Organisational Behaviour and Human Resource Management Southwest Airlines - Research Paper Example

? Southwest Airlines Inserts His/Her Inserts Grade Inserts (19, August, Southwest Airline is a success story in the aviation industry of United States of America. The company has displayed a strategy of cost leadership strategy with great success. Leadership of the company has been charismatic since the foundation of Southwest. The management style of the company is friendly and organization has a clan culture. The human resource issues the company can face in future are legal issues. Also in future the company should start international flights. For this the company will have to launch a new brand under which international flights should be started. Introduction Southwest Airlines is a well known name in the American aviation industry. It is the largest domestic carrier in United States operating more than 3000 flights a day. The company is a huge success story due to its record continuous profits, even in years when other airlines were suffering. The company was founded in 1971 and since 1973 to 2003 the company never recorded an annual loss. This strong financial record has forced management gurus to study the company in detail in order to understand the factors behind its success. Southwest Airlines only flies within United States and even then the company has done extremely well over the past three and a half decades. The friendly organizational culture of the company may be one of the reasons behind this tremendous success. In this report Southwest Airlines will be discussed in great details and a thorough SWOT analysis will be conducted. Organizational behavior and leadership within the company will be discussed alongside with human resource management issues. Details of organizational culture and structure will also be included in the report. In the end future directions of the company will be analyzed and discussion will be made on how it will try to launch its operations globally. Recommendations will also be made at the end. Background Southwest Airline has always used a strategy that is not widely practiced in the aviation industry. The company uses cost leadership approach in its business operations. Since its inception the company has targeted shorter routes and has tried to fly more flights between cities. Due to this approach Southwest Airline has been successful in gaining a significant market share in the country. The company has been successful in lowering costs to an amazingly low level and by doing this it has knocked out its competitors (Bunz & Maes, 1998). With very low fare it is a first choice of cost conscious frequent travelers. The company uses a variety of techniques to lower its costs down and maintains profitability by utilizing its resources in an efficient manner. An example would be the plane of Southwest Airlines where there is no first class seating available. All the seats are labeled economy class because it allows more seats in the plane. This is one example of how lower costs is achieved by South West Airlines. Southwest Airline has also achieved success because of its inspirational leadership. The CEO of the company for a long time was Herb Kelleher. His charismatic leadership is one of the major reasons why the company did well for a long time (Gibson & Blackwell, 1999). The business strategy of the company has been of lowering costs and increasing efficiency, and charismatic leadership blends well with such a strategy. The organizational culture of the company is also commendable. Southwest Airline has a very friendly culture and employees are encouraged to take initiatives. Employees are also treated in a good manner and this is what motivates them to work hard. Workers of the company are a major reason why company has always been successful even in tough economic times. Employees are given power to take decisions and this is why they are able to come up with innovative ideas and this helps the company at the grass root level. The company only flies short routes with United States and it focuses on domestic flights only. Southwest Airline tries to charge passengers less and fly more flights. This is how it tries to maintain profitability. This is the essence of the cost leadership strategic plan of Southwest Airlines. SWOT Analysis In this section we will conduct a thorough SWOT analysis of Southwest Airlines. Some strengths and weaknesses alongside with opportunities and threats will be discussed. Strengths Cost leadership is one of the main strength of the company. No other airline is able to compete with the fares offered by Southwest. The company charges incredibly low prices and attracts frequent passengers. Due to lower costs the company has also started new short routes that were previously not explored by other airlines. These short routes of 40 to 45 minutes flight are also feasible for Southwest due to its lower costs. Employee customer relationship of Southwest Airlines is also very good and this is an added strength for the company (Gilbertson, D. 2006). Employees work in groups and try to offer the best services to customers. They are also intrinsically motivated to provide quality services to customers. The worker base of Southwest Airlines is huge strength for the company. Southwest Airlines is known for taking initiatives. The company was the first airline to offer ticketless travelling by using internet. Southwest also started given senior discounts to old passengers. Steps like these make the company popular and at the same time help Southwest Airlines maintain a loyal clientele. The airline is able to reduce costs by standardizing its practices. Southwest Airline has only one type of Boeing planes and this helps the company reduce costs. Because of one plane the company has standardized its repair procedure. The airline can hire technicians who know one plane only and this can make the repair process swift and efficient. Also by buying one type of plane the company is able to avail discounts on purchase. This is how the company tries to lower its cost and maximize profits. Weaknesses Southwest Airlines only offer one kind of seating in its plane. There are no divisions of business and economy class (Hauck, T. 2004). This is a weakness because it misses on a specific target market that prefers luxury. This restricts the customer base the company is trying to attract. Also Southwest Airline does not fly international. This is a weakness because any problem in the domestic market and hurt the company badly. The sources of profits of the company are also not diversified because Southwest is dependent on American market only. Another weakness of the airline is its lack of allowed cargo on passenger flights. The company allows only a restricted cargo with passengers and this is not possible for all people. Southwest Airlines allow passengers to take a limited cargo because it affects the speed of the plane. The company is also dependent on a single producer of airplanes and that can be a potential problem. If Boeing comes across any problem then Southwest Airlines will have no place else to go. Using planes of only a single manufacturer can cause long term damage. For example if safety board of aviation industry in United States found out that there is a problem with Boeing planes then Southwest Airlines will have to shut down its entire operations. Opportunities Southwest is a brand name that is extremely popular in the United States. Everyone knows about Southwest and how they were able to maintain profits for many decades. This positive sentiment about the company can help Southwest start new flights in the domestic market. The company will not have to worry about marketing its brand because it is already there. The reputation of the brand is also very good so launching new flight on new routes will not be a big problem. Southwest Airlines also has an opportunity to start worldwide operations. The company can launch international flights easily because Southwest is a huge success story. The whole world is aware of the brand name therefore the airline can attract passengers internationally as well without facing many problems. The company has an opportunity to start longer flights and by doing so Southwest can cater to the needs of a whole new target market. The company is currently flying short routes all over United States but longer flights can also be started. Southwest has also an opportunity to use internet for marketing purposes. The low cost strategy of the company will remain in place because internet marketing is quite cheap. This can enhance the brand image of the company and attract more clients. Threats One of the major threats for the company is the potential decline of leisure travelling due to terrorism and economic issues. A huge number of people in United States travel on weekends to enjoy their vacations. These passengers fuel the profits of the company but in the wake of economic problems and terrorism threats this market can shrink. This is a major threat for the company because its main market is that of frequent travelers. Increasing oil prices is another threat for Southwest Airlines. Increase in fuel prices is a major problem for the company because it can drive the cost up significantly. Depreciation of dollar and volatile financial markets can also hurt the financials of the company in the long run. It can increase the cost of imports for the company and can also decrease investment income. Lack of skilled labor is a major problem for Southwest because it relies on employees a lot. Domestic market of employees can become less skilled due to increasing education costs. This is a potential long term threat that Southwest is facing today. New regulations by safety boards can also hurt the operations of the company. Organizational Behavior and Leadership Organizational behavior of Southwest Airlines is one of the most significant success factors for the company. The friendly management of the company has developed cordial relationship with employees and therefore employees reciprocate by hard work. Employees at Southwest are intrinsically motivated to work for the betterment of the company and this drives the company on the path of success. Organizational structure of the company complements the strategic approach of Southwest. The company has a cost leadership strategy and that can be successful only through involvement of employees at all levels. Leadership is another important factor behind the success of the company. Southwest Airline takes pride in its unique culture. The company has a clan culture that involves employees in managing operations of the company. Southwest encourages employees to take initiatives and come up with new ideas. Employees are allowed a level of control on their jobs and because they think they are involved in decision making, they perform better. The organizational culture at Southwest is quite friendly and there is no communication gap between employees and management. This allows the employees to communicate their thinking and ideas to the top management. The culture of Southwest displays core values of commitment, cost effectiveness and customer satisfaction that are shared by majority of employees of the company (Robbins & Judge, 2009). Employee behavior at Southwest is focused and because most employees share similar core values their work has a direction. The top management takes into account employee satisfaction but at the same time employees are motivated to work hard. This makes employees believe that the organization is working for them therefore they should reciprocate in a similar manner. Many of the cost cutting techniques practiced by Southwest Airline have been proposed by lower level employees. Information systems also play a huge part in organizational culture of Southwest. Employees communicate in events that are a part and parcel of Southwest culture. In these events upper and lower management communicates. Also employees can approach top management easily at Southwest. Information dissemination within the organization is very fast. Employees have organized themselves in unions and information is disseminated through unions as well. The company issues newsletter within the organization and this is another way of disseminating information. All employees are given newsletters so that they know how their efforts are contributing to the overall success of the organization (Buller & Schuler, 2006). Information systems used within the organization go hand in hand with the cooperative culture of the company. The organization structure of the company is flat and this allows communication between upper and lower management (Southwest Airlines Case Study, 2010). There are not many line managers and employees at the lower levels are also independent. This independence is not abused by employees and they try to work as hard as possible. When employees are given a sense of responsibility then their performance is enhanced. Everyone wants to take control over his or her work, and when employees are given control they perform in a better way. Management of Southwest Airlines also encourages employees to form groups. Team based approach is followed widely in Southwest. Even janitors work in group at Southwest. Team based work approach allows innovation and motivation within employees. When working in teams employees are better equipped to come up with new ideas because many minds are working in the same direction. A team can pool its intellectual resources better therefore innovation is bolstered. On the other hand employees are also motivated as a result of team based working. When they see their fellow employees working they are automatically motivated to work hard. Team based approach therefore works well for the company. Hiring of new employees at Southwest Airlines is also done keeping in mind the organization culture of the company. Attitude of employees is evaluated and only people who can fit in the culture of the company are hired. Newly hired employees are given time to socialize with other employees. Team based approach allows the socialization process to speed up and this is how new employees are made aware of the organizational culture and practice of the company. Leadership is another driving force behind the success of Southwest Airlines. Herb Kelleher is an inspirational leader who leads employees by example. Kelleher promotes a happy culture within the organization through his behavior and by doing so allows employees to follow that culture. Leadership at Southwest is devoted to give employees satisfaction. Employees are taken care of and unlike other organization employees is the main focus of top management. This motivates the employees to go an extra mile for the company because they know that the company is also going an extra mile for them. This relationship of trust is a main characteristic of the leadership of Southwest Airlines. Employees at Southwest Airlines take their example from their leader Herb Kelleher. They try to act like him and in this way customer satisfaction is at the core of employee behavior within the organization. There are many examples of employees that have acted in a unique manner just to provide highest quality of customer care. One Southwest employee stayed with an old lady for the whole night after her flight was cancelled just because she was afraid of sleeping alone (Buller & Schuler, 2006). Employees actually follow in the footsteps of their leader and that employee who stayed with the old woman knew that his leader would have done the same thing. Leadership at Southwest has also gone to great heights to develop a friendly and trust worthy relationship with employees. Kelleher once agreed to freeze salaries of pilots for five years just to buy their trust (CBS News, 2009). This is an example that is typical to Southwest only. It is because of this trust that employees at Southwest Airlines are able to work as hard as possible for the betterment of the company. The friendly environment of the company is because of the friendly and trustworthy leadership of Southwest. Human Resource Management Issues Human resource management is an important part of all organizations. In Southwest Airlines too human resource management matters because employees are regarded as the driving force behind the success of the company. Southwest is famous for its unique hiring methods and they have proved to be extremely successful. The company also focuses on coaching and mentoring of employees and team based work approach is followed. But the company can face human resource management issues in future. Compensation packages offered by the company are higher than other similar airlines and in tough economic times this can hurt the company. Issues like this will be discussed in this section of the report. In Southwest Airline employees are hired by a group of employees of the same department. This means that an employee is hired by people with whom he or she will work in future. This allows the company to choose employees who will best fit in the culture of the company. The focus of Southwest Airlines is not mainly on skill but on attitude of the employee. The company feels confident in its coaching and mentoring techniques therefore hiring focuses on the attitude of the employee. It is said that Southwest Airline is religious about hiring the right kind of people (Freiberg & Freiberg, 1996). In aviation industry employee turnover is a big problem. It is hard for companies to attract the right people and keep them for a longer period of time. This increases the hiring costs as well as the training costs of the company. Southwest deals with this problem by choosing the right people who can blend in the organization. This is how it decreases its employee turnover rate. Employees are hired with great care and this allows the company to save training and hiring costs. The compensation package offered of Southwest to its employees is higher than the industry average. This is done in order to ensure hard work and commitment from employees but this is not a sustainable practice in the tough economic times of United States of America. Higher salaries can motivate employees but it can also increase the cost of the services offered by Southwest and in turn decrease profitability. This is an issue that Southwest Airline will have to deal with in coming years. Southwest airline also does hire pilots who belong to a union. This allows the pilots to fly more flights hours in a day. This is another cost cutting strategy of the company but it can have legal consequences. An employee lawsuit can hurt the reputation of the company badly and more flight hours than allowed can also kill productivity. The focus of Southwest is on attitude mainly and this is also a HRM issue. Skilled employees are important for certain jobs and only attitude is not important. The hiring process of the company is dominated by focus on attitude of employees towards work instead of skill. This can bring unskilled employees in the company for jobs that require skilled worker. As discussed earlier the company follows a team based approach. This allows better training of newly hired employees. A senior and experienced person is always with a new employee because worker operate in teams so training costs are reduce in this way. Coaching and mentoring is done at all levels by employees and no special expert is hired. Employees are actually made responsible for mentoring other employees and this is how Southwest uses its friendly culture within the organization. Performance appraisal at Southwest is done by evaluating employees on the core values of the company (Hall, A. 2007). Customer satisfaction is the main aim of the organization therefore employee performance is measured through it. Also it is observed whether employee is trying to follow the organizational culture of the organization or not. Leadership and management are responsible for motivating employees. The focus is on non monetary motivations. Employees who take initiatives are admired and there name is propagated within the organization. This makes other people also try to take initiatives. Company issues a newsletter in which employee initiatives are discussed. Such techniques of motivation are the reason of the success of Southwest Airlines. Performance is enhanced by motivating employees in the right direction. Future Direction The future direction of the company will involve going international. Southwest Airlines will have to launch international flights in the coming years in order to compete effectively. There will be a need of change in management strategy because present strategy of Southwest Airline may not work in international flights. The company will have to think of new management strategy in order to sustain in the international flight market. A new target market will have to chosen and strategies will be designed keeping in mind that target audience. It is vital for Southwest Airlines to start its international operations because United States is suffering from bad economic times and there is no hope for any short time revival. Unemployment rate is very high therefore demand for airlines will decrease. It will be difficult for Southwest Airlines to operate in United States for a long time. The company will have to start international flights in near future. This will not be easy because the company will have to make adjustments in its strategic plan and management style. The airline will also have to change its core values in order to accommodate international flights. Cost cutting strategies would work with international flights as well but fast turnarounds will not be possible. Also international travelers do not always go for cheap flights. Because international flights are longer passengers look for comfort. Passengers who often travel internationally do not care about fares. They want luxury and comfort, and this changes the whole philosophy of Southwest. The airline is famous for cheap fares and fast services. The brand of Southwest is not known for luxuries. This will have to change when the airline will start international flights. The firm will have to change its seating arrangement and will have to cater to both price conscious and luxury demanding passengers. The international brand will have to be launched with a different name. The name of Southwest is perceived as a cheap airline but this cannot go with the international operations of the brand. The airline should start its international flights with a new brand name. This brand name should be built upon the core values of customer satisfaction and luxury for all. In this way the company can operate two brands with different focus. The majority of target market of the international flights will not be price conscious. People who cannot afford international flights do not make them so it is important that people who prefer luxury should also be targeted. Customer satisfaction should be the main aim and costs should be reduced. But a section of the plan e should also be provided luxury. This combination can help the company in the long run. Southwest should also start international flights slowly and steadily. A few flights should be launched and reaction of the passengers should be taken. The company has no experience in international operations therefore every step should be taken with extra heed. The company should first operate a few international flights flying from United States. Initially flights should be started in countries that are culturally synonymous to United States. Britain and Europe should be the first international flights of the company. The performance metric should be the number of flights the company starts within 2 years. The performance of the company will judged by this. The company should also keep in mind the human resource issues it can face. Operating in one country is one thing but operating internationally will require hiring on the basis of skills. Also line managers will have to be increased in order to take a centralized approach towards managing international operations. This change will be vital for launching international operations. Conclusion Southwest Airline has been greatly successful in United States and the financial record and the brand name of Southwest is evidence of this success. But this cannot continue for a long time because the economic condition of United States is not very good. The airline will have to launch its international operations in near future. Southwest should launch a new brand and international flights should be operated under that name. Price conscious and luxury demanding clientele should be targeted at the same time. This can be done by changing the seating arrangement of the planes. The company will also have to revamp its HR strategy in order to successfully launch international flights. Bibliography Buller & Schuler. 2006. PLU edition of managing organizations: Cases in management, organizational Behavior, and human resource management. Mason, OH: Thomson/Southwestern. Bunz & Maes. 1998. Learning excellence: Southwest Airlines’ approach. Managing Service Quality, 8(3): 163 – 169 Case study: Southwest Airlines. 2010. Hitachi Consulting. Accessed on August 19, 2011 from http://www.hitachiconsulting.com/files/pdfRepository/CS_SWA_BIChangeLeadership.pdf Freiberg & Freiberg. 1996. Nuts! Southwest Airlines’ Crazy Recipe for Business and Personal Success. Austin: Bard Press Gibson & Blackwell. 1999. Flying High with Herb Kelleher: A Profile in Charismatic Leadership. Journal of Leadership Studies Gilbertson, D. 2006. CEO says Southwest's strength is in its workers. USA Today. Accessed on August 19, 2011 from http://www.usatoday.com/travel/flights/2006-02-20-swa-qanda_x.htm Hall, A. 2007. Southwest Airlines: The Role of Human Resources in Implementing Business Strategy and Hiring Practices. Capella University Hauck, T. 2004. Southwest Airlines Case Study. Accessed on August 19, 2011 from http://www.thomashauck.net/pdfs/1southwest.pdf Robbins & Judge. 2009. Organizational behavior (13th ed.).New Jersey: Pearson Prentice Hall. Something Special about Southwest Airlines. 2009. CBS News. Accessed on August 19, 2011 from http://www.cbsnews.com/stories/2007/08/30/sunday/main3221531.shtml Read More