WestJet is facing an urgent problem. The pilots’ contract expires in two weeks’ time and the pilots are unhappy with the offer that has been presented. This has created conflict between management and the pilots as the pilots feel that too many things are being taken away. If a quick agreement is not reached, flights would be grounded, which would impact the bottom line and negatively affect culture. A collaborating approach will need to be applied in order to come to a swift resolution. WestJet is also facing a strategic problem, the longer term impact that growth is having on WestJet’s culture.
WestJet’s success and competitive advantage have been a direct result of its unique corporate culture. Due to the rapid growth WestJet has experienced, it is becoming more of a challenge to maintain WestJet’s culture. If WestJet continues to pursue a growth strategy, steps will need to be taken to ensure their culture is protected. Ten alternatives were considered that would contribute to maintaining culture. Based on our weighted analysis the following five alternatives were chosen: Strictly adhere to WestJet’s mission, vision, and values. Align recruiting practices with culture.
Develop a strategy for internal communication and feedback. Revisit the CARE program to ensure it is meeting its objectives. Develop new managers internally. By following the action plan presented in this report WestJet will be able to maintain its competitive advantage, which is its culture. Please review the remainder of this report for detailed analysis. Background WestJet began operations on February 29, 1996 with approximately two hundred WestJetters. In only thirteen years WestJet went from three airplanes flying to five destinations to employing seven thousand WestJetters with eighty-one planes flying to sixty-five destinations.
It is late April 2009 and there is a dilemma at WestJet, how can WestJet continue to build its high engagement culture and manage WestJetters’ attitudes and expectations in an atmosphere of growth? Relevant Facts WestJet’s success has been a result of its low operating costs, non-union environment, and unique corporate culture. WestJet’s goals are to become the dominant airline in Canada by 2013 and one of the five most successful international airlines in the world by 2016. Achieving these goals requires continued expansion.
Growth has been seen as positive in the company because it would provide new and exciting opportunities for WestJetters. Leaders across the organization are under pressure to communicate and sustain the culture; although they may need to build new skills and competencies. A major challenge in the airline industry is dealing with largely absentee workforce spread all over the country. Communication and creating an environment where people manage themselves is essential. Currently negotiations between WestJet and its pilots have stalled two weeks before their three-year agreement expires. Define the Issues
Will the rapid growth at WestJet come at the cost of building and maintaining a high-engagement culture? Can WestJet’s culture withstand the shocks that lay ahead? What could the management team do to keep the unique culture intact? WestJet’s strategy has committed to high rates of growth, but WestJetters are not sure how this growth will affect them and the overall organization. If WestJet does not protect their culture will they be able to achieve their goals? Is WestJet’s success due to their culture? If they do not maintain their culture what would the results or impact be on the company?
What skills and competencies will be required by leaders who are expected to drive the culture? Despite WestJet’s predictions of further growth and success, pilots seemed dissatisfied with elements of the new contract offer. Has contracting out international employees had an effect on WestJet’s culture? SWOT Analysis Strengths Unique corporate culture. Low operating costs – cost savings are generally passed on to guests. WestJet operates in a non-union environment which means they have lower labour costs and a relatively low risk of labour disputes.
Organic growth has occurred to this point, so there have not been any problems integrating cultures and systems. Proven access to capital markets. Excellent equity position: $820 Million cash on books so they are well positioned for growth. Fleet was replaced in 2005. Newer fleet means savings on maintenance costs. Low training and maintenance costs due to using one model of plane. Amenities such as LiveTV and lounges. Easy to attract quality applicants due to culture, profit share and Employee Share Purchase Plan, and decent salaries. Strong brand. Weaknesses
Employees at the international destinations are not WestJetters so they may not be acting on the basis of the WestJet CARE-antee. Missing a layer of management that might contribute to poorer communication. Getting messages all the way to the frontline is a challenge. Communication is becoming more and more of a challenge as workforce is spread across a number of countries – working at airports, hangars or in the air. Not capitalizing on the share that they have. WestJet could be charging more for fares, albeit at the risk of losing the loyalty of their guests.
Lack of flight destinations or routes, especially internationally. Lack of differentiated seat classes (i. e. first class). Low cost airline – hot meals are sacrificed. Opportunities Gain domestic market share (WestJet 36%, Air Canada 57%). Gain transborder market share (WestJet 11%, Air Canada 36%). International market share. Threats Losing culture due to growth; lose market share. No longer an upstart, becoming more bureaucratic. Cost structure (fuel, labour, airport). Cheap flights for people who live close to the US border. Demand heavily relies on economy.
Rapid advances in technology, specifically plane design. Could render WestJet’s fleet obsolete or provide competitive advantage to other airlines. PEST Analysis Assumption: analysis based on WestJet’s current situation. Political Regulation changes could affect the competitive environment. Government influence, especially with respect to taxes. Costs associated with international regulations. Economic Recession likely means decrease in passenger numbers. Oil prices drastically affect fuel costs. Low interest rate market could mean that people have more disposable income to spend on travel.
Are there any other low cost airlines? Lower labour costs in emerging markets. Potential lower availability of capital due to downturn in capital markets. Social Demographics – More baby boomers retiring (snow birds); high disposable income. Terrorism – Reluctance to fly (after 9/11). Tighter security measures (passports required). Threat of organized labour (unions). Green movement (carbon footprint, reduce greenhouse emissions). Technological Technology is becoming cheaper and cheaper. How much to invest in R&D?
E-commerce for selling tickets is well established so less infrastructure is required meaning lower overhead costs. Fleet has been recently updated, aging fleet results in higher maintenance costs. New technology increases tertiary costs (training, outages, bugs). Reliance on technology. Mobile phones allow for connectivity with customer. This can aid in building customer relationships (i. e. text when flight is delayed). Contributes to cutting cost, increases convenience and speed. Potential reduction in business travel as a result of technological advancement in telecommunications.
What Creates and Contributes to WestJet’s Culture? WestJet has a very unique culture that provides it with a competitive advantage over its competitors. The following are some of the unique attributes of WestJet’s culture: “Culture of Care” is the basis for its customer service guidelines. WestJet has its own language for many business related aspects. Employees are identified as “people”, the accounting department is called “beanland”, policies are labelled as “promises,” and supervisors are even labelled as “team leaders. ” Having fun and enjoying your job is paramount at WestJet.
An environment that fosters creativity and decision making responsibility has been created. Its people are very empowered because decision making responsibility has been pushed as far down to the front lines as possible. WestJet has created a committee called CARE (Creating a Remarkable Experience) that is entirely dedicated to promoting the culture throughout the organization. Threat of Losing Culture If WestJet does not maintain their culture the following negative impacts could occur: Loss of competitive advantage. Loss of market share and decreased profit.
Costs would increase as a result of higher turnover and absenteeism, lower productivity and morale, the need for more managers, and the lack qualified or willing applicants. Threat of unionization. Longer turnaround times. Damage to the WestJet brand. Negative effect on the guest experience More susceptible to competition, it is difficult to differentiate an airline solely on price. Negative publicity. Decrease in share price. Once corporate culture is gone it is very difficult to re-establish, it could leave a stain on the WestJet’s reputation.
Company-wide failure. “Given enough time and money, your competitors can duplicate almost everything you’ve got working for you, the only thing they can’t duplicate is your culture,” (Bradt, 2012 pp. 1). WestJet’s success has largely been attributed to their unique corporate culture. It has created a powerful and sustainable competitive advantage which has allowed WestJet to succeed when many other airlines have failed. Although it can be difficult to quantify how WestJet’s corporate culture has contributed to success and it may be
easy to undermine its importance, the list above illustrates how important it is to maintain its culture. Analysis of Industry Failures Many airlines (Continental, Value Jet, Spirit, SkyBus, United Airlines) have tried to imitate SouthWest’s business model, but none have surpassed them. “You can’t copy the corporate culture, you can’t copy the people, you can’t just flip a switch and say we’re going to be more like SouthWest,. ” (Elliot, 2002 pp. 1). It is very difficult to differentiate an airline, especially based on price. Competitors only have to offer the same price and that competitive advantage will be lost.
The airlines that tried to emulate SouthWest’s business model experienced failure because a low cost model is not enough to guarantee success in the airlines industry. In fact, after some airlines that tried this low cost model ended up returning to the business niches that made them successful in the first place (Elliot, 2002). “There’s something to be said for getting back to your roots, at least philosophically and the airlines need to figure out who they are. Unless you know what your mission is, how can you achieve it” (Elliot, 2002 pp. 1)?
Culture provides a foundation, and without a good foundation, success is incredibly difficult to achieve. If WestJet does not preserve its culture it is likely that it will suffer the same fate as the failed predecessors that tried to copy SouthWest’s strategy. Problem Statements There are two salient problems that WestJet is facing, a short term and a long term problem. In the short term WestJet pilots are dissatisfied with management’s new contract offer. In the long term WestJet needs to address what can the management team do to keep their unique culture intact?
For the purpose of this analysis it is assumed that WestJet is pursuing a growth strategy and strategy problems will not be analyzed. Short Term Problem – Pilots’ Contract Definition of the Problem The pilots’ new contract offer involves a sizeable adjustment to the pilots’ total compensation in an effort to ensure market pay parity with the Canadian commercial aviation industry. This has created conflict between management and the pilots and the feedback that management received has been very negative. Many pilots feel that the leadership team has taken too many things away.
If the pilots continue to be unhappy they could quit, which would impact the company’s bottom line and negatively affect the corporate culture. Alternatives for Addressing the Pilots’ Contract Offer 1) Forcing – Play hardball 2) Avoiding – Do nothing 3) Compromising – Give and take 4) Accommodating- Give them everything they want 5) Collaborating – Middle ground Decision Criteria Effect on profitability and sustainability, needs to be in line with low cost business model Time, current contract expires in two weeks Percentage of agreement among pilots must meet guidelines set out in PACT Effect on culture, should minimize negative effects
Degree to which new contracts undermines senior management should be minimized Analysis and Evaluation of Alternatives 1) Forcing – Play hardball Pros: – reach a quick decision and achieve cost cutting objectives Cons: – pilots feel defeated, decreases morale, pilots may quit, disruption in service, negative effect on bottom line 2) Avoiding – Do nothing, delay Pros: – More time, avoid conflict and tension Cons: – Dissatisfaction, extending existing contract (not saving money) 3) Compromising – Give and take, Middleground Pros: – Win-win, each partially achieve objectives
Cons: – Neither side is 100% happy with the outcome, wouldn’t achieve cost saving objective 4) Accommodating- Give them everything they want Pros: – Pilots are happy Cons: – Suffer financially, detrimental to long term company longevity, threat to long term survival 5) Collaborating – Win Win Pros: Everyone’s happy, both parties are committed to the solution Cons: Time consuming Preferred Alternative Implementing the collaborating approach will be most effective in this situation. It will mitigate the risk of pilots leaving WestJet and the negative results that would ensue. Action Plan
WestJet needs to revise the details of the contracts. These revisions need to involve proactively discussing the elements of the contract directly with the pilots. Two-way communication must be encouraged. Involving pilots in the solution will guarantee buy-in on the revised contract. Long Term Problem – Maintaining WestJet’s Culture Definition of the problem WestJet has committed to a high growth rate. Their goal is to be the dominant airline in Canada by 2013 and one of the five most successful international airlines by 2016, but employees are unsure how this growth will affect them and the overall organization.
If WestJet does not protect their culture they will likely fail to meet their goals as it is their source of competitive advantage. WestJet’s culture was built from the ground up and permeates through every aspect of their business. Their culture allows them to provide superior customer service while continually driving down cost through employee initiatives. It would be very difficult for a competitor to emulate their culture. It is critical to keep WestJet’s unique culture intact throughout this growth. In the short term, the pilots are dissatisfied with management’s new contract offer.
The outcome of the negotiations will have implications with respect to culture. As Durfy, WestJet’s president, summarizes: “The hardest thing to create is a great culture, but it’s the easiest thing to lose, if as a leader, you take one wayward action or one wayward step outside of your value set,” (Durfy pp. 14). Rank Order of Critical Issues There is an unclear growth strategy. Is WestJet’s strategy aligned with their values? Are cost cutting and preserving culture competing objectives? Are WestJetter’s buying in to management’s strategy? Does WestJet have an adequate leadership team to protect their culture?
Is the organizational structure scalable? How can WestJet manage attitudes and expectations in an atmosphere of growth? How can WestJet manage communication as it grows? How can WestJet ensure contractors represent WestJet’s culture? Decision Criteria Cost – can we afford it? Performance – will it affect plane turnaround times? Safety – will it impact safety? WestJetter Culture – could it affect WestJetter engagement? Time – when can we implement it? How long will it take? Compatibility – is it compatible with WestJet’s vision and values? Turnover and Absenteeism – will it have an impact?
Alternatives to Maintain WestJet’s Culture 1. Strictly adhere to WestJet’s mission “to enrich the lives of everyone in WestJet’s world by providing safe, friendly and affordable air travel,” and vision “by 2016 WestJet will be one of the five most successful international airlines in the world providing our guests with a friendly caring experience that will change air travel forever” and values. 2. Develop a strategy for internal communication and feedback. 3. Align recruiting practices with culture. 4. Patriate contractors. 5. Socialize and mentor contractors to the same standard as new employees. 6.
Revisit the CARE program to ensure it is meeting its objectives. 7. Develop new managers internally. 8. Hire new leader(s) to manage growth and change. 9. Hire consultants to manage growth and change. 10. Review of technology to ensure it supports the WestJet culture. Analysis and Evaluation of Alternatives Cost Performance Safety WestJetter Culture Time Compatibility Turnover and Absenteeism TOTAL Weighting 15% 10% 15% 25% 5% 15% 15% Strictly adhere to WestJet’s mission, vision and values. 1. 35 0. 9 1. 35 2. 5 0. 5 1. 5 1. 35 9. 45 Align recruiting practices with culture. 0. 9 0. 9 1. 35 2. 5 0. 3 1. 5 1. 5 8. 95
Develop a strategy for internal communication. 0. 9 0. 9 1. 35 2. 5 0. 35 1. 5 1. 35 8. 85 Ensure CARE program is meeting objectives. 0. 45 1 1. 35 2. 5 0. 3 1. 5 1. 5 8. 6 Develop new managers internally. 0. 45 1 1. 35 2. 5 0. 15 1. 5 1. 5 8. 45 Hire new leader(s) to manage growth and change. 0. 3 0. 9 1. 35 2. 5 0. 2 1. 5 1. 5 8. 25 Review of technology. 0. 15 1 1. 05 2. 5 0. 05 1. 5 1. 35 7. 6 Hire consultants to manage growth and change 0. 3 0. 9 1. 35 2 0. 3 1. 5 1. 2 7. 55 Socialize and mentor contractors. 1. 05 0. 6 1. 05 1. 5 0. 3 1. 05 1. 05 6. 6 .Patriate contractors. 0. 3 0. 5 1. 05 1. 75 0. 2 1. 35 1. 05 6. 2
*Scores of each alternative are based on a scale of 1 to 10, 1 being the least important 10 being the most important. Scores are weighted based on the impact of the decision criteria. Preferred Alternatives Based on the weighted decision criteria we have selected the top five alternatives: Strictly adhere to WestJet’s mission “to enrich the lives of everyone in WestJet’s world by providing safe, friendly and affordable air travel,” and vision “by 2016 WestJet will be one of the five most successful international airlines in the world providing our guests with a friendly caring experience that will change air travel forever.
” Align recruiting practices with culture. Develop a strategy for internal communication and feedback. Revisit the CARE program to ensure it is meeting its objectives. Develop new managers internally. Action Plan Alternatives Who What When (Start Date) How Impact on Budget Strictly adhere to WestJet’s mission, vision and values. Upper management in respect to strategic decisions. All WestJetter’s responsible for everyday decisions. Align all decisions with WestJet’s mission, vision and values. On-going. Always use WestJet’s values in decision-making.
Reinforcing mission, vision and values. Leveraging the CARE team. Continue the adopt-a-base program. Minimal, new money spent, continual cost savings. Align recruiting practices with culture. Executive VP of People. Continue to hire people that are the right “fit. ” Semi-annually. Review and update recruiting practices and ensure they are aligned with culture. Moderate, recurring costs. Develop a strategy for internal communication. Executives to develop strategy All WestJetter’s to provide feedback. Keep all communication timely and transparent.
Within one year. Review organizational structure to communicate culture throughout WestJet (move the VP Culture and Communications under EVP Operations). Be sure to send a consistent message through all levels of WestJet. Utilize PACT to facilitate two-way communication. Choose the appropriate channel based on the importance of the message. Moderate, one-time cost. Ensure CARE program is meeting objectives. VP of Culture and Communications. Ensure all WestJetter’s are consistently exposed to the CARE program. Immediately and annual reviews thereafter.
Ensure that employees from new locations or destinations have at least one representative in the care program. Ensure proper funding is available to allow events to be held for existing and new bases. High, recurring costs. Develop new managers internally. EVP of People. Identify more potential leaders. Create a process to develop them. Within the next three years. Develop formal training associated with maintaining and permeating WestJet’s culture. Provide potential leaders with mentors. Hold mandatory training sessions between the CEO and senior leaders.
Senior and subordinate leaders to also hold mandatory training sessions. High, recurring costs. High time commitment from all WestJetter’s involved. Measures of Success Cost – must allow WestJet to maintain its number one position based on operating cost per available seat mile. Performance – must allow WestJet to maintain industry best turnaround times. Safety – must maintain or improve WestJet’s safety standards. WestJetter Culture – must allow WestJet to maintain a minimum score of 80 in the WHY survey. Time – ability to implement within the short to medium term (one to five years).
Compatibility – must be compatible with WestJet’s short and long term vision. Turnover and Absenteeism – maintain or improve current levels. Conclusion Based on this analysis, culture is imperative to WestJet’s success. If WestJet wants its growth strategy to succeed it must take steps to ensure its culture is maintained. If WestJet cannot maintain its culture it risks losing their competitive advantage and exposing the company to a variety of risks. By following the action plan presented above WestJet will be able to maintain its competitive advantage, which is its culture.