>to Southwest, profit is not the main objective. Providing inexpensive
>airfares so that more people can afford to fly is what drives the
>company.
I have been largely sitting on the sidelines watching the interesting
discussion taking place on profits, for-profit-companies, etc.
Several people have defined profit as more than $, which is fine, but not
how most people use the word. I like Brian's example of Southwest, which
provides something solid to talk about. It is a good analogy.
Southwest mission might be summarized as: "...inexpensive airfares so that
more people...." However much more than that drives the company. They
have a fairly holistic view of the world. They look and more importantly
act on measures that take into account a variety of perspectives. One
perspective does not drive the company, although it may summarize their
hopes.
Any one number taken to the extreme could cause the company to do goofy
things. Just like an individuals health, one number will not do it.
Would you select blood pressure, heart beat, colesterol count, etc.
Probably not, one metric does not describe the health of an individual.
Companies (for profit, and not-for-profit) are the same way. Most do not
just look at profit or net revenues. I think I mentioned the concept of a
strength taken to excess (Elias Porter) becomes a weakness in an earlier
posting.
Each of the Southwest Airlines examples below could be driven down to
further sub-levels of detail, which is part of the beauty of what holistic
perspectives do. I will take some information from Southwest documents to
avoid simple theory:
Reveues and Profits They do matter, this is their words..
....In 1998, Southwest posted a record annual profit for the seventh
consecutive year and a profit for the 26th consecutive year. The Company also
posted record operating revenues; record operating income; the highest net
profit margin since...
New Markets Focus on unit growth vs price increases.
....We added service to Manchester, New Hampshire,....
People/Employees An area not talked about in the Annual Report by most
companies
...Also during 1998, the Company's Customer Service and Reservations Sales
Agents, represented by ... ratified collective bargaining agreements which
will run through the years 2002 and 2009, respectively. In addition, in
September 1998, the Company's pilots voted to continue their ten-year
agreement with the Company which next becomes amendable in 2004.....
Customer Looking at the customer, multiple markets,
...While Southwest's passenger revenues increased 8.9 percent in 1998, the
RPM (revenue per mile) yield decline resulted from the higher load
factorsfactors, a 6.0 percent increase in passenger trip lengths,...
...Freight revenues in 1998 were $
Cost Watching the bottom line...there was a bunch on this, I included the
noble part
...operating expenses per ASM are expected to increase in first quarter 1999
compared to first quarter 1998 primarily due to higher Profitsharing and
Employee savings plan contributions and increased advertising primarily
related to the opening of Islip, ....
FLIGHT SAFETY SYSTEMS
...The Company has completed all phases of its Year 2000 project as it
relates to its aircraft fleet and onboard support systems. The Company has
determined ....
Operating Statistics
They look at a bunch. I'll just highlight one. Turnaround time at the gate.
Planes are expected to turn around within 15 minutes. If you can't do it,
you get "dinged" or sent to learning school. Measuresx like this benefit
fewer planes needed, costs, quality is actually better as a result, etc.
Best wishes to all for the holidays!
Michael Bremer
Flow-Works, inc.
(the software company for complex mixed-model lean manufacturers)
630-789-8262
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