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The Value-Adding Manager

In “At What the Price Value” Tim Mapes of Song Airways marks that the main key value drivers for airline indstry include the following: focus on the actual customer experience within the airline rather than traditional marketing communications used in the previous years; positively differentiated experience in relation to present and potential customers (easy access to low fares for tickets; snacks during flights); focus on services for customers offered at lower costs, and providing customers’ self-expression; focus on female passengers as those who care the most about the quality of service; implementation of strong coordination of employee’s performance by senior-level management; providing full cost accounting at all levels to ensure the profitability. Southwest Airlines has used discounted price as added value. They promise customers, “we’ll always give you a really great price- you’ll be surprised how great. ” (8) The major force driving changes in 5 years will be the discount pricing for customers as the result of the improved leadership paradigm between managers and employees of all levels. 2. Shortage of skilled and entry level employees. According to Michael P.

Zepf in his article “Industry Aircraft Workforce”, the main key value drivers airline managers have to monitor are: monitoring the level of education and skills of employees currently working for airplane industry; making search of suitable candidates for vacant positions who are working in other airline companies; attracting business school graduates by decent job suggestions; providing training programs for entry-level employees; creating opportunities to enter high-level positions for the most skilful employees; developing incentives for potential employees with high skills. In “Quantifying Employee Contribution Contents” William F. Mahoney marks that “Southwest Airlines’ distinctive people management and service processes achieved productivity of $76,000 per employee, compared to American Airlines’ $62,000 and United Airlines’ $69,000 in 2000” (10). Ratio of employee costs/capital costs for typical company in airline industry is 1,8. According to FORTUNE, 2000, Southwest students consider Southwest airlines a good employer. “The academic research firm, Universum, placed Southwest in “The 50 Most Desirable MBA Employers” list for the fourth consecutive year” (8).

The need in skilled and entry-level workers will be the force driving forces in the industry in 5 years. 3. Training and education are out of step with industry need. According to Kerb Kelleher in “A Culture of Committement”, it’s very important for airline managers to monitor the following forces: the level of scientific research on the main developments in aircraft industry; the quality of skills of the employees working for the company; the quality of training programs teaching managers of all levels about finance, marketing, strategy; ensuring informality and free thinking in the company; promoting challenge; making investments in employees through their promotion.

The major force driving change in the next 5 years is going to be the need of airline industry in highly-skilled employees and aircrafts of the highest quality. 4. New laws regarding employee security issues. The executive summary on Aviation Security (www. piperrrudnic. com) marks that the following forces have to be considered by the Southwest managers: the application of the new security legislation to the employees’ coordination; monitoring of additional costs raising from the new security issues; monitoring increased emphasis on the security of airplane passengers and cargo. During the next 5 years, the activities of the airlines companies will be influenced by security issues rising for Sep 11th tragedy. 5. Workplace violence. According to Barbara M.

Ross and Lauren G. Krasnow in their article “Cameraphones: Innocuous Gadgets Or Workplace Threats”, the following key value issues have to be considered by Southwest managers: prohibiting taking videos or pictures in the workplace; ensuring employees get a permission to take pictures or make videos in the workplace; providing maximum confidentiality about customers of the airline; ensuring measures taken against terrorist attacks in workplace. The major force causing change in the next years is the terrorist issue which will influence the airline industry in many ways. 6. Employee health and wellbeing relative to customer contact individuals.

According to Kerb Kelleher in “A Culture of Commettement”, the management of airline industry has to devote maximum attention to analyzing customers’ needs on the same level as they analyze employees’ needs, providing additional benefits both for employees based on their performance and for customers who are using the airline frequently and fly first class; preventing strikes of employees by making sure they get satisfaction from their work, and preventing customers from stopping to use the airline by maximum satisfaction of their needs. Southwest got the fewest complaints from customers during the last 13 according to Department of Transportation’s Air Travel Consumer Report.

Southwest is only 80% unionized. The problem of equally high satisfaction of employees and customers will be the driving force bringing changes during the next 5 years. 7. Compensation and job growth. According to the work of Janet Kraus “Loyal Employees Lead to Loyal Customers… Which Lead Back to Loyal Employees” the major key value-adding forces are instilling loyalty among employees; building healthy relations among the employees working in teams; providing recognition for the best employees; providing opportunities for promotion in the company. For example, according to profit-sharing plan, employees of Southwest airline own 10% of company’s stock.

The employees’ thirst for occupying better positions and ownership in the company is going to be the driving force in the airline industry in the future years. 8. Integrity and values. According to the official website of Southwest airlines (www. southwest. com), the main values on building which in the team the managers of the airline have to concentrate include desire to work; responsibility; thirst for success; superiority of company’s interests over personal interests; desire to face challenge; desire to satisfy customers’ needs. About 2000 people working for Southwest airlines have spouses working for the same company, which creates warm atmosphere.

Southwest airlines were nominated “The Most Pleasant” airline in 2003 with 27% of votes but it’s afterwards it lost its positions. According to Kerb Kelleher in “A Culture of Committement”, “…when our competitors began demanding tens of millions of dollars a year for us to use their travel agents’ reservations systems, I said, forget it; we’ll develop an electronic, ticketless system so travel agents won’t have to hand-write Southwest tickets — and we won’t be held hostage to our competitors’ distribution systems. ” Therefore, the major force driving change in the following years is going to be orientation of customers’ needs and taking maximum responsibility. 9. Self management and responsibility. According to the official website of Southwest airlines (www. southwest.

com), the major key value drivers include building an efficient team of employees with strictly defined functions; providing high responsibility for the quality of flights; providing coordination on all levels; an emphasis on the importance of employees in the company. The driving force of changes in the next 5 years is going to be the increasing role of employees’ responsibility for the quality of flights in the airline. Airline industry faces many problems nowadays which will cause major changes in the industry in recent years. After the Sep 11th events, 15-20% reduction of airline capacity occurred. However, the major force driving changes in the airplane industry in the following years is going to be training new employees with high skills for efficient working in the airline industry. The Southwest airline has already faced this problem.

At present, there are 34,000 employees working for Southwest airlines. Due to the low skills of employees, the performance of the company and thus the value of shareholders are not on the high enough level. For the moment, the net income of the company is estimated by 443 million USD, and the total operating revenue is 5,9 billion USD. The issue of low-skilled labor force is the weakest in the airline industry nowadays because the labor force in it doesn’t answer present day realities. As far as Joseph Durso mentions, one of the airline companies has 75% of employees who have been working for it for more than 25 years and are older than 40 years.

About 5% of employees are under 35 years, so it has very few young people with modern outlook which is a very negative factor. Whenever the slowdown in flights occurs, the first people who get fired are the newest ones with minimum experience. Therefore, the workforce in the airline companies mostly remains middle-aged and not welcoming changes or developments. At this time, there are very few young people who have graduated from prestige universities who are looking for jobs in airline industry. Even though there are some MBA graduates who would like to work at Southwest airlines, they often tend to look for jobs in other industries, like computer or electronic industry. The level of skills which airline industry employees perform is very low.

In order to achieve the employment of entry-level employees with high basic skills, it’s necessary to provide different training programs for young graduates, or team with universities which could provide special courses which could be beneficial for further working in the airplane industry. Another beneficial factor could be government sponsoring of research projects in the aircraft industry. This research could be very beneficial for the future work of Southwest airlines because their business is connected with risk. Donations for research in the industry decreased more than by 50% after their highest point in 1987. The rise of research in the industry could also provide it with high-skilled specialists.


At What the Price Value” (www. reveries. com) 2. Barbara M. Ross and Lauren G. Krasnow “Cameraphones: Innocuous Gadgets Or Workplace Threats” (www.torys. com) 3. Debra Eckersley “Drive performance to a new level”, 2000 4. Executive summary on Aviation Security (www. piperrrudnic. com) 5. Janet Kraus “Loyal Employees Lead to Loyal Customers… Which Lead Back to Loyal Employees” (www. doit. circles. com) 6. Joseph Durso, Michael P. Zepf “Industry Studies 200: Aircraft” (www. ndu. edu/incaf/industry/2000/aircraft/aircraft. htm) 7. Kerb Kelleher “A Culture of Committement” (www. cfoproject. com) 8. The Innovator’s Dilemma. ” Clayton M. Christensen. HBS Press. 1997. 9. www. southwest. com 10. www. web. mit. edu/airlines 11. William F. Mahoney. “Quantifying Employee Contribution Contents”, 2002.

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