Control Mechanism

Topics: Southwest Airlines, Airline, ATA Airlines Pages: 5 (1410 words) Published: April 14, 2008
Southwest Airlines: Control Mechanisms
Southwest Airlines is a dynamic organization that is researched and studied by many. One reason for this attention is the positive corporate culture. This culture attracts dynamic people to the organization who are encouraged to be innovative and grow as leaders while supporting and promoting the mission of the airline. This culture was established through effective planning, organizing and leadership. To maintain this culture and the success of the airline, the function of controlling is critical. Systems must be in place to monitor performance and outcomes to ensure that organizational goals are being met. When an outcome is not one that is desired, the control mechanisms are used to address the issues and allow for corrective action to be taken. There are various control mechanisms used my many different companies. Some that are used by Southwest Airlines are management audits, finance control, behavior control and output management. Southwest Airlines is known for its innovative planning, unwavering organizational skills, collaborative leaders, and efficient monitoring and controlling. The organization has a continuous cycle of planning and controlling which has made the company a success. Southwest Airlines has used this cycle because the leaders of the company realized the importance of the two functions. Southwest Airlines uses various monitoring and controlling methods to determine if the organizational goals are being met and to allow for changes or improvements if necessary. As mentioned previously, four types of control mechanisms used by Southwest Airlines are management audits, finance control, behavior control, and output management. These different controlling mechanisms give the leaderships at Southwest Airlines a look into the every day operations at the airline. One type of management audit at the airline is performed by the Audit Committee of the Board of Directors. The committee’s primary function is to monitor the independent auditors of Southwest Airlines and report audit reviews to the Board of Directors. Southwest uses external teams to audit the organization so that its integrity upheld. The Audit Committee supervises the audit process, ensures that Southwest Airlines complies with legal regulations, and prepares financial reports for auditing. The Board elects the Audit Committee and it must have at least two directors. One director is an employee of Southwest Airlines and the other is an independent contractor (Southwest Airlines, 2007). Southwest Airlines uses finance controls by reviewing quarterly and annual balance sheets in addition to profit and loss statements. Southwest Airlines uses Generally Accepted Accounting Principles (GAAP) and non-GAAP. The company believes that both are necessary “to evaluate the Company’s performance and believes that comparative analysis of results can be enhanced by excluding the impact of the unrealized items” (Southwest, n.d., ¶ 4). The use of both accounting principles gives a more adequate comparison of results for use by management when monitoring and controlling. Southwest Airlines also uses automated systems to monitor employee productivity, but does not believe in bureaucracy when it comes to employee performance. Instead, the airline company uses more of a clan type of control mechanism. Southwest Airlines has developed incentives to promote employee productivity and encourages employees to participate in the Company’s stock market. The employees have multiple stock purchasing programs available to them (Southwest Airlines Co., 2007). This form of control allows the employees to get more involved in the company. The company benefits from increase employee productivity and the employee benefits from the increase in stock value; thus, the company and the employee are happy. Southwest Airlines uses a variety of differentials to calculate output. This mechanism is used to find errors and formalize a solution to...

References: Cohen, A., Watkinson, J., Boone, J. (n.d.). Herb Kelleher, executive chairman of southwest airlines talks about building leaders and how their innovative people-culture has lifted the airline to success. Babson Insight. Retrieved February 7, 2008, from
Owens, J. & Ritz, Tim. (n.d.). Southwest Airlines: An In-Depth Review. Retrieved February 15, 2008, from
Southwest Airlines. (2007, January 18). Audit Committee Charter. Retrieved February 13, 2008, from Investor Relations. Corporate Governence:
Southwest Airlines. (n.d.). Non-GAAP reconciliation (Quarterly). Retrieved February 14, 2008, from Investor Relations. Financials:
Southwest Airlines Co. Annual Report 2006. (2007, January 31). Retrieved February 14, 2008, from
Southwest Airlines Reports Fourth Quarter Earnings and 35th Consecutive Year of Profitability. (Jan 23. 2008). Retrieved February 17, 2008, from
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