Southwest Airlines

The past few decades the airline industry has experienced major setbacks. They
went through governmental deregulations in the 1980’s where many of the airlines had to
file for bankruptcy or close down because they were not making a profit. The ones who
survived these series of crises out of deeply in debt, strapped by union regulations, and
facing an industry that was highly competitive.

Then when the World Trade Center was hit by terrorist late in 2001 these airline
companies faced a country that was leery of air travel and as a result these companies
often had to fly their planes with empty seats. On top of that these airlines had to incur
additional costs due to the rising cost of fuel. The airlines that had survived these earlier
disasters finally succumbed to the economic pressures that they were facing. Again, they
were forced to either file bankruptcy or merge into other companies.

During all of these trials and tribulations when many of these organizations were
failing, “one carrier grew and prospered throughout this entire period –[this airline is]
Southwest Airlines.” (Buller, 2006).

Company Description

Southwest Airlines was founded in the 1960’s and since its beginning Southwest
has always been the underdog, fighting for its survival. It was approved to fly on
February 20, 1968 from the Texas Aeronautics Commission. But it had many legal and
political battles to fight over the next few years in order to continue doing business.
Braniff, Trans Texas, and Continental fought to keep Southwest Airlines out of the
market. Eventually Southwest had to go to the Texas Supreme Court and then to the
United States Supreme Court in order to get the approval to continue to operate. Herb
Kelleher, who was a law student graduate from New York University and also
Southwest’s CEO, led the fight most of the way and it was through his efforts that
Southwest came out of their early legal battles, victorious.

From these early battles to the major airline that is now days, Southwest’s growth
can be divided up into three different phases. The first, named Proud Texan phase, took
place from 1971 to 1978. It was during this period that Southwest expanded its services
within the state of Texas. Since it did not cross state lines the company was not subjected
to many of the federal regulations that other airlines had to face, thus saving the company
time and money.

The second phase is called the Interstate Expansion and it took place from 1978 to
1986. It was during this phase that Southwest Airlines started flying into other states. By
the end of the Interstate Expansion Southwest was flying into 14 different airports.
Southwest opened into these markets after the deregulation which allowed them to
operate on interstate bases without being overburden by the government.
 The third phase is the National Achievement phase which took pace from 1987 to
1997. During this phase Southwest gained much of its success and notoriety. It was
during this phase where Southwest airlines had most of its growth.

By looking at the past we can discover important insights about the company’s
culture and philosophy. In Southwest’s case after looking at its different stages of growth
we can see that the company is careful about how fast it expands. Many airlines have
expanded to fast, lost control, and going under. Southwest decided to take a more
conservative approach, “go-slow,” a philosophy which comes from Herb Kelleher. The
company has a policy that even if a city offers money to the company they can not enter
that market. Rather, the only way Southwest will enter a market is if conditions are
favorable to the company, including, but not limited to weather and economic conditions.

The way Southwest handles their growth brings up two important points about the
company. The first is that the company does not want the growth of their organization to
get out of hand. They have watched other companies in the past and have learned from
their mistakes This efficient growth strategy is evidenced by the fact that the top 100
most profitable markets for airlines account for 75 percent of Southwest’s profits. The
second is that Southwest airline is an ethical company. They refuse to take bribes from
cities and communities that want their business. Both of these points come from
Southwest cultures and can be traced to back to Herb Kelleher and management
techniques.

The CEO

Herb Kelleher is a man who must be looked at in order to understand Southwest

Airlines. It was Kelleher’s vision that made Southwest Airlines what it is today and much
of the company’s fun oriented culture comes directly from him. He took the company
from scratch and built it into a major airline company. Kelleher is “friendly, participative,
deeply involved, and caring approach is revered throughout the organization.” He can be
described as being both a charismatic and a transformational leader. For Kelleher’s aura
inspires the people of Southwest Airlines and to “transcend their own self-interest.”
(Robbins, 2007).

Herb Kelleher has been described time and time again as having charisma. Even
though it is hard to put a definition on charisma, Kelleher does fit into Robert House’s
four characteristics of a charismatic leader. First, Kelleher has a vision and he articulates
that vision of high quality customer service in the mission statement at Southwest airline.
Second, he takes personal risks in order to achieve that vision. He showed that he was
willing to take personal risk and incur high costs when he was fighting the legal battles at
the inception of Southwest Airlines. Third, he is sensitive to his followers needs. Herb
Kelleher seems to really care about his employees and their well being. This permeates
throughout the whole organization and most of his employees understand his level of
empathy for them. Finally, he displays unconventional behavior. This can be seen by
looking at Southwest airlines, it seems to do everything unconventional but it has the
success to back it up.
 Herb Kelleher can also be described as a transformational leader. By listening to
the stories from Southwest employees a person will soon learn that the culture at
Southwest is truly different and that this difference is credited to Herb Kelleher. One of
the stories that resonates throughout the company is how one of the Southwest agents
“babysat a passenger’s dog for two weeks so that the customer could take a flight on
which pets were not allowed.” (Buller, 2006). It is this kind of service that can be seen
throughout the whole organization. Southwest’s employees often ask themselves if this
“is something Herb Kelleher would do?”

Mission and Objectives

Southwest Airline’s mission focuses on their employees and customer service.

Southwest’s mission is “dedication to the highest quality of Customer Service delivered
with a sense of warmth, friendliness, individual pride, and Company Spirit.” (Buller,
2006). Since Southwest is a no frills airline they gain and keep customers by offering
exceptional customer service which is provided through the employees, the cornerstone
of the company.

Southwest Airline proclaims that “We are a company of people, not planes.
That is what distinguishes us from other companies.”(Buller, 2006). Other companies
may have nicer airplanes but they only provide good service to first class ticket holders.
Southwest treats all of their customers as if they were all riding first class. Having a
mission statement focused on customer service makes Southwest’s relationship to its
customers unique. This is what allows Southwest Airline to dominate the discount airline
market.

The objective at Southwest are simple; to provide basic services

in an efficient effective manner. Southwest’s flights are safe, low-price transportation
with great customer service. Southwest offers some of the industries lowest fares and
have one of the industries highest safety ratings. Another main objective of Southwest is
to provide arrivals and departures that are consistent and on time. This has been a large
problem for many airlines. But because Southwest’s average turn around time of 15 to 20
minutes helps ensure on-time flights. As long as Southwest continues to achieve its
objectives, they will continue to excel in the airline industry.

Southwest Strategies

The strategy portion of Southwest’s business begins with its workforce which is
carefully selected and trained to reflect the image of the company. It starts with a careful
hiring process. Applicants to Southwest are put through a strenuous selection process
because the company is focused on obtaining people with the right attitudes for their
company. This is because the belief at Southwest is that they can teach skills but they can
not teach attitude. Some of the attributes the company is looking for in employees
include: positive attitude, positive self image, internal locus of control and highly
conscientious.
 Once the right people are selected for the jobs, the training begins. Kelleher
pushes the importance of maintaining a cohesive culture and training is an excellent way
of assuring that this is achieved. A major way that employees learn to adhere to the
culture of Southwest is through Southwest University which is a training facility where
employees learn what it means to be part of the Southwest family.

In addition to strenuous hiring and training processes Southwest Airlines invests

heavily in treating its employees well. In an industry notorious for labor disputes and bad
union relations Southwest Airlines is a rare exception. The majority of their employees,
85 percent, are non-unionized. When the company does have to deal with unions the
negotiations are generally friendly. Much of this success comes from a practice of profit
sharing with its employees. In this case, profit sharing can be beneficial because it
encourages employees to be personally vested in the company and it allows for room for
salary negotiations. Southwest also offers excellent medical and dental benefits which are
very important in the era of rising health costs. Good salaries, health care programs and
profit sharing are tools the company uses to retain the valuable employees it worked so
hard to obtain.

All of the benefits of working for Southwest directly feed into its corporate
culture, which is one of Southwest’s key strategies. Part of the reason Southwest is so
successful is because they strive to make it fun to fly with them. To accomplish this the
company created an atmosphere that is fun to work in. This means diminishing the
influence of bureaucratic restrictions so the employees feel like the management is
working with them, to bring excellent customer service. Southwest creates their desired
culture by using: a flat structure, teams, good labor relations and profit sharing to modify
employee behavior to be that of a free flowing team versus a bureaucratic dictatorship.

Another important way that Southwest works to reinforce its corporate culture is
through company mailings. LUV Lines is the company news letter and it contains
detailed information about the performance of Southwest as well as other competitors.
This is a good tool for flattening the organizational structure because well informed
employees are more likely to make the correct decisions. The newsletters helps make sure
the employees know where their company stands in relation to the competition which
encourages the feeling of ownership that is necessary to create involved employees.
Southwest also has an entire book devoted to creating, “positively outrageous service.”
This is crucial because one of the main goals of a cooperative culture is to bring about an
environment in which its customers are properly cared for.

Structure

Largely due to the fact that the planes must operate safely and efficiently,
Southwest Airline’s structure is like most airlines, “formal and centralized.” But where
Southwest differs is on their “loose tight design.”(Buller, 2006). They give their
employee informal job descriptions concerning customer service. “While there is very
high standardization regarding operations, it is low with respect to customer
service.”(Buller, 2006). Southwest empowers its employees to do what is necessary to
please their customers. So Southwest follows both the mechanistic model and organic
model. On its upper levels, such as the corporate office and the flight crew, the
mechanistic model is used. On the companies lower level where safety and time is not as
high of a priority, the organic model is used. This gives the employees leeway to try new
things on the customer service level while maintaining safety.

Human Resource Management

Southwest’s human resource department’s mission statement is: “recognizing

that our people are the competitive advantage, we deliver the resources and services to
prepare our people to be winners, to support the growth and profitability of the company,
while preserving the values and special culture of Southwest Airlines.” (Buller, 2006).
Structurally, Southwest places more focus on their human resource department, “The
People Department” than do its competitors. This is a major advantage for Southwest
Airlines. Since Southwest Airlines has a reputation for being a great place to work, many
people apply to work there. This allows Southwest airlines to be selective in its hiring
process and to look for the best fit for both the employees and the company. Southwest
rejects about 100,000 applicants a year while maintaining a lower turnover rate than their
competition. Having this low turnover rate show that Southwest airline does a good job in
their selections and their employees that they do hire have a good fit for their
organization.

Culture and Control

Southwest’s culture is its most unique attribute. The company focuses on a team-
oriented culture and is not distracted by work rules and regulations that most competitors
are consumed by. Southwest foregoes the functional structure of its competitors in favor
of a more positive equalitarian culture to create a positive equally based culture. This
approach contributes significantly to Southwest having the lowest employee turnover rate
in the industry and the highest level of consumer satisfaction.

Conclusion

As was noted above Southwest Airlines has had success while their competitors
have gone under. A majority of this success can be credited to Herb Kelleher and the
culture that he has created. However, Herb Kelleher is getting close to retiring and he has
no clear successor to take his place. It will be interesting to watch and see who Southwest
picks as Herb Kelleher’s successor. This will be an important crossroads in Southwest’s
future as a new CEO can change Southwest’s whole culture and the direction that the
company is going. Only time will tell if the unique culture and organization that Kelleher
has created will survive this uncertain future.
 Reference:

Buller & Schuler. (2006). Managing Organizations and People. Ohio:Thompson

Robbins, S., & Judge, T. (2007). Organizational Behavior. New Jersey: Pearson.