How National Institutions Limit Turnaround Strategies and Human Resource Management: A Comparative Study in the Airline Industry

• Date: 01 December 2019
• Author: Monica Santana,Ramon Valle,Jose‐Luis Galan
• DOI: http://doi.org/10.1111/emre.12177
• Published date: 01 December 2019

How National Institutions Limit Turnaround

Strategies and Human Resource Management:

A Comparative Study in the Airline Industry

MONICA SANTANA,

1

RAMON VALLE

1

and JOSE-LUIS GALAN

2

1

University of Pablo de Olavide, Seville, Spain

2

University of Seville,Seville, Spain

The influence of national institutions, particularly employee representation, on managers’turnaround strategies

remains largely unexplored in the literature. Therefore, this paper assesses the pressures that affected two European

airline companies, British Airways (BA) and Iberia, and their turnaround responses in a context of economic crisis

and austerity, particularlyfrom the perspective of strategic human resource management (SHRM). Our case studies

show that when national institutions grant a number of rights to employee representatives, an innovative HRM

strategy enables the recovery strategy required to deal with internal sources of decline. In contrast, when national

institutions provide fewer rights to employee representatives, there is room for company HRM strategy to challenge

or resist institutional pressures. Our research focuses particularly on how coercive pressures exerted by employee

representation, according to the legal framework governing labor relations, affect turnaround strategies.

Keywords: sources of decline; turnaround strategy; HR strategies; national institutions; employee representatives

Introduction

The persistent wea kening of the global econo my has led

many companies into decline, and turnaround strategies

have implied drastic measures for human resources, such

as layoffs or pay cuts, which have a very negative effect

on workers. In this context studies of organizational

decline and turnaround strategies (Trahms et al., 2013)

may deepen our understanding of alternative models of

work and practices to assure human and social rights at

work. In the era of austerity business represents a key

institutional player, and thus business management has

an important role in preserving human and social rights.

Managers are key in matching turnaround strategies and

HR strategies to the sources of decline (Santana et al.,

2017). However, managerial decisions may be

constrainedby national institutions, particularly employee

representation (Crossland and Hambrick, 2007, 2011;

Lange et al., 2015), and this fact has been largely

unexplored in the literature so far (Lange et al., 2015).

This constraintpartly accounts for thedifferential in firms’

flexibility (Fiss and Zajac, 2004). In some countries, like

the United Kingdom, institutional environments allow

for more managerial discretion, whereas in other

countries, like Spain, managers have considerably less

discretion (Crossland and Hambrick, 2011). In order to

address this difference, we de velop a comparative case

study of internal and external pressures, turnaround

strategies and HRM responses to decline at Iberia and

British Airways (BA). We investigate the extent to which

the position of employee representatives, which is

potentially strengthened by institutions in the areas of

collective bargaining, law and employment, has

influenced the turnaround process.

Interrelations among sources of decline, turnaround

strategies, human resource strategies, and the effect of

national institutions and employee representatives’power

remain largely unexplored (Arogyaswamy et al., 1995;

Lange et al., 2015), and they are crucial to better

comprehend models of work and practices in the era of

austerity. Our study contributes to the decline and

turnaround literature, as we take into consideration the

relationship between the different levels of HR strategies

and practices and the institutional context to explain

variation in the turnaround process. The results also

contribute to the securing of human and social rights and

to the literature on s trategic human resource m anagement

Correspondence: Monica Santana, University of Pablo de Olavide,

Carreterade Utrera, Km1, 41013 Seville, Spain.E-mail msanher@upo.es

DOI: 10.1111/emre.12177

©2018 European Academy of Management

European Management Review, Vol. 16, 923–, (2019)

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