A discussion of organisational culture and the corporate culture at Ryanair
Executive summary
This report is based on secondary data research about Ryanair. It is consists of five chapters. The introduction emphasises the need for understanding organisational culture. The research aim to analyse Ryanair’s corporate culture is stated and the rational for research is briefly discussed. The second chapter, Literature review, introduces three cultural models (Edgar Schein, 1985; Harrison and Stokes, 1990; Slocum and Hellriegel, 2007) that can be used to analyse organisational culture. The third chapter is based on discussion and observations of how culture manifests itself according to the models previously introduced the in Literature review. More attention is paid to how Ryanair’s culture is affecting the company, its stakeholders and management. The fourth and fifth chapters provide conclusions and recommendations for the company.
1. Introduction
Since the early 1980s, organizational culture has been one of the most controversial concepts that is analysed in business and academic studies (Buchanan and Huczynski, 2007). It is an important concept in organisational studies, because it influences every aspects of an organisation, such as: development and implementation of strategies in companies, organisational performances, economic performances, employees’ reward and control systems, customer service, etc. (Buchanan and Huczynski, 2007; Handy, 1985; Lynch, 2006). Each organisation has a unique culture which can be influenced by various factors (Brown, 1998).
Ryanair is a low-cost airline company that was set up by the Ryan family in 1985. During the first five years, despite the growing numbers of passengers, the airline was not profitable. The company reached profitability and growth when the new CEO, Michael O’Leary, came on board. Ryanair then became the top and largest low-cost airline in Europe (Ryanair.com).
The company’s success depended on one other factor: adoption of Southwest Airlines’ low-cost leadership model. A cost-cutting technique was implemented in every aspect of the organisation. However, Southwest Airlines’ model’s core philosophy: to provide low-cost fares along with the highest standard of service (Creaton, 2005), was not considered. Nowadays Ryanair’s relationship with organised labour and customers makes it the most controversial airline that creates a lot of rigorous media attention and criticism.
The aim of this report is to analyse Ryanair’s corporate culture.
The objectives are to:
- briefly introduce existing culture analysis models;
- indentify how existing organisational culture manifests itself with Ryanair;
- understand what impacts Ryanair’s culture has on the organisation as a whole and its individual stakeholders;
- discuss how cultural issues are dealt and managed in the organisation.
2. Literature review
The most simplistic definition of organisational culture was suggested by Deal and Kennedy (1982): ‘How we do things around here’. The definition contained complex aspects which could not always be easily recognised. It also avoided analysing the critical issue of why and how such norms develop in an organisation (Goodstein, Nolan, Pfeifer, 1993).
Figure 1: Schein’s three levels of culture. Based on Buchanan and Huczynski, 2007: 625
Edgar Schein (1985) provided a more compounded organisation culture model. He divided organizational culture into three levels: surface manifestations; values; and basic assumptions. Surface manifestations are considered visible elements such as physical objects or behaviour patterns which can be seen, heard or felt (Buchanan and Huczynski, 2007). Organisational values are located below the surface and are often unspoken but provide common directions to employees and guidance towards their behaviours (Buchanan and Huczynski, 2007). Basic assumptions are invisible and taken for granted, and describes aspects of human behaviour and an organisation’s relationship to its environment (Buchanan and Huczynski, 2007).
Further studies were considering different variations existing between cultures and their applicability to the organisations.
Figure 2: Harrison and Stokes (1990) four culture categories in Brown, 1998:66
Harrison and Stokes (1990) identified four categories: power, role, achievement (task) and support (person). Power culture has a single source of power and is based on hierarchical structure. It is highly dependent on trust, telepathy and personal communication, there is very little bureaucratic procedures. Organisation is able to move quickly and will react to threat and danger. Employees are judged by the results and are tolerant of means. They can be seen as tough and suffer from low morale, and also have high staff turnover in middle layers (Brown, 1998; Goodstein, Nolan, Pfeifer, 1993; Howkins and Miller, 1993). Role culture is controlled and coordinated by senior management and is followed by high bureaucracy. Rules, procedures and job descriptions are the main components. Organisations with such culture can be successful in a slow environment, because they are slow to react and difficult to change. They offer security and predictability to the individual (Brown 1998; Goodstein, Nolan, Pfeifer, 1993; Howkins and Miller, 1993). Task culture has diffused power which is located in interstices and based on expertise. When things go wrong it can be quickly changed to role or power cultures. This exists in the environments where the market is competitive and product lifecycle is short and needs constant innovations (Brown 1998; Goodstein, Nolan, Pfeifer, 1993; Howkins and Miller, 1993). Person culture has low significance of rules and coordination and is self-oriented (Brown 1998; Goodstein, Nolan, Pfeifer, 1993; Howkins and Miller, 1993).
Figure 3: Four types of culture, Slocum and Hellriegel (2007:109)
Slocum and Hellriegel (2007) suggested framework of four types of culture: clan; entrepreneurial culture; bureaucratic culture; and market culture. Allocation of each culture is based on relative control orientation and relative focus of attention of organisation functioning. Bureaucratic culture is based on formality, rules, standard operating procedures and hierarchical coordination; roles of employees are clearly defined. The main organisation goals are predictability, efficiency and stability. Clan culture is based on tradition, loyalty, personal commitment, extensive socialization, teamwork, self-management and social influences. While employees commit their loyalty, organisation provides security. In this culture, members share pride in membership. Entrepreneurial culture is founded on high levels of risk-taking and creativity. It reacts and creates changes in its external environment. It stimulates individual initiatives, provides flexibility and freedom which causes provision of unique products and rapid growth. Market culture is based on achievement of measurable and demanding financial and market-based goals measured on profits. The relationship between the organisation and the individual is contractual with stable and formal control orientation. Levels of rewards are directly linked with levels of performance. The low level of security is provided by the organisation and a low level of loyalty is returned. Market culture values independence, individuality and encourages motivations driven by individuals’ financial goals.
3. Ryanair Culture
3.1 Culture manifestation
This section will describe how culture manifests itself within Ryanair. Discussion will be made using three models: Schein’s (1985), Harrison and Stokes (1990), Slocum and Hellriegel (2007). Attention will also be drawn to changes in the company’s culture.
3.1.2 Schein’s (1985) model
When Ryanair was launched, Ryan had an idea of a low-cost, no-frills airline, but at the same time he did not want his name to be associated with anything cheap. The airline was recognised as a glamorous and exciting place to work (Ruddock, 2008). On the other hand, O’Leary had the attitude that the company’s environment had to reflect its culture. Cost-cutting policies are applied in every organizational aspect. For example, when Ryanair people travel, they stay in budget hotels and they fly economy class (Ruddock, 2008). The company do not have prestige corporate headquarters and the old company logo was used (Barrett, 2004).
Language used by O’Leary became synonymous with Ryanair (Creaton, 2005). He can tell anyone to ‘fuck off’ and his favourite insult is ‘wanker’, he used his own ‘bolloxology’ (Creaton, 2005:5). A volatile atmosphere was created at the airline, where people were impatient, shouted and roared when they shouldn’t (Creaton, 2005).
Ryanair does not publish an official vision and mission (Byus, 2005). However, the literature acknowledges that Tony Ryan’s original vision was modified over the years. Ryanair was established as a ‘value for money’ company (Creaton, 2005), which provided affordable air fairs, with excellent and professional customer service (Creaton, 2005; Ruddock, 2008). O’Leary had only one vision – to make money (Ruddock, 2007). He was concentrating on providing deals and ignoring the value that it brings to the customers (Ruddock, 2008).
O’Leary is cutting costs in every organizational aspect. Basic assumptions of the staff that they would get uniforms, refreshments, health checks, airport passes, vetting procedures, car parking spaces or Christmas parties have been changed. Working in Ryanair means that you are paying for these things yourself. It is staff’s responsibility to get pens, Post-it notes or paperclips (Schroeder and Salzer-Mörling, 2006; Channel 4, 2006). Moreover, they are not allowed to charge mobile phones at the airline’s expense or use cover sheets when sending a fax (Creaton, 2005).When Ryanair was launched, Ryan had an idea of a low-cost, no-frills airline, but at the same time he did not want his name to be associated with anything cheap. The airline was recognised as a glamorous and exciting place to work (Ruddock, 2008). On the other hand, O’Leary had the attitude that the company’s environment had to reflect its culture. Cost-cutting policies are applied in every organizational aspect. For example, when Ryanair people travel, they stay in budget hotels and they fly economy class (Ruddock, 2008). The company do not have prestige corporate headquarters and the old company logo was used (Barrett, 2004).
Language used by O’Leary became synonymous with Ryanair (Creaton, 2005). He can tell anyone to ‘fuck off’ and his favourite insult is ‘wanker’, he used his own ‘bolloxology’ (Creaton, 2005:5). A volatile atmosphere was created at the airline, where people were impatient, shouted and roared when they shouldn’t (Creaton, 2005).
Ryanair does not publish an official vision and mission (Byus, 2005). However, the literature acknowledges that Tony Ryan’s original vision was modified over the years. Ryanair was established as a ‘value for money’ company (Creaton, 2005), which provided affordable air fairs, with excellent and professional customer service (Creaton, 2005; Ruddock, 2008). O’Leary had only one vision – to make money (Ruddock, 2007). He was concentrating on providing deals and ignoring the value that it brings to the customers (Ruddock, 2008).
O’Leary is cutting costs in every organizational aspect. Basic assumptions of the staff that they would get uniforms, refreshments, health checks, airport passes, vetting procedures, car parking spaces or Christmas parties have been changed. Working in Ryanair means that you are paying for these things yourself. It is staff’s responsibility to get pens, Post-it notes or paperclips (Schroeder and Salzer-Mörling, 2006; Channel 4, 2006). Moreover, they are not allowed to charge mobile phones at the airline’s expense or use cover sheets when sending a fax (Creaton, 2005).
3.1.3 Harrison and Stokes’ (1990) classification scheme
According to Harrison and Stokes’ (1990) classification scheme, Ryanair, since its establishment, maintained a power culture. In the early days, Tony Ryan, who had no shareholding in the company, actually ran the business (Creaton, 2005:31). The central power role was transferred to the new CEO, O’Leary. The company continued to be driven from the top to down, where O’Leary always had a final say. Opposing discussions by other managers were not tolerated (Creaton, 2005). A flat management structure (three layers) was kept despite rapid growth of the company. Only numbers of aircrafts, pilots, in-flight people and engineers were increased. This enabled them to avoid bureaucracy (Ruddock, 2008). Ryanair has the ability to react and respond to competitive threats quickly, which is crucial in the competitive environment within which they are operating.
3.1.4 Slocum and Hellriegel (2007) framework
Ryanair’s aim and objectives are very clear: to be profitable; to be Europe’s leading low-fares scheduled passenger airline; to prevent further airlines’ domination in the market (Creaton, 2005; Ruddock, 2008); and to generate traffic numbers through low fares (Ruddock, 2008; Ryanair.com). Its relationship with employees is performance-based. Everyone in the company can benefit from the company’s success (Ruddock, 2008). When the company was established its employees became shareholders (Creaton, 2005). The performance-based rewards scheme was strengthened and taken to a different level after the agreement between Ryan and O’Leary. His bonus percentage was directly linked with company’s profits (Creaton, 2005). Under O’Leary’s management, employees’ salaries are productivity based and related to incentives and commissions for on-board duty free goods sales (O’Sullivan, 2009) and for numbers of hours flown (Ryanair.com).
The above-examined factors enable us to make assumptions that, according to Slocum and Hellriegel’s (2007) framework, Ryanair culture can be classified as a market culture. The concept has not changes since the company’s establishment.
3.2 Impacts of Ryanair’s culture
The impact of Ryanair’s culture will be discussed from two perspectives. Firstly, what impacts have to be faced by the organisation. Secondly, the influence perceived by the stakeholders.
3.2.1 Impacts on the organisation
‘For decades air travel had been the preserve of money classes’ (Ruddock, 2008:231). Ryanair low-cost fares revolutionised air travel. The concept of budget airlines became the norm across Europe (Ruddock, 2008). Moreover, due to Ryanair’s low-cost fares, a new short break phenomenon developed. Furthermore, Ryanair became one of the most profitable of Europe’s low-cost airlines.
After establishment, Ryanair was known as a small company with a very positive atmosphere. However, because of O’Leary and his ‘bolloxology’ used to insult any stakeholder on his way, the Ryanair brand is being seen as cheap, nasty and rough to anyone (Byus, 2005; Ruddock, 2007). It is disliked, even by the customers who continue to fly with it (Ruddock, 2007). The organisation’s revolutionary impact on the airlines industry is often forgotten.
3.2.2 Impact on stakeholders
Gratitude or appreciation for its stakeholders is not acknowledged in Ryanair’s corporate culture or policy. Two groups of stakeholders: customers and employees are mostly impacted by Ryanair’s culture. Cost-cutting strategy applies in every aspect of the company.
During the years, O’Leary is sending a message to the public that it is a cheap airline with no concessions. The airline’s commitment to the customers is to provide the lowest fair, and a safe and on-time flight. Its attitude to the passengers when something goes wrong is not to provide anything extra because they are paying too little and have no right to complain (Creaton, 2005; BBC a, 2009; Channel 4, 2006). The no frills concept includes everything where the right to use of a wheelchair or use of toilets in the airplane can be charged (BBC b, 2009).
The staff at Ryanair are seen as a tool for maintaining high productivity. The concept is to make them work hard through long hours and short holidays, get rid of them when they are not useful and put in a fresh team (Creaton, 2005; Ruddock, 2008). Ryanair’s culture and especially its customer service policy are perceived as embarrassing by the staff, and causes high staff turnover in customer service-related positions. Conversely, the main advantage of Ryanair’s culture is that it stimulates a company’s growth and opportunities for promotion are considerably higher than in other airlines (Barrett, 2004).
3.3 Management
In the organisation’s early days it was believed that those who joined Ryanair – joined a dream (Creaton, 2005). It was easier for management to contact and negotiate with employees because everyone had the same dream and the company was small. Nevertheless, the young staff employed weren’t restricted by union conditions and job definitions. In a crisis, employees were expected to help out where they could, this flexibility was crucial to Ryanair’s development (Ruddock, 2008). After the 1990s, people were joining an airline (Creaton, 2005). The rapid expansion of the airline complicated direct contact with employees. A tough management style, policies and cultural dissatisfaction increased threats of strikes.
4. Conclusions
Ryanair’s culture and its low-cost strategy had a major impact on airlines, the tourism industry and society lifestyle. Power and market cultures identified in the airline have not changed since its establishment. However, the CEO, Michael O’Leary, revolutionised the company’s cultural artefacts, values and basic assumptions. There is strong evidence that the cost-cutting concept is implemented in every aspect of the company’s operations. Customers cannot expect to gain anything more than a cheap, safe and on-time flight. If something goes wrong, nobody has the right to complain and the company does not take any responsibility. Employees can be awarded for excellent performances, but at the same time abused and ‘bolloxed’ if they made a mistake. Language used by O’Leary internally and externally is a cultural attribute which had direct impact to its corporate culture and image. A volatile atmosphere is dominating the company. The brand is recognised for its rudeness and nastiness by various stakeholders. The only measurement of success is profits and there is no place for loyalty appreciation or gratitude to stakeholders. Management of the company can be seen as complicated because there are high demands and very few incentives provided.
5. Recommendations
In this section, key recommendations are made concerning four issues: Ryanair’s image, customers, employees and management style.
Since Ryanair’s establishment and its growth, tough management and its outspoken CEO O’Leary was seen as acceptable. His management style and strategies, motivations and negotiation skills turned the small and not profitable airline into Europe’s leading low-cost airline. However, previously adopted management techniques and his public image are inappropriate in terms of the current company’s position. During the coming year changes have to be made; either in O’Leary’s behaviour or a new CEO has to be brought into the company.
Secondly, the company’s values have to be reconsidered. While the company continues to grow and expand their routes, passenger flow will be increasing. However, there are limits. When they are reached, customer loyalty has to be appreciated and stimulated. Increasing competition allows us to predict that in the near future the company’s performance has to be measured using more factors than profits.
Thirdly, because of the company’s growth, it will not be possible to cultivate a power culture, because of the volume of tasks and operations. Two cultures will have to be merged or totally changed. More elements of task culture will need to be adopted.
In addition, with global economic growth, employees’ requirements will start to increase. If working conditions continue with the same pattern, staff turnover will rise. Teams will be imbalanced and efficiency lost, causing longer turnaround times or even delays. Also disruption can be brought to the by protest. In order to avoid disruptions there is a need to increase the number of incentives provided to staff. They are not necessarily costly, for example, a best employee of the year award or a free Christmas party. A strong market culture could be merged with a clan culture.
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