Southwest Airlines

Southwest Airlines, Key Facts:

Niche strategy. Concept:

* Concentrate in underutilized airports

* 1 type of aircraft - fuel-efficient 737 (1994 - more that 200 planes)

* Frequent, on-time departures

* Low cost fares, only 2 types of fares per root

* No seats assigned, no meals

* Point-to-point roots

* Higher equipment initialization, shorter turn-around times

Competitive advantage:

* Cost structure

* "The workforce is dedicated to the company. They're Moonies basically. That's the way they operate."

Issue: New Competition. Other US airline companies started to imitate Southwest Airlines and created their own low cost carriers (for example: Continental Lite and United's Shuttle).

How has Southwest used OB ideas to secure a competitive advantage?

In the past when Southwest was unique in its approach to airline service, the company did not really have competitors within the airline industry (of course, Southwest had rivals, but the company managed to find its' place on the market). As one of the managers said, they were competing more with on-land transportation means (such as busses and trains) rather than with other airlines. From 1980s the situation in the airline industry started to become more unfavorable with companies loosing money and going bankrupt. At that time American airline companies realized that they can probably deal with these problems by copying the Southwest Airline's concept (as Southwest has been profitable in all years of its; operations). In the first part of 1990s two companies - Continental and United launched their own low cost carriers and Southwest was concerned with the new competition. In fact these companies had plenty of time to analyze Southwest's model and they could copy their concept partly without any serious problems (one plane type, one way flights, no meals, low fares, etc). But the way the operations were structured and cost savings that resulted from it was only one part of Southwest's success, while the second part - the workforce attitude was far more difficult to imitate. From the case we learned that Continental Lite and United's Shuttle faced many problems and were not able to become as successful as Southwest, therefore we can conclude that Southwest's people were in fact N1 success factor.

Leadership

Southwest is a company with very strong corporate culture, which formed thought the years of company existence. The "Southwest Way" of doing business came to the organization from its' owned - Herd Kelleher. As we are told, from the beginning this person adopted a visible, hands on, slightly over-the-top style - always ready to promote a party and have fun. His approach was that there is no reason that work has to be suffused with seriousness and that the professionalism cannot be worn lightly.

In my opinion, such approach, together with the fact that he was the lowest paid CEO (and was proud of it) brought Kelleher closer to his employees. His behavior and his attitude to business enabled him not to go too far from "his people" and not to become someone at the top level who cares only about meeting the needs of company shareholders.

I think that having reliable and efficient workforce resulted mainly from the fact that Herb was not "The manager" or "The Big Boss" for all those pilots, mechanics and agents who worked for Southwest Airlines. Kelleher was a Leader first of all. As chapter 16 from our book emphasizes, the study of 167 companies showed that leadership can make a huge difference (as we are told, companies with higher net profits were the companies with effective leaders).

If we identify leadership as influencing employees to voluntarily pursue organizational goals, we can say that this is 100% what Kelleher and his team was doing. At the same time I would like to stress the importance of leadership prototype concept. Kelleher Herb was a good leader for those people who worked in the Southwest Airlines, but this does not mean that he can perceived to be a good leader for every single industry worker. As we know from the case, the recruitment process and selection of candidates was given serious attention in the Southwest Airlines, as they stressed, they hired and fired people for attitudes. Therefore we can assume, that Southwest Airlines tended to attract people who have the same vision of how things should work in the business and how they should be treated, thus Southwest Airlines put together people who have the same leadership prototype, and traits of "their leader" were the traits that Herb had. It seems unlikely that all people would preserve a "party guy" who was known for his love of Wild Turkey Bourbon, 5 packs of cigarettes a day and who's team asked applicants to change suit-and-tie style for Bahamas shorts, would be a real leader for everyone. What Southwest succeed in is finding those who share the attitude of the company and its' management.

(I said all this keeping in mind that Kelleher was more like a role model and ideas generator, but needed his team to organize its' ideas and activities).

Employee's commitment to the company.

Company - is the Family

According to Southwest members, the best word that could be used to describe their company was a word "FAMILY". Employees were treated as internal customers and though about Southwest as a comfortable and fun place to work. As they perceived their company to be the family, it is unlikely that they will allow things going wrong and falling apart in their family.

The mission of Southwest's People (HR) Department 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.

As Collet Barret, Executive Vice President said: "If you're comfortable, you're smiling more and you give better service". The same idea was emphasized by flight attendant working from United: "...the bosses ought to think harder about how we feel if they want to keep their customers happy". Treating