime shipping, rail way operations, overland trucking and warehousing. Unlike the airline industry, many of these industries employ these positions full time with advancement up to foreman or shift leader status. The part time nature of the position coupled with the ability to train and license in house makes airport and cargo service employees an appealing option for redundancy though lay offs. Part time employees are not subject to the same rules as full time employees and therefore would be less likely to be provided severance packages. Further, these employees are more easily drawn from the civilian workforce in general thereby allowing more rapid recovery of personnel when economic conditions allow. Like its other employees, Air Canada should ensure those chosen for redundancy via lay off is provided with some level of career counselling and planning. The entry level nature of the position will likely mean few if any employees will have an option for early retirement. Those who do have the option should be provided with the same level of career counselling and planning made available to those being laid off. Career development Plan - Non Operational Employees Non- operations employees are those employees engaged in the operation of the non-aviation portion of the company. Customer service, building and facilities maintenance and administrative positions support the operation of the company as a whole. Non-operational employees positions are highly diverse including generalists (e.g. customer service, secretaries) and others being speacialists (plumbers, lawyers). Development for these positions may be very specific as to the opportunities for advancement, replacement cost and portability of skills (e.g. lawyer). On the other hand, development for these positions may be very broad leading to internal opportunities for advancement (e.g. customer service to marketing). There is a wider array of skills required and available within these positions. The following individual work force audits provide recommendations for redundancy, early retirement and reemployment of employees resident in these positions. Work Force Audit and Career Development - Customer Service As earlier stated, customer service representatives are often the first person a customer meets or speaks with when contacting the company. Their duties are fairly diverse, providing check in, ticketing, information and assistance to customers. As a result, they are an important component of the customer service mission. At Air Canada, customer service representatives are characterized as either airport and call centre agents Air Canada.com, 2012]. 30 Customer service representatives must maintain extensive knowledge of airline procedures and policies and computer applications (e.g. ticketing). This knowledge is specific to the airline they are working for and is therefore not particularly portable. At the macro level however, customer service is a requirement in virtually all industries. The travel industry in particular uses a large number of customer service personnel both in person and in call centres. This means that as a whole, customer service is a portable position (see Table 3). Customer service is not usually a career in and of itself. Air Canada, like many other airlines promotes many of their administrative staff and management from customer service. There is great value from a macro point of view since customer service representatives are highly knowledgeable about the company, its products and its markets. Customer service representatives may easily move into marketing, customer relations and public affairs positions. This makes the position valuable for development of future talent, especially within management. For all their value, customer service representatives are generally not highly paid in relation to other positions at the company (e.g. pilot, dispatcher). This results in a fairly high natural turnover of positions as employees move to other higher paying positions inside or outside the company. Given this fact, planned redundancies may be mitigated somewhat through natural attrition. Not all customer service employees are full time or even located on site. Call centre employees may work from a designated location or in some cases, from home. These employees may be full or part time and may have reduced benefits because of their status and/or location. It should be noted that full time employees and are therefore subject to rules dealing with redundancy and severance packages. As a result, decisions to reduce customer service representatives require analysis of the type of position, location and potential for reemployment. Since the position does lend itself to part time employment, the option for part time reemployment may be offered to redundant customer service representatives. While this option does result in reduced pay and benefits, it may offer affected employees an opportunity to stay with the company or to supplement their income as they search for new employment. Redundant employees not wishing to take a part time position should be provided with career counselling and planning designed to expedite reemployment. This counselling and planning may include suggestions on career training and education needed to move into other related and nonrelated positions (e.g. marketing, public affairs) with other companies. Because the customer service position is not regarded as career track, there are not likely to be employees capable of taking an early retirement option. Those who do should be afforded the same level of career counselling and planning afforded to those subject to redundancy through lay off. Work Force Audit and Career Development - Building and Facility Maintenance Building and facility maintenance employees are a highly diverse group within a company. They may include but are not limited to custodians, stock keepers, millwrights, technicians, electricians, plumbers and plant operators. In most cases, they are not interchangeable. For example, electricians cannot repair plumbing and automobile technicians cannot set up data bases. Because of their specialization, building and facility maintenance positions enjoy a high degree of portability. Those skilled in trades such as electrician, plumbing, carpentry and auto mechanics are especially able to find positions both inside and outside of the airline industry. 31 Regarding redundancies, most companies hire the number and type of employees needed to ensure proper maintenance and operation of their facilities. For this reason, there may be little or no excess capacity in the building and facility work force. The corollary to this is when the company decides to close or decommission one or more of their facilities. By closing facilities the number of building and facility maintenance employees may be reduced dramatically. This is especially true for companies closing entire facilities (e.g. a factory). With regard to redundancies, building and facility maintenance employees do have a high degree of portability. However, the diverse nature of their skills means Air Canada must carefully select those for both redundancy and early retirement. Loss of capability in a highly skilled area such as plumbing may have significant effects on the operation of the company. Further, the corresponding requirement to contract out emergency service may cost more than the original employee. For this reason, redundancies in the form of lay offs should be limited to more junior employees and to positions enough depth to allow functionality after the redundancy. Early retirement may be offered to older employees based on the companies needs. Those who do have the option should be provided with the same level of career counselling and planning made available to those being laid off. One other option may also be evaluated, that of contracting some or all building and facilities maintenance to an outside company. Contracting of similar services has been on the rise, especially with regard to cleaning and general maintenance. Companies like Air Canada may upon analysis find the costs of contracting services to be less expensive over the long term than employing their own. Contractors take responsibility for pay, benefits, medical insurance, vacation, workman’s compensation, etc. Further, contracting out services allows the company to add or reduce additional positions as required. This in turn provides a higher degree of agility in a dynamic economic environment. Before Air Canada decides to pursue the contracting option, they should perform a detailed cost benefit analysis. While contracting services appears to be a rapid way to reduce costs, it may actually cost more and reduce flexibility, especially during periods of crisis where extra services are required (e.g. 9-11 closure of airports). Work Force Audit and Career Development - Administrative Employees Administrative employees are resident in finance, management, marketing, legal affairs, consumer affairs, human recourses, medical support and public affairs. In many ways, they provide the glue which holds the company together and allows it to operate effectively. Administrative positions are present in all industries. As a result, administrative positions are some of the most portable in any company (see Table 3). Secretaries, receptionists and human resources personnel working for Air Canada can just as well work for General Motors Canada or any other industry. That does not mean all administration positions are the same. Some positions do require a degree of specialization due to the company and its products and services. Marketers for example need to understand their target industry; public affairs must know the company well enough to speak on its behalf and lawyers must be well acquainted with laws, regulations and cases related to the company (e.g. aviation law). As a result, 32 the company cannot simply reduce the administrative workforce across the board without first analysing what skills they need and what excess skills they current have. As with building and facilities maintenance above, Air Canada must carefully select those for both redundancy and early retirement. At the higher levels of administration the number of positions is reduced. If the company lays off or retires a lawyer skilled in aviation law, the knock on effect could be damaging should Air Canada have to go to court. Similarly, marketers may be difficult to replace given the experience available to a long term employee. For this reason, redundancies in the form of lay offs should be limited to more junior employees and to positions enough depth to allow functionality after the redundancy. There could be some options for contracting services in lieu of employees. However, unlike building and facilities maintenance, administrative jobs such as aviation law, marketing and public affairs require extensive knowledge of the industry and the company. Administrative positions that may lend themselves to contracting include secretary, typist, receptionist, recruiting and auditing. By contracting these positions, the company may be able to mitigate redundancies within the company as a whole. Before Air Canada decides to pursue the contracting option, they should perform a detailed cost benefit analysis. RECOMMENDATION Air Canada faces a difficult choice. In order to reduce costs and boost revenue, the company will make 280 middle management personnel redundant through lay offs and offer early retirement to an undetermined number of senior employees. The company has decided to offer Career Development Planning for both redundancies and early retirees. The following recommendations pertain to the development and implementation of these plans. Recommendation Air Canada - Career Development Plan Air Canada should develop and implement a career development plan covering the following criteria. The plan should meet the three requirements normally associated with a career development plan. These include a review and understanding of the current economic situation, an analysis of skills and requirements supporting employment in the current environment and finally development of a written plan based on that analysis. The plan’s contents should include a detailed interview of the employee’s performance, skills, desires and aspirations. This interview should be supplemented by personality, aptitude and skills testing. This information is critical to the development of a realistic plan. In addition, personal counselling is recommended in addition to carer counselling. By providing the full range of counselling, the employee will feel more prepared to re-enter the job market with a coherent and realistic plan. Finally, the company should provide a formal written copy of the plan to the employee prior to their departure. This document will serve as a road map for future training and exploration and is therefore a critical component in the process. In order to facilitate the transfer of information and provide a document that can be updated more easily Air Canada should consider using an online career development program. By doing so the company can maintain an better view of their former employees plans, issues and success rate. 33 Estimated Cost - Air Canada - Career Development Plan The estimate cost of the Career Development is approximately 420,000.00 CAD. The estimate is based on figures detailed in Table 4: Table 4 Estimated Costs – Air Canada Career Development Plan – Workforce Reduction Leadership Assessment Skills Testing Career Counseling Personal Counseling Financial Counseling Administration Number of Participants 165.00 CAD6 per person 175.00 CAD per person 150.00 CAD per hour (1 hour per person) 150.00 CAD per hour ( avg 2 hours per person) 50.00 CAD per hour (1 hour per person) 50.00 CAD per person (includes supplies, facilities, etc) Total Per Person 500 (280 redundancies and 220 early retirements) Air Canada Total 165.00 175.00 150.00 300.00 50.00 890.00 445,000.00 Notes 1. Cost for skills testing average across the population (aviation skills testing is more expensive than administrative skills testing) 2. Personal counseling average two hours per person 3. Additional costs for Air Canada automated Career Development Program not shown The cost reported is shown only for career development planning for the estimated 500 employees that will be made redundant or accept early retirement. Severance packages, retirement payments, contract settlements and other costs are not represented. The basic cost of career development planning should be viewed from the point of the recipients as well as the company. Employees being made redundant will face a number of hurdles and have significant fears about their future. Providing career planning as well as career, personal and financial counseling will greatly reduce these fears, thereby better preparing employees for reemployment in the shortest time possible. Further, offering career development services also supports the company’s responsibilities to their employees. This not only boosts morale and reduces fear, but also reduces the possibility of expensive and difficult litigation in the future. Based on this, the cost appears to be reasonable given the magnitude of the task and the tangible and intangible benefits provided to both the employees and the company. Assessment Criteria - Air Canada - Career Development Plan Assessment criteria is detailed in the document above. As a minimum, the main measure of success will be the reemployment of more than 70% of redundant employees within 60 days on average. Marginal success may be achieved if 70% of redundant employees are reemployed by 90 days. The actual numbers and success criteria are directly tied to the individual position and therefore will require specific measurement (see Table 2). Other less tangible success criteria will include reduced personnel costs for the fiscal year due to workforce reduction, minimal labour litigation and improved employee relations. While these 6 Cost taken from Government of Nova Scotia Training Program costs – 360 degree Learderhip Training, [GOV.NS.CA., 2012] 34 criteria are difficult to measure prior to the workforce reduction, these results will be the measure by which the action is judged. Options - Air Canada - Career Development Plan Air Canada may also investigate less drastic options for reduction of their workforce. These include the use of furlough in lieu of layoffs, especially for their highly qualified and difficult to replace employees. Positions benefiting from furlough include pilots, flight attendants, flight dispatchers and aircraft mechanics. Another option that should be explored is part time reemployment with the company. This option is especially useful for early retirees who may be willing to return as instructors or mentors. For Air Canada, this option has benefits including the retention of expertise, reduced costs and improved employee morale. CONCLUSION Air Canada has a long history of safe, efficient operations and is popular with the Canadian public. As a commercial endeavor they are however, required to turn a profit, whenever possible. Because the airline industry is cyclical and dynamic, the company must be prepared to make difficult decisions, reducing their liabilities in light of a poor economic environment. By providing a coherent, realistic and fair career development planning program, the company can reduce overhead costs while maintaining goodwill with their employees and their customers. The plan as described in this document provides such and option. 35 This Page Left Blank 36 A&P CAA CAD FAA MBTI PBGC TWA ACRONYMS Airframe and Power plant Canadian Aviation Administration Canadian Dollars Federal Aviation Administration Myers Brigs Type Indicator Pension Benefit Guarantee Corporation Transworld Airways 37 This Page Left Blank 38 REFERENCES [Air Canada, 2010] Air Canada Annual Report 2010, 2010 [Air Canada, 2011] Air Canada Third Quarter 2011 Interim Unaudited Report, November 4 2011 [Air Canada.com, 2012] Air Canada.com, Careers, http://www.aircanada.com/en/about/career/index.html, 2012 [Air Canada Training.com, 2012] Air Canada Training.com, About the Air Canada Flight Training Centre, http://www.aircanada.com/en/training/index.html, 2012 [ATAC, 2005] Air Transport Association of Canada, Professional Pilot Career Info Guide, http://www.atac.ca/en/learn_to_fly/pilot_career_brochure.html#_Toc65056522, 2005 [Broscio, Scherer, 2003] Broscio, Mike, Scherer, Jay, Creating and implementing a reality-based career plan , Journal of Healthcare Management, Chicago; Mar/Apr 2003 Businessdirectory.com, 2012] Businessdirectory.com, Definition Wide body Aircraft, http://www.businessdictionary.com/definition/widebody-aircraft.html, 2012 [Dragonair, 2012] Dragonair Careers, Dragonair.com, http://www.dragonair.com/da/en_INTL/careershome, 2012 [law-faqs.org, 2010]] Canadian Legal FAQs, http://www.law-faqs.org/wiki/index.php/Employment_Law, 2010 [Flypast 60.com] Flypast60.com, Dec 15 2011 Update, http://www.flypast60.com/Update.htm, 15 Dec 2011 [GOV.NS.CA., 2012] GOV.NS.CA., 360 degree Leadership Assessment, Nova Scotia Canada Government Online, http://www.gov.ns.ca/psc/v2/employeeCentre/training/management/assessment.asp, 2012 [Herbst,, 2009] Herbst, Robert, How the Legacy Airlines Lost So Much Altitude Since 9/11 24/7 Wall Street, http://247wallst.com/page/market-wire/, August 31, 2009 at 3:48 pm [Investopedia, 2012] Investopedia, Definition, Capital Assets, http://www.investopedia.com/terms/c/capitalasset.asp, 2012 39 [Merchant, 2012] Merchant, Robert C. 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Michael, Dr, Long Term unemployed Workers Face Even tougher Battle, Fox Business.com, http://www.foxbusiness.com/personal-finance/2011/09/26/long-term-unemployed-workers-face-eventougher-battle, 26 Sep, 2011 40 Certification of Authorship: I hereby certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and fully disclosed in this paper. I have also cited any sources (footnotes or endnotes) from which I used data, ideas, theories, or words, whether quotes directly or paraphrased. I further acknowledge that this paper has been prepared by me specifically for this course. Candidates Name: John L Mahaffey Date: 3 February 2012 Declaration of Originality of Work: I, hereby affirm that the attached work is entirely my own, except where the words or ideas of other writers are specifically acknowledged according to accepted citation conventions. This assignment has not been submitted, either in part or in whole, for any other course or credit granting activity at the International School of Management or any other institution. I have revised, edited and proofread this paper. Candidates Name: John L Mahaffey Date: 3 February 2012 41