Management - Southwest Airlines - Term Paper Example

?Introduction In the rapidly transforming dynamics of business environment, the effective change management becomes a critical factor. The various external and internal factors that significantly impact the performance outcome of the organizations need to anticipated and identified to meet their challenges. Indeed, success of the firm is always the driving force behind the business strategies. Hence, managerial leadership encourages preparedness for changes to not only survive but also to maintain its competitive advantage in the difficult times. Southwest Airlines has been an exemplary example of success, even during recessive time. It has been able to identify various elements of change management and effectively exploited them to maintain its leverage against it rivals. The paper would be analyzing its various components of success. Profile of the Southwest Airlines Southwest Airline is one of the most popular low cost American domestic airlines which was incorporated in Texas and commenced operation in 1971 with three Boeing 737 aircrafts serving 3 cities. Today it has nearly 400 Boeing 737 series of aircrafts and operates in more than 59 cities across America. In 2011, it completes 40 years of its existence. Its mission is to provide the customers with highest quality of personal services (company). It has been able to sustain its profitability through the turbulent phase of post 9/11 period and current recessive economy even though the rest of the important airlines like Pan Am, Eastern etc. were struggling to survive. Situation analysis After deregulation in 1978, the airline business had become highly competitive. It had used various mechanisms to enhance its operational efficiency. While its human resource strategy was its major organizational coup to maintain its customer centric image, its efficient use of air routes, cost effective strategy in operation became critical to its success. As such main reasons that have contributed to its continued success are: human resource; customer service; and innovative cost effective strategy of operation. Schwenk (1997: 4) claims that ‘employee’s absolute commitment to a shared vision of change is seen by many leaders/ change agents as so important for their organization’s continued survival’. The organizational culture of the company is highly encouraging which believes in empowering its workforce. It also provides a facilitating environment of continuous learning and most importantly it encourages share in profits through stock ownership. After the 9/11 tragedy, the operations cost of SW Airlines as well as other airlines had considerably increased. The key reasons being: tighter security had required more rigorous screening; increase of overheads expenses vis-a-vis security screening, changes and reprogramming of its tracking of passenger information details and management strategy etc; drastic reduction in the number of passengers due to terrorist threat. These were major challenges that required highly creative inputs to not only maintain trust of the customers but also the confidence level of the employees. In the tough times, Southwest airline maintained high degree of employees’ morale by not laying off any employee. Most importantly, the management initiative was able to inculcate tremendous confidence amongst its workers by ensuring that there was no cut back in the number of flights also. This was a hugely important factor which sent a positive feedback to the public and greatly boosted the confidence of employees. Addressing the problem Maintaining the confidence of the customer was major problem which was mainly met by its human resource policy and organizational culture. It was also a key element that led to the firm’s continues success. It retained its policy of non attrition and did not lay off any staff. The company’s strategic plan was to improve customer service by increasing the number of customer service agents. This helped the passengers to get more personalized service. The empathetic attitude of staff, emotional support and security at the crisis time greatly helped enhanced customer loyalty. It has recently joined hands with AirTran to improve and improvise its operational efficiency. The organizational culture of the company was important element of competitive advantage (Spector, 2010). It promoted the concept of a ‘big family’ and profit sharing further strengthened the employees’ commitment. Various scholars believe that sharing profits with the employees significantly impacts organizational performance and encourages mutual cooperation amongst the employees (Bratton & Gold, 2007; Foot & Hook, 2008). Indeed, employees of Southwest were more conscientious and worked harder during the tough time which considerably contributed to the performance of the company. All the employees of the SW airline become eligible for ‘Southwest’s profit sharing plan’ after undergoing probation for six months that greatly motivates the workforce. SW labor policies were also important tools that promoted better relations with the labor unions. It encouraged union membership within its workforce which became critical to the wider interest of the human capital employed across the organization. There was almost nonexistent loss of man-days which helped the company to maintain its revenue. The collective bargaining of the union has greatly facilitated the welfare of the workforce and has promoted their interest amongst the management. The company was able to negotiate successfully with the labor union maintained its leverage. The post 9/11 period was fraught with uncertainty and fear. Building customer relationship became hugely important to gain their trust. The employees and staff were therefore empowered to make decisions regarding the welfare of the customer on and off the flight. Increasing the number of customer service agents has hugely garnered the confidence of the travelers and earned their loyalty. Grant (2007) asserts that analysis and identification of the changing preferences of the customer are important ingredients to gain leverage. Southwest’s policies are customer centric which continuous make efforts to update its products line to suit the changing requirements of the public. Interesting its ‘LUV’ feature has been highly successful. Its stock ticker symbol is also fittingly named as ‘LUV’! Indeed, the company’s highly innovative inputs and creative ideas in its new plans and features have been able to meet the challenges of time. Effectiveness of changes made The Southwest management follows stringent regulations and strict time schedules in its various flight destination. It prefers destination to destination flights which is preferred by customers and therefore is more popular. Its low cost strategy has been successful because of its exemplary customer service, security features and specialized short distance flights. The high frequency of flights with emphasis on reliable and unfailing on-time arrival and departure has considerably impacted its performance and its market credibility. Understanding of consumer psychology has played a vital role in the development of market strategy and planning. In 1992, 10% of stocks of the company were owned by employees (company). Providing the employee with bonus shares ensures that the workforce becomes a part of firm’s profits and as legitimate shareholders, become more performance driven. Indeed, as shareholder of the company, they develop more personal relationship with the firm and greatly support the committed goal linked performance. The excellent teamwork promotes collective decision making, common goals and shared learning. The company has redefined its HR strategies to create versatility and flexibility to suit the demands of contemporary work environment. The competition has not been able to copy the success of Southwest because of various factors. Southwest work culture has differed in its teamwork and empowered decision making as against the hierarchical management system of other airlines which thrives on individual responsibilities and role. It has also emphasized on destination to destination flights to attract customers. Other airlines exploit ‘parents’ hub’, used for reconnecting the flights to other destination. It substantially reduces the overload and extra expenses. But Southwest’s destination to destination flights are preferred by people and therefore are very popular and more cost effective. The ‘low fare’ strategy of other airlines was also not successful because Southwest was more creative in its strategy. The low fare option open for the customers who wished to avail them was kept open by Southwest while attracting customers with fringe benefits with the higher fare. New challenges In the current times, while cost, human resource etc are important issues for gaining competitive advantage, the challenges of sustainable business practices have also emerged as key components of competitive advantage. The sustainable aviation has become highly essential ingredient of success. Customers have increasing become environmentally aware and therefore more conscious of sustainable business practices of airlines. Apart from carbon footprints, the need to cater to the wider compulsions of environmental paradigms and external stakeholders has become crucial factor. Various elements of sustainable development like sustainable biofuels, fuel efficiency, emission etc. are highly sensitive issues that need to be incorporated within the broader framework of business strategy. Indeed, the exigencies of contemporary times necessitate new mechanisms of control and innovation tools that can effectively address the needs of the environment. Southwest airline therefore must become more proactive in its sustainability efforts. It should introduce more measures of environment friendly features within its operation and customer focused policies. Another challenge is that some of the large cities like Atlanta are not served by SW airlines. The company needs to expand its services to larger cities. Conclusion The customers are the mainstay of all business and Southwest has not only retained but also significantly enhances features of its customer centric polices. Therefore, it can be concluded that the competitive advantage of Southwest would be sustainable over a long period of time. Effectively managing change is vital part of continued success. Montgomery (2008) strongly believes that business’ must be dynamic to absorb and adapt environmental changes to compete and maintain strategic leverage. It helps the firms to meet the changing requirements of the customers and environment with speed and sustain efficient delivery of goals. Southwest airlines has been able to keep up with change and overcomes challenges of time through innovation in its strategic plans and goals.. To develop effectiveness in strategic change, flexible approach to managerial leadership is highly desirable factor. One can therefore, conclude that various measures of competitive advantage used by the firm hugely facilitate its continued journey to new heights of success. Reference Bratton, J., and Gold, J. (2007). Human Resource Management, Theory and Practice. Basingstoke: Palgrave. Foot, M. & Hook, C. (2008). Introducing Human Resource Management. 5th Edition, Harlow: FT/Prentice Hall. Grant, Robert M. (2007). Contemporary Strategic Analysis. (6th edition). Blackwell. Schwenk, Charles, R. (1997). The Case of Weaker’s Leadership. Business Strategy Review, 8(3), 4-9. SouthWest Airline. Retrieved from: http://www.southwest.com/html/about-southwest/ Spector, B. (2010). Implementing organizational change: Theory into practice (2nd edition). Upper Saddle River, NJ: Pearson Prentice Hall. Read More