Southwest Airlines vs. Koch Industries: Organizational Culture

Introduction

There are many different pathways to success for companies, and as a result, successful organizations can have distinctly different cultures. This paper examines two companies — Southwest Airlines and Koch Industries — to explore their different organizational cultures, how those cultural differences have emerged, and how they support the overall business objectives of each organization.

Organizational Culture at Southwest Airlines

The Southwest Airlines culture is one of the more celebrated organizational cultures in business. The company is built around "a warrior spirit, a servant's heart, and a fun-loving attitude." The fun-loving element speaks to day-to-day interactions, the servant's heart to genuine care for customers, and the warrior spirit signals that employees are expected to rise to challenges and overcome obstacles in their service (Makovsky, 2013).

These values are reflected even on the company's website. For example, a featured Star of the Month profile of a pilot quoted that "his love of serving others helped him fit within the culture from the start" (Southwest.com, 2017). This indicates that a servant mindset is a critical component of the culture — one that extends even to workers like pilots who may not have extensive direct contact with customers.

The value of this culture to Southwest is straightforward. As a B2C company serving consumers, Southwest needs employees who will go the extra mile, empathize with customers, and bring a great attitude to their work. The company recognized that these qualities would be differentiating factors in the airline industry. Southwest also understood that if it was going to undercut other airlines on price, it would need to deliver service at a higher level — one that would make customers overlook other service trade-offs when comparing Southwest with competitors.

The company works hard at maintaining its culture. Southwest has recognized that attracting the right talent is critical to its business. Many jobs in the airline industry are essentially low-skill positions that anyone can perform, but Southwest determined that placing people with a genuine service mindset in those roles was optimal. Crucially, those people would only be attracted by a team-oriented, service-focused culture. Southwest therefore built that culture deliberately as a means of attracting the right people over time. Maintaining a sustainable culture was important to the company's founders and continues to be a priority today, to the point where senior leadership actively works to preserve it (Harder, 2016).

All told, these elements of organizational culture help differentiate Southwest from other airlines. Even when Southwest launched in the 1970s, other airlines were not focused on culture or on making their workplace genuinely great. Southwest sought to create a different flying experience — one that was pleasant and positive — setting itself apart from competitors. This approach works well alongside its pricing strategy: Southwest offers lower prices and better service, making it a compelling proposition for many travelers. The result is that Southwest has gradually become one of the most successful and widely recognized airlines in America.

Organizational Culture at Koch Industries

Koch Industries takes a very different approach to organizational culture. As with Southwest, it asks employees to buy in to the culture — but the culture at Koch is quite different. It follows the principles of market-based management, a philosophy expounded by co-founder Charles Koch (Charles Koch Institute, 2017). This philosophy encompasses several elements: integrity, compliance, value creation, principled entrepreneurship, customer focus, knowledge, change, humility, respect, and fulfillment. While customer focus is shared with Southwest, many of the other elements represent an overt emphasis on value creation for the organization. Interestingly, much of what Southwest does is also rooted in value creation, but it is not expressed as explicitly; at Koch, this orientation is front and center.

A study of changes at Georgia-Pacific after its acquisition by Koch Industries revealed several distinct elements of the corporate culture. First, there is a focus on the long run that is less common in publicly traded companies. Management seeks high returns but is willing to wait for them — a marked contrast to companies that take a short-run, transactional approach to business (Leonard, 2017). This long-term orientation manifests in decisions such as reinvesting in the business rather than paying dividends, and it has been deeply embedded into the culture at Koch Industries.

Reports suggest that Koch Industries genuinely lives up to its stated values. Employees believe in those values and implement them in practice; they are not empty talk. In this respect, these values have been significant drivers of success for Koch Industries.

The Koch organizational culture serves a couple of important functions. First, it acts as a unifying element across the disparate businesses that exist within Koch Industries. The Koch leadership views organizational culture as something that adds unique value to each company they acquire. All businesses within their portfolio — regardless of whether they have synergies with other Koch entities — benefit from belonging to the organization because of the way the Koch culture helps to transform them.

Second, Koch's businesses largely produce commodity goods, operating in environments where high performance is expected. The market-based management philosophy attracts only the most talented and self-motivated individuals, effectively filtering out low performers. One of the most important consequences of this is that Koch Industries maintains a culture that is highly oriented toward results. Combined with a long-run perspective on those results, the company is able to build strategy that works over time. The culture therefore supports the business strategy and allows it to flourish, helping to differentiate Koch from other companies operating in the same commodity markets.