An Airline in Trouble?Presented by:Anuprabha DBinny SinghPrapti AgrawalShachi GoyalT. Sandhya

IntroductionIntroduction

Southwest Airlines

Change in CEO

Implications of the change

Change In LeadershipChange In Leadership

In 2001Herb Kelleher stepped down as CEO and President of SW Airlines.

James Parker became the new CEO

Parker v/s KelleherParker v/s Kelleher

• KELLEHERoFlamboyant and fun loving attitudeoGreat communication and

negotiation skillsoHigh on extraversionoPromoted shared identity and values

in the companyoIconic StatusoGreat motivational power

PARKER

oReservedoStaidoGood negotiation skills oPoor communication skillsoLess motivational power

ANALYSISANALYSISTheories Of Leadership• Behavioral model of leadership- Kelleher, a

perfect example of the model • Contingency model

Casual Variables

Group performance

Contingency VariablesGroup atmosphere

Task structurePosition

Continued…Continued…

Based On Contingency Model Kelleher score high on the three

variables.Parker score low on these

variables

Leader – Member Exchange Theory

oKelleher did not believed in “in-grouping and out-grouping”.

oLess interaction with out-group by Parker

Contemporary Model

1. Transactional model2. Charismatic model

o Kelleher, a combination of both models

o Parker belongs to Transactional model

Transformational Leadership Model

o Kelleher possessed all the three variables

o Parker possessed only Intellectual stimulation variable

RecommendationRecommendation

Gradual change in leadership

Selection of the successor 1-2 years before the retirement of Kelleher

Change in CultureChange in Culture

Kelleher’s time

◦People oriented◦Informal ◦Nurturing◦No distinct level of hierarchy◦Flexible◦No employee restlessness

Parker’s time

◦Lack of communication between management and employees

◦Formal◦Lack of flexibility◦Conflict with labor unions on working conditions and pay.

◦Employee began to disassociate themselves with the culture

AnalysisAnalysis

Types of organization culture

Clan cultureEntrepreneuri

al culture

Bureaucratic culture Market culture

Flexible

Stable

Internal External

AnalysisAnalysis

In Southwest airlines they had Clan Culture

On basis of performance Southwest had a Strong CultureoManagers and employees share common

values and methods of doing business.

There was a shift towards Market Culture

RecommendationRecommendationCultural committees should work

more actively

Programs to encourage interaction between employees at all levels.

Greater part of senior management in socializing with the employees.

MotivationMotivation

Under Kelleher• Employees did not mind doing

work out of there sphere.

• Employees went out of their way to improve customer service

• Sense of belongingness in the company

Under Parker

Union unhappy with work and pay

Demanded remuneration for “extra work”

Flight attendants felt secondary to pilots

What Went WrongWhat Went Wrong??

Motivation and lack of it.

Southwest employees drew motivation from Kelleher.

No Longer Industry Outsiders.

How is Motivation How is Motivation ImportantImportant

The willingness to exert high levels of effort towards organizational goals conditioned by the effort’s ability to satisfy some individual need.

The Motivation ProcessNEEDS DRIVE

INCENTIVE

Theories Of MotivationTheories Of MotivationHerzberg’s Theory

Equity TheoriesEquity Theories

Equity

Inequity Person’s OutcomePerson’s Input

Other’s OutcomeOther's Input

Person’s OutcomePerson’s Input

Other’s OutcomeOther's Input

Person’s OutcomePerson’s Input

Other’s OutcomeOther's Input

RecommendationsRecommendations

Parker should connect with his subordinates.

Learn from Kelleher( e.g. watch his videos).

Informal meets within the organization- interaction.

Customer relationsCustomer relations

Post 9/11 security measures took a toll on first-come-first-serve seating

Refusal to take ticketing enquiries over e-mail

AnalysisAnalysis

First-come-first-serve seating a perceived benefit for the customer.

Lightly staffed airport systems resulted in delays in purchasing tickets. Not accepting email enquiries caused wastage of time.

RecommendationsRecommendations

Incorporating a system to make seating more structured.

Utilizing staff in the best possible way to ensure minimum delays in ticketing.

Accepting email enquiries.

Rising CostRising CostRising fuel prices

Early retirement plan accepted by more than thousand employees. Expenditure on recruitment.

Higher labor cost as a proportion of operating cost

Hedging position due to expire in 2005

AnalysisAnalysis

Cost was a big competitive advantage

But it was losing its cost advantage and also the market to other low cost airlines.

RecommendationsRecommendations

Needs to adapt to new costs and strategize its future policies.

Rising CompetitionRising Competition

JetBlue and Air Tran- 2 main competitors

Jet blue offered better facilities like more legroom, comfortable leather seats, set back television sets and free internet

Had best record for punctuality and baggage handling

It was a non union airline

AnalysisAnalysis

Because of increase in number of competitors in the airline industry and better services being provided by the other market players SW airlines was losing its market share.

RecommendationsRecommendations

Update itself with market trend and improve on its facilities to retain its old customers and attract new ones

Improve its customer services like baggage handling, boarding on time

Regular feedback from customers

Can Kelly Replace Can Kelly Replace Kelleher?Kelleher?

2004 : Gary Kelly joined as new CEO

Kelly would be compared to Parker not Kelleher

Kelly should learn from Parker’s mistakes.

THANK YOUTHANK YOU