Piedmont Airlines is a fully owned subsidiary of U.S. Airways. U.S. Airways is the 6th largest airline in the United States (Piedmont Airlines, Inc., 2011). Piedmont flies 440 daily departures to 55 cities throughout the Eastern United States and Canada. They operate 44 DeHaviland DHC-8 Turbo prop aircraft as their primary fleet. The headquarters is based in Salisbury, Maryland. They employ nearly 4000 aviation professionals (Piedmont Airlines, Inc., 2011).
Like many organizations, Piedmont is facing problems with employee morale. Low employee morale is closely linked to high turnover rates in many organizations. Low morale also leads to low productivity. Employee satisfaction is one of the most important factors in maintaining an experienced workforce. Poor morale leads to excessive employee absences and a higher absence rate (CCH, 2007). This costs the company money and lost time. It also has an impact on customer quality at the airlines. When an employee is absent it places greater strain on those who are at work and their ability to meet customer needs. They must take on a greater workload and the customer is greeted with longer lines, stressed employees, and a poor image of Piedmont Airlines.
Lower turnover provides a competitive advantage for the airlines in building customer relationships. An employee who is dissatisfied with their job projects this image to the customer and provides a poor customer experience. Job satisfaction has been linked to organizational commitment (Kin, Leong, & Lee, 2005). A high level of organizational commitment results in employees that are happy with the jobs and that projects a positive company image to the customers. This improves employee morale and represents an even more important issue for Piedmont Airlines.
Standard philosophy in organizational management finds that employee turnover is costly for the employer. In addition to replacement fees and costs there are hidden costs such as productivity loss, workplace safety issues, damage to morale and other costly factors (O'Connell & Kung, 2007). However, Piedmont Aairlines has a different viewpoint on employee turnover. They target a turnover rate of 29.6%, according to the Vice President of Operation's assistant. The reasoning provided is that when the turnover rate becomes too low, costs rise due to employee wages and vacation. However, when the rate increases to a higher level the costs rise due to the frequency of training classes.
This philosophy of turnover rate only takes to into account one single factor, employee costs. However, it does not take into account many of the other effects of high turnover rate. For instance, employees that are happy project this image to customers, have lower absentee rates, and are likely to speak of the company in a positive way when they are out of the work environment. Experienced employees are less likely to make mistakes than newer trainees. Experienced employees lower managerial costs in many other ways, such as refunds due to inexperienced employee mistakes. On the maintenance and safety side of the airline industry, experienced employees offer many benefits over new trainees. They are less likely to make mistakes that result in safety issues or FAA violations. Other than absentee rates, these other factors are not considered in the equation that Piedmont uses to adjust their target turnover rate. They are difficult factors to measure, but they do have a real affect on the bottom line.
A high turnover rate is counterintuitive to much of the literature on productivity, organizational effectiveness, and the importance of employee morale. Experienced employees bring many advantages that help save costs in other areas, other than simply vacation and wage increases. Mistakes and lower productivity in trainees costs the company money, that may offset the amount saved in higher wages and vacations. Employee morale is one of the most important factors in maintaining lower turnover rates, thus increasing the number of experienced employees in the airline. Experienced employees bring many benefits to the company, but Piedmont Airlines is only looking at one factor of the equation. Taking a holistic approach to cost analysis may reveal that lowering absentee rates has more positive effects than negative ones, and that these affects make a real difference in the bottom line. Currently, Piedmont Airlines is in danger of increased turnover rates due to disgruntled employees.
For the reasons stated, improving employee morale would have many positive effects on the organization that go beyond increased employee wages and vacations. In informal interviews with employees, several factors were found to influence lower employee morale. One of these factors is the human resources policy that promotes a higher turnover rate in order to save costs on wages and vacations. This means that employees have no incentive to become productive and to look at Piedmont airlines as a place to build a future. Current human resources policy means that they can only go so far. They will only be allowed to reach a certain level of pay and a certain level of vacation. There is no chance for ramp workers to advance into management.
This policy of promoting turnover as a way to save costs, has many negative effects on the company, one of which is employee morale. With no chance for advancement and higher pay, actual turnover rates may only be around 30%, but it is likely that the intention to leave is around 100%. When employees find that they have no chance for a future at Piedmont Airlines, other than the low wage that they are currently making, it is likely that they will soon begin to look elsewhere. This could have the effect of creating an even higher turnover rate.
This policy of not allowing employees to advance within the company and earn higher wages and vacation levels also has an affect on organizational commitment. If the organization is not committed to the employee, then it is likely that the employee will not be committed to the organization either. Organizational commitment by the employee has been demonstrated to have a measurable effect on the bottom line (Kim, Leong, & Lee, 2005). Employees with a high level of organization have been demonstrated to have increased productivity as well.
In addition to a limited chance for advancement and longevity with the company, employees also complain about their work schedules and a feeling of not being appreciated by upper management. Also on the list of problems associated with low employee morale were complaints about being written up for minor, unintentional mistakes. Employee benefits, aside from pay and vacation include the ability to fly for free, as long as a seat is available. In addition, employee parents, children, spouses, or registered guests can fly free as well, except for taxes on the flight. Piedmont employees also receive the benefits associated with U.S. Airways employees. They receive discounts on hotels, car rentals, cell phone bills, and on many other places and services.
The question is whether the benefits of being an employee for Piedmont Airlines outweigh the costs. If the benefits do not outweigh the costs, then higher turnover rates could be in the future. There is a larger possible outcome if Piedmont Airlines experiences a higher turnover rate in the future. The effects of high turnover rate on quality, safety issues, and customer satisfaction have already been discussed in this research study. Literature indicates that high employee turnover goes beyond wages and vacation pay. Higher turnover rates have a negative impact on all areas of the business. Taking a narrow view of employee turnover misses the bigger picture, as indicated by the literature review. The literature reveals that the costs of high turnover rate far outweigh the positive ones in terms of retained wages and vacation pay. The literature indicates that companies lose much more then they gain by promoting policies that result in high turnover rates.
Thus far, information was not available as to how many employees took advantage of free flights, flights for extended family, and the benefits of hotel and car rentals. If employees are suffering from low wages, and they are uncertain of their future in terms of employment, they are not likely that they will have a high usage of these benefits. They will be more likely to take a protectionist attitude about their own financial situation, which means not spending money that they do not have to. If employees had a greater sense of security and their job situation, or increased chances for advancement, they would be more likely to enjoy these fringe benefits offered by Piedmont Airlines. At present, it does not appear likely that surveys would reveal a high usage, or a high value being placed on the fringe benefits of working for the airlines. Employees need to have a greater sense of security before these other benefits would be attractive to both new and experienced employees.
Managerial attitudes towards employees go beyond creating an atmosphere that promotes low organizational commitment. It creates an atmosphere of hostility and fear between employees and managers. Rather than working together…