Corporate Culture And Leadership Actions For Strategy Implementation - Essay Example

Corporate Culture Leadership Actions for Strategy Implementation. Table of Contents Introduction 3 Corporate culture in South-west Airlines 3 Competitive advantages arising from the culture 4 Analysis of financial performance 5 Characteristics of South-west Airline’s culture and its impact 7 Recommendations for strengthening the company’s culture 8 Leadership actions for implementing strategic decisions and their significance 8 Reference 10 Introduction South-west airlines faced a number of regulatory and legal hurdles at the time of its incorporation but it eventually emerged as one of the most profitable airlines of US. Herb Kelleher who fought the legal battle for the airline and later became its CEO and Chairman ingrained a bellicose and optimistic spirit in the airline’s corporate culture. The competitive and legal battles developed a fighting streak and the desire to survive and succeed despite all odds. Corporate culture in South-west Airlines The warrior attitude that the airlines developed over the initial years has shaped up its corporate culture. This attitude is also visible in the recruitment activities of the airlines. While hiring new people the airlines gives preference to candidates with a combative and hardworking spirit. Besides this in the hiring process the airline officials look for traits like dedication, sense of humor and extroverted people with an empathetic attitude in dealing with the peoples’ emotions. The airline gives special emphasis to learning and expects its employees to learn even from the day to day job experiences. Leadership courses designed for the airline managers emphasize on encouraging, empowering and coaching and are not limited to supervision or rule enforcement. Through regular courses the cultural themes like trust, teamwork, diversity and harmony are ingrained in the employees and supervisors. The supervisory positions in the airline are mainly filled internally as it is the belief of the management that the people who had been in the system are better equipped in handling and understanding the beliefs of the co-workers and find acceptance among the peer. This concept of internal job promotion motivates the employees to put in their best performance. The compensation offered by the airline is higher than the industry standards and it also consists of a plan for profit-sharing for the senior employees. The company has a non-adversarial and harmonious relationship with the employee unions. Airline’s contract with the employee union does not consist of any restrictive rules permitting even the pilots, gate-keepers and ticket agents to perform loading and unloading work. South-west airline has a “no-layoff policy”. This is because the company is of the belief that laying-off people is only a short term measure of increasing business profits. Instead the company seeks to build a sense of trust with the employees as this makes the employees more loyal towards the company. For this reason the company has been successful in building a good-will with its unions and employees. South-west gives special recognition to the employees who are able to make a positive difference in the experience of the customers as well as the life of the co-workers. The work environment at the company is permeated with fun and LUV, which is more than an extension of the company’s ticker symbol. Competitive advantages arising from the culture The efficient people management skills together with the combative spirit led to higher productivity of labor and considerably reduced the labor costs of the company as compared to its rivals. The willingness of the employees to do their part of the work considerably boosted the performance of the airline. This lowered the turnaround time of the company to 25-30 minute as compared to the industry average of nearly 45 minutes. The labor productivity of South-west for the year 2007 was much favorable as compared to the average of the US airline. A constant monitoring of the arrival and departure by the airline managers is done so as to find out ways to improve the on-time performance. The company encourages suggestions and practices from the workers and even implements them. The core values and cultural practices of the company established it as the most competent airline in the industry and made it the best operator in the airline industry of the country for 2008. Analysis of financial performance The company has managed to retain profitability even during the tough financial times. This is evident from the profitability ratios of South-west airline for the year 2008. For this year the airline reported an operating profit margin of 4.07%. This shows that the company has been successful in managing its operating costs fairly well. The net profit margin which is expressed as Net profit/Revenue is positive at 1.61% highlighting the efficient administration of the expenses. The return on equity (ROE) which is measured as Net profit/Total Equity is 3.87% which indicates that the company has been able to create wealth for its shareholders. Return on asset (ROA) is measured as Net Profit & Interest /Total Asset. This gives the return earned by the company on the assets employed in the business. ROA of South-west airline is 2.15% indicating that the company has managed its asset base quite efficiently. The returns of the South-west airlines is much better compared to its rival Delta Airlines that failed to maintain profitability in 2008 even at the operating level, reporting a operating loss of $8314 million (Southwest Airlines. 2008; Delta Airlines Inc, 2008). Characteristics of South-west Airline’s culture and its impact The culture of the airline is ingrained with passion, combativeness and provides a very friendly atmosphere. Its employees are passionate about the performance of their jobs. This is evident from everyone partaking in the activities for ensuring a smooth performance of the operations. The easily accessibility of the company executives encourages an open discussion with the employees and the former also seek for their suggestions and recommendations in lowering cost and improving the level of efficiency. Even amidst the legal and competitive hurdles that the company was passing through in the initial phase the employees maintained a warrior spirit and this inculcated in them the spirit to succeed against all odds. This highlights the dedication and passion of the employees. The motto of the airline is to provide an atmosphere of fun and love where all the employees are treated with dignity and display love and affection. These beliefs have enabled the airline to emerge as one of the most successful airline in the country. One of the main objectives of the company is to ensure an on-time performance of its flights. The coordinated efforts of all the employees irrespective of their rank has made the airline stand above most of its rivals in the operating performance. In terms of “scheduled flights arriving within fifteen minutes” the airline ranks second among the major US airlines reporting a percentage of 78.7. As per the “mishandled baggage reports per 1000 passengers” the airline features in the bottom two at 4.14%. The number of complaints against the airline is the lowest in the industry at 0.41% highlighting the customer satisfaction that the airline is able to provide to its passengers. Recommendations for strengthening the company’s culture The airline operates on a strategy of low fare and low cost. Their approach is mainly customer centric aimed at providing maximum satisfaction through reliable flight schedules. Even the employees of the company are encouraged towards adopting a friendly approach and display a caring attitude in handling the customers. For strengthening the culture the company must try and maintain the same spirit among the new recruits. Just by being a part of the organizational set-up they must be able to get a feel of the workplace. The rewarding program of the airline, where an employee is given a special recognition for providing valuable customer services or making a difference in a co-worker’s life, is an important step in the direction of employee motivation. Moreover the direct interaction between the management and the employees makes them feel a part of the system. The suggestions forwarded by the employees are actually implemented by the management personnel and this makes them work earnestly in achieving the airline’s objectives. It is important that South-west keeps strengthening its efforts in making the airline a low-cost and low-frill air travel service. For this a concerted action of the management and employees is desired. The success of any organization depends greatly on employee satisfaction. A satisfied employee develops a sense of loyalty towards the company and if needed puts in an extra effort in performing the tasks. Leadership actions for implementing strategic decisions and their significance The strategy of the airline is to provide air travel services at a low cost to the passengers. This is important in raising the revenues and business profitability. For providing the facility of low air fares the company must keep a check on its costs. Inability to lower the costs may lead to loss of business profitability. Thus it is important that the managers keep a close tab on the operating costs of the airline as only if the costs are low the company will be able to pass on any price cut benefits to its customers. Customer satisfaction is the key to the success of every business. It helps in building a sense of brand loyalty among the customers. This is crucial as even during the tough economic times the revenues of the company stay intact. To achieve customer satisfaction South-west already has a number of mechanisms in place like better handling of baggage, flight arrival etc. To supplement this, the managers can monitor the customer services imparted by the employees. If needed they should personally intervene and make a surprise check of the systems to ensure that all the works are carried out as per the rules and promises made to the customers. South-west has the tendency to improve its air services in the places where its rivals reduce the services. The management is in favor of having a number of flights for the same route. This too is aimed at giving benefit to the passengers who due to unexpected reasons miss their flight. In this regard the managers can work towards ensuring that the passengers who miss the flight are accommodated in another flight. This will establish its image as a reliable airline and go a long way in improving the revenues. Here the managers can monitor the cities that have a higher number of people travelling for business related work. Mostly their travels are crucial and missing a flight can result in financial losses. If the airline can successfully cater to the needs of this particular class of passengers then it will build a sense of trust with the customers. A business that is based on trust and loyalty can put it in good stead. Therefore it is important that the management includes this as a part of the agenda. In today’s fiercely competitive world, if the airline is able to build up a special bonding with the employees and the customers then this can contribute significantly to the business prospects. Reference Delta Airlines Inc. 2008. Consolidated Statement of Operations. Annual Reports. Available at: http://images.delta.com.edgesuite.net/delta/pdfs/annual_reports/2008_10K.pdf [Accessed on March 19, 2010]. Southwest Airlines. 2008. Entering the Zone. Annual Reports. Available at: http://www.southwest.com/investor_relations/swaar08.pdf [Accessed on March 19, 2010]. Read More