Throw a dart at the figurative board of case studies about great business cultures, and chances are that dart will pierce a study in praise of Southwest Airlines. Their employees are highly engaged, their customer service is renowned, their mission and company vision are inspiring, and they know how to party.
But the one thing this vaunted airline isn't doing right is arriving on time.
As Justin Bachman reports in BloombergBusinessweek, Southwest finished dead last in on-time flights for the fourth quarter of 2013, according to the US Department of Transportation. How is Southwest solving the problem? Steve Hozdulick, Southwest's senior director of operational performance, shared a few of the company's methods with Bachman. Here's what you can learn from those methods, if you're facing some delivery problems of your own.
1. Forget about one-step, magic-bullet solutions. In reality, you'll probably need to take several steps. Sometimes you won't know what move to make next, until you gauge results from the initial moves. For example, in August, Southwest freed up more time for planes to fly between 9 a.m. and 6 p.m. Ostensibly, this step was going to improve on-time performances. Instead, as Bachman writes, the move created "unintended consequences" for Southwest to contend with:
That schedule, and an improving U.S. economy, produced more customers than the company anticipated and more-crowded planes, just as Southwest was learning how to operate a larger model in its network, the 175-seat 737-800. That model typically takes longer to load than the 143-seat 737s Southwest has traditionally flown. Add to this the cascading effects of a late aircraft in the type of nonhub network the airline operates, along with the winter storms that struck in December and January, and you wind up with only about two-thirds of Southwest's flights landing on time. In the fourth quarter of 2013, just 71.8 percent of its flights were on time--dead last in the industry.
The lesson is that one move rarely solves the problem. And sometimes, your first move initially exacerbates the problem--even if it's a good idea.
2. Emphasize what you're doing right. Yes, customers hate being late. But there's a silver lining for any business struggling to meet high customer demand: The high customer demand. From Southwest's perspective, 2013 was still a stellar year, despite the tardy arrivals. Southwest's fifth annual "One Report," which stresses what Southwest calls the "triple bottom line of performance, people, and planet," also came out last week. The positives included record revenues ($17.7 billion in 2013), more than 144,000 volunteer hours by Southwest employees, and an absolute decrease in greenhouse gas emissions.
More specifically, CEO Gary Kelly noted that Southwest achieved all of this while taking "significant steps in our fleet modernization." That's an especially interesting comment, when you consider that one of the upgrades (to the larger-sized planes) was increasing load times (and therefore decreasing on-time performance).
In other words, Southwest is stressing a second silver lining. Yes, the larger planes take longer to load. But the larger planes are part of an upgrade to the fleet, an upgrade which makes Southwest's planes more fuel efficient and environmentally friendly. Isn't that worth a few bumps in the road?
3. Don't hide from the problem. You might think an airline would be hesitant to publicize problems with on-time performance. But Southwest isn't hiding. Hozdulick spoke to the media, and the article appears in plain sight on Southwest's news page.
The takeaway here is one you've heard before: transparency matters. What's more, tranparency in marketing is only believable if you share negatives with your customers. As my colleague Laura Montini recently wrote, both Patagonia and Domino's saw their sales increase following transparent marketing campaigns in which they opened themselves up to public criticisms.
So far, Southwest Airlines seems to be on the right track. Hozdulick tells BloombergBusinessweek that Southwest's on-time arrivals will increase to 83-85 percent next year. Meanwhile, he remains mindful that the problem won't be solved overnight. "It really is a series of levers, and you pull these levers one at a time," he says. "You don't just yank one down really hard."
Modeling after the California intra-state airline, Pacific Southwest Airlines, entrepreneur Rollin King and lawyer Herb Kelleher started Southwest Airlines in 1967.
Southwest Airlines’ goal was to make life simpler for travelers who wished to travel the distances between Houston and Dallas-Fort Worth and San Antonio. The need was there, the Texas economy was booming, and the business model made eminent sense.
However, the existing entrenched power base was not willing to relinquish its control of the the Texas airline market uncontested. Kelleher suspected as much, and was determined to raise twice his initial figure of $250,000 venture capital, because of the likelihood of a prolonged fight to get Southwest off the ground. It turned out to be even more difficult a proposition than even Kelleher imagined.
Kelleher filed Southwest’s application to fly between Dallas, Houston, and San Antonio with the Texas Aeronautics Commission (TAC) on November 27th, 1967, and on February 20th, 1968, TAC approved the application. However, the day after TAC voted for approval, Braniff, Trans-Texas, and Continental successfully filed a restraining order to keep Southwest from flying, arguing that the markets were already saturated; the restraining order was upheld in the intermediate appellate court but was over-ruled in the Texas Supreme court.
Four years after its incorporation, Southwest was finally ready to fly. On June 18th, 1971, Southwest was finally off the ground, in spite of additional efforts by existing airlines to keep it grounded.
Southwest differentiated itself from the other airlines, especially in its excellent customer service, lower fares, and in its use of older, smaller, close-to-downtown airports which were more convenient for business travelers.
The key factors in the early years for Southwest’s success were:
2) 10-minute turn-around
3) Steady growth rate
4) Low debt; low leveraging
5) Outstanding stock performance
6) Lowest fares
7) Market dominance
8 Most productive work force
9) Low turn-over
10) No furloughs
11) Highest customer service ratings
12) Cancels fewest flights
13) Best safety record
14) Youngest fleet
15) Most emulated
In 1978, airlines and the newer airports (shunned by Southwest) made their influence felt once again, this time through legislation, spear-headed by congressman James Wright. Ultimately, this legislation’s impact was gradually mooted.
Out of this early contentious history of Southwest Airlines came a fighting attitude of us vs. them, a spirited, passionate belief in the mission they represented which was giving people the “Freedom to Fly.” This was a unifying force for both employees and customers as Southwest made it possible for “the common man” to fly.
2. Focal Strategy: Key Metrics and the 10-minute turn-around
Out of necessity, Southwest mastered the capability of the 10-minute turn-around of their planes. In September of 1971, Southwest had four 737’s to cover all their routes. When a federal district court ruled that Southwest could not fly charters outside Texas, the fourth plane became a financial liability.
In order to service their routes with just three planes, it became necessary for quick turn-arounds. No one thought they could do 10-minute turn-arounds, but they did, enabling them to make do with just three planes. The quick turn-around became a strategy for economy, as well as on-time performance.
At the present time, metrics still play a large part in Southwest’s success and customer service excellence. The four key measures that Southwest Airlines tracks are:
1) Luggage check-in times
2) Bag delivery times
3) Wait-line times
4) Number of lost bags
These measures drive accountability of Southwest operations in 5 key areas: agents, connecting opportunities, bags, the ramp, and the ticket counter. Each of these areas have to coordinate in order to optimize the four metrics. If luggage check-in times lag, the flight may be delayed. The connecting opportunities must be monitored so that passengers going to Houston and those going to LA do not arrive at at the terminal and find that the planes tagged to fly them to their destination are hours away.
The whole Southwest team sees the over-arching goals and work to together to make the flights leave on time, baggage does not get lost, and the friendly on-flight atmosphere is maintained.
3. Action plan: Key metrics
Example: an IT Company: identify service metrics; demonstrate how the values on these metrics affect the companies they serve
Develop key metrics for your business (like Southwest Airlines) so you know how your customers are being served (customer service quality)
Just as Southwest Airlines has four measures:
1) Luggage check-in times
2) Bag delivery times
3) Wait-line times
4) Number of lost bags
The IT company can identify its key measure — those that are crucial to its customers:
1) Time until company starts work on project; companies of course want the problem fixed, but you get high marks for starting to work on it in timely fashion
2) Time until system is working properly again
3) Customer’s happiness factor with problem-solving procedure
4) Write-up that tells what went wrong, what was remediated, and how it will be prevented in the future–completed or not completed for each project
When these crucial goals are articulated by the IT company, employees know they are important and will receive the crucial attention needed to make them happen in a timely fashion, just as is the case for Southwest Airline.
Book: Nuts! By Kevin Freiber and Jackie Freiberg, 1996
Quick turn-around times: monitoring the process example ***
Quick turn-around strategy + treats it employees right
Tags: Highest customer service ratings, indianapolis small business, John Gifford, Key metrics, Low debt, Low fares, Most productive work force, Southwest Airlines
This entry was posted on Thursday, June 12th, 2014 and is filed under Business Profiles, Business Tips, Financial strategies, Indianapolis Small Business. You can follow any responses to this entry through the RSS 2.0 feed. Join the discussion, or trackback from your own site.
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