Corporate Culture of Southwest Airlines

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Table of Contents

Company’s financial performance
Operating profit margin
Net profit margin
Return on total assets
Company’s culture and performance
Strategic decision to foster culture
Three leadership actions
References

Company’s financial performance

The corporate culture of Southwest airlines is mainly constructed on the basis of attitude, hard work and passion. The company values employees with positive attitudes, hardworking and passionate about their jobs because it is through employee’s performance that a company can create a sustainable competitive advantage in any industry.

Southwest therefore optimizes on its employees core values, their initiatives and the corporate culture spirit to enhance its competitive advantage. The rationale of the corporate culture which mainly focuses on employees’ attitudes and passion towards their jobs is derived from the fact that the company comprehends that it is through its employee’s contributions that will determine the success or the failure of the company.

For instance, as enshrined on the core cultural values an employee with passion and of positive attitude will also result in high satisfaction level of the customer. More so, creating a competitive advantage involves other aspects such as cost reduction and innovative strategies.

In Southwest airlines, a frontline employee suggested that not placing company’s logos in trash bags which ended up saving the company an estimate of about $250,000 annually. The employees also suggested assembling computers for half the price of new ones instead of buying 800 computers for usage in new reservation centre in Albuquerque; this saved the company about $1 million.

Other cost saving and innovative ideas put forth by the company’s employees have created unparalleled competitive advantage to the company. Southwest also encouraged their executives and supervisors to attend courses on corporate culture which was intended to ingrain, instil and nurture cultural themes such as teamwork, trust, diversity and harmony.

By investing on employees trust and loyalty, the company has consistently gained a lasting competitive advantage over other airlines because of the employees’ innovative measures and their passions towards their job and Southwest airlines as well.

Operating profit margin

Operating profit margin = Operating profit (Losses) / Total revenue

Year	1995	2000	2005	2006	2007
Operating profit	5,852	6,999	427	7,514	9,210
Revenue	603,400	692,800	778,600	796,800	829,000
Operating profit Margin	0.97	1.01	0.05	0.94	1.11

From the above ratios, there has been increase in operating costs management strategies by the company over the years apart from a decline in 2005 which resulted in a decline in the margin to 0.05%. The company should endeavour to reduce its operating costs as a way of increasing its profitability.

Net profit margin

This is a measure of efficiency in generating shareholders income and is calculated as below;

Net profit margin = Net profit / Total revenue

Year	1995	2000	2005	2006	2007	2008
Net profit (Loss)	2,283	2,486	(5,782)	3,126	4,998
Revenue	603,400	692,800	778,600	796,800	829,000	190,300
Net profit Margin	0.38	0.36	-0.74	0.39	0.60	0.00

The net profit margin of the company is less than 1% but it has been slightly improving over years apart from 2005 where the company recorded a net loss.

Return on total assets

This is a measure of efficiency by the company in using its assets to generate revenues. The company’s return on asset from 2005 to 2007 has been fluctuating consequently indicating inconsistency in the generation of revenues using the available assets.

Year	2005	2006	2007
Operating profit (Loss)	725	934	791
Total Assets	14,003	10,460	16,770
Return On total Assets	5.18	8.93	4.72

Return on Stockholders’ Equity= Net income / Stockholders funds

Year	2005	2006	2007
Net income / Loss	484	499	645
Stockholders’ Equity	6,675	6,449	6,941
Return On stockholders’ Equity	7.25	7.74	9.29

There has been an increase on income attributable to stockholders funds from the year 2005 to 2007.

Company’s culture and performance

Southwest airline is an employee oriented company as it believes on the significance of employees to the company. The company acknowledges that employees are the source of the company’s performance. The company therefore encourages employee’s sense of ownership, pride, accomplishment and enhanced job satisfaction levels in order to keep the spirit of Southwest alive.

The Southwest slogan of “Southwest way” mainly consisted of three major sections namely; warrior spirit, servant heart and fun-loving attitude. The warrior spirit fostered the need for hard work, desire to do the best, be courageous, and display a sense of urgency, perseverance and innovativeness.

The servant’s heart fostered the spirit of following the Golden Rule, adhering to basic principles, treating others with respect, putting others first, being egalitarian, demonstrate proactive customer service and embracing the SWA family. The Fun- Loving attitude fostered having fun, not taking yourself too seriously, maintaining perspective balance, celebrating successes, enjoying your work, and being a passionate team player.

Attitude of the employee is a major factor in the recruitment of the Southwest employees. In essence, the company valued attitudes to skills and hence recruits employees with positive and fun loving attitude with little or no skills instead of skilled employees with negative attitudes.

More so, the employees had to value customers, be hardworking and posses a heart of a servant. This made the company implement the Myers-Briggs personality assessment to learn the behaviours of the employees using their past experience in order to positively predict their future behavioural orientation especially when dealing with customers (Thompson, 2010).

In order to foster trust and loyalty from its employees Southwest encouraged personal decision without necessarily following the Golden rule. Again the non-layoff policy which was implemented in 1971 clearly points out to the core values and underlying factors that makes Southwest an employee oriented company.

It is thus imperative to note that the company’s increased performance has been as a result of increased sound organizational culture that has been maintained by the company since inception four decades ago.

Strategic decision to foster culture

The strategic decisions of Southwest airlines are to increase presence in areas being deserted by competitors, approach new markets, emphasise on safety, quality maintenance and reliable operations among other strategies.

In order for the management to sustain the positive culture of the company to successfully implement its strategic decisions, it should enhance its cultural values by providing specialised trainings for the employees in different sectors of the company.

This will act as a form of career building and talent management on ways of handling new markets and how to approach and conquer new market niches as well as ensuring quality service delivery. Provision of additional training will also act as a fostering influence on the employees’ passion and warrior spirit.

Increasing compensations and enhancing the benefits of maintaining positive attitudes will also act as a strategic approach of cultural enhancement and accomplishment of the company’s strategic goals. The management should also maintain its recruitment strategy of absorbing employees who share the same values as the company.

This will specifically help in coping with the challenges of new markets as the same successful customer satisfaction approach will be used to meet the needs of different market segments.

Three leadership actions

Strategic decision in this case provides requires strong leadership skills necessary in the implementation process. The first leadership action that should be fostered is motivating employees on the need to achieve the goals. The leader can thus offer competitive compensation and other form of rewards for exceptional employee performance and also other employees’ contributions to the success of the company’s strategy.

This will thus be important in achieving the strategic goals. The leadership should also give more confidence on the need to make decisions and also contribute suggestions on the best approach of achieving the strategic goals. By doing so the company will benefit from the strong suggestions put forth by the employees (Hughes, 2005).

The other important action that the leadership of the company should take in order to ensure that the strategic decisions are achieved is leading by example. This is an important aspect as it is both motivating and inspiring. A leader taking the point of a servant and closely interacting and even offering assistance to employees, listening to their suggestions and issues will not only contribute to the attainment of the strategic goals but also sustainability of the organization’s functions.

References

Hughes, R., & Beatty, K. (2005). Becoming a strategic leader: Your role in your organization’s enduring success. San Francisco: John Wiley & Sons.

Thompson, A.A., Strickland, A.J., & Gamble, J.E. (2010). Crafting and executing strategy. New York, NY: McGraw-Hill-Irwin.

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