Study On Southwest Airlines Management Essay

2468 words (10 pages) Essay in Management

5/12/16 Management Reference this

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The past few decades the airline industry has experienced major setbacks. They went through governmental deregulations in the 1980’s where many of the airlines had to file for bankruptcy or close down because they were not making a profit. The ones who survived these series of crises out of deeply in debt, strapped by union regulations, and facing an industry that was highly competitive.

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Then when the World Trade Center was hit by terrorist late in 2001 these airline companies faced a country that was leery of air travel and as a result these companies often had to fly their planes with empty seats. On top of that these airlines had to incur additional costs due to the rising cost of fuel. The airlines that had survived these earlier disasters finally succumbed to the economic pressures that they were facing. Again, they were forced to either file bankruptcy or merge into other companies.

During all of these trials and tribulations when many of these organizations were failing, “one carrier grew and prospered throughout this entire period -[this airline is] Southwest Airlines.” (Buller, 2006).

Company Description

Southwest Airlines was founded in the 1960’s and since its beginning Southwest has always been the underdog, fighting for its survival. It was approved to fly on February 20, 1968 from the Texas Aeronautics Commission. But it had many legal and political battles to fight over the next few years in order to continue doing business. Braniff, Trans Texas, and Continental fought to keep Southwest Airlines out of the market. Eventually Southwest had to go to the Texas Supreme Court and then to the United States Supreme Court in order to get the approval to continue to operate. Herb Kelleher, who was a law student graduate from New York University and also Southwest’s CEO, led the fight most of the way and it was through his efforts that Southwest came out of their early legal battles, victorious.

From these early battles to the major airline that is now days, Southwest’s growth can be divided up into three different phases. The first, named Proud Texan phase, took place from 1971 to 1978. It was during this period that Southwest expanded its services within the state of Texas. Since it did not cross state lines the company was not subjected to many of the federal regulations that other airlines had to face, thus saving the company time and money.

The second phase is called the Interstate Expansion and it took place from 1978 to 1986. It was during this phase that Southwest Airlines started flying into other states. By the end of the Interstate Expansion Southwest was flying into 14 different airports. Southwest opened into these markets after the deregulation which allowed them to operate on interstate bases without being overburden by the government.

The third phase is the National Achievement phase which took pace from 1987 to 1997. During this phase Southwest gained much of its success and notoriety. It was during this phase where Southwest airlines had most of its growth.

By looking at the past we can discover important insights about the company’s culture and philosophy. In Southwest’s case after looking at its different stages of growth we can see that the company is careful about how fast it expands. Many airlines have expanded to fast, lost control, and going under. Southwest decided to take a more conservative approach, “go-slow,” a philosophy which comes from Herb Kelleher. The company has a policy that even if a city offers money to the company they can not enter that market. Rather, the only way Southwest will enter a market is if conditions are favorable to the company, including, but not limited to weather and economic conditions.

The way Southwest handles their growth brings up two important points about the company. The first is that the company does not want the growth of their organization to get out of hand. They have watched other companies in the past and have learned from their mistakes This efficient growth strategy is evidenced by the fact that the top 100 most profitable markets for airlines account for 75 percent of Southwest’s profits. The second is that Southwest airline is an ethical company. They refuse to take bribes from cities and communities that want their business. Both of these points come from Southwest cultures and can be traced to back to Herb Kelleher and management techniques.

The CEO

Herb Kelleher is a man who must be looked at in order to understand Southwest Airlines. It was Kelleher’s vision that made Southwest Airlines what it is today and much of the company’s fun oriented culture comes directly from him. He took the company from scratch and built it into a major airline company. Kelleher is “friendly, participative, deeply involved, and caring approach is revered throughout the organization.” He can be described as being both a charismatic and a transformational leader. For Kelleher’s aura inspires the people of Southwest Airlines and to “transcend their own self-interest.” (Robbins, 2007).

Herb Kelleher has been described time and time again as having charisma. Even though it is hard to put a definition on charisma, Kelleher does fit into Robert House’s four characteristics of a charismatic leader. First, Kelleher has a vision and he articulates that vision of high quality customer service in the mission statement at Southwest airline. Second, he takes personal risks in order to achieve that vision. He showed that he was willing to take personal risk and incur high costs when he was fighting the legal battles at the inception of Southwest Airlines. Third, he is sensitive to his followers needs. Herb Kelleher seems to really care about his employees and their well being. This permeates throughout the whole organization and most of his employees understand his level of empathy for them. Finally, he displays unconventional behavior. This can be seen by looking at Southwest airlines, it seems to do everything unconventional but it has the success to back it up.

Herb Kelleher can also be described as a transformational leader. By listening to the stories from Southwest employees a person will soon learn that the culture at Southwest is truly different and that this difference is credited to Herb Kelleher. One of the stories that resonates throughout the company is how one of the Southwest agents “babysat a passenger’s dog for two weeks so that the customer could take a flight on which pets were not allowed.” (Buller, 2006). It is this kind of service that can be seen throughout the whole organization. Southwest’s employees often ask themselves if this “is something Herb Kelleher would do?”

Mission and Objectives

Southwest Airline’s mission focuses on their employees and customer service. Southwest’s mission is “dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.” (Buller, 2006). Since Southwest is a no frills airline they gain and keep customers by offering exceptional customer service which is provided through the employees, the cornerstone of the company.

Southwest Airline proclaims that “We are a company of people, not planes. That is what distinguishes us from other companies.”(Buller, 2006). Other companies may have nicer airplanes but they only provide good service to first class ticket holders. Southwest treats all of their customers as if they were all riding first class. Having a mission statement focused on customer service makes Southwest’s relationship to its customers unique. This is what allows Southwest Airline to dominate the discount airline market.

The objective at Southwest are simple; to provide basic services

in an efficient effective manner. Southwest’s flights are safe, low-price transportation with great customer service. Southwest offers some of the industries lowest fares and have one of the industries highest safety ratings. Another main objective of Southwest is to provide arrivals and departures that are consistent and on time. This has been a large problem for many airlines. But because Southwest’s average turn around time of 15 to 20 minutes helps ensure on-time flights. As long as Southwest continues to achieve its objectives, they will continue to excel in the airline industry.

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Southwest Strategies

The strategy portion of Southwest’s business begins with its workforce which is carefully selected and trained to reflect the image of the company. It starts with a careful hiring process. Applicants to Southwest are put through a strenuous selection process because the company is focused on obtaining people with the right attitudes for their company. This is because the belief at Southwest is that they can teach skills but they can not teach attitude. Some of the attributes the company is looking for in employees include: positive attitude, positive self image, internal locus of control and highly conscientious.

Once the right people are selected for the jobs, the training begins. Kelleher pushes the importance of maintaining a cohesive culture and training is an excellent way of assuring that this is achieved. A major way that employees learn to adhere to the culture of Southwest is through Southwest University which is a training facility where employees learn what it means to be part of the Southwest family.

In addition to strenuous hiring and training processes Southwest Airlines invests heavily in treating its employees well. In an industry notorious for labor disputes and bad union relations Southwest Airlines is a rare exception. The majority of their employees, 85 percent, are non-unionized. When the company does have to deal with unions the negotiations are generally friendly. Much of this success comes from a practice of profit sharing with its employees. In this case, profit sharing can be beneficial because it encourages employees to be personally vested in the company and it allows for room for salary negotiations. Southwest also offers excellent medical and dental benefits which are very important in the era of rising health costs. Good salaries, health care programs and profit sharing are tools the company uses to retain the valuable employees it worked so hard to obtain.

All of the benefits of working for Southwest directly feed into its corporate culture, which is one of Southwest’s key strategies. Part of the reason Southwest is so successful is because they strive to make it fun to fly with them. To accomplish this the company created an atmosphere that is fun to work in. This means diminishing the influence of bureaucratic restrictions so the employees feel like the management is working with them, to bring excellent customer service. Southwest creates their desired culture by using: a flat structure, teams, good labor relations and profit sharing to modify employee behavior to be that of a free flowing team versus a bureaucratic dictatorship.

Another important way that Southwest works to reinforce its corporate culture is through company mailings. LUV Lines is the company news letter and it contains detailed information about the performance of Southwest as well as other competitors. This is a good tool for flattening the organizational structure because well informed employees are more likely to make the correct decisions. The newsletters helps make sure the employees know where their company stands in relation to the competition which encourages the feeling of ownership that is necessary to create involved employees. Southwest also has an entire book devoted to creating, “positively outrageous service.” This is crucial because one of the main goals of a cooperative culture is to bring about an environment in which its customers are properly cared for.

Structure

Largely due to the fact that the planes must operate safely and efficiently, Southwest Airline’s structure is like most airlines, “formal and centralized.” But where Southwest differs is on their “loose tight design.”(Buller, 2006). They give their employee informal job descriptions concerning customer service. “While there is very high standardization regarding operations, it is low with respect to customer service.”(Buller, 2006). Southwest empowers its employees to do what is necessary to please their customers. So Southwest follows both the mechanistic model and organic model. On its upper levels, such as the corporate office and the flight crew, the mechanistic model is used. On the companies lower level where safety and time is not as high of a priority, the organic model is used. This gives the employees leeway to try new things on the customer service level while maintaining safety.

Human Resource Management

Southwest’s human resource department’s mission statement is: “recognizing that our people are the competitive advantage, we deliver the resources and services to prepare our people to be winners, to support the growth and profitability of the company, while preserving the values and special culture of Southwest Airlines.” (Buller, 2006). Structurally, Southwest places more focus on their human resource department, “The People Department” than do its competitors. This is a major advantage for Southwest Airlines. Since Southwest Airlines has a reputation for being a great place to work, many people apply to work there. This allows Southwest airlines to be selective in its hiring process and to look for the best fit for both the employees and the company. Southwest rejects about 100,000 applicants a year while maintaining a lower turnover rate than their competition. Having this low turnover rate show that Southwest airline does a good job in their selections and their employees that they do hire have a good fit for their organization.

Culture and Control

Southwest’s culture is its most unique attribute. The company focuses on a team-oriented culture and is not distracted by work rules and regulations that most competitors are consumed by. Southwest foregoes the functional structure of its competitors in favor of a more positive equalitarian culture to create a positive equally based culture. This approach contributes significantly to Southwest having the lowest employee turnover rate in the industry and the highest level of consumer satisfaction.

Conclusion

As was noted above Southwest Airlines has had success while their competitors have gone under. A majority of this success can be credited to Herb Kelleher and the culture that he has created. However, Herb Kelleher is getting close to retiring and he has no clear successor to take his place. It will be interesting to watch and see who Southwest picks as Herb Kelleher’s successor. This will be an important crossroads in Southwest’s future as a new CEO can change Southwest’s whole culture and the direction that the company is going. Only time will tell if the unique culture and organization that Kelleher has created will survive this uncertain future.

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