This paper will deal with issues related to organisational structures using examples of two companies Southwest Airlines and Semco to identify what makes these companies different in their structure and how it contributes to their effectiveness and better performance.
Southwest Airlines was established as a low cost airline company in the US in the year 1966. The company has been highly successful over the years and has not reported losses since going public in 1973. Despite of low travellers’ turnout in the current financial crisis the company has managed to perform much better than its competitors. The airline’s network spreads over 59 cities in the US serving a large number of passengers every year and employs 34,000 individuals throughout its network. The major contributor to the company’s success has been its organisational structure and values which are shared amongst its employees. The company has implemented a unique culture within its business levels which is based on its motto which states that “we are a company of people not planes”. The culture allows workers to relate to each other and work under relaxed and employee friendly environment. This has lead to greater productivity and lower operational costs. The company takes pride in its employees and arranges to share a pool of knowledge and clear definition of roles and responsibilities assigned to employees within the organization (Lazslo, 1999). The emphasis on hierarchy in some cases is overshadowed as employees when required are expected to do tasks which may not be on their job description. However, this is not considered negatively by employees and the organizational culture ensures attributes which keeps employees motivated and committed to their jobs. The company has always aimed to hire the best staff and has received recognition as the employees’ choice for several years. The leadership is observed to be from top to down where company’s top management has gained trust of middle managers and they have also been in front line with employees at times of difficulty. This way the role of top management has been convincing and decisive for ensuring company’s growth over the years. The top management remains committed to the corporate culture and emphasizes on the company’s mission statement that is to promote a corporate culture that is aimed at providing employees stable and well deserving careers (Gittell 2005). This has resulted in sustainable growth rates more than its competitors even in difficult times of economic recession and oil price hike. The company still manages to attract a large number of applicants for job offerings and is still considered as one of the most favoured employers.
Semco is owned by CEO Ricardo Semler and is recognized as one of the world’s pioneering company’s in radical establishment and implementation of business innovation aimed at deriving exceptional levels of productivity from organizational democracy (Semler 2001).
Since the late 1980s, managerial bureaucracy has been brought down to the minimum level of three layers from the ten layers with which the organization began. In order to do so effectively, the significance of an employee is not measured through thresholds based on job titles and each employee is given the liberty to establish attire principles and the management only forms general strategies and policies for the employees to adhere to.
The organization has given a high degree of relevance is given to outsourcing of administrative functions and the corporate staff is made to function so that each employee provides the maximum possible degree of productivity. This allows Semco to function in complete adherence to Lean Management Principles.
The organization functions so that managers are not determined by designation but through the effective leadership that the employee exercises. By doing so, the organization exists without any hierarchical structure on paper and therefore allows every employee to perform to the maximum level of productivity. At Semco, each employee is made to handle his/her responsibilities first hand and no secretaries, receptionists or assistants exist in the organization structure.
Exercising a purely democratic organizational infrastructure, there are no closed door meetings and all employees are welcome to not only be present in senior management meetings but are encouraged to provide their opinions and are even allowed to question senior management on their decisions. As a furthering of the attempt to effectively exercise a democratic organizational infrastructure, transparency is encouraged extensively and all the employees are not only aware of the salaries of senior managers but are also provided training to enable them to interpret the company’s accounting and financial statements.
All of the distinctive features of Semco mentioned above come together to provide Semco with an immaculate set of outcomes that assist the company in achieving better performance.
The reduction in hierarchical rigidity has allowed for communication barriers to be virtually eliminated from the organization.
Employee loyalty is stimulated through increased opportunities of growth provided by an opportunity to contribute and lead every time an obstacle or critical decision comes forth.
By abolishing the reliance of relevance on designation, privileges have been minimized in order to give way to real benefits to all employees based on their productivity.
A cyclic check-and-balance is formed by allowing transparency to be present and exercisable on all levels of the organization.
By giving employees the liberty to decide their working attire and working hours, each employee is given complete accountability of his/her own
However, it is important to note that these are not merely speculations and observations and Semco has shown a significant degree of productive performance in the last few decades to prove the effectiveness of its unique organizational structure. An example of this statement can be found in the fact that the outcome of these measures came forth in the willingness of employees to take pay cuts during the 1990 downturn that caused countless Brazilian companies to file for bankruptcy. In return, the organization came into an effective deal with the human resource to provide them with an increased share of the profits and the authority to approve or disapprove of the organization’s expenditures. The company is yet to report a loss since this radical organizational structure was established. Furthermore, the idea of establishing Nucleus of Technological Innovation at Semco came forth as a result of an increased degree of confidence that the employees had in the company; as a result the organization expanded all the more rapidly and productively (Fenton 2002).
Fenton, T. L. (2002). The Democratic Company: Four Organizations Transforming our Workplace and our World. World Dynamics, Inc., 1-91.
Gittell, J. H. (2005). The Southwest Airlines way: using the power of relationships to achieve high performance. 2nd ed. New York: McGraw-Hill Professional.
Lazslo, G. P. (1999). Southwest Airlines: Living Total Quality in a Service Organization. Managing Service Quality, Vol. 9 (2) 90-95.
Semler, R. (2001). Maverick!: The Success Story Behind the World’s most Unusual Workplace. 1st ed. London: Random House Business Books.