Developing Operational Performance Measurement System

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Introduction

The performance of different industries has developed into significant element in the competition competitiveness of an industrial company. The basis of the development of south west airlines has been globalization of the markets in the 20^th century, customers increased demand for services and the capital intensiveness of distribution logistics and aircrafts.

In order to have control over the performance and capability to direct the development efforts effectively, the formulation of performance needs to be measured.

Dimensions of performance include physical, economic, internal and external measures. However, the use of performance measures for strategic and operative business management requires a limited set of measures to ensure to top corporation performance.

Aspects of performance measurement

The development measure and today’s needs for measurement and different rules of performance measurement could be approached from aspects vital to successful business management in today’s environment including both internal and external viewpoints.

Operations analysis enhances both effectiveness and efficiency by identifying what does and does not work and identifying specific areas for improvement. Performance of an organization can be measure on the basis of ; the number of fleets and aircraft, the routes and operation expansion, human resources, among others elements.

Location of Southwest Airlines

Southwest airline is one of fortunes top 100 companies. Its mission is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride and company spirit. Southwest airline is an American low fare airline based in Dallas, Texas with its largest focus on Las Vegas, McCarran international airport. He is the largest airline in the United States by number of passengers carried domestically per year. It maintains the forth largest fleet of aircraft among the world’s commercial airlines and is arguably the most profitable.

The company was incorporated to serve three cities in Texas as air Southwest in 1964 by Rollin King and Heb Kelleher. Later the airline changed its name to south west airline (1971) Kelleher; the founder used many of the existing airlines ideas to form the corporate culture at southwest. The airline is about 87% unimised. The pilots are represented by southwest airlines pilot association, union separate from the much larger ALPA union.

Layout

It currently flies to 64 destinations throughout the United States by 2007. Southwest airline faces intense competition from airlines like Delta, North West etc and some markets are not so cost effective for it. The top ten most served airports by Southwest airlines by July 2007 include Las Vegas, Chicago –midway, Phoenix, Baltimore/Washington, Oakland, Houston-Hobby, Dallas –love field, Los Angeles (LAX), Orlando and San Diego.

Maintenance

The airline now flies almost 100million passengers a year in 63 cities across United States of America. It has over 500 aircraft and young fleets with an average age of nine years.

While the SWA has existed for more than 36 years a notion that ‘if you get your passengers to their destinations when they want to get there at the lowest possible fares and make sure they have a good time doing it people will fly your airline’. By 1977 self ticketing machines were introduced in 10 cities which made it faster and more convenient for customers to fly South west airlines. These have led to SWA maintaining the best airtime record, baggage handling and fewest customer complaints. Their employees have a stable working environment.

Designing a Performance Management System

Although the concept of performance measurement and management has existed for long, there is increased demand that agencies begin to transport their organizations to institutionalize these practices, this has resulted out of two forces i.e.

Increased demand for accountability on the part of governing bodies, media and the public in general.
Amounting commitment of manager and government agencies to focus on results and work force deliberately to strengthen performance (Poister 2003).

An organization performance goals can only be achieved through its employees, an effective performance management system links individuals &teamwork behaviors to the organizations business strategies, goals & values. For organizations to achieve its goals its essential for each employee to understood individual roles and responsibilities for good achievement, there must be continuous dialogue between leaders & employees to set performance expectations, monitor progress and evaluate results.

Performance measurement can be done in phases during the planning phase, measurement is defined as organizational business strategy viz mission, vision and objectives & specific outcomes to achieve the overall strategy at this phase employees come to understand their individual roles and responsibilities with respect to performance measurements & motivation to ensure their successful execution,

Phase two – measurement and analysis data that informs areas of a success and challenges for the organizations are collected and analyzed. Specific elements and factors that contribute to success or challenge along with new and modified information needs and lessons are learned are identified.

Phase three involves performance management here solutions to address identified challenges are developed and implemented along with mechanisms to ensure the continuation of program or organizational success. This staged also needs systems in place to ensure that information collected through performance measurement process is timely, relevant and sufficient. www.icfconsulting.com/performance.

While there are several methodologies for performance measure (e.g. balance score board, logic model) techniques are frequently a function of a number of contextual factors some of which are under the control of human resource managers.

Looking of southwest airlines mission statement this we note that mission statements are enduring statements of purpose that distinguish one business form others of similar kind. It identifies the scope of firms operations in product and market terms. Through these statement southwest airlines addresses the basic question that faces all strategists, what is our business? A clear statement describes the values and priorities of statement describes the values and priorities of any organization, while developing it strategists are compelled to think of the nature and scope of present operations and to assess the potential attractiveness of future markets and activities and broadly charts the future direction of an organization.

Studies have shown that high performing firms have more well developed mission statements these low performers (John and Fred 1987)

An evaluation on southwest mission statement one realizes that this is an integral part of strategic management as it provides, direction, for formulating implementing and evaluating strategic activities.

Business unit level measurement includes evaluation of economic forces, social, cultural, demographic and geographic forces political, governmental and legal forces, technological forces, and competition.

Key environmental forces can broadly be categorized The relationship among these forces and events significantly affect all products, services, markets and organizations in the world.

Changes in environmental forces translate into changes in consumer demand for both industrial and consumer products and services. They affect the nature type of products and services. They also affect the types of products developed the nature of positioning and market segmentation strategies and types of services offered and choice of business to acquire or sell.

Environmental forces directly affect both supplies and distributors. Identifying and evaluating environmental opportunities and threats enables organizations to develop a clear mission to design strategies to achieve long term objectives and to develop policies to achieve annual objectives. Some organizations service solely because recognize and take advantage of environmental opportunities e.g. southwest airlines.

The increasing complexity of today’s business environment is evidence by more countries developing the capacity and willing to learn a dept innovate and invent to compete successfully in world markets.

American businesses can no loner bet foreign competitors with ease. Mot organizations practice some form of environmental analysis as part of their planning process.

The next measure is economic forces, these factors have a direct impact on the potential attractiveness of various strategies they include the interest rates raise. The funds needed for diversification may be too costly or available.

As interest rates rise the discretionary incomes declines and the demand for discretionary goods fall. Also as market rises, consumer and business wealth expands the economic variables often represent

Opportunities and threats for organizations- trends in the dollars value have significantly unequal effects on companies in different industries and operating id different areas.

The social demographic and geographic forces form another bases for evaluating performance changes in such have a major impact upon virtually all products, services, markets and customers. Organizations are challenged by the opportunities and threats arising from changes in sound, cultural, demographic and geographic variables. These are shaping the way Americans live, work, produce and consume census data suggests that Americans are not returning to traditional lifestyles.

Consumers have become more educated, the population is aging, minorities have become more influential, and people are looking for local rather than federal solutions. There appears to be a weaker commitment to the work environment and ethic. More are questioning corporate culture/values and procedures, companies experiencing more job turnover and absenteeism and more demand for business to assure social functions such as childcare, retirement, counseling for employees.

New trends are creating a different type of consumer and consequently need for different products, different services and different strategies. How much South west airlines accommodate different variables, determines how well it operates, (operational effectiveness) the variables could include child bearing rates, number of marriages and marriage rates, immigration and immigration rates (intercity and state) life expectancy rates, attitude towards governments, work and per capita income. Also of concern is the traffic congestion, attitudes towards business and service business, energy conservation and consumptions.

The other measurement variables are the legal forces that include patent laws, legislation, tax rates that all affect companies significantly. Firms should consider the increasing interdependence among economies, markets and governments, economies have become more interdependent and the legislation relating to labor and labor unions too must be considered.

Measuring performance

The basis for measuring south west airlines performance would be on strategy.the strategies include market positioning, delivery time reliability and flexibility, services and its international strategy.

South west’s organizational philosophy is to keep organizational structure as flat as possible, shorten the lines of communication, allow free ideas within managerial hierarchy, top manager and decision making. Control of south west airlines is geared towards boosting productivity, lowering cost and maintaining a reliable high quality service. These goals are achieved through a combination of budgetary control, pay for performance incentive systems and a corporate culture that continually stresses key values, for instance a degree of self control is achieved by trying to establish a corporate culture that focuses on employees’ attention.

Quality of Service

On the key values required to maintain a competitive edge in the air express industry. The values continually stressed by top managers at southwest and communicated throughout the company by the company’s newspaper and quarterly video.

The company also emphasizes on satisfying customers needs, maintaining quality doing it right the first time around and excellent service. There is also a company wide emphasis on productivity and cost control. Thus in a nutshell the business level market positioning compared to the competition other issues include buyer power determinants, price sensitivity. A division, product line or other profit centre that can be independently from other business units of the firm.

At business level the issues are less about the coordination of operating units and more about developing and sustaining a competitive advantage for the services. It deals with positioning the business against rivals. Anticipating changes in demand and technology and adjusting the strategy to accommodate them, influencing the nature of competition through strategic actions such as vertical integration and through political actions.

Functional level strategy is an operational decisions and departments southwest continues to make enhancements.
Market and customer focus through the process management and people empowerment. High and through efficiency through human resources that could lead to continuous improvement and improving manufacturing strategies and empowering people.

In a market place where too many products and services are choosing too little demand business face additional challenge. Southwest does everything to attract and retain customers. They have also employed employees branding and how this process can help them achieve a competitive advantage for the organizations by positioning the organization in the minds of customers, employees and other stakeholders.

Airline industry is every competitive one it costs a lot of capital investment and also affects market share and profits. The company has implemented some form of innovative work system or human resource practices to strengthen relationships between management frontline employees or among frontline employees themselves. This has resulted into a powerful performance in airline industry worth about $9 billion. It has achieved high levels of employees’ satisfaction. (Fortune Magazine 2007).

Southwest has consistently enjoyed lower turnover rates than airlines. Many of its innovations were incorporated by the ambitions offering quantity service at low cost. The operations of Southwest have been exemplary in the following:

Leading with credibility and caring – top leadership and other organizational practices. Herb Kelleher and Collen Barret have created credibility throughout the organization and services as a foundation for other leaders. The company supports the firmly relationships of employees at home.
Invest in frontline leadership top leadership reaches the frontline employees
Hire and train for relational competence for pilots and other employees without regard to conflicts and identifying opportunities
Using conflicts to build relationships – are flexible job descriptions are greater in terms of expanding the scope the scope of responsibility but create potential for conflicts that otherwise arise.

Broad performance measures hold people jointly responsible for outcomes and create conflict between letting these conflicts resolution can make the difference as an opportunity for learning about the overall process and the role that each party plays init. Keep job flexible at the boundaries practices in the organization are geared toward minimizing functional division and discourages or actively prevent employees form performing the work.

For suppliers, SWA is dedicated to the highest quality of customer service delivery with a sense of warmth, friendliness, individual pride and company spirit. This has to be accompanied with a stable work environment, provision of low fares, low costs and an increased productivity and quality through close monitoring of systems and suppliers.

The outcomes for measuring operations at southwest airlines

In Southwest tickets are issued directly by the airline over the phone or online at the company’s website. Their passengers are allowed to change reservations without additional cost to allow for flexibility to customers and do not assign customers seats. It allows 3 pieces of luggage to be checked in free, further, meals and in-flight beverages (excluding alcohol) are served to customers. It manages to maintain excellent customer satisfaction ratings.

South west has a reward program called Rapid Rewards where customers receive one credit for each one way trip. A free ticket expiring after 11 months is automatically issued when a member accumulates 16 credits in a 24 months period.

Capacity controls were instituted to redeem its free tickets issued. In advertisements, the company has employed humor in its advertising slogans since the 1990s; south west has been running a television ad campaign based on the phrase “wanna get away?”

Among its human resource, there is the chairman the chief finance officer, flight attendants, airline pilots, aircraft maintenance technicians, aircraft mechanics, customer service agents and research agents and flight dispatchers.

The organization is committed to provide their employees a stable work environment with equal opportunities for learning and performance growth. Creativity and innovation are encouraged for improving effectiveness of the South west airline.

The company has managers and workers who are so skilled that other companies try to attract them away. They are able to reach quickly and adequately to marked changes. They foster continuous improvements in human assets technology, materials and information flows. The company is able to deliver low cost without giving up great service, their airline planes especially spend much more time in the air than in more individual airline companies i.e. 11 hours per day. Their pilots fly many more hours for lower wages than pilots on other airline companies. They also have a very good record of on-time performance and very few lost bags.

A key success to their success lies in selection of their employees carefully and training them to be customer oriented. Any company can teach customer service but only companies have systems in place that reward great service will demonstrate it in practice. The key is to invest heavily in training, staffing and rewarded systems for your people that are delighted with the values of the company.

South west airlines embraces dynamic processed that allow them to change and improve in a continuous way. These processes explain why such a firm is able to be active on these different performance fronts simultaneously.

Customer orientations

Continuous improvement
Lead time performance (Sweeney 1991)

Production function must be externally oriented and more specifically customer oriented.

Continuous improvement starts with reliability of process and products employees are considered as the main source of new ideas and are empowered to implement changes. Sometimes this leads to radical changes) re-engineering) to obtain seamless processes quality assurance system must consolidate the progress of the company.
Lead time performance believe in time based competition on production, administrative processes, purchasing, and distribution and in product development generate and important leverage effect on performance.

Human Resources in southwest airlines

The founders of SWA, by Rollin King and Herb Kelleher have held the company for a long time, this airline that is now the largest has a woman as its chairman (Colleen Barret) Working with the current CEO and founder Kelleher. Together they oversee the massive workforce move from strength to strength and milestones of achievements. A southwest airline as a company has had many employees working for them, since the airline started operation in 1971 had 195 employees and with 517 employees at the 5^th year. The number grew to 3300 employees who lived life the southwest way. it is worth remembering that in this industry change happens overnight and employees need adapt to change faster than a chameleon.

The human resources that perform different tasks have been increasing steadily over the decades and by the end 15 years the workforce had raised to5819 and 22,944 by quarter decade celebrations. Currently southwest has a strong dedicated employees totaling to 29,274.

As the saying goes a satisfied employee is a happy employee, the employees of southwest have consistently worked towards meeting the organizations goals/mission. This evident by how since 1987 the department of transport that began tracking customer satisfaction statistics, SWA has consistently led the industry with lowest ratio of passenger complaints.

The company has also been an innovator; it pioneered a same day air freight delivery service and a ticket less travel. It is also the first airline webpage to link customers’ computer desktops.

References

Mintzber, Henry, Lampel, J Ahlstrand, B Strategy Safari – Guide tour through the winds of strategic management
Business Horizons Vol 48 issue 6, 2005 pp. 535-545
David F strategic management(1989) Columbus Merrill Publishing company
Poister; TH (2003) Measuring in performance in public non profit orgs sun Francisco C.A
Ansoff, Igor (2000) corporate strategy McGraw Hill New York
Drucker, Peter (2002) the practice fo management Harper and Row New York
Marylyn Royce (1996) airborne freight value line investment survey
Standard and poor’s industry survey airlines. Web.
Standard and poor aerospace and air transport industry surveys

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