Questions on management in southwest airlines semco

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Successful companies have a compelling customer and employee value proposition that make them different and successful. They clearly showcase the benefits of doing business or working for them versus their competitors (Silzer & Dowell, 2010). The corporate values and management practices are completely in sync with each other. Organizational hierarchies and bureaucracy are avoided to the maximum extent. There is widespread sharing of operational and financial information with employees (Schippmann, 1999). Organizational systems are designed in a way that promotes a sense of belonging amongst employees.

The most distinct competitive advantage of Southwest Airlines is its ability to build and sustain relationships which are mainly characterized by shared goals, knowledge and respect. These are mainly due to four crucial factors- leadership, culture, strategy and coordination. Southwest's spectacular performance can be credited to its status of being a non unionized carrier in an industry which is predominantly unionized. Southwest Airlines understands the value of human resource and gives them due respect. Multifaceted and diverse workforce gives Southwest Airlines another key advantage (Bhattacharyya, 2010). It has an outstanding network of almost 35,000 employees. A good mix of backgrounds, expertise, varied market knowledge and experience has shaped the corporate culture consistently (Gittell, 2005). There has never been redundancies even around 9/11.This is hugely because Southwest Airlines is committed to providing stable environment to all its employees. It gives immense importance to learning and development needs as well as parties, celebrations and rewards for employees. Not only this, Southwest Airlines ensures the personal Safety of each Southwest Customer and Employee. Southwest Airlines also believes in low-cost Leadership through effective and efficient procurement, fuel management and construction of facilities. Its project management practices, high levels of customer service and efficiency in turn ensure wise spent of capital. Further the benefits are passed on to the customer in terms of low cost tickets.

Southwest Airlines follows 'The Golden Rule' meaning treating everyone the way one wants to be treated. In fact it endorses 'Living the Southwest Way' which means having a warrior Spirit, a Servant's Heart and a Fun-Loving Attitude. These behaviors are a reflection of Southwest's success as a safe, profitable and fun place to work (Southwest, n.d.)

Inspite of taking a drastic step of firing majority of top line managers within first year of becoming CEO at fragile age of 21, Brazilian Ricardo Semler has driven Semco as an exemplary. From an abysmal shape to $240 million in 2005, Semco is now a $100 million conglomerate. Semler was always aware and believed in possibilities. He always encouraged an organization where there is informal control, employee respect and willingness to support each other as and when need arises.

Semco's success is basically attributed to three interdependent core values: employee participation, free sharing of information and profit sharing. Employees in a group of six to ten organize their work and production schedules and goals. Salaries are tied to monthly budget and production performance. Managerial staff set their own salaries and bonuses resulting in phenomenal results. There is utter liberalization of employees from rigidity of hierarchy. Semler has reduced layers of management bureaucracy. He could do this mainly by outsourcing many administrative functions and keeping focus on core functions. Profit sharing too happens in a very logical and democratic method. Employees receive approximately a quarter of their department's net profit. A committee from the employees elected democratically decides the distributions resulting in doubling or even tripling an employee's salary. Semco is an effective company as the employees' needs and company needs go hand in hand. There are no cabins, official code of dress and job titles. Employees set their own hours of work and top management consist of six counselors including Semler (Haynes, 2000) who take up the CEO role on a rotational basis. There is a sense of belonging and a community feeling amongst the employees. Self enquiry and self empowerment which has been given equal importance as corporate goals has encouraged employees to achieve to their maximum levels. Ricardo Semler has put employee freedom and satisfaction ahead of corporate goals.

A high performing executive in charge is not a guarantee of organizational growth and productivity. However if there is interaction between skills, competencies, values, corporate mission, vision, culture and resources then organizational success is inevitable (Sperry, 2002).

Q. Evaluate the effectiveness of these features in helping the companies concerned to achieve

better performance. What evidence is there to support this?

The evidence of phenomenal success is clearly reflected in the productivity of these businesses.

Southwest Airlines founded in 1966 achieved success at an extraordinary rate by becoming $11.7 billion business in 2004.The Company never faced losses after 1973 when it started making profits, which is an achievement in itself. Southwest Airlines has now become one of the most admired companies in America. It has the lowest airfares resulting in ever increasing loyal customers. It is the most actively sought after company for job seekers as it has earned the reputation of one of the best places to work. Even in difficult times like 9/11, the company took temporary hit to stock prices and profits but protected their employees' jobs. Southwest's success can be attributed to a string of innovative and creative methods but its people aspect has been the most prominent one. Herb Kelleher, a charismatic leader, has related the mission of Southwest to deeply rooted values and aspirations of its employees. Another important principle that Southwest has worked on is 'Make them want you before you want them' (Gittell, 2005). Southwest is perceived as a fun working place where all employees have respect, importance and empowerment which entices people seeking jobs.

Southwest believes in hiring people with right attitude and train the skills. For this they have used their marketing and PR department to their advantage. Once an employee comes onboard, they are immediately immersed in the warm corporate culture of southwest. Apart from intelligent people management, the other part of equation in achieving success has been to control costs. While revenues increased by 20% in 2006, salaries, wages and benefits only rose by 10%. Southwest further controlled costs by getting into hedging agreement to lock fuel costs. Also Southwest consciously chose smaller airports not posing a direct threat to major airlines (Kotler, 2008).

To sum up, a blend of contemporary values, strong corporate culture, vision, job security and a lot of privileges to employees makes Southwest an exemplary company.

Despite a seeming recipe for chaos, Semco's revenues have grown from $35 million to $160 million in 2004. It has experienced almost no staff turnover and has exceeded its growth benchmarks. So, how did Semco become hugely successful despite contravening many accepted laws of business?

Semco has been run on management principles which deem suitable for a perfect world but surprisingly have been successful in an unstable economy and turbulent times. Ricardo Semler has shown that for people who are willing to take risk, toy with new ideas and apply management principles in an innovative way, a better way exists in which an organization can be run. With his radical approach to business, he has challenged the work ethics and productivity of the business world and shown the world that nothing is unachievable (Semler, 2004).

In Semco, Employer employee relationship has gone through a paradigm shift. As a company, it has linked its overall strategic plan to the empowerment of employees which has reaped success. By involving employees in strategic planning, budgeting, production forecast and profit sharing, he has created an organization which is literally run by its employees. The liberation from rigid rules, autocratic management and importance given to each and every employee has resulted in a natural feeling of belongingness. Semler has ensured continued success in an organization's life cycle, by infusing passion in employees. He has given importance to employee empowerment more than vision of the company i.e. what it really set to achieve and where has it reached today. The ability of Semler to identify opportunities, manage and create industry best practices in the face of competition and globalization has determined him a winner (Semco, n.d.).

A partnership relationship between employer and employee is the essence of a successful business. Both the companies have done an excellent job of tapping into emotional intelligence to create a fun dynamic family oriented work environment. In business, becoming consistently successful is important but it is equally important to celebrate success together with employees as a family. If the employees work and play together, a company succeeds exponentially.