Thesis on "Southwest Airline"

Thesis 9 pages (3718 words) Sources: 4 Style: APA

[EXCERPT] . . . .

Southwest Airlines Culture and Management

Organizational Structure

Southwest Airlines is an organization that illustrates the strength of the correlation between decision making, exceptional internal communications, and effective use of unique and highly differentiated leadership styles to attain profitable performance in one of the world's most competitive industries. Southwest's nontraditional approaches to managing decision making (Rhoades, 2006) that seeks to create trust with employees as the foundation for delivering exceptional service (Kochan, 2006) (Krames, 2003). The essence of Southwest's ability to translate these three organizational areas into long-term revenue and profit growth is based on creating and sustaining a culture where risk-taking on behalf of customers is expected and rewarded (Rhoades, 2006). At the center of the Southwest culture are thirteen core values (Freiberg, Freiberg, 1996) including seeking out low cost yet high value solutions to customers' challenges and problems, profitability, family, fun, hard work, individuality, ownership, legendary service, egalitarianism, common sense and good judgment in serving customers, simplicity, and altruism. According to Ginger Hardage, Southwest looks for employees who have a unique combination of a servant's heart and a warrior's heart with a fun-loving attitude (Hardage, 2006). Southwest completes testing of potential employees to make sure they align with these values (Krames, 2003). Senior management clearly sees their culture as a competitive advantage and the passion it generates on the part of employees delivering exceptionally high and consistent levels of service (Rhoades, 2006).



Cultural Assessment of Southwest Airlines

First, the culture has become ingrained with the values of being one based on a high-trust, high knowledge and this continues today with a culture committee that rotates employees from each business unit and department to keep it relevant and updated to the needs of the company (Laszlo, 1999). Second, the company's approach to managing for exceptional service continues with more awards and recognition being given to employees who deliver exceptional service to customers. In an industry where customer expectations have risen while quality of service has degraded over recent years, Southwest's approach on giving employees the freedom to serve customers is revolutionary (Kochan, 2006).

Egalitarian in its initial development (Krames, 2003) to the point of informality (Sadri, Lee, 2001) the decision making style at Southwest Airlines has been considered to be one of the key success factors in the development of profitable low-cost airlines as an industry (Berry, Shankar, Parish, Cadwallader, Dotzel, 2006). Many start-up companies have attempted to imitate Southwest Airlines' success by overtly focusing on their unique decision making style. What the start-up companies looking to imitate Southwest fail to realize is that underneath the egalitarian approach to reaching decision consensus are high expectations and a work ethic that borders on the extreme (Sadri, Lee, 2001). One of the most telling moments in the company's history illustrates this point. Founder and CEO Herb Kelleher went to the ground crews and asked them to turn a flight around in 15 instead of 55 minutes to save on costs and increase the airlines' route efficiency network-wide. Mr. Kelleher explained that without these improvements either nine planes would need to be sold or the company would have to let go several hundred employees, and he did not want to do either (Smith, 2004). This was a critical time in the history of Southwest Airlines, as the company was less than nine years old and was getting strong competition on their most profitable regional routes from larger competitors. Mr. Kelleher explained that price wars and increased use of gates by competitors was beginning to take Southwest customers, and only by matching the frequency of flights could the company hope to remain in these profitable markets (Smith, 2004).

This egalitarian and very open approach to describing what a difficult situation the company was in energized the ground crews. They internalized the challenge and met the 15 minute turn-around time and even created entirely new, innovative processes to make this possible. Management theorists who specialize in the airline industry credit this significant improvement in performance to standardization of the company on only Boeing 737 jetliners (Bovier, 1993) and the economies of scale achieved. Academicians who have specifically studied this accomplishment credit the reduction of 40 minutes per plane is more attributed to the decision being made by Mr. Kelleher to openly share the grim trade-offs he was forced with if the goal was not achieved (Rhoades, 2006) than resort to an autocratic leadership style (Harari, 1996). What this example of decision making shows about Southwest is that while there is a remarkably high level of transparency and honesty on the part of senior management about how they perceive trade-offs and the costs or benefits of each, there is an equally strong level of candor regarding how much work is required. The decision making style at Southwest is unique in that its transparency invites ownership of the problems and solutions.

A second scenario also illustrates how the decision making process at Southwest pushes accountability and ownership for results into operational teams rather than keeping it centralized in senior management. The outcome of this specific decision making process is the attaining of the enviable safety record of not a single fatality in the history of Southwest Airlines' operation. In 1985 Southwest was the first airline to realize that Crew Resource Management (CRM) was critical to inter-department and intra-crew communication in their planes and between crews and functional teams at gates (Bovier, 1993). Instead of having senior management responsible for routine safety training and for taking responsibility for periodic safety training as defined by the Federal Aviation Administration (FAA) Southwest senior management made the decision to make pilots the safety training, department cross-functional, and intra-crew training leaders across the company. This decision was made unilaterally; there wasn't much of an egalitarian level of voting to opt in or not on the pilots. The decision proved to be one of the best ever made by Southwest as having pilots the safety leads galvanized the team spirit and individual accountability and ownership everyone working on an aircraft had in every gate, for every flight. Fatal safety errors in safety often occur when one team believes another is completing a safety check of systems on the aircraft, or when conflicts emerge between cross-functional teams, leading to a sense of isolation that extends to plane, gate, and repair crews on each flight. Putting situation awareness and assessing potentially unsafe aircraft system conditions at the gate level also made it possible for technicians to cancel flights immediately for safety reasons. Other airlines would require a manager at a centralized location to approve a flight cancellation. By making pilots the safety leads, any flight at any time could be cancelled due to safety concerns by the pilot and the team's judgment.

Southwest Airlines External Analysis

Fluctuating fuel prices are the greatest risk to SWA both in the near-term and strategically. The purchase of oil futures (Birkner, 2008) has been credited as the one factor that has assisted SWA in staying competitive from a profitability standpoint. This is illustrated by the fact that the price of jet fuel increased significantly through 2008, reaching approximately $140 per barrel by the summer of that year. Industry experts cite this as a 59% growth in the price of jet fuel over just a single year (Birkner, 2008). From a financial analysis of their 2007 performance, SWA reported that approximately 28% of their operating expenses were tied to fuel alone, with the statement made in their 10Ks that the company expected to use approximately 1.8 million gallons of fuel in 2008 (Southwest Airlines Investor Relations, 2009).

Continued price competition from national and global airlines competing in SWA's core markets is also a major competitive factor outside the organization as well. These competitors include American, Delta, United and as of 2009, Virgin America. There is also continued pressure to continually increase the types and levels of services delivered prior to flights and in-flight. The increasing focus on offering WiFi (Banstetter, 2009) to stay in competitive parity to Delta and Virgin America is forcing SWA to re-evaluate their more egalitarian-based approaches to seating and service.

The challenge of staying in compliance with safety and health regulations, in addition to security regulations are continuing to significantly impact the performance of airlines throughout the U,.S. In the case of SWA the challenges have been particularly difficult as the company faced investigations from the FAA with regard to their maintenance and repair records and practices (Wade, 2008). Due to a higher priority on sustainability, earth-friendly operation of jets and "green" initiatives throughout the airline industry, SWA has created a "green team" to address the specific aspects of the company's operations including how to make their refueling, waste disposal, cleaning and refurbishment processes more environmentally friendly.

The broader global economy currently in the midst of an economic slowdown is significantly impacting every airline's bookings and capacity rates. SWA has been continually using the value proposition in its marketing campaigns of making it less expensive to fly than to drive. Despite how much of a recession… READ MORE

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