High Performane Relationships At Kingfisher Airlines


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High Performane Relationships At Kingfisher Airlines

  1. 1. High Performance Relationshipsat Kingfisher Airlines<br />Sugata Khastagir<br />S.P.Jain.Institute Of Management and Research <br />E-MBA Batch 11<br />
  2. 2. Contents<br />Introduction to Southwest Airlines.<br />Sustainable Competitive advantage and Southwest.<br />High Performance Relationships.<br />Ten Southwest practice for building High Performance Relationships.<br />High Performance Relationships at Kingfisher Airlines.<br />Observation and Recommendations.<br />
  3. 3. Introduction to Southwest Airlines<br />Southwest is one of the world&apos;s most profitable airlines and in 2008 posted profit for the 35th consecutive year - a record in the airline industry. The Fortune magazine calls it “The most successful airline in history”. <br />It is the largest airline in the in the world by number of passengers carried and the largest domestic airline in the United States.<br />Southwest has won the Triple Crown (best on time performance, fewest complaints, fewest lost bags) for 5 years in a row.<br />It has been included in the list of “100 Best Companies to work for in America”3 years in a row .<br />Southwest has always maintained its no-lay-offs policy even after Sept11 and never had a strike till date. <br />
  4. 4. How it all started<br />Incorporated as Air Southwest on March15 1967, by Rollin King and Herb Kelleher. <br />After a three year legal battle ,Southwest started service in June 1971 with three 737-200 aircrafts ,a fourth one was added in September same year. <br />The rest of 1971 and 1972 saw operating losses. One of the four aircraft was sold to make payroll and cover other expenses.<br />Continued to operate a 4 aircraft schedule using only 3, and in doing so the “Ten minute turn&quot; was born, which was the standard ground time for years.<br />Southwest earned its first annual profit in 1973, and has done so every year since .<br />Today with a fleet of 535(world’s third largest) 737’s Southwest serves 64 cities in 32 states, with 3,500 flights a day. <br />
  5. 5. Let us watch a video clip<br />
  6. 6. U.S.Airline Industry Operating Profit ($Millions) <br />
  7. 7. Southwest and Competition –Market Cap<br />Southwest&apos;s market cap( $9.7 Billion,Aug 08) is more than the combined $5.7 Billion market cap of its big six competitors.<br />
  8. 8. Southwest’s Market and Revenue share<br /> U.S. Dept.of Transportation in its report ‘The Southwest Effect ’ confirmsthat when Southwest enters a market, the market itself changes, and usually grows dramatically .<br /> Fares drop 50% from their historical averages, and the number of customers in the market sometimes quadruple.<br />
  9. 9. Southwest and the industry –C.A.S.M <br />CASM - Cost per Available Seat Mile is total airline operating expense over available seat miles (ASM s) produced. <br /> ASM s equal the number of available seats flown by the airline, multiplied by the total distance flown by its aircraft<br />
  10. 10. Stage Length is the average distance flown, measured in statute miles, per aircraft departure. It is calculated by dividing total aircraft miles flown by the number of total aircraft departures performed.<br /> Longer stage lengths allow the fixed costs of each flight to be spread over more ASM s.<br />
  11. 11. Labor costs include total salaries, all social benefits and other costs, paid out to employees either directly or indirectly. This category gives an indication of cost of the labor inputs in an airline’s total cost structure.<br />
  12. 12. Non-labor costs include everything that is not part of transport related, fuel or labor-related costs. <br /> This category contains cost items that provide a good gauge of how management influences “controllable costs” in other areas of its operation. <br />
  13. 13. Sustainable Competitive Advantage and Southwest<br />Porter’s Five Forces Analysis <br />To earn above normal returns these five forces must beLow.<br />During 1972 to1992 the stock that has given the highest return in United States is Southwest Airlines 21,775%.<br />In the same period U.S.Airline industry has seen massive competition and horrendous losses, no barriers to entry, little proprietary technology and many substitute services.<br />
  14. 14. How did Southwest create its “Blue Ocean” ?<br />Strategy Canvas of Southwest<br />Southwest’s success in creating an Uncontested market space and making Competition irrelevant makes it a compelling case of Blue Ocean Strategy. <br />
  15. 15. Southwest created its Blue Ocean by eliminating and reducing certain factors of competition and raising others as well as by creating new factors drawn from alternate industry of car transport.<br />Southwest&apos;s low costs are not based on low wages. More of its employees are unionized (90%)than at any other major U.S. airline and they are paid higher than the industry average.<br />Southwest is able to offer lower prices due in large part to the highly productive use of its major assets- <br /> its Aircraftand its People.<br />
  16. 16. Why is Southwest Successful?<br />“NOT” because :-Only flies 737’s<br /> -Only Small Airports<br /> -Quick Turnaround<br /> -Low Cost<br /> -High Efficiency <br />But how successful are Southwest’s Imitators ?<br />Among the dozens of Southwest imitators, most were start-ups and some were subsidiaries of other airlines like Continental Lite,<br /> United Shuttle, Delta Express and Metro Jet . <br />Most of them are out of business and none of them including the <br />present ones like Jet Blue and Air Tran have achieved success <br />even remotely comparable to Southwest.<br />
  17. 17. What is Southwest’s Magic Formula ?<br />“I’ve tried to create a culture of caring for people in the totality of their lives, not just at work. There’s no magic formula. It’s like building a giant mosaic-it takes thousands of little pieces…The intangibles are more important than the tangibles. Someone can go out and buy airplanes from Boeing and ticket counters, but they can’t buy our culture, our esprit de corps.” <br /> Herb Kelleher <br />
  18. 18. Southwest&apos;s most distinctive organizational competency <br /> Its ability to build and sustain relationships characterized by :<br />Shared goals<br /> Shared knowledge <br /> Mutual respect <br />Southwest is most distinctive in its intense focus on the quality of its relationships, and in its willingness to invest long-term in the maintenance of relationships among managers, employees, and business partners.<br />Southwest&apos;s commitment and passion for shared goals, shared knowledge, and mutual respect, joins with frequent, timely, problem-solving communication to form a powerful force called Relational Coordination <br />
  19. 19. Aircraft Turnaround Process<br />The flight departure process is one of the core processes of an airline&apos;s operations. <br />Repeated hundreds of times daily in dozens of locations, the success or failure of this process can make or break an airline&apos;s reputation for reliability.<br />Representatives of 12 distinct functions, who often do not communicate well with each other, perform a complex set of interdependent tasks based on information that usually changes rapidly .<br />Southwest can turnaround an aircraft in 25min against industry average of 47min and its aircrafts averaged 11 hours in air (Industry average 8.0)and 10.5 flights per gate (Industry average 4.5) due to very high Relational Coordination among employees.<br />
  20. 20. LANDING<br />CHECK-IN<br />TAXI-IN<br />GATE ARRIVAL<br />SERVICE AIRPLANE<br />UNBOARD PASSENGER<br />UNLOAD BAG<br />FUEL<br />FOOD<br />CHECKS<br />CLEAN CABIN<br />LOAD BAG<br />WATER<br />TOILET<br />BOARD PASSENGER<br />TAXI OUT<br />TAKE OFF<br />Critical Path method for Aircraft Turnaround<br />
  21. 21. Efficiency and Quality Measures<br />Efficiency<br />Turnaround time - Minutes of scheduled time at the gate, per departure, equal to the average difference between scheduled arrival time for each aircraft and its scheduled departure time, excluding flights with overnight stay.<br />Staff time -Airport employees per 1000 daily passengers, including full-time-equivalent airport personnel in the ticket, gate, operations, ramp, and cabin cleaning functions. <br /> Quality<br />Customer Complaints -Number of airport-related customer complaints per 100,000 passengers.<br />Lost baggage - Number of bags mishandled per 1000 passengers.<br />Late arrivals - Percentage of flights arriving at their down-line destination more than 15 minutes delayed<br />
  22. 22. Impact of Relational Coordination on Efficiency and Quality<br />MIT conducted a study at multiple sites of United ,Continental, American and Southwest - employees of five core functions were surveyed on their intra and inter-functional relational coordination.<br />A doubling of relational coordination among frontline employees enables a 21% reduction in turnaround time and a 42 %increase in employee productivity.<br />The same increase in relational coordination contributes to 64 % decrease in customer complaints, a 31% decrease in lost baggage, and a 50% decrease in flight delays.<br />Employees who engaged in frequent, timely, problem-solving communication with other functions also had relationships based on Shared goals, Shared knowledge, and Mutual respect. <br />
  23. 23. Ten Southwest Practices for building High Performance Relationships<br />Lead with Credibility and Caring<br />Invest in Frontline Leadership<br />Hire and train for Relational Competence<br />Use conflicts to build Relationships<br />Bridge the work/family divide<br />Create Boundary Spanners<br />Avoid Finger Pointing-Measure Performance Broadly<br />Keep jobs flexible at the boundaries <br />Make Unions your Partners, Not Adversaries<br />Build Relationship with your Suppliers<br />
  24. 24. 1.Lead with Credibility and Caring<br />The top management team has built trust over time by being up front and consistent in their message.  <br />Employees come first and Customers come second.<br />Think and Act like an owner.<br />Southwest is known for saturating its people with information that will help them better understand the company and its mission, customers and competition. <br />Leaders leading leaders.<br />
  25. 25. Southwest President Colleen Barrett , on her Farewell shares her<br />“ proudest moments ”<br />
  26. 26. 2. Invest in Frontline Leadership<br />Southwest has more supervisors per frontline employee than any other airline in the country. <br />They are &quot;player coaches&quot; having managerial authority but also performing the work of frontline workers. <br />The supervisors spend more time than their counterparts in other airlines ,engaged in coaching in the form of problem solving and advising the frontline employees.<br />
  27. 27. 3.Hire and Train for Relational Competence<br />Southwest places a great deal of importance on the hiring process to identify people with Relational competence. <br />“Professionals need not apply”.<br />Southwest&apos;s assessment of how a job candidate will affect the &quot;overall operation&quot; of the airline goes beyond the typical search for appropriate skills and experience. <br />Training at Southwest is geared toward building functional expertise as well as relational competence. <br />Most positions at Southwest are filled through internal promotion and through lateral moves across departments, creating a great deal of internal job mobility and therefore opportunities for learning about other parts of the operation. <br />
  28. 28. 4.Use Conflict to Build Relationships<br />Southwest proactively resolved cross functional conflicts which prevented these from festering and weakening critical relationships of shared goals, shared knowledge and mutual respect. <br />When conflicts arise and are not resolved by the parties themselves, a conflict resolutions process is used: informational-gathering, or &quot;Come to Jesus&quot; meetings, suggesting that conflicting parties were expected to bare their souls to achieve reconciliation.<br />
  29. 29. 5. Bridge the Work/Family Divide<br />Employees are encouraged to be themselves at work and to openly recognize major events in the lives of employees and their families.  <br />Fun taken seriously.<br />Each individual station has a Culture Committee to maintain and strengthen Southwest&apos;s culture and to plan social and charitable events. <br />
  30. 30. 6. Create Boundary Spanners<br />The Operations agent is at the center of communication among the various functional groups that are working to get the plane unloaded, serviced, reloaded. They serve as &quot;boundary spanners,&quot; managing the flow of information across functional boundaries. <br />They also engage in relationship building, developing relationships of shared goals, shared knowledge, and mutual respect among fellow employees .<br />Moving in the opposite direction of the rest of the industry Southwest has increased the staffing levels for &quot;boundary spanners”.<br />
  31. 31. 7.Avoid finger pointing- Measure Performance Broadly<br />Southwest uses Cross-functional, not functional performance measures to encourage participants to focus on learning rather than blaming when things go wrong.<br />Preoccupation with functional accountability leads to blaming, which in turn causes information to be distorted or to go underground. <br />Performance measuring by functional accountability weaken relationships of shared goals, shared knowledge, and mutual respect among those whose cooperation is critical for achieving high performance.<br />
  32. 32. 8.Keep jobs flexible at the boundaries<br />Flexible job boundaries help to build stronger relationships between functions, improving coordination between them.<br />Flexible jobs have a positive correlation with both efficiency and quality and relational coordination.<br />Southwest Airlines successfully negotiated flexible job descriptions in all of its union contracts. <br />Southwest managers and supervisors were used to working side by side with frontline employees.<br />
  33. 33. 9.Make Unions Your Partners, Not Adversaries<br />Southwest is the most highly unionized airline in the U.S. airline industry and in contrast to other airlines has emphasized the importance of labor/management partnerships. <br />Respectful relationships between company management and the unions chosen by frontline employees appear to set the tone for respectful relationships throughout the company.<br />
  34. 34. 10.Build Relationships with Your Suppliers<br />External parties are treated to the same kind of relationship building efforts that exist throughout Southwest Airlines.  <br />Southwest stands apart from the rest of the airline industry in the emphasis it places on building partnerships with the airports it serves, air traffic controllers, and aircraft manufacturers. <br />
  35. 35. Relational coordination at Kingfisher Airlines<br />Relational Coordination Survey<br />Respondents will be asked to answer each question with respect to each of the functions involved in flight departures.<br />Answers will be in the form of a 5-point scale<br />Do people in these groups have the same work goals as you?<br />How much do people in each of these groups know about your job?<br />How much respect do you get from the people in these groups?<br />How often do you communicate with each of these groups?<br />Do the people in these groups communicate with you in a timely way?<br />When there is a problem, do the people in these groups try to<br /> solve the problem, or try to determine whose fault it was?<br />