Southwest Airlines Organizational Culture Analysis of Organizational

¶ … Southwest Airlines Organizational Culture

Analysis of Organizational Culture at Southwest Airlines

Application of the OCP Framework

Developing Organizational Culture at Southwest Airlines

Implementation of Organizational Culture

Organizational Culture as an Important Determinant of Organization's Success

Southwest Airlines is a world renowned air travel company and a low cost leader in airline industry of USA. Formed in 1971 by Rollin King and Herb Kelleher, the company is committed to "providing highest level of customer service with pride and caring" to its varied market segments ranging from leisure travellers to freight transportation. The two most important stakeholders for the company are its employees and its customers. Southwest Airlines owns 520 different types of aircrafts and serves 411 cities and 63 million customers at 59 airports in 30 different states within the United States with its nonstop air travel service (Southwest Airlines Inc., 2010).

The major reason for company's 35 years of phenomenal success has been its top leadership's ability to articulate its core philosophy and implement its visionary goals to the lowest levels of management. This vivid strategic management has enabled it to endure all economic downturns (Box, 2009). Herb Kelleher, who was the co-founder and former CEO of the company, has been recognised as the greatest organizational leaders who accomplished the success through their charismatic and collaborative leadership style. He has been able to motivate his employees and articulate a team oriented culture within the organization, committed to success and hence, the turnaround rate for Southwest is the lowest in the U.S. airline industry (McNerney, 1996).

There has been extensive literature pertaining to the evolving management theories over a period of time. The early theories by Frederick Taylor's scientific management approach to the Henri Fayol's 14 principles of organizational behaviour, the theories constructed into more contemporary theoretical constructs including the Path Goal Theory and Systems Approach (Ford, 1977), all of which emphasise the role of organizational behaviour in determining organization's success (Robins & Judge, 2007). This is because an organization's culture reflects its norms, values, practices and its distinct identity. The essay further explores the different dimensions of Southwest Airline's cultural construct (Bailey, February 13, 2008).

Analysis of Organizational Culture at Southwest Airlines

The organizational culture at Southwest Airlines has been articulated by its top leadership and implemented through the mission and vision statements. The corporate goals of the organization majorly focus on maintaining its position as a cost leader in the airline industry. Hence, leadership has adopted cost minimization as its top priority (Bailey, February 13, 2008).

Application of the OCP Framework

The seven dimensions of organizational culture constitute an integral part of the literature. Proposed by Chatman and Jehn (Helmers, 1991), the seven dimensions suggest the identity and uniqueness of each organization. These dimensions include detail orientation, people orientation, team orientation, outcome orientation, innovation, aggressiveness and stability (Erdogan, 2010).

People Orientation

People orientation is one of the most distinct aspects of its organizational culture. The company has a separate People Department within the structure. This department facilitates flow of information and encourages employees to develop a direct and an open relationship with the co-workers by preferring face-to-face means of communication and preferably on the first name basis. This is because the corporate culture at Southwest Airlines, developed by its leadership, focuses on empowering employees with the critical information so that significant problems can be fixed timely, not just on customer satisfaction (Nocera, 2008).

Team orientation is one of the most important criterions for short listing applicants at Southwest during its recruitment process. It promotes collaborative culture through cross training and encouraging employees to cooperate. A lot of emphasis is placed on training. The participative role of the leadership has encouraged the employees of Southwest to contribute positively in terms of ideas and suggestions (Smith, 2011). It has not only motivated the employees but also made them a fundamental part of the organization which is reflected in its lowest turnaround rates in the industry. There is not just one leader at Southwest, as the belief of the organization is, that a single person cannot be considered a leader because all the employees are an embodiment of leadership so titles are not meant to differentiate. Hence team work and collective effort is given most significance (Looper, 2008).

Outcome Oriented

Another important dimension of the OCP Framework is people orientation. Companies having outcome orientation emphasise achievement of results. This can be related to Southwest Airlines as its management majorly revolves around maintaining its cost leadership model. The company has kept its focus on the regional and national airline service which has enabled it to maintain its position as the cost leader in the American airline industry. These tactics include getting passenger seats on first come first serve basis and the humorous commentary during the journey (Looper, 2008). Southwest Airlines has been recognised as the airline experiencing the fewest customer complaints. This success has been rendered to the unprecedented discipline reflected in its leadership and strategy management. As a result, it has been the industry leader which has offered customers with most affordable packages, providing its employees with career development opportunities and job security (Bailey, February 13, 2008).

The airlines do not serve meals, and a maximum of 20 minutes is allotted to the turnaround at the passenger gate to keep the costs 22% lower than that of the industry average and the operating margin thrice as much as the industry (Looper, 2008).

Developing Organizational Culture at Southwest Airlines

Much of the development of Southwest's culture is owed to the visionary leadership of Herb Kelleher, former CEO of the company. At southwest, leadership is a lifestyle, culture and commitment hence, is applied in totality. The mission statement, vision and corporate goals have instilled a clearly designed strategic perspective in its management. Culture is an intangible aspect of social fabric thus these statements reveal the uniqueness of every organization which is reflected in its non-verbal cues. From its very beginning, the company has focused on a people oriented approach. In its initial years, for example, Herb Kelleher was faced with the dilemma of lying off employees to overcome the survival mode of the stand amidst the financial problems. However, he chose to reduce the turnaround time to 15 minutes, down from 55 minutes in attempt to increase the revenue generation with the same number of employees (Southwest Airlines Inc., 2010).

According to Vecchio (2007), the founder of a company plays an integral part in developing its culture (Vecchio, 2007). This is also eminent at Southwest where the "legendary" culture is actually a legacy of Herb Kelleher and remains an embodiment of his values. This development of corporate culture, which has become an essential aspect of modern organizations, has its roots in the "Southwest Spirit" encompassing its shared values, beliefs, norms, stories and artefacts envisioned by Kelleher. The fundamental aspect of his leadership was to ensure that employees form an integral part of the organizational fabric (Freiberg, 1996).

This inadvertent culture was further developed by the team. As put by Fiedler and Schein, the interpersonal interactions of the employees within an organization, determine the culture to a great extent. There is an absence of bureaucracy as according to the management, bureaucracy restricts the ability of employees to innovate and puts a constraint on its competitive position in the market (Freiberg, 1996).

Implementation of Organizational Culture

The aforementioned analysis predicts that culture at Southwest is fostered and maintained not only through its top management but the entire workforce comprising of 31,000 employees (Southwest Airlines Inc., 2010). The company initiated a Culture Committee in 1991 to facilitate the development of its legendary culture in the new employees and to maintain its cultural values. This department has acted as an embodiment of the Southwest spirit, ownership and responsibility to promote and foster these cultural values in the employees. Hence, employees are trained to provide unprecedented customer support and flexible working hours has enabled the employees to become motivated and committed to the organizational values (Aguinis, 2009).

Aguinis (2009) argues that the significance of human capital in organization's success is unprecedented. Hence, the employees must be motivated and provided job satisfaction, in compliance with the early motivation theories of McGregor and Herzberg (Aguinis, 2009). In one of the New York Times articles, Herb Kelleher was reported to say, "We have never had layoffs, we could have made more money if we furloughed people. But we don't do that. And we honour them constantly. Our people know that if they are sick, we will take care of them. If there are occasions or grief or joy, we will be there with them. They know that we value them as people, not just cogs in a machine' (Nocera, 2008).

Along with the People Department as an integral part of the organizational structure, the company has also adopted an open door policy as a primary means of employee motivation. Employees are encouraged to share their feedback, suggestions and concerns with the CEO, which are forwarded to the concerned departments on a daily basis. Moreover, in attempt to motivate its workforce, Southwest Airlines was the first airline to initiate a profit-sharing plan with its employees. In this program the concept of performance related pay was introduced which lead to an introduction of stock option plan in 1991. Based on research stocks that rose up to a thousand fold after the financial year 1972, have resulted in many millionaires throughout the company (Nocera, 2008). Despite the September 11 stock market crash down, the investments worth U.S.$10,000 in 1984 would be worth U.S.$200,000 in the financial year 2003 (Freiberg, 1996).

Organizational Culture as an Important Determinant of Organization's Success

Southwest Airlines is recorded to have generated U.S.$278 million in revenue in the year 2011 and the company has experienced 39 years of constant profitability. The company has further earned the place as the fourth largest airline in the U.S.A. And in the FY2002, the stock price for Southwest increased to a whopping 29% per annum for a consecutive ten-year period (Southwest Airlines Inc., 2010). Much of this phenomenal success is owed to the corporate culture fostered in the organization. The company is determined to maintaining its cost leadership model through highly motivated workforce (Bailey, February 13, 2008).

This can be further emphasized by the illustration of cash flow difficulties faced by the company in its initial years. Herb Kelleher set the stage for a collaborative culture in the very first year of operation. When faced with the dilemma of selling off some of its fixed assets, in attempt to meet the short-term obligations, he chose to reduce the turnaround time instead. The company has further emphasised the importance of people as the most valuable asset of the organization. Moreover, a relaxed corporate culture at Southwest Airlines encourages employees carry out operational duties independently and more creatively. The culture that has been ingrained in the organization focuses on employees as the "first customers" whereby passengers come second (Box, 2009). This approach has enabled the tremendous success of the company as the customer satisfaction is only achieved through a highly motivated workforce which is committed to serving each customer with a fun experience. This includes the humorous commentary by flight attendants, free round-trip offers, and fun contests. Hence, Southwest's competitive strategy is experienced-based differentiation that gives it's a competitive edge in the airline industry (Nocera, 2008).