Tuesday, April 5, 2016

The Recipe for Success

Well, there is no recipe for success, but there does seem to be many similarities between Southwest Airlines and General Electric, two companies that I have previously said were VERY distinct. Southwest Airlines has always been the underdog, while GE is gigantic. Southwest is entrepreneurial while GE is well established and 100+ years old. However, it turns out there are several things that the two corporations tend to do nearly exactly the same, which makes for a good lesson about successful strategies.

Trust in Employees

GE and Southwest both seem to respect their employees, and treat them as equals. Southwest shows their respect by giving its trust to their employees. Southwest employees are entitled to “do whatever [they] feel reasonable to do for a Customer.” Which requires that they be creative and customer focused, but also that they act with discretion.

Respect for Employees

At GE, many manufacturing employees describe their experience as different than many other factories where hierarchies and titles seem to be paramount. At GE, all the employees were an identical uniform, and the boss holds the title “leader”. One employee said that at first the transition was difficult, and that at GE she is required to “make a lot of decisions”. The culture is similar at Southwest where their focus on efficiency and margins require everyone to pitch in. Says one employee “Pilots could handle baggage if the situation demanded it”.

Employees at both corporations seem to have risen up to meet the challenges of increased autonomy, and it has paid off. Southwest is the only airline to have been awarded the Triple Crown of service, and both are among the most profitable in their respective industries. Additionally, hiring for both corporations is the envy of any organization. At one of GE’s manufacturing plants in Massachusetts, they receive 30 applications for every hire they make, while at Southwest the ratio is 82:1.

Efficiency

One of the biggest and most impactful characteristics of both Southwest and GE is their focus on efficiency. Jack Welsh was famous for his results, which were the product of very tight internal controls and ubiquitous metrics. Southwest is famous for their 10 minute turnaround. These small differences have made monumental differences in the long run, proven by GE’s 124 year record, and Southwest’s valuation (more than all other airlines combined in 2001).

While the differences between Southwest and GE are easier to count than their similarities, I have found that they have both implemented similar strategies for their long-term success. Both companies have stayed true to their strategies, which have required them both to make difficult decisions about how to expand or contract, but they have stayed within the bounds they originally set for themselves, including focus on their employees and efficiency. 

The recipe of success will differ from company to company, and in many cases, the recipe will change day to day. There is no one recipe for success, but there are ingredients. Southwest Airlines and GE have found three of the most potent ingredients for their recipes, which would make for a good addition to any recipe. 

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