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1. Indicators of Excellence1. Indicators of Excellence
Zero market share in 1989, California
→ Leading airline in 1993→ 10 cities with 70% market share by 1995
Total operating revenues: $535,948(1984) to $2,296,673(1993)
Busi
nes
sEx
pan
sion
Finan
cial
Info
rmat
ion
: $535,948(1984) to $2,296,673(1993)Net income: $49,724(1984) to $154,284(1993)Net income per share: $.38(1984) to $1.05(1993)
Low turn-over of employees- 4.5% (1991)- Less than half of that of other major airlines
Lower Fares comparing to the competitors
Finan
cial
Info
rmat
ion
Som
e oth
ers
2. Drivers of Excellence2. Drivers of Excellence
Southwest People
Efficient and Simple Business
Model
2. Drivers of Excellence2. Drivers of Excellence
Southwest People Southwest People Efficient and Simple Business Model
LeadershipGreat leaders with clear vision and goalsValue its people by building and preserving special and unique culture
Internal Customer (Employee policy)The Southwest Spirit : family, customer service, hard work, equality, cost consciousness, dedication, fun, trust by sharing information, mutual respects. E.g: the catastrophe fund
Efficiency
• Point-to-point routes
• Only fly fuel-efficient 737s
• Frequent flights
• On-time departures
• Low cost fares
the catastrophe fund
The People Department : make employees happy, prepare them to be winners, preserve the values and special cultureRecruiting: peer & customer recruiting, teamwork, fit in the culture, feedback after rejection
Training : constructive two-way communication, oriented on customer services, company spirits and values, teamwork and team building,
Southwest Work Force : low hierarchical in wage, profit-sharing, young work force, low turn-over, excellent labor-relations
Simplicity
•Simple fares: only two fares on a route
•Simple price policy: same fare within a state
•Simple service: no meal, just beverages, frill, light
snacks
•Simple booking service: discourage agents to book
tickets
•Simple frequent flyer programs: “The Company
Club”
3. Herb Kelleher’s Leadership3. Herb Kelleher’s Leadership
““““ CultureCultureCultureCulture ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success.
Leadership type Leadership type Leadership type Leadership type ---- AffiliativeAffiliativeAffiliativeAffiliative : create harmony and builds emotional bonds: create harmony and builds emotional bonds: create harmony and builds emotional bonds: create harmony and builds emotional bonds
“ people comes first” “ people comes first” “ people comes first” “ people comes first” - AuthoritativeAuthoritativeAuthoritativeAuthoritative : mobilizes people toward a vision “come with me” : mobilizes people toward a vision “come with me” : mobilizes people toward a vision “come with me” : mobilizes people toward a vision “come with me”
““““ CultureCultureCultureCulture ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. Business structure would not be possible to maintai n without “culture”Business structure would not be possible to maintai n without “culture”Business structure would not be possible to maintai n without “culture”Business structure would not be possible to maintai n without “culture”Low fare with good service is from happy mood emplo yeesLow fare with good service is from happy mood emplo yeesLow fare with good service is from happy mood emplo yeesLow fare with good service is from happy mood emplo yeesWhen he put “people” first, company success follows When he put “people” first, company success follows When he put “people” first, company success follows When he put “people” first, company success follows
Setting Setting Setting Setting VisionVisionVisionVision and and and and GoalGoalGoalGoalSetting visible goal and leading by examples could make people believe Setting visible goal and leading by examples could make people believe Setting visible goal and leading by examples could make people believe Setting visible goal and leading by examples could make people believe
himhimhimhimThinking creatively and challenging to management g ive brandThinking creatively and challenging to management g ive brandThinking creatively and challenging to management g ive brandThinking creatively and challenging to management g ive brand---- new new new new business structure which another company can not du plicate it easily business structure which another company can not du plicate it easily business structure which another company can not du plicate it easily business structure which another company can not du plicate it easily
Interact and
communicate
Interact and
communicate
Always interacting with
people
Always interacting with
people
Listening well employee
and customers’ voice
Listening well employee
and customers’ voice
Value the peopleValue the people
Do not be afraid to be
funny and familiar leader
Do not be afraid to be
funny and familiar leader
Try to find the way the
employee and customer happy
Try to find the way the
employee and customer happy
Try to open the information
to people
Try to open the information
to people
Challenge Challenge
Challenge with
existing culture
and business
model
Challenge with
existing culture
and business
model
3. Herb Kelleher’s Leadership3. Herb Kelleher’s Leadership
Finding solution together Finding solution together
to peopleto people
Encourage employee to
make bottom-up culture
Encourage employee to
make bottom-up culture
model model
4. Threat from Competitors 4. Threat from Competitors Successful duplication of biz model of Southwest
Short-term or Long-termCom
pet
itor
THREAT
ShuttleCALite
Successful change the organization’s culture
Com
pet
itor
NONE THREAT
5. Short5. Short--term challenges and longterm challenges and long--term growth objectivesterm growth objectives
Short-term challenges
Competitions from other airlines
- Imitation of biz model and practices- Head-to-head matching of price
Suggestion
- Do not expand too quickly
- Maintain current customers and market share by enhancing customer service, preserving and updating company’s culture
Suggestion
Long-term growth objectives
Sustainable and profitable growth:
Expand routes and offer greater customer services without losing its unique competitive advantages which lie in its people
Suggestion
- Prepare for future growth by preserving and updating the unique culture even when the company size increases: anticipate changes and get the people together to find a solution
- Maintain the two-way communication to prevent overconfidence
- Smooth transition of leaderships from current management: look for capable people , enable them to learn before the actual transition
6. The ways to continue success6. The ways to continue success
Maintaining and strengthening the “Maintaining and strengthening the “Maintaining and strengthening the “Maintaining and strengthening the “ CultureCultureCultureCulture ” ” ” ” –––– people come first people come first people come first people come first
Internal Support for Employee Internal Support for Employee Internal Support for Employee Internal Support for Employee • Making creative Making creative Making creative Making creative Rewarding SystemRewarding SystemRewarding SystemRewarding System (e.g. annual “best southwest man” award) (e.g. annual “best southwest man” award) (e.g. annual “best southwest man” award) (e.g. annual “best southwest man” award)
• Supporting Supporting Supporting Supporting intraintraintraintra---- communitiescommunitiescommunitiescommunities (e.g. cooking community, soccer community) (e.g. cooking community, soccer community) (e.g. cooking community, soccer community) (e.g. cooking community, soccer community)
External Service for Customer : External Service for Customer : External Service for Customer : External Service for Customer : Strengthen MembershipStrengthen MembershipStrengthen MembershipStrengthen Membership SystemSystemSystemSystem• Special service for frequently flying customersSpecial service for frequently flying customersSpecial service for frequently flying customersSpecial service for frequently flying customers• Special service for frequently flying customersSpecial service for frequently flying customersSpecial service for frequently flying customersSpecial service for frequently flying customers
• Members’ communityMembers’ communityMembers’ communityMembers’ community
• Easier way for reservationEasier way for reservationEasier way for reservationEasier way for reservation
• Free cockFree cockFree cockFree cock---- tailtailtailtail
Finding Finding Finding Finding New WaysNew WaysNew WaysNew Ways to keep the Low Fare and Low Cost strategyto keep the Low Fare and Low Cost strategyto keep the Low Fare and Low Cost strategyto keep the Low Fare and Low Cost strategy
Preparing for the Preparing for the Preparing for the Preparing for the Post Post Post Post ---- KellerherKellerherKellerherKellerher• CEOs for a larger size of companyCEOs for a larger size of companyCEOs for a larger size of companyCEOs for a larger size of company
• CEOs who experienced the culture and know the value of the culture in SWACEOs who experienced the culture and know the value of the culture in SWACEOs who experienced the culture and know the value of the culture in SWACEOs who experienced the culture and know the value of the culture in SWA