Abstract

This paper is designed as a literature review regarding organizational cultures theories and its actual implementation in Southwest Airlines. The research methodology used for this paper was from library research which consists mainly of academic journals. Other reference such as books and online articles are also used. This paper explained the organizational theories based on various academic journals. Later in the paper implementation of two theories namely Schein level of organizational cultures and 7 dimensions of organizational cultures was analyzed in terms of its implementation in Southwest Airlines. It is expected that further research could be extended in this related topic such as correlation between organizational cultures and company performance.

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Table of Contents Abstract. Table of Contents... Introduction... 1 2 3

1. Literatures Review.. 4 1.1 Definition of Organizational Culture...... 5 1.2 Concept of Organizational Cultures 6 1.3 When Understanding Organizations Culture Is Particularly Important? 1.4 Level of Organizational Culture.. 1.5 Dimension of Organizational Culture. 1.6 Function of Organization Culture 1.7 Strong versus Weak Culture 1.8 The Importance of Organizational Culture 2. Case Study: Southwest Airlines 2.1 Analysis of Scheins Organization Culture Level.. 2.2 Analysis of Organizational Cultures Dimension ... 6 7 8 9 10 10 11 12 15

Conclusion. 18 Reference. 19

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Introduction This literature reviews explore the concept of organizational cultures and some of its theories. The later part of the paper consists of analysis of two organizational theories, namely Scheins level of organizational culture and 7 dimension of organizational culture implemented in Southwest Airlines. Southwest Airlines is renowned for its employee friendly culture where employees are considered more important than customers. Although academic interest in organizational culture has started a long time ago, we saw an increase in the attention paid to organizational culture as an important determinant of organizational success. We all know what organization culture is the way things are done in an organization. Basically, organizational culture is the personality of the organization. Culture is comprised of assumptions, values, norms and tangible signs (artifacts) of organization members and their behaviors. Members of an organization soon come to sense the particular culture of an organization. Culture is one of those terms that are difficult to express distinctly, but everyone knows it when they sense it. For example, the culture of a large, for-profit corporation is quite different than that of a hospital which is quite different than that of a university. You can tell the culture of an organization by looking at the arrangement of furniture, what they brag about, what members wear, etc. This is similar to what you can use to get a feeling about someone's personality. Southwest Airlines is selected as our example of implementation of organizational culture because it has successfully integrated its people focused culture to achieved competitive advantage. Through its people oriented culture Southwest able to achieved high level of coordination among employees which translated into higher productivity and reduced of costs. Therefore it supports many academic opinions that state strong organizational culture gives positive impact in company performance.

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1. Literatures Review Theories surrounding culture have been prevalent in various disciplines such as anthropology, psychology and sociology. Mainly, many researcher of an organizational culture has relay on two approaches First is functionalist tradition in anthropology approach. This tradition is supported for example by Radcliffe - Brown (1952) and Malinowski (1961) focuses on the group, organization, or society as a whole and considers how the practices, beliefs, and values embedded that unit function to maintain social control. In this approach researcher is the central figure in interpreting phenomena that are observed in organizational functions, events and activities. The researchers job is to construct a meaning for the organizational phenomena and to identity and label certain patterns. For example published descriptions of the aggressiveness of General Electrics corporate cultures (Deal and Kennedy, 1982) The second tradition is the semiotic tradition approach. This tradition has had a major impact on a substantial amount of the scholarly writtings. This tradition is represented by Geertz (1973) in which obtaining the natives point of view and thick description predominate. Language, symbols, and rituals are the principle artifacts by which the natives point of view is discerned and intuition and immersion by researchers in the phenomena of study is required. The researchers job in this tradition is to obtain interpretation from locals. Complete immersion in the culture is required through participant observation so that the researcher him or herself can actually experience the natives point of view. These two traditions differ primarily in whose point of view is legitimate (researchers or natives) and in the level of analysis (organization versus cognition). The functionalist tradition views culture as a component of the social system and assumes that it is manifested in organizational behaviors while the semiotic tradition views culture as residing in minds of individuals. Despite similarities between the sociological and the anthropological perspectives on culture, important difference exists as well. In sociology, culture is often used as a predictor of behavior or performance (Kanter, 1968). In anthropology, culture is usually considered as the object of prediction or explanation. (Goffman, 1959)
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Another distinction that emerged from analysis of these two tradition is that anthropological literature tends to view culture as something an organization is while sociological literature tends to view culture as something an organization has. 1.1 Definition of Organizational Culture In spite of many attempts, there has been no clear consensus about the definition and measurement of organizational culture among researchers and practitioners (Deshpande & Webster, 1989). Indeed, an early study found no less than 164 varying definitions of culture (Kroeber & Kluckhohn, 1952, cited in Leidner and Kayworth, 2006). There is no universal definition of organizational culture, although almost all of the most widely accepted ones are similar and cover many of the same aspects. Here are some of the many definitions of organizational culture that can be found. Organizational culture has been defined as the normative glue that holds an organization together (Tichy, 1982) Forehand and von Gilmer (1964) suggest that culture is the set of characteristics that describe an organization and distinguish it from other. Morgan (1997), describes culture as an active living phenomenon through which people jointly creates and recreates the worlds in which they live. Uttal (1983), defined it as the system of shared values and beliefs that interact with the people, structures, and control system of an organization producing behavior norms. Schein (1990) definition of organizational culture is more comprehensive. He define organization as "A pattern of shared basic assumptions that the group learned as it solved its problems that has worked well enough to be considered valid and is passed on to new members as the correct way to perceive, think, and feel in relation to those problems." Martin (1992), defined organization culture as a set of commonly held attitudes, values, and beliefs that guide the behavior of an organizations members. So while there are many definitions of organizational culture, all of them focus on the same points: collective experience, routine, beliefs, values, goals, and system. These are learned
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and re-learned, passed on to new employees, and continues on as part of a company's core identity. 1.2 Concept of Organizational Culture Despite the increased attention and research devoted to Organization culture, there is still some confusion about what the term Culture really means when applied to organization. Martin (1992), argues that culture can be viewed from an integrated, a differentiated or a fragmented perspective. The integrated view focuses on culture as an organizationally shared phenomenon. It represents a stable and coherent set of beliefs about the organization and its environment. In contrast to the integrated perspective, the differentiated view argues that culture is not monolithic but that it is best seen in terms of subcultures that exist throughout the organization. While each subculture is locally stable and shared. The fragmented view holds that culture is always changing and is dominated by ambiguity and paradox. Despite these different cultural views, there is some agreement about elements of culture that are typically measured. They include the artifact, norms values, and basic assumptions there are more or less shared by organization member. 1.3 When Understanding Organizations Culture Is Particularly Important? According to Schein (1980), there is four specific instances in which it is very important for a manager to understand an organizations culture in a rigorous, detailed way. These include 1. When he or she first joins a new organization as a manager 2. When one company acquires another 3. When the manager is coordinating the efforts of different functional groups within his or her organization 4. When the manager confronting the need to fundamentally change the companys strategic director, and by implication its culture.

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1.4

Level of Organizational Culture

Aritifact

Norms

Values

Basic Assumption

According to Schein (1980), there are 4 level of organizational culture level. At the more visible level, culture represents artifacts; consist of the physical manifestation of an organizations culture which includes members behaviors, clothing, and language and the organizations structures, systems, procedures and so on. Norms is just below that surface of cultural awareness. Norms are guiding how member should behave in particular situation. These represent unwritten rules of behavior. Norms generally are inferred from observing how members behave and interact with each other. Values are the third deepest level of awareness includes values about what ought to be in organizations. Values tell organization members what is important in the organization and what deserves their attention.

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Basic assumption is the deepest level of cultural awareness is the then the taken- forgranted assumptions about how organization problems should be solved. These basic assumptions tell organization member how to perceive, think about and feel about things. In Scheins view, basic assumptions constitute the core and most important aspect of organization culture. 1.5 Dimension of Organizational Culture Chatman and Jehn (1994) proposed seven dimension of organization culture which distinguish one organization from another. Organizational cultures, within and across industries, can be characterized by seven dimensions: innovation, stability, respect for people, outcome orientation, detail orientation, team orientation, and aggressiveness. The seven dimensions give comprehensive view of organization culture. A company might have more than one dimension, however normally it emphasized one dimension.

1.6 Function of Organizational Culture According to Nelson and Quick (2007), organization cultures serve four basic function. First, culture provides a sense of identity to members and increases their commitments to the organization. When employee, internalize the value of the company, they find their work more rewarding. Motivation is enhanced and employees are more committed.
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Second, culture is a sense making device for organization members. It provides a way for employee to interpret organizational events. For instance, change in corporate logo can be utilized as sense making device to help employee to understand the changing nature of their organizational identity or organization culture. Third, cultures reinforce collective commitment towards the values of the organization. For example, Southwest Airlines value is employee friendly. Finally, cultures serve as control mechanism for social system stability. Norms that guide behavior is part of culture. Therefore it help shape stability in the system.

ORGANIZATION IDENTITY

SENSE MAKING DEVICE

organization culture

COLECTIVE COMMITEMNT

SOCIAL SYSTEM STABILITY

1.7 Strong versus Weak Culture In the current literature of organizational studies, it has been argued that there is a clear differentiation between organization cultures which can be labeled as strong and weak organizational culture and their consequences related to organizational performance and employees behaviors (Sorensen, 2002; Rosenthal & Masarech, 2003; Peters & Waterman, 1982).
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This strong or weak culture is based on how much the core values are shared among organizational members and the degree of commitment the members have to these core values. The higher the they share and commit, the stronger the culture. It increases the possibility of behavior consistency amongst its members, while a weak culture opens avenues for each one of the members showing concerns unique to themselves. According to that, many scholars attempt to explain the performance superiority of some giant organizations such as IBM, Hewlett-Packard, Proctor and Gamble, and Mc-Donald's based on their organizational cultures (Deal & Kennedy, 1982; Peters & Waterman, 1982). However, they concluded that the superior performance of these companies can be mainly attributed to their core value sets established and maintained by their leaders. These core values related to the human resource management practices, customers and suppliers relationships. These management practices foster innovativeness of these organizations and hence led to competitive advantage (Peters & Waterman, 1982). In addition to that they emphasized that these successful organization cultures have been imitated by other organizations as a way to improve the employees morale and quality of work life that eventually lead to improved overall performance. Organizations as a way to improve the employees morale and quality of work life that eventually lead to improved overall performance. 1.8 The Importance of Organizational Culture Organizational culture is one of the critical variables that have received an increasing attention in organizational behavior literature (Kilman, Saxton, & Serpa 1985; Ouchi, 1981; Owens, 1987; Schein, 1990). This attention is because of the key role played by organizational culture in determining the organizational performance. Different academician has different way to relate cultures and company performance. According to some theorist, organizational culture is expected to shape organizational procedures (Deal & Kennedy, 1982; Jarnagin & Slocum, 2007) therefore there is clear guideline of what supposed to be done. Schein (1984) and Day (1994), believes organization culture provide solutions for many problems that face the organization by coordinate and direct various organizational capabilities and activities into a cohesive whole. Other academician stated that since the organizational cultural driven capabilities are usually inimitable due to their social
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complexity, it is considered a valuable source of sustainable competitive advantage (Barney, 1986; Hall, 1993; Peteraf, 1993). For the last few decades, organizational culture has been gaining an increasing attention by researchers as one of the factors affecting organizational performance through enhancing the productivity, commitment, self-confidence, team work spirit, and ethical behaviors (Deal & Kennedy,1982; Ouchi & Wilkins, 1985). This, in turn, will be reflected significantly in the organizational financial performance (Holmes & Marsden, 1996). However, it has been observed that the organizational culture of an organization will affect its perception of the environment and consequently its interaction. Therefore, many researchers emphasized that for effective organizational performance there should be a good fit between the organizational culture and the business environment, including national culture, in which they operate (Peters & Waterman, 1982). 2. Case Study: Southwest Airlines The airline business is a brutal one. If you added up all the profits earned since the industry started, and subtracted the losses incurred during the same time period, the net profits would be a loss. Yet, consistently for the past 30 or so years, without fail, one player has made money, and had fun doing it. Southwest Airlines is the only major airline that has been consistently profitable in the industry. Southwest has earned a profit every year of its existence except the first year of their operation. Although the industry suffered a major blow from the unfavorable economic conditions, the company is still making profit while other airline companies were making loss. The market capitalization of Southwest exceeds the combined market capitalization of other US airlines. The reason why Southwest is successful while other airlines in USA are not is due to Southwests employee work harder and smarter. In return, they get job security and a share of profits. The glue that holds Southwest together is its corporate culture.

Southwest's culture was a reflection of one of its founders, Herbert D. Kelleher. Kelleher has been very successful in gaining the trust and loyalty of the Southwest people throughout the years. He is a very effective communicators and loved to joke with employees. Fun and humor were essential, he preached. He also has been consistent throughout the years regarding to people lay-offs. There has been no history of lay-off in Southwest.
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Kelleher cares about his employees and he even returns the telephone calls and e-mails of the people on timely basis. Lauer (2010) wrote that Kelleher loves to tell the story of an executive who complained it was easier for a baggage handler to get in to see Kelleher than it was for him. Kelleher told the executive that was because the baggage handler was more important. Trottman (2003) noted that original employees considered Kelleher more of a father than a boss. They wanted to please and emulate him. The workers routinely went beyond their responsibility to help the airline succeed. For instance, during the Gulf War when the fuel price increased significantly, flight attendants volunteered to give up pay for vacation days to help the airline pay for fuel. Kelleher has made large contributions to Southwests corporate culture. He has played a key role in building up Southwest, both through his business insight and his excellent interpersonal skills. He has created a culture at Southwest where employees feel like part of an extended family. His charisma and sense of creativity has helped to generate intense employee loyalty. 2.1 Analysis of Scheins Organization Culture Level Schein organizational culture level is apparent in Southwest case. At the first level, culture is visible to organizational insiders and outsiders through organizational artifacts. These can range from employees behavior, corporate logos or slogans such as Southwests Just Plane Smart. Any one taking a Southwest flight will notice the attitude of the Southwest employee. They typically have the friendliest, most accommodating employees of any airline. One of the factor that contribute to Southwests excellent customer service is Southwest allow its employees to entertain and serve its customers using whatever talents and skills they can muster, as long as they make them happy. For example, Southwest employ gate personnel who enjoyed interacting with customers, had good interpersonal skills and displayed outgoing personalities. Another instance is their flight attendants dont simply serve customers by demonstrating seatbelts and serving food and drinks on Southwests flights. Some of them improve their flights dramatically by singing or telling jokes. One celebrated flight attendant named David Holmes which has become a YouTube sensation even raps to the travelers on his flights (Lauer, 2010).

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At the middle level which consists of norms and values, culture involves the expression through stories and rituals. Through corporate stories and rituals employee could understand what is important in the organizations and how they should behave in a particular situation. Example of corporate stories in Southwest is about the tough situation the company must face in the first nine years of its operations. Eleven of the first employees of Southwest Airlines from 1971 are still working at Southwest. Seven of them are the original flight attendants from Southwests first flight, one is a manager in flight operations, another works as part of Southwests ground crew, one works as a dispatcher, and the last works in maintenance. They are called the Originals (Lauer, 2010). On special occasions, Southwest invites the Originals to come in to Southwests headquarters and talk about their experiences to current employees. When the Originals speak to current employees, they describe the struggles of a new airline working hard to grow. They also talk about how the company had no money for advertising during its early days, so the flight attendants would go down to the streets of downtown Dallas, Houston, and San Antonio in their uniform and hand out flight schedules for the airlines four flights to everyone they met. This type of storytelling keeps the history of Southwest alive, while also linking the companys early corporate culture to the lives of the people who work there today and into the future. On the other hand, corporate rituals are repetitive sequence of activities that express important values of the company. In Southwest case, the appropriate rituals would be its Halloween party. Southwests founder Herb Kelleher turned his love of Halloween into a tradition at Southwest Airlines. One Halloween, Kelleher showed up dressed as Elvis driving a Harley-Davidson. After Kelleher retired, his successor Gary Kelly demonstrated his belief in and support of carrying on Southwests unique corporate culture by dressing up on Halloween as Captain Jack Sparrow from the film The Pirates of the Caribbean. Other years, Kelly has dressed up as Gene Simmons from the rock band Kiss and Billy Gibbons from rock band ZZ Top (Lauer, 2010). The Halloween party express that fun in working environment is an important values of the company.

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In 2005, these are the leaders of Southwest Airlines on Halloween: Gary Kelly, CEO (dressed as Captain Jack Sparrow from the film Pirates of the Caribbean), Colleen Barrett, President, and Herb Kelleher, founder and Chairman Emeritus (dressed as the legendary fictional defense attorney Perry Mason)

At the deepest level also called basic assumption level, the transmission of culture is done unconsciously or beneath the surface. Basic assumptions help to formulate organizational values and these become shared assumptions that guide how employees interact with each other. Over time and through socialization, the values are passed on and taught to new organizational members as the correct way to do things. There are two tools employed by Southwest to socialize its values to new employees. First is New City committee which goes to each new city Southwest serves to educate new employees about the values of the company. It helps new employees to adapt to Southwests culture, therefore they can learn the Southwests ways of doing things. Back to Basics team is another socialization tool in Southwest. It sponsored an essay contest to describe what makes Southwest successful. The team chose a series of essays that were integrated into a book with an

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accompanying video that is given to every new employee. These committees are all staffed by volunteers working on their own time.

2.2 Analysis of Organizational Cultures Dimension There are seven features in organizational culture; these include innovation and risk taking, attention to detail, outcome orientation, people orientation, team orientation, aggressiveness, and stability. Of these, the two areas of main focus in Southwests organizational culture people orientation, and team orientation.

People-Oriented Southwest Airlines is known to make its employee a central part of its culture. It means the management decision take into account the effect of the decision on people in the organization. This is reflected in its mission statement. Normally, organizational mission and values place customer service at the center of the business. However, customers do not come first at Southwest. Instead, employees come first and customers a respected second. It is based on the belief that you supposed treat your employees the way you want them to treat your customers. The origin of the Southwests people culture was created in the first year of operation for Southwest in 1971. Southwest was encountering cash flow difficulties in its first year of operation. Herb Kelleher and his management team faced the dilemma of either selling planes or laying off people to save cash. Herb Kelleher met with his ground service people and explained the financial dilemma. He asked the ground service people to reduce the turnaround time at the airport gate from 55 to 15 minutes, thereby, improving the revenue producing capability of the airplanes. The ground service personnel agreed to the goal and accomplished the goal. Herb Kelleher completed his part of the agreement by not laying off any people. During the first 9 years of operation, Southwest was primarily in a survival mode. The emphasis on people started in the early 1980s. Southwest started on focusing on its employees and identifying them as valuable assets of the company (Smith, 2004). During the early days of Southwests existence, times were tough. The hostile environment the company faced as a result of legal and competitive challenges from other airlines created a survival mode at the company that had a powerful bonding effect among
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Southwests first employees. That early culture was based on people helping each other make it through difficult times using humor and hard work. Today, what started as a unique employee culture that was built on surviving daily struggles still continues to be successful and productive. In those early years, working at Southwest Airlines was often very difficult for its employees. Sometimes they would work without knowing whether they would get paid. Original employees still tell stories about how their family members would join them at work to help them do what needed to be done to keep the business in operation. Furthermore, there is a department in Southwest which is called People Department. It provides Southwests employees with tremendous amounts of information that will enable them to better understand the company, its mission, its customers, and its competitors. Employees are regularly made aware of the importance of good customer service and of the impact that losing customers can have on the company as a whole. The companys advertising and public relations are not only directed towards customers but employees as well. The corporate newsletter, LUV Lines, is an important vehicle for celebrating outstanding employee performance. In short, People Department has a key role in communicating brand values to the employees. Furthermore, Southwest implement open-door policy as primary channel for employee input, in which employees are encouraged to write to Herb Kelleher with their concerns, suggestions, or questions. These letters forwarded on a daily basis to appropriate managers to prepare a response. All letters receive a response To boost employees morale and motivation Southwest implement profit sharing plan with its employee from mid-1970s. Therefore, Southwest became the first airline to start a profitsharing plan. By using profit sharing plan, Southwest tie company performance directly to employee financial gain. Later Southwest added a stock-purchase plan in 1984. In 1991, it started a stock-option plan that includes many of its employees. Trottman (2003), explained the stock, which has risen more than a thousand fold since 1972, has produced millionaires throughout company ranks, down to mechanics and flight attendants. Even with the stock declines after 9/11, a $10,000 investment in early July of 1984 would be worth just over $200,000 in 2003.

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Team-Oriented Southwest gives emphasis upon team formation, cohesion and dynamics. The first step to ensure their employees is team oriented is by careful selection of new employees. Southwest hires individuals with people skills and then rewards them for demonstrating those skills. The companys selection procedures include a number of tests to ensure that new employees have the right attitude for the airline. It heavily favors people who like others and are willing to work with others to get the job done. Southwest believes that all customers are valuable and worthy of respect and consideration. Therefore, to achieve this goal, Southwest hires people who like people and who can and are willing to work together to get the job done. Second, at Southwest job description is flexible. This is the opposite with majority companies where job descriptions clearly define responsibilities between employees and departments. Southwest decided that there was no room for such rigid job descriptions. Southwest's philosophy is shared goals, shared knowledge and mutual respect. Southwest's expectation is that each person's job includes helping colleagues with their work whenever necessary. By providing greater job flexibility, Southwest believes it improves labor productivity and provides them a competitive advantage through greater teamwork. For instance, when a flight delay looms, everyone from pilots to flight attendants and from customer-service agents to baggage handlers pitches in to help to ensure that the aircraft leaves on time. Southwest believes their way is more effective and the ability and willingness of their workforce to be flexible at the boundaries of the job description has allowed Southwest to fly more planes with fewer employees than almost any other airline in the world. Last but not least, to strengthen team spirit among Southwests employees, performance appraisal system and rewards is based on team performance rather than individual. Again it is the opposite with majority companies which utilize individual performance measurements to monitor performance of a department or an employee. Many companies maintain this functional metric method to ensure functional accountability. Southwest believes functional accountability leads to finger pointing between departments. Southwest measures performance and rewards the employee involved on overall process performance and encourages all of the units and individuals involved in these processes to work together to improve performance and resolve conflicts. For example, at a traditional airline the various functional units involved in the flight departure process, such as fueling, cleaning, maintenance, baggage handling can easily become
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involved in arguments over who should be faulted with a late departure. At Southwest, they are all part of one process and, if necessary, expected to assist other functions in order to get the plane out on time. Conclusion Organizational cultures have become a topic with extensive academic writings. Academician has taken interest in organizational cultures for a long time, however there is an increase in attention towards this issue especially how it is related to company performance. Based on the literature review we conclude that although academician differs in terms of their definition of organizations culture, however their definition shared similar point which is collective experience, routine, beliefs, values, goals, and system. There are several organizational cultures theories mentioned in this paper, for instance Schein 4 level of organizational cultures, 7 dimensions of organizational cultures and 4 functions of organizational cultures. We analyze two theories namely Schein level of organizational cultures and 7 dimensions of organizational cultures in its implementation in reality in the case of Southwest Airlines. In the analysis of Schein level of organizational cultures in the case of Southwest we found out that artifacts level is represented by company motto and ultimately excellent customer services. Corporate stories mainly through The Originals and corporate rituals such as Halloween party symbolize norms and values level. Furthermore, in the deepest level or basic assumptions level, Southwest implement socialization for new employee through committees which consist of voluntary from current employee. In the analysis of 7 dimension of organizational culture, we found out that Southwest focused on two dimensions which are people-oriented and team-oriented. People-oriented dimension are implemented through People Department, open-door policy and profit sharing plan. While team-oriented dimension is pursued through careful selection of employees, flexible job descriptions and utilizing team performance appraisal system rather than individual appraisal system. Nevertheless, we believe that there is still a lot of aspect in this issue that still need further research. One suggestion is to use quantitative decision making method such as regression analysis to measure actual correlation between organizational cultures and company performance.
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