Southwest Airlines Comparative Analysis - Case Study Example

Running Head: Southwest Airlines Organization Culture, Leadership and Structure Southwest Airlines Organization Culture, Leadership and Structure: Name: University: Date: Introduction: Southwest airline was founded in the year 1971 by Herb Kelleher and Rolling King. Its headquarters are located in Dallas, the airline has remained profitable for the past 30 years despite other airlines recording an increase in debts and losses. Its main competitors include American, Delta, continental and US airways and the company’s low pricing plan has ensured high profitability over the years. (Hoffer, 211) The company success is attributed to its ability to under price its competitors, the company offers low priced tickets and therefore it becomes the customers choose increasing demand, the company also receives less complaints compared to other airlines and this has made it to become a market leader in the airline industry. There are however other factors that has led to the success of South west airlines and they include the organization structure, organization culture and leadership, the following is an analysis of the company’s structure, culture and leadership compared to its competitors. Organization structure: Organization structures include the flat structures, tall structures, hierarchical structure, centralized and decentralized structures and each structure adopted has advantages and disadvantage associated. The company is organized in a hierarchical structure whereby top workers include the CEO and executive vice presidents. (Hoffer, 29) The advantage of this structure is that authority and a responsibility are clearly defined. Clearly defined roles help in reducing conflicts in an organization and also help in improving productivity and specialization. The other advantage associated with the hierarchical structure is that promotion paths are clearly defined. This means that workers are well motivated to achieve higher positions in the organization, promotion is based on performance and therefore top managers are well aware of the operations and activities in their division. High productivity is achieved where worker are motivated to improve performance which in turn leads to high profitability. (McCartney, 2007) Managers are specialized in the hierarchical structure, managers are promoted from non managerial positions in the organization and also from the same division they work and therefore they specialize in the same position and this ensures efficiency in the company. The other advantage of this structure realized by the Southwest airline is that workers are more loyal to their divisions; the company is divided in several divisions and these department help in improving productivity of workers through increased loyalty. (Cascio, 1184) The executive vice presidents include those in charge of government affairs, marketing and sales and promotion and advertising and human resource, each of the vice presidents report to the CEO daily and this helps in improving decision making for future strategies. Many supervisors who supervise the employees report to the vice presidents in their respective departments, these supervisors focus on interpersonal skills and their purpose is to encourage workers to utilize their abilities to improve efficiency and effectiveness. (Rewick, 2001) The American airlines and the Continental airlines also have hierarchical structures, however their hierarchical structures are tall given that there are many ladders in the structure, there are many intermediary managers and supervisors and these contribute to an increase in the cost of staff and reduced profitability. Workers are highly supervised and this result into reduced occurrence of innovation, their bureaucratic organization slows decision making and therefore workers are less involved in the decision making, therefore this has reduced their profitability. (McCartney, 2007) By maintaining a typical hierarchical structure the southwest airline is able to reduce its staff costs and also helps in motivating workers, by employing fewer supervisors the company is able to realize higher profitability and also increased employee innovation. This in contrast with the American airline and continental airline that has a tall hierarchical structure with many supervisors and managers in the hierarchical ladder, The Southwest Airline Company also realizes the advantages associated with the hierarchical structure. (McCartney, 2007) Organizational culture: Organization cultures include role, power, and task and person culture. Southwest airline has a person focused culture whereby individuals in the organization believe they are superior in the organization. Decision are made by all in the organization and employees are encouraged be innovative and to think independently to improve performance. This is evident from the employment of fewer supervisors in order to encourage workers to make decisions on their own. This has led to innovation which has led to increased efficiency where new costs saving processes are introduced. Some of these innovations include customer service innovation, airport location innovation, travel booking and single aircraft innovation where the company operates using Boeing 737 only. (Greco, 28) A profit sharing plan was introduced in the mid 1970’s where employees would get further compensation as the company realized profits. This compensation plan acts a motivation factor where employees work to increase the profitability of the company, for example in 2001 over 130 million were distributed to all the employees and this increased their annual salary by approximately 14 %.( Greco, 29) The person focused culture is also evident with the formation of the culture committee. In 1990 the culture committee was formed and it comprised of all people in the company, this committee meets four times in a year and its purpose is to enhance the company’s culture. This committee also helps in encouraging team work and enhancing functional cooperation across the organization and this help the operations division identify customer needs and focus on ways to satisfy these needs. (Hoffer, 119) The American airline has a power culture whereby only a few individuals in the company have the power to control and make decisions in the company; this form of culture has an advantage in that within a limited period of time decision can be made immediately. This form of culture has disadvantages in that the employees are not engaged in the decision making process. (Rewick, 2001) From the above analysis on the organization culture it is evident that southwest airlines has a person focused culture where the individuals have the responsibility of making decision in the organization, the worker are empowered and they are responsible for the actions they take, being owners of the company there are continuous innovations and improvements that lead to higher efficiency in the organization which is in contrast with the other airlines. Leadership styles: Leadership can be defined as organizing, planning and controlling individuals. Leadership is an important factor in the success of an organization. There a number of leadership styles and they include Autocratic, participative and delegative style. Southwest airline has a participative form of leadership where all workers are allowed to participate in decision making. (Hoffer, 53) Leadership illustrated the organization principles, leadership serves as a base for others including other leaders in the organization. Good leadership helps build strong relationship between employees and leaders. Herb’s leadership created credibility in organization and this helped build stronger relationship between employees and leaders. (Hoffer, 54) Leadership in Southwest airlines and has also prioritized employee initiatives, this is an entrepreneur culture whereby employees are expected to help in decision making and the improvement of existing processes, employees are therefore expected to take actions that allow them to make decision that benefit the company. The companies as a result of empowering its workers improves productivity of workers and also less employees leave the airlines, the company also has a policy in place that depict job security for its permanent workers, it states that protects permanent worker from being be laid off. (Cameron, 188) Employee ownership of the company through stocks also motivates them to increase efficiency in the company increasing worker productivity and overall profitability, employees are responsible for their actions and therefore the company employs fewer supervisors. By employing fewer supervisors there is a reduction in the staff costs and this helps in the increasing profitability, employing fewer supervisors has another advantage in that employees become more empowered in making decisions on their own in order to improve efficiency. (Sartain, 15) The American and the continental airlines have a history of employee mistrust between workers and top managers; there have been strikes and disagreements among workers and managers. They force employees to choose from being loyal to unions or the company. This form of leadership has been a major disadvantage to the company whereby workers are less motivated and less empowered. (McCartney, 2007) Comparing the southwest airline and the two airlines there is a difference in the leadership style exercised, southwest airline has a participative leadership style while the other airline have an autocratic leadership style. This hinders innovation and motivation of workers reducing efficiency and effectiveness of the company. Productivity is also reduced whereby the workers are not allowed to make decisions on their own and also are not included in the decision making process. Conclusion: From the above discussion it is evident that the organization structure, organization culture and leadership adopted by southwest airlines is different and better than those adopted by its competitors, all the factors have contributed to the success of the company and it is now termed as the southwest model, this model has been adopted by many company’s in order to try and improve their profitability. The southwest company still remains one of the best airline companies in terms of building relationships with employees and in terms of profitability. References: Cameron, K, (1998) Strategic Organizational Downsizing: An Extreme Case. Research In Organization, 20: 185 to 229 Cascio, F. And Morris, J. (1997) Financial Consequences of Employment Change Decision In Major US Corporations. Management Journal, 40. 1175 to 1189 Greco, J. (2001). Southwest’s Second Act Takes the Stage. The Journal of Business Strategy 22, 28-29. Jody Hoffer (1991) The South West Airlines Way: Using The Power of Relationships to Achieve High Performance, McGraw Hill Press, New York Libby Sartain; Why And How Southwest Airlines Uses Consultants Journal of Management Consulting; Milwaukee; Nov 1998; Volume 10, Issue 2, 12 To 17 McCartney, Scott. (2007) Southwest Sets Standard on Cost, The Wall Street Journal, Retrieved 26th July, From www.wsj.com Rewick, J. (2001). E-Commerce Airline Industry: Carriers Are Making Big Gains. The Wall Street Journal, Retrieved 26th July, From www.wsj.com Read More