Southwest Airlines in 2008: Culture, Values, and Operating Practices
A southwest airline is a company based in Dallas and it operates more than 57 cities in 26 states in the United States successfully. It was started by Rollin King and has over 300 airlines providing low fare services, short-haul and high frequency services. The company is dedicated to high quality customer services delivery with a sense of warmth. It has culture, values and operating practices that enable it to manage and operate the organization successfully. The southwest airlines’ corporate culture can be defined in three areas including, value, culture and organizational management or operation. This organization incorporated various key areas in order to increase its profitability in the organization and enable the company to operate smoothly in the organization.
Corporate culture at Southwest airlines and the way it leverages culture to achieve a competitive advantage
Southwest is well known for passion and culture that attracts customers. The introduction of performers in the company to serve diverse customers enabled the company to outdo their competitors. It maintains its culture through employing top performers who lend themselves for reasons. They hire individuals who create humor and always perform duty as a team and are ready to accomplish work as a team. They manage their culture through offering opportunities and recognizing individuals’ performance thus provides incentives for proficient development. Their culture is focused on innovation, mentoring and technological advancement to progress on its performance (Hamel, 2007).
In addition, they decided to introduce colorful hot pants with high-heeled boots for each flight hostesses. This attracted the attention of customers and thus the company became well known because of the services and cultural dressing styles of their workers. Many flight hostesses were encouraged to wear hot pants in order to show their legs and most of the employees were young graduate women. They were trained and encouraged to be cheerful to their customers and most of the employees had experience in serving customers. They performed their duties in front of customers well while their skimpily dressed style kept influencing many customers.
Evaluating the company’s financial performance by calculating and interpreting the profitability ratios
The common tool used for evaluating financial ratio is profitability ratio, which is used to determine the company’s bottom line. Therefore, the operating profit margin is the measure of overall operating efficiency by comparing its earnings before interest and taxes (EBIT). Southwest Airline Company’ EBIT made $ 791 and sales equaled $ 9861 in the year 2007, therefore the operating profit margin will be 8% because EBIT is roughly a measure of the operating leverage that a company can obtain. Thus, 791/9861 x 100= 8%. This means that for every sales made, the southwest generates 8% of profits in their daily business activities.
Net profit margin is used to analyze the ratio for instance if the net profit is 8%, then it means that 8 cents of every dollar is what the company makes as a profit. If the net profit margin of Southwest airlines in 2007 generated $ 791 on its $ 7861 of sales, therefore its net profit margin = net profits after the sales or taxes thus it amounts to 10% in total net profit. Thus, 791/7861 x 100 = 10%. This means that the southwest generates a total net profit of 10% per annum in every total sale.
Return on total assets also known as return on investment (ROI) is used to generate profit. It is the total net income divided by the average total assets. Thus, 791, 16772 x 100 = 4.7, which is approximated 5%, this means that for every total income earned, the southwest company generates 5% on the return investment.
Return on stockholders’ equity can be obtained through adding the beginning stockholders’ equity with the ending stockholders’ equity and the percentage can be obtained. Thus, 645/6941 x 100 = 9%. This means that at the end of the year, the stockholder’s equity of southwest was approximated at 9% per annum.
The characteristics of company’s culture and the ways they affects company performance
Different characteristics of the company’s culture may affect the company’s performance. First, team oriented cultures; these cultures are collaborative and encourage members to work as a team. Southwest Airline Company encouraged its employees to work as a team and help each other where necessary. It laid emphasis on training their workers as a team than individual work. This has a negative effect on the working environment because sometimes members may tend to have relationships that are more positive with their coworkers. This may lead to workers concentrating on their relationships and tend to forget their duties. This eventually may lead to poor performance in the company thus, it may end up losing its reputation and definitely result to low productivity.
Secondly, innovative and service cultures which are flexible, adaptable and incorporated with new ideas. Service culture can shatter an organization because employees are trained to serve customers in a unique ways (Hamel, 2007). The company may introduce innovative cultures and incorporate them with service cultures in order to bring about development. Workers are empowered in a way to resolve the problems of customers and employees are trained on how to meet the needs of the customers. These have a positive effect on the company’s performance because they enable the company to outdo their entrants thus increasing their investments.
Lastly, people-oriented cultures that require value fairness, support and respecting the rights of individuals. Southwest Airline Company values their customers as their greatest assets. In addition, they have unique management styles and create a fun atmospheric working environment and employees do not select between occupation and certain features of their lives. This can affect the performance of the company positively in that customers may be attracted to the company hence customers will continue to choose the company’s services. This will consequently lead to high profits since many customers will prefer their services because of employees who are always cheerful and ready to serve customers warmly.
Recommended actions that Southwest management should take to sustain/strengthen the culture or implement a change
Southwest management should take several recommended actions to sustain or strengthen the culture. First, increasing in the long-haul flights; I recommend that there should be an increase in the long-haul flights in order to maintain point-point service delivery. They should revolutionize the airline industry so that they can continue leading in development. Increasing long- haul flights will lead to change especially increasing more customers globally. In addition, the company will be able to develop more and widen the employees’ knowledge on different cultures thus will be able to meet the needs of their clients.
Another action that I recommend is avoiding layoffs policy. There is nothing, which destroys the company’s culture like the layoffs policy. In order for the company to sustain their culture, they should avoid this policy incase they want to sustain and nurture their culture (Thompson, Strickland and Gamble, 2010). Incase the company wants to show individuals that they value them and they are not ready to hurt them, then they should avoid policies that threaten the welfare of the company.
Lastly, they should put more efforts to strengthen the Southwest culture through creating programs to award their employees and organizing meetings to celebrate and nurture their culture. This is crucial because it will enable the company to share their messages with the customers, employees and their executive members. These meetings will enable the company to keep the spirit of the company a live thus creating change and maintaining culture.
Leadership actions that the company would need to consider implementing the decisions and reasons why these are critical in implementing the strategic decisions
There are leadership actions that the company would need to consider in implementing the decisions. First, creating an environment where customers can be able to learn structures and understand things. This action is essential in implementing the strategic decisions because it can enable individuals to be responsible and become comfortable in the decisions being implemented. A leader should create a better environment in order to allow customers make their own decisions and undertake their own efforts incase the decision-formulated does not work. Thus, the company would consider this action as the essential requirement in formulating their strategic decisions that would be well appreciated across the company and by all customers.
Secondly, cognitive decision-making is an essential action that a company would need to consider. Leaders should be able to make cognitive decision that can enable the company to achieve their goals. This action has an objective of creating an innovative environment and they should be structured in a way that can meet the needs of customers and that of the company. This action is crucial in implementing the strategic decisions of the company because it is descriptive, empirical and considers a decision making process similar to a problem solving process. This is essential because it allows the company to implement strategic decisions that can benefit the whole system (Collinson, Grint and Jackson, 2011).
Lastly, Southwest is well known for passion and culture that attracts customers. The dressing style of employees’ especially colorful hot pants and high-heeled shoes attracts the attention of many customers. Southwest management should take several recommended actions to sustain or strengthen the culture through creation of better environment and proper decision making. The common tool used for evaluating financial ratio is profitability ratio, which is used to determine the company’s bottom line. This enables the company to evaluate their sales and determine if they are making losses or profit at the end of the financial year. Different characteristics of the southwest airline’s culture may affect the company’s performance such as innovative, team oriented and people oriented cultures. These many led to high performance and high profits in the company. Opportunity or problem recognition is the essential action that leaders should take. This will in turn be considered by the southwest company whenever they want to consider implementing decisions. This is vital in implementing the strategic decisions because it will enable the company to achieve developmental goals.
Collinson, D., Grint, K., & Jackson, B. (2011). Leadership. Los Angeles, LA: Sage publishers.
Hamel, G. (2007). The future of management. Boston, Mass: Harvard Business School Press.
Thompson, A.A., Strickland, A.J., & Gamble, J.E. (2010). Crafting and executing strategy: The
quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York, NY: McGraw-Hill-Irwin.