Southwest has made an organization out of providing low-fare, short haul routes between city pairs. It has concentrated specifically on offering low-fares on all of its flights by maintaining its no frills attitude and high frequency of flights. This has afforded Southwest Airlines with the lowest cost structure in the industry. Southwest has created a niche for itself by flying a network of flights between smaller U.S. cities that average just one hour apart. This has differentiated them from their competition and avoided many clashes with industry giants who concentrate more on coast-to-coast flights. Kelleher, who is the president, chairman and CEO of Southwest Airlines is the companies single biggest asset and driving force. Kelleher runs the company very tightly and makes all the major decisions through a very centralized decision making process. This brings to light two potential problems. Firstly, how can a company such as Southwest airlines maintain such a centralized organization in the face of growth. Secondly, how is this company going to survive once Kelleher is no longer running it.
The problem that Southwest Airline is facing, is how are they going to survive in an aggressive industry without Kelleher’s leadership. It is a significant problem as the company is a symbol of Kelleher. However, unlike the company, Kelleher has a limited life-span and therefore the company will likely outlive him. This problem therefore requires some urgency as the succession of Kelleher could be the airlines biggest problem. The consequences of Kelleher leaving could be that the company loses its corporate identity. Employees may not respond well to new management. Customers may perceive that the company will not be run in the same manner and will therefore lose its niche market. This could also apply to stakeholders, who will see the departure of Kelleher as a serious decrease in the value of the company. Competitors may also try to take advantage of the company during this unstable period.
Kelleher is the face of Southwest airlines, even going as far as starring in most of their TV commercials. He also personally maintains an excellent relationship with a virtually all-union workforce. He has single handedly given Southwest the lowest employees turnover rate in the industry. Kelleher’s personal motivational style has put the company on the map. It is therefore critical to understand the importance of Kelleher to Southwest Airlines and how is departure will create a serious problem for the company.
The first solution obviously would be to do nothing. This involves letting Kelleher retire and then searching for someone to take his place. This solution is reactive to its environment and the company will therefore be left at the mercy of how well the new person will be able to fill Kelleher’s shoes. Stakeholders may be happy about this solution as they have some say in Southwest’s new president. However if the new president is not able to meet the challenges ahead, then stakeholders may see this as a managerial mistake that was not preemptive enough. The benefit of this solution is the lack of expenses involved in formulating a strategy. However, the costs can be very high and can potentially mean the demise of the company.
The second solution would be to develop a management team that could potentially take over from Kelleher. This solution requires anticipating change and planning strategies to ease the transition. This solution does not guarantee anything, but at least the management team will be highly proficient and ready to take over the company and run it like Kelleher. Stakeholders should not be adversely affected as the management team will be run the company as if nothing ever changed. However, there may be some stakeholders who feel that the company needs fresh management and would have liked to have seen a change in the style of management to enhance growth potential. The costs to the company would obviously be the development and implementation of the management team. The benefits would be that the company anticipates the transition and will therefore be better prepared for it.
The third solution would be to gradually phase Kelleher out of the company spotlight and spread his power out. This solution is the most proactive and the gradual transition would help eliminate a lot of shock. Stakeholders should barely feel the implementation of this plan as it would just require a quieter roll from Kelleher. A beefed up marketing campaign would help align the companies new image with Kelleher out of the spotlight. As for the power struggle, I think most stakeholders would be very happy with receiving more power and access to decision making. The benefit of this solution is less market shock which would help ease the transition. The downfall is that the companies power will be more diffuse and large capital investments would be needed to gradually realign the companies image with Kelleher being phased out.
I believe that the solution to gradually phase out Kelleher is the best alternative. This solution offers the least interruption to the companies performance, as it relies on a proactive campaign. I believe that the only real sacrifice will be the diffusing of the companies power from an extremely centralized decision making process, making the company more inefficient. I believe this solution is very consistent with the reality of the firm.
The implementation of this decision will require a marketing campaign that will be used to phase out Kelleher. The major resistance will be from the employees who will be fearful of new management. This will be addressed by the management team reinforcing the corporate strategies to the employees and reiterating the fact that Southwest airlines will remain the same company and the employees should expect things to stay the same. The ramifications of this plan is that power within Southwest could become to decentralized, therefore changing the core competencies of the firm.
In order for this plan to work it would require: Assembling a team to head the marketing campaign, restructuring of upper management, and decentralize decision making. The objective is to redefine and restructure the upper management in such a way that the loss of Kelleher is manageable. This plans effectiveness will be measured by employee and customer satisfaction throughout the transition. The project will be concluded when the new structure has been phased in and the reaction to Kelleher’s departure is under control.