Thursday, April 21, 2011

Southwest Airlines: Gregory Takyi & David Froelich

Southwest Airlines

Yellow (Collaborate) Quadrant

There is no doubt that the yellow quadrant is Southwest’s strongest quadrant on the competing values framework. Its foundation is built upon the concept of treating others as you would want to be treated. The company believes in a dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.

Leaders Values & Behaviors:

· Southwest Airlines has always tried to foster the spirit of fun in the workplace, has been exhibited past and present CEOs. Herb Kelleher, Executive Chairman from 1978 - 2008 and Ceo from 1981 - 2001, adopted a visible, hands on, and friendly style in his time running the company. He was always was ready to promote a party and have fun, much like the culture of the organization.

· He believed work was important, but not to spoil it with seriousness.

o Kelleher believed fun stimulated employees, caused them to enjoy their work more, and work more productively.”

o His strategy was to make sure all the staff had the right information needed in order to make decisions, as well as to encourage and promote family and fun environment for staff and customers.

· Southwest’s current Ceo, Garry Kelly, carries the same torch. He encourages collaboration among employees and builds trust through consistency. He believes that his employees are the company’s single greatest asset, giving the company an advantage over their competitors.


· Southwest invests a lot in its employees including planning FUN and spirit parties that assist in motivating employees, making them proud to work hard for the Company they love!

· The People Department (Formerly the HR Department) views employees as “internal” customers and their goal is to make their internal customers happy, ultimately leading to happy external customers. They have a strong belief in serving with compassion and common sense. They also believe that people need to be the right fit in order to succeed within the company, which is why the company is so particular about recruiting. To ensure proper fit:

o Emphasis on peer recruiting

o Customers are sometimes involved in interviewing flight attendants

o Pilots hire other pilots

o Other employees are allowed to interact with applicants

o Process focuses on positive attitudes and teamwork

· The Southwest Way

o A Servants Heart

§ Follow The Golden Rule: “Treat others how you want to be treated.”

§ Adhere to the Principles

§ Treat others with respect

§ Put others first

§ Be egalitarian

§ Demonstrate proactive

§ Customer Service

§ Embrace the SWA Family

o A Fun-LUVing Attitude

§ Have FUN

§ Don't take yourself too seriously

§ Maintain perspective

§ Celebrate successes

§ Enjoy your work

§ Be a passionate Team-player


· One of the company’s goals is to be the “Best Place to Work”

o It is only fitting that the company has received multiple recognitions for places to work and topped the “50 Best Places To Work” list this past December.

· Southwest Recognizes that our their employees are the competitive advantage, so they deliver the resources and services to prepare their employees to be winners, to support the profitability and growth of the company, as well as preserve the values and special culture of the company.

· The bigger the company gets, the smaller the company wants employees to act. The team aspect is HUGE at Southwest.

Blue (Compete) Quadrant

Southwest demonstrates the Blue Quadrant through its strategic understanding of the airline industry. As a result the company is consistently at the top of its marketplace in terms of process execution and financial performance. On the other hand there are some Blue aspects of its strategy that seem to contradict its values.

Leaders Values & Behaviors:

· Strategic awareness of the market:

· Constantly seeking out new markets with only careful, considered expansion

· Aware of competitive threats and seek to maintain what makes them unique: trust, information sharing, non-adversarial labor relations, high productivity, low fares, and great customer service


· Cost saving measures:

o Lower wages at all levels:

· increase with seniority

· pilots and flight attendants paid per trip

· executive compensation is also comparatively low

· Transform customer experience in the face of competitive threats:

o Compete/conform, but also differentiate with:

· reserved seating

· new fares and products

· onboard services

· “bags fly free”

· The Southwest Way

· The Warrior Spirit

o Work Hard

o Desire to be the best

o Be courageous

o Display urgency

o Persevere

o Innovate


· Cost structure/Financial position within industry:

· Consistently the lowest cost per available seat mile

· Consistently profitable during every year of operation and delivering shareholder value: i.e. from 1972-1992 Southwest’s LUV stock earned highest returns among all publicly traded U.S. stock (compounded return of 21,000%)

· Revenue grew from $5.9 million in 1972 to $5.7 billion in 2000=compound annual growth rate of 25%

· Various other outcomes:

· Over time a waiting list for airport managers who are seeking the airline to initiate service at their locations

· Consistently winning the Triple Crown award given out by the DOT (on-time performance, fewest lost bags, fewest customer complaints)

· Imitation by startups and smaller airlines-within-airline; still no one has been able to get near them in terms of performance

Blue quadrant deficiencies:

Higher traffic destinations are more expensive to serve due to regulations and fees involved. This may lead to higher prices for customers. It also increases turn-around time of aircraft, increases delays, and reduces utilization due to congestive nature of these locations. Southwest is still comparatively the fastest at turn-around and addressing delay problems in these situations, but this does indicate that they are willing to loosen their standards and the finer aspects of their Compete Quadrant for the sake of expansion/competitive position.

In a hypocritical move, Southwest has lobbied against the installation of high-speed rail in Texas. One is reminded that its competition stalled the establishment of Southwest operations through litigation meant to block the company’s entrance into the Texas marketplace when it was first established in the 1970s.

Red Control Quadrant

Southwest Airlines is well grounded in the Red Quadrant given its adherence to low-cost, efficient operations. The company has also done a great job of balancing this control with its need to stay competitive by being flexible with its procedures and infrastructure. Unfortunately, its customer focus may be interfering with more practical infrastructure concerns.

Leaders Values & Behaviors:

· Established with a deliberate low-cost, highly competitive strategy:

· Incorporates best in class utilization of human capital and other resources

· Provides a cheap, customer centered experience

· Low-fares for customers

· Low cost, no frills flying

· Point-to-point service

· This founding strategy has been consistently used throughout the airline’s

history and has been altered strategically when needed to maintain the company’s competitive edge as it grew.


· Efficiency of processes:

· Low cost, simple fares based on automobile as competition

· Fleet of only Boeing 737s (very fuel efficient)

· Consistently on-time

· Short plane turnaround for greater utilization

· Short 2 way flights = greater frequency of flights

· No interline connections (except int’l)

· Targets underserved locations near metro areas:

· Help ensure efficiency and turnaround ability

· This practice has gradually grown to include and be able to handle high traffic destinations

· Recently code-sharing has been integrated into Southwest’s customer service strategy:

· Technical systems/infrastructure make it possible to include code-sharing and connections (int’l) with others

· Airlines they partner with must qualify with/adhere to similar culture and performance metrics (customer service and on-time rates)


· Fuel hedging to save money leads to:

· Lower fuel expenses

· Easier/better planning of cash flows

· Better planning towards profitability

· Various other outcomes:

· Code sharing=greater utilization and customer convenience

· Quick turnaround and lower head counts = higher levels of employee productivity (smaller ground crews and fewer agents per gate and more efficient/cross-functional teams)

· Over time Southwest has become the airline serving the most U.S. Customers with the most flights and seats.

Red quadrant deficiencies:

Tremendous aircraft utilization may compromise safety and reputation given the on-going problems with older 737s (i.e. frame stress and cracking on outer hull). Similarly the company has gotten in trouble several times with the FAA for not fulfilling their inspection schedule obligations.

Some critics say that Southwest gets the same kind of complaints and accolades that any airline accumulates during the course of operations. They claim the difference is that Southwest and its fans do a better job of capitalizing upon and marketing positive praise and stories while overlooking and even denying negative outcomes by leveraging savvy marketing, brand reputation, and a very loyal customer network.

Green (Create) Quadrant

Southwest is the number two most innovative company in its industry. The company is continually looking for new ways to deliver the best products and service possible to their customers, as well as encourage input from creative, passionate, and energetic employees.

Leaders Values & Behaviors:

Company executives encourage and applaud out-of-the-box thinking from all employees of the company, from flight attendants to top-level executives.

Company leadership ensure that employees feel free to communicate whatever they may please.


Southwest has a rule within the company that allows any employee can send an idea to anyone at any time. It can be conveyed orally, or in writing; it does not matter who it is. Because the company wants to show employees that they respect them enough for submitting their idea, responses are sent within 1 week.

Never will an employee be given a simple “no.” If an employee’s idea is turned down, they are likely to receive a page and a half explaining why their idea will not work at that point in time.

This method fashioning an open door policy keeps ideas coming because employees know that their voices will be heard and their ideas taken into consideration.


· Southwest is working with Spigit, a software management company to assist with streamlining innovation and collaboration among its employees. The company hopes to identify and implement revenue generating ideas, as well as reducing operation costs and improving customer service.

· Spigit assists Southwest in defining, measuring, and analyzing employee-submitted ideas, and determining whether or not these ideas will generate a return on investment.

· This strongly encourages employee participation by offering incentives for top participants and top-rated ideas. The medium for which ideas are submitted is referred to as the ideas runway:

o Since Southwest Airlines' implementation of Idea Runway in September 2009, 98% of the ideas submitted have received responses and comments from other members of the community.

· With respect to taking care of its customers, Southwest is also making innovations that will allow customers to have a better experience. A few of these innovations include:

o New Destinations

o New Non-Stop Services

o Boarding Process Re-Engineering

o Fuel Savings

o Rapid Rewards Program

· Southwest also has a large social media network. The company has a social media team that works around the clock to promote Southwest’s brand as well as answer customer’s questions in real time.

o 12 million monthly visits to its website

o 1 million Twitter followers

o 1.3 million Facebook “likers”

o 29,000 reviewers on its Travel Guide

§ Surprisingly, its social media team only consists of 5 individuals. The social media team often collaborates with outside partners, brainstorming new and effective was to reach customers. The company also has its very on blog offering information about new city and route announcements, new product offerings, etc.


  1. "Southwest recognizes that their employees are the competitive advantage". However, in the blue quadrant, there is a belief of lower wages at all levels. Do you think that having "lower wages at all levels" will deteriorate the company's "fun-luving" attitude and culture, along with affect the type of individuals that they hire into the company?

  2. In terms of the green quadrant, do you feel that Southwest is truly innovative? You've listed a loyalty program, an open door policy, and software that helps turn ideas into profit. This all seems to be relatively normal for most companies. The boarding system and low frills method were innovative when they were invented, but I don't see anything that is truly innovative since then. To me, it looks to be their weakest quadrant.

  3. It does not surprise me at all that yellow is their strongest quadrant. That is where their whole competitive advantage comes from and what really sets them apart from other airlines. I wonder if they would have survived or done as well if they were not so yellow focused. I think that their collaborative environment and approach towards employees is what allows them to have their fast turnarounds and enables them to have the culture for their success. At first glance I was surprised they were such a green company, but then I thought about how they were the first airline of their kind and really differentiated themselves from the other airlines.

    Even though other airlines are beginning to have the same operating strategy as Southwest, such as United Express, I think Southwest will continue to outperform them because of their culture and strong yellow quadrant.

  4. It's unfortunate Southwest received such bad press re: their turnaround time affecting maintenance checks since they're thinking Boeing is the one at fault. I think at the same time, hopefully it gives them a more "red" awareness in their safety checks while still maintaining their quick turnaround.

  5. Adam,
    That’s a good point. I think at Southwest there is a trade-off. In exchange for lower pay, employees get a stronger, healthier culture. They also get to work for a company that truly values them and their opinions and ideas for innovation. Southwest is also in a much stronger position financially than others in the industry and that means that their head count is more consistent and less likely to suffer from involuntary un-employment. One example of this is that during the industry meltdown following the 9-11 attacks Southwest didn’t let go of anyone. At worst there were a few temporary layoffs and those who were affected were called back as demand increased; but mainly employees were kept and paid and given additional training in the process. Another thing to consider is that because the airline focuses on underserved, less popular locations the cost of living at these places is likely to be much lower than at the more popular, congested airports.


    I agree with you. I was surprised to hear that they were having trouble even though it could be blamed on Boeing. I was also surprised to hear about their deficiencies when it comes to fulfilling their maintenance schedules. Maintenance and upkeep processes are key to maintaining the fleet and ensuring that the product can be delivered to the customer. I don’t know how it will effect Southwest’s ability when it comes to turnaround time and on-time departures, but I think that if the company is really serious about preventing these problems it will also be able to compensate for any delay such measures will take such that there will be a minimal impact on the company’s reputation for timeliness. Whatever happens I think that the company will still be the best at what it does even if that means that the gap between them and their nearest competitor on these metrics closes somewhat in the process.

    Then again, dead customers are much less likely to complain ;)

  6. I feel like the CEO saying he believes "employees are the company's single greatest asset" is a bit cliche these days, but nonetheless I feel Southwest does place a heavy emphasis on their culture and employee happiness. I too wonder if and what effects will result from the recent plane incident regardless of which company is truly to blame.

  7. Julie, I think Southwest truly is innovative. The have made flying affordable for the masses due to their ability to efficiently squeeze more flights out of each plane daily. Overall, they provide the best value in low cost airline travel. The company is also in the process of redesigning airport gates to streamline boarding. They also paved the way with a software application called DING, which was started a few years ago which was available on computer, and is now available as a cell phone application alerts customers when exclusive, limited-time-only airfare deals on select flights are available for purchase. Of course other airlines followed suit. Although they haven't come out with anything groundbreaking recently, I still think they are innovative in their thinking and constantly refining the services and technology they currently have.

  8. Jackie: I don't think that Southwest would be nearly as successful as they are now if it weren't for their culture and the way they view and treat their customers. Of course they have their low fares but low prices can only go so far. If employees are not happy, they are less likely to take care of the customers, and if the customers aren't happy, then they are less likely to continue doing business with Southwest.

    David: Regardless of who was to blame, it was definitely bad press for Southwest and I'm sure customers or potential customers are now weary of flying with them, but I agree that they will definitely put more focus on the quality, and it will be interesting to see what strategies the company comes up with to overcome this incident and make customers feel comfortable again.

  9. I always wonder about Southwest... sometimes I believe the idea of the employee is everything isnt true. I feel like management wants every employee to add the most value as possible to the company, which seems understandable. But I wonder how hard Southwest pushes employees and if at the entry level position if they are true happy or engaged in their work? -- Not sure if it is possible for all employees at all levels to "love" their jobs as much as Southwest says they do.