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Introduction and Background
The conception and history of WestJet Airlines read like a fairy tale that bears a happy ending. It mesmerizes many analysts ever to comprehend the fact that WestJet was conceived through a subconscious idea in the mind of Clive Beddoe, the President of Hanover Group. Beddoe, during one of his weekly business travels from Calgary to Vancouver, felt that having a private aircraft would help him save on costs while traversing the two cities.
The realization that there was no affordable airline with good service flying the western Canada route made four businessmen – Clive Beddoe, Don Bell, Mark Hill, and Tim Morgan – realize the huge business potential that existed in terms of starting an airline to serve the travel needs of people residing within this region of the country (Mark 52). They knew they wanted to start the airline, but no one had the expertise on how to go about it
A successful business enterprise must lay its groundwork on a workable business plan and sound financial model. Towards this objective, the businessmen extensively researched on North American airline models, and invited David Neeleman, the then president of Morris Air, to assist in designing a blueprint on how the airline should operate. The blueprint was modeled along with several principles that still remain relevant to WestJet to date – low-cost, affordability, and good service.
In 1996, after acquiring the needed capital, the Calgary-based WestJet started operations with two aircraft only (Mark 53). The airline grew steadily to become one of the few success stories in the aviation industry. By April 17, 2001, WestJet market capitalization had outshone that of Air Canada, the then leading air carrier. As the title of the case rightly suggests, WestJet’s story is based on a raw passion to succeed by embracing effective organizational culture, employee motivation strategies, and unsurpassed customer care.
WestJet Airlines continues to achieve unprecedented growth in the aviation industry ever since it’s inception in 1996, and has been constantly graded among the most profitable in the region and beyond. According to Mark, “…in an industry where 90 percent of startups fail financially, WestJet grew from two planes in 1996 to 21 in 2000” (54). The major growth incentives for the airline have already been mentioned above, but according to the founders, it owes much of its exponential growth to a closely-knit culture whereby everybody understands everybody else and where the aims, objectives, and aspirations are vehemently articulated and closely held at heart by all.
But according to Don Bell, one of the airline’s co-founders, stiff competition and increased airline’s growth proved to be challenges to the organizational culture that had served to propel WestJet into sustained profitability (Mark 52). The competition came from other low-cost airlines such as Halifax-based CanJet, Canada 3000, and Royal.
These airlines, which later merged, were all interested in the low-fare market segment, a niche so well held by WestJet. Other big airlines such as Air Canada and Canadian Airlines merged in an attempt to regain a foothold and venture into the low-cost low-fare market segment (Mark 59). According to industry experts, the phenomenal growth embraced by WestJet will make it literally impossible for the airline to sustain its ‘fun’ culture (Mark 60). In the same vein, it was projected that an economic recession would inarguably hurt an airline that is so dependent on the hospitality business.
WestJet has continued to be largely successful in an industry where major airlines, including national carriers, are filling for bankruptcy. This reveals that sound financial policies, excellent customer service, innovation, effective people management practices, and efficient organizational strategies are essential ingredients if organizations are to remain successful. Indeed, the carrier has remained profitable, the above-mentioned problems notwithstanding.
One of the strong points about the airline is that the project was founded on a solid framework after the idea was hatched way back in 1995. The founders conducted extensive research on how other airlines, specifically the profitable Southwest Airlines and Morris Air, operates prior to starting the airline (Mark 52). Their success, therefore, reinforces the notion that information is power in any business startup. The choice of a market segment is also important in starting a business. WestJet chose to operate in a previously untapped segment – low-cost, low-fare segment. The choice paid off almost immediately
The organizational practices employed by WestJet are topnotch. The airline realizes that employees are its greatest asset and rewards them for excellence and performance. For instance, the generous profit-sharing plan not only ensures that employees remain motivated, but it also ensures that employees take charge of the airline’s affairs and activities as if they were their own (Mark 54). For instance, the employees were allocated Cdn$ 8 million in cash bonuses in November 2000. This can only serve to enhance performance and trust. The employees are also allowed to own equity in the organization. This is important in that employees will identify with the company, and will work hard to ensure shares price stability.
Customer service is a corporate culture that is valued at WestJet. A satisfied customer is a valuable asset to the company in terms of increasing the organization’s profitability due to the likelihood of returning, not mentioning the fact that he or she enhances job satisfaction among employees by virtue of knowing that their services are appreciated (Mark 55). According to Clive Beddoe, “WestJet’s corporate culture was the primary reason for the airline’s superb performance” (Mark 55). The entire environment, which is relaxed, fun-filled, and youthful, has helped the management to bring out the best in employees. Indeed, such a working environment encourages creativity and innovation both in theory as well as in practice.
It cannot escape mention that WestJet utilizes a bottom-up management style, giving employees a clear mandate and independence to carry out their duties with minimal supervision (Mark 55). The trust to look into the interests and affairs of the airline has been bestowed upon the employees by the senior management. Not only does such a gesture instills a sense of responsibility on the employees, but it also increases employee satisfaction and motivation derived from the act of being allowed to decide what is good for the organization, customers, and shareholders.
Pilots are encouraged to view themselves as managers. Indeed, for an organization to achieve such success, its culture must be well defined and customer-oriented. The above, coupled with an effective team spirit and employment of cost-cutting strategies, have enabled WestJet to maintain a competitive advantage in the industry. The hiring procedures utilized by WestJet have enabled the company to recruit employees who share in its objectives, aspirations, and culture (Mark 57). In short, the leadership structure in WestJet borders on transformational leadership.
Despite the hugely successful organizational structure, the problems articulated elsewhere in this paper still persist, with the most troublesome one is coming up with strategies through which organizational culture can be maintained and enhanced in the face of growing competition and expansion strategies. Here, the airline needs to come up with a new competitive strategy that will factor in the dynamic changes taking place in the modern business environment. Such a strategy must aim to institute a profitable and much more sustainable position against all competitors and other forces that decide industry competition (Porter 1).
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To avoid losing its organizational culture, the airline needs to evaluate its fundamental principles and approaches within the organization’s cultural mindset and integrate it with positive attributes of organizational behavior that have recently emerged. In essence, culture is also dynamic, and the airline needs to make adjustments to incorporate positive elements of modern organizational culture through adaptive planning (Porter 5). The company must also remain strict in hiring policies to ensure that it only recruits employees who will completely identify with its objectives, ambitions, philosophies, values, and work ethics.
Lastly, the airline may need to utilize forecasting and modeling to ensure that costs related to the macro-environment, such as fuel costs and economic recessions, do not eat into its profitability, thereby curtailing performance (Porter 5). When these loopholes are sealed, WestJet is bound to remain the airline of choice into the future due to its key attributes – affordability and good service.
Mark, K. WestJet Airlines (A): The Culture that Breeds a Passion to Succeed. In: G.H. Seijts, Cases in Organizational Behavior. Sage. 2006. ISBN: 1412909295.
Porter, M.E. Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY: Free Press. 1998. ISBN: 0684841460.