PEOPLE MANAGEMENT PRACTICES IN
RICHARD DUNFORD* AND IAN PALMER**
he travel industry is characterised by ﬁerce rivalry, high threat of entry by would-be competitors, high supplier and consumer power and a developing threat of substitutes (especially online). However, despite this, Flight Centre, an Australian travel agency, has managed to achieve an exceptional performance record in terms of proﬁtability and share price. In this paper we focus on the people management practices in Flight
Centre in the context of the argument that there is a direct relationship between a company’s ﬁnancial performance and its utilisation of speciﬁc practices. The results of the research show that Flight Centre is representative of most of the advocated practices, but its parallel strategies in marketing and operations/logistics raise questions about the appropriateness of people management practices being given priority over other areas of management practice in the determination of performance outcomes.
Flight Centre is an Australian-based, international travel agency and the largest travel retailer in Australia. At the end of June 2001 it had 712 retail outlets in
Australia (where two-third of its stores are located), the United Kingdom, the
United States, New Zealand, Canada and South Africa. This represented an increase in 184 retail outlets in just one year, meaning that during this year a new Flight Centre was being opened every two days. Five years earlier (June 1996) the number of stores totalled only 245 (see Fig. 1).
Flight Centre’s sales for the year ending 30 June 2001 were $3.02 billion, an increase of 30 per cent per annum for every year since 1996 (Fig. 2). Similarly, its net proﬁt after tax for the year ending 30 June 2001 was $42.85 million, an increase of 37 per cent per annum for every year since 1996 (Fig. 3). This was its tenth consecutive year of proﬁt growth.1
The company’s share price performance has been even more noteworthy. Flight
Centre was ﬁrst listed, in December 1995, at 95 cents per share; by August 1999 it was $8.80, an almost ten-fold increase in only four years. At this point, the company’s performance was described in the Australian Financial Review as stellar (West 1999). Two years later (August 2001), the share price had hit
* Professor of Management, Macquarie Graduate School of Management, Macquarie University,
Sydney NSW 2109. Email: Richard.Dunford@mq.edu.au ** Professor of Management,
School of Management, University of Technology, PO Box 123, Broadway, Sydney NSW 2007.
Email: I.Palmer@uts.edu.au The authors wish to thank Michael Ryan and Jodie Benveniste for their research assistance and Tyrone Carlin for his ﬁnancial analysis.
THE JOURNAL OF INDUSTRIAL RELATIONS, VOL. 44, NO. 3, SEPTEMBER 2002, 376–396
$28.52, a thirty-fold increase since listing less than six years earlier (Fig. 4).
Although the share price dropped back to $21.15 at the end of October 2001, when the international travel industry was particularly hard hit by the decline in air travel that followed the September 11 attack on the World Trade Center, this proved to be a short-term decline; by February 2002 the share price was back up to $25.35.2
What makes this performance noteworthy is not just that it has been sustained over a number of years, but it has been achieved in an industry which is characterised by intense rivalry among existing competitors, high threat of entry into the industry by would-be competitors, developing threat from substitute services and high supplier and consumer power. Such an ‘unattractive’ industry environment, is not conducive to high performance (Porter 1979; 1980).
The competitive state of the industry is borne out by the relatively poor ﬁnancial performance of Flight Centre’s main competitors (Business Review
Flight Centre shop and business numbers
Source: Flight Centre