Organizational culture has taken a significant importance in the management of every type of business. By analyzing and understanding the culture of a company we can determine how it performs. Culture refers to an organization’s values, beliefs, and behaviors. Firms with strong cultures achieve higher results because employees sustain focus both on what to do and how to do it. Southwest Airlines, created thirty years ago, has gone through important organizational changes, which revolutionized today’s business practices and structures.
A unique corporate culture has strongly contributed to Southwest’s success. Southwest Airlines, has remained a model for many business types because of its success. Southwest’s primary focus has been on providing low-cost airline tickets, customer service and employees relations.. We are first going to analyze Southwest’s culture; then explain how it drives performance, and finally review the challenges that it faced as it transitions from the founder to a professional manager.
The idea behind the creation of Southwest Airlines, as stated in the case, is at first to be able to “get your passengers to their destinations when they want to go there, on time, at the lowest possible fares, and make sure they have a good time doing it, people will fly your airline. ” (“Southwest Airlines Case Study”p1). Herb Kelleher and Rolling King, the two founders of the company, were very ambitious entrepreneurs who elaborated a simple concept adapted to the demand of frequent travellers and also paid very close attention to its employee environment.
According to Southwest’s Mission, Company Values and Corporate Philosophy (Exhibit 1, p6), commitment to Employee and a high level of Customer Service is essential. Fun also has to be part of the experience and environment. Kelleher wants all his employees to be “themselves”. He believes that “fun is a stimulant to people” (“Southwest Airlines Case Study” p2). There are often major events and parties organized for the employees to socialize and to participate in various activities besides their job.
Herb’s goal is that every employee had to spend more time building an organization in which personality counts as much as quality and reliability. Hiring people is a very important process at Southwest. The types of people who match the Southwest requirements are people who take initiative and are happy everyday when they go to work. The more people are active, the less control has to be done. Employees at Southwest are all considered as part of a big family. Everyone contributes to the growth and success of the company by using their own culture.
The fact that Southwest employees are treated so well, make the employees want to stay longer. In order to develop a strong culture, employees must follow certain artefacts such as rituals and routines, stories, symbols, power structures, organizational structures or control systems. Rituals are a regular process here which maintains cultural beliefs and values (Brown, 2001, S. Kemp/ L. Dwyer, p 83). At Southwest, there are often parties and social activities and at the headquarters, pictures of these memorable moments.
The dress code and the familiar language employees use to communicate reflect their ability and comfort among everyone else. Another important ritual and routine is the training program they have once new employees are hired. This program aims at developing a culture where everyone appreciates everyone and everyone’s job (“Southwest Airlines Case Study” p3). Southwest has developed a unique Human Resources policy based around lifetime employment. As shown in Exhibit V and VI, their slogan is a positive and attractive statement which demonstrates the culture which is present in the company among all employees.
Working at Southwest is a “lifetime experience” which is fun and challenging. The presence of “strong corporate culture” created a stable environment and was beneficial to all employees. They are considered as a family, which is one of the reasons for such a success in the business. Human resources practices emphasize on the importance of the company’s “spirit and value”. They want everyone who works at Southwest to encourage relatives to be part of the family (“Southwest Airlines Case Study” p3).
The six essential artefacts (routines ; rituals, stories, symbols, power structures and organizational structures) have played an important role at Southwest. They have formed a certain paradigm which well-established Southwest position among other airline companies (Brown, 2001, Kemp/Dwyer, p79). By following this pattern, the way the company functioned became a certain “lifestyle”. II) Southwest Performance Southwest has performed exceptionally well when Kelleher was CEO of the company, from 1982 until 2001.
He used strategies such as being strong-minded, enthusiastic, selecting and socializing with employees, managing the cultural network, maintaining a stable workplace, helped the company to out perform its competitors and become “one of the most admired companies” as reported by Fortune Magazine. Southwest had a great business model. They focused on essential points which helped them become a leader in the industry (“Southwest Airlines Case Study” p1). Their strategy of being the less expensive airline and providing a remarkable customer service was key to their performance.
As shown in Exhibit IV, Southwest says it has the least expensive airline tickets There are no penalty when you change your ticket, unlike most other airlines. Their slogan: “We’d like to match their new fares but we’d have to raise ours” is in a sense humorous but is also very well straight-forward. Team work and consensus are essential element among employees at Southwest. Every employee learned to work and take decisions by adapting to every type of profile. This is part of the culture.
A coherent culture helped the group form, have great relationships and be effective in communicating with employees and customers and have a good management. Profit-sharing to all employees demonstrates how much importance they provide to their employees. All employees have a significant ownership of Southwest airlines. This is a strong motivational reason to stay in the company. It is part of the “spirit”. Southwest has a great competitive advantage compared to many other airlines because this market is very demanding and being able to well differentiating yourself usually can lead to success.
Culture here, has a huge influence on behavior within the organization (Brown, 2001, Kemp/Dwyer, p79). The high motivation of the employees as well as their adaptation to the company’s culture and their management strategies made the company very profitable. It has been profitable for thirty one years and is the “only major short haul, low fare, high-frequency, point to point carrier. ” (“Southwest Case Study”, p4). III) Challenges faced by Southwest Although Southwest had an outstanding management, it has been exposed to organizational challenges along its growth.
Southwest faced union pressure and generational change (“Southwest Airlines Case Study” p4). As a result of the union pressures the company rules change which led to a destabilization. This happened due to the loss of motivation by the employees and the loss of a strong leadership in the organization. Southwest employees were used to work with different methods and conditions when Herb Kelleher was CEO. He strongly motivated his employees because of his personality and behaviour.
The transmission of culture is essential to preserve it, but in order to keep it leaders have to be able or manage cultural change. When “Herb” left due to retirement, he was replaced by Jim Parker, but problems started to arise. Employees did not consider the new President and CEO as a member of the family or as a “hero”. His methods and strategies to operate the firm were not as efficient as Kelleher’s. As it is mentioned in the Founder’s article (Schein, 2001, p13), the founder of an organization, forms a group’s culture “by force of his or her personality”.
Usually, when the founder of a company creates a certain type of environment and culture, it stays among all employees. Unfortunately when Jim Parker became the new CEO, there was a strong crisis in the aviation and tourism industry because of September 11th. As stated by a Wall Street expert in the Southwest case study, there is a risk in generational change. When people are used to a certain type of atmosphere, which has lasted for many years, it is very difficult to adapt to new changes. Especially when having been in a successful company such as Southwest.
The fact that employees stay so long, also has an effect on the environment in the company, they get older, and were used to a certain type of “way of life”. Employees were strongly attached to Kelleher. They were very disappointed when Kelleher left. It was not possible for them to consider Parker as Kelleher. The role Kelleher assumed was unforgettable in the employees mind. His ability to communicate and manage the company was exceptional. He not only was a great manager, but he also was a very friendly and human person.
As we can see in Exhibit II (A tribute to Herb Kelleher, Southwest Airlines Case Study, p7) he obtained many rewards by his employees on Bosses Day. The reward is very personalized and every member of the Southwest team dedicated this award to him. This award is very personalized. As it is described the exhibit, Kelleher was a very open person which cared a lot for his employees. Having such human personality, he acquired great respect, loyalty and dedication from his employees (“Southwest Case Study”, p2).
Having been used to such a good leader, employees were challenged when Jim Parker was at the head of the company. His methods were completely different and he did no have the same personality and culture as Kelleher. IV) Recommendations Southwest has been historically a high performance company However, in the last three years it hasn’t been performing as well as it had done in the past. In order to stay number one airline, Southwest must analyze how these companies function and what are their future goals. Competition has been very fierce.
Southwest face this problem as well. For many years, they were the company with the lowest fare in the United States. Nowadays other companies such as Jet blue or Song Airlines are very innovative and use similar techniques as Southwest did in the past and are coming up with more innovations. Song now provides customers with an excellent and entertaining service, new multimedia (TV, movies, games… ), great comfort with leather seats and low fares. Jet Blue is more focused on providing very low fares and isn’t advanced as Song or Southwest in customer service and quality.
Many employees had lost motivation when the new CEO came into place. Management strategies have been affected as well. In order to perform at a higher level it is essential that all employees adapt to these changes. Employees may not be totally satisfied but they need to recreate the same kind of environment as when Kelleher was leading the company. Alternatively, the need to create a new culture that differentiates them from the competition. Conclusion: The Southwest culture has remained a legend in today’s business world.
Since it’s creation it has gone through a few changes, which affected its organizational culture but has still been able to prove its great performance during the past few years. Herb Kelleher strongly contributed to this culture. He was admired by all his employees and was considered to be a leading CEO. His methods of treating employees and customers were very beneficial to the growth of Southwest. “Herb” had a strong influence on the company employees which he considers as a “Family”. Organizational culture in a firm can change many things. It is essential to understand why and how changes occur in firms.
As we can see in the Southwest case, firms with a strong corporate culture are usually very successful and recognized by many business publications such as “Business week” or “Fortune Magazine” for their culture. Southwest airlines can be described as an entrepreneurial company focused on the key points a service company should acquire: customer relationship, value-driven, productivity and efficiency. As a conclusion, we can say that Southwest Airlines has a great organizational culture characterized by its remarkable customer focus and employee-management relations but needs to reinvent it self to remain a leader.