Proj 587 Portfolio Management Plan Paper
PROJ 587: Advance Program Management
Portfolio Management Plan
Prepared for: Southwest Airlines
Professor: Robert Kenmore
October 19, 2014
Prepared by: Team B
Jonathan Alexander
Jeffrey Dietz
Trinece Henry
Aliyyah Simmons
Shaun Sowers
Brandon Story
Table of Contents
Introduction 1
Southwest Airlines Strategic Plan 1
Southwest Airlines Strategic Capacity Plan 3
Portfolio Management Process 4
Project Selection Criteria 5
Program Management Plan 7
Conflict Resolution Plan 9
Change Management Plan 11
Resource Utilization Plan 12
Summary 14
Works Cited 15
List of Tables
Table 1: Roles and Responsibilities 12
List of Figures
Figure 1: Portfolio Management Process Flow 6
Figure 2: Resource Forecasting 14
Introduction
The following information …show more content…
is an overview of Southwest Airlines’ business management practices and how they relate to Portfolio Management. In the following paragraphs, the reader will be introduced to Southwest Airlines’ strategic plans, which include improved efficiency, improved customer satisfaction, and expansion into international markets. Other discussion points include Southwest’s portfolio management process, project selection process, conflict resolution plan, change management plan, and resource utilization plan.
Each of these subject areas will expose the reader to how Southwest Airlines plans to navigate their future to achieve their strategic goals with portfolio and project management plans, how they plan to get around stumbling blocks that may arise along the way by using conflict resolution and change management plans, and finally, the reader will get a glimpse at how Southwest Airlines tracks their progress by using a resource utilization plan. All of these plans were designed by Southwest executives to help the company become a dominant force in the airline industry.
Southwest Airlines Strategic Plan
Southwest Airlines’ strategic plan includes the primary initiative of integrating AirTran Airways, which they acquired in 2011, into one travel network, which allows Southwest to expand their low fare services into more markets.
Other major initiatives in their strategic plan include Rapid Rewards® frequent flyer programs, Fleet Modernization to the 737-800s, a New Reservation System, and International Capabilities (Southwest Airlines, 2013).
All of these initiatives are part of Southwest Airlines’ five-year strategic plan and are designed to increase Southwest Airlines’ market share by improving customer service and increasing customer satisfaction and overall efficiency. Rapid Rewards® is designed to increase customer satisfaction with airline rewards systems; fleet modernization will increase fuel efficiency and decrease greenhouse gasses; and the new reservation system is being put in place to enhance revenue management capabilities as well as other operational benefits to aid their expansion into international services (Southwest Airlines, …show more content…
2013).
According to McNamara, “strategic planning determines where an organization is going over the next year or more, how it 's going to get there, and how it 'll know if it got there or not” (p.1). Southwest Airlines is putting their plan into action, and they seem to know where they want to go. They are in the midst of their five-year strategic plan, which started in 2011. As of 2013, they have fully incorporated the Southwest and AirTran networks, allowing customers of both to book flights between the two carriers and travel between any of the 96 combined Southwest and AirTran destinations (Southwest Airlines, 2013).
Additionally, since the implementation of their rewards program, Southwest has seen increases in membership that have “exceeded expectations.” Because of this, customers of Southwest and AirTran redeemed approximately 5.4 million flight awards, which is up from approximately 4.5 million in 2012.
In 2012 Southwest Airlines ranked 26 of all companies in the U.S. in Harris Interactive’s The Reputations of the Most Visible Companies and had a reputation quotient (RQ) score of 74.6, which places them in the good to very good range of general public opinion (Harris Inveractive, 2013). Based on this, Southwest Airlines seems to be in good favor with the public and they carry an excellent reputation. Increased customer satisfaction means increased business. Southwest is on the path to achieve their strategic goals (Harris Inveractive, 2013).
Southwest Airlines Strategic Capacity Plan
The strategic capacity plan is a process that is used to balance the use of available resources, resulting in an optimum output that increases efficiency. In many corporations this involves a lot of attention to each step in the production process to ensure that little to no waste is created. There is an attempt to keep the cost of production as low as possible while maintaining the greatest quantity of goods and services that are produced and sold. “There are a number of factors that go into strategic capacity planning, including understanding customer demand and the ability of the company to adjust its operation to meet that demand” (Tatum, 2014, p. 1). There was no specific information found when searching for a strategic capacity plan for Southwest Airlines, but when reading through their annual report, one comes to the realization that Southwest incorporates their capacity plan into their strategic plan. This is based on how the strategic plan outlines how they are going to increase fuel efficiency by replacing old planes with newer models that have improved fuel economy, an initiative that started with their current strategic plan in 2011. As of their 2013 annual report, they plan to have 40 next generation planes in their inventory by 2014 and plan to have 547 next generation planes by 2027 (Southwest Airlines, 2013). Southwest Airlines has a number of initiatives that help them maximize use of available resources to increase profits. One initiative is fleet modernization, which includes upgrading their fleet to Boeing next generation 737 planes and Boeing 737 max planes. Another is their fuel initiative, which includes fuel planning and single engine taxiing. Both initiatives are designed to use fuel to maximum efficiency. All show Southwest Airlines’ dedication to improving efficiency in their fleet. Finally, the rewards program and improved reservation system shows their dedication to improving customers satisfaction (Southwest Airlines, 2013).
Portfolio Management Process
What is project portfolio management process? Project Portfolio Management (PPM) is the centralized management of processes, methods, and technologies used by project managers and project management offices (PMOs) to analyze and collectively manage current or proposed projects based on numerous key characteristics. The objectives of PPM are to determine the optimal resource mix for delivery and to schedule activities to best achieve an organization’s operational and financial goals ― while honoring constraints imposed by customers, strategic objectives, or external real-world factors (Rajegopal, 2007). PPM provides project managers in large, project-driven organizations with the capabilities needed to manage the time, resources, skills, and budgets necessary to accomplish all interrelated tasks. It provides a framework for issue resolution and risk mitigation, as well as the centralized visibility to help planning and scheduling teams to identify the fastest, cheapest, or most suitable approach to deliver projects and programs (Cooper, 1998 p. 2). In the early 2000s, many PPM vendors realized that project portfolio reporting services only addressed part of a wider need for PPM in the marketplace. Another more senior audience had emerged, sitting at management and executive levels above detailed work execution and schedule management, who required a greater focus on process improvement and ensuring the viability of the portfolio in line with overall strategic objectives. In addition, as the size, scope, complexity, and geographical spread of organizations’ project portfolios continued to grow, greater visibility was needed of project work across the enterprise, allied to improved resource utilization and capacity planning.
Finding information on Southwest Airlines’ project portfolio management process is not in the traditional sense. They have a Procurement Department, which is responsible for fuel management, facilities construction, and project management practices oversight - ensuring that they spend their valuable capital wisely. The procurement department works with suppliers, vendors and internal employees to ensure everyone is aligning with the company’s mission. Established in 1971, Southwest Airlines continues to be an innovative force in the industry, according to David Harvey, the airline 's senior director of network planning and performance. As Southwest has grown, there has been the need for much more cross-functional, integrated planning, now across 25 departments, Harvey said. "Our level of planning has ramped up and gone through a significant transformation." (Southwest Airlines, 2013)
Additional project management goals include coordinating and completing a new sophisticated reservation system, integrating Southwest 's recent purchase of AirTran Airways into its system and modernizing its aircraft fleet. To meet this demand Southwest Airlines has started to use to processes like Agile/Scrum to help run their projects more effectively.
Figure 1: Portfolio Management Process Flow
Project Selection Criteria
Benefit Measurement Methods can be considered a category of project selection methods, which employ various analytical as well as comparative approaches on how to select the appropriate project. Cost-benefit analysis, scoring models, benefit contribution methods, and economic models to name a few; are just some of the ways an organization determines the risk associated with selecting a project.
Aligning individual projects according to the organization’s overall strategic objectives may prove to be quite challenging. Certain tasks may be prioritized according to the interest of the project sponsor or management team without any rhyme or reason on a reactive basis; which can prove to negatively impact the project selection process. Without a method to prioritize the right project and tie any technological initiatives to specific business objectives; any collaboration efforts made by the team is misaligned and therefore a waste of time, effort and money (Unknown, 2013). To better identify and prioritize low-risk/high reward projects, streamline the company’s objectives and reduce operating expenses; it is imperative a business implements a standard scoring system and doesn’t deviate from it.
Depending on the organization, there are various scoring models to select from:
Number range and un-weighted
Using this model, a project will receive a point for each criteria met. Projects are chosen based on the total number of points. All criteria are assumed to be of equal importance
Range and weighted
Using this model, a project is scored according to a range (1-5) of criteria. This process allows for a more in-depth analysis of how a particular project aligns with goals.
Weighted
Using this model, the importance of each project is determined by how it impacts the organization based on the top priorities of the business. Each value assigned must equal one hundred percent (according to Gartner’s methodology):
Strategy (25%)
Financial (25%)
Technology (20%)
Process (15%)
Delivery (15%)
Program Management Plan
During the planning phase of a program, it is imperative the right people, methodologies and supporting resources are in place to deliver the project on time, within budget and to positively impact quality standards. In 2011, Southwest Airlines began a five year strategic plan to improve five critical areas of the business:
Integrate AirTran Airways into the Southwest Airlines portfolio
Improve the Rapid Rewards frequent flyer program
Modernize the fleet
Introduce a New Reservation System
Improve International Capabilities
Southwest Airlines is a company passionate about connecting consumers with what’s important in their lives. By addressing these targeted areas, revenue would significantly increase, the customer experience would be enhanced, associated unit cost would be reduced, the Southwest network would expand, positive attributes already affiliated with the Southwest brand would be sustained; Southwest Airlines will have the flexibility to manage the fleet’s needs from an economic, social and environmental perspective. The strategic goals set forth support continuous improvement designed to reduce operating costs, greenhouse emissions as well as assisting communities with recovering from natural disasters by providing a compassionate, humanitarian response to events (Southwest Airlines, 2013). Southwest Airlines is making strides to continue with forward movement with their five-year strategic initiatives. As referenced previously, Southwest acquired AirTran, which creates the opportunity for low fare itineraries with an emphasis in outstanding customer service, high quality, and low cost operations. The acquisition of AirTran directly supports the company’s strategy to attract more business travelers. Secondly, it opens up access to Atlanta’s Hartfield International Airport, the world’s busiest airport; provides expertise on international flights and expands its foothold in New York and Washington to directly compete with the perceived leaders in the industry- United, Delta, and Continental (Southwest Airlines, 2013).
In addition, connection capabilities between the Southwest and AirTran networks were fully deployed allowing customer to book itineraries between the two carriers. All 700 and 800 fleets were equipped with satellite-based Wi-Fi allowing Southwest Airlines to become the first carrier to offer gate-to-gate connectivity on personal electronic devices (Southwest Airlines, 2013). Other modifications such as maximizing the space inside the seating areas, updating the interior for a brighter color scheme, and installing more comfortable yet durable and eco-friendly seats were necessary to enhance the customer’s comfort, personal space and overall travel experience. Another process implemented, Southwest launched flight service beyond the United States extending service to Puerto Rico. These changes were made without negatively impacting employees through rifts and achieving their 41st consecutive year of profitability, which is a goal any other airline (Delta Airlines, United Airlines, or Continental) has yet to accomplish (Southwest Airlines, 2013).
After these changes were implemented, Southwest Airlines saw an improvement in their portfolio. The company’s overall profits increased by 93% to a whopping $805 million, there was a return on invested capital, total operating revenues were at $17.7 billion all despite a shaky economy. Southwest Airlines is hopeful they will remain on track to fully integrate Southwest and AirTran’s network and operations throughout the end of the year. Taking on AirTran’s international and remaining domestic markets and converging Southwest Airlines and AirTran’s frequent flyer programs into one rewards program is a priority for Southwest. Analysts have stated in the past Southwest was slow to adapt by failing to update its reservation software or not scheduling flights to leisure destinations frequently traveled and favored by Americans (i.e. Cancun or the Caribbean). To keep up with customer demand, Southwest Airlines is planning on launching full international service to Mexico City and the Dominican Republic at the end of the 4Q2014. These objectives are very important to maintain as newer rivals such as JetBlue Airways and Allegiant Airlines are threatening Southwest’s dominance in the low-fare trade thanks to efficient operations, lowers costs and attention to customer service.
Conflict Resolution Plan “Conflict resolution is the process through which the conflicting parties reach a settlement” (Sadri, 2013, p11). Due to the fact that conflicts in the workplace are destined to arise, conflict resolution is the solution to creating and maintaining a positive working environment. Without conflict resolution the organization would be in dismay, which would result in workplace indifference, low or lack of motivation from employees and ultimately high turnover rates. This is why conflict resolution is important in an every organization.
Southwest Airlines currently has a great approach to how they handle the conflict within their organization. They take several approaches to resolving conflict:
1. Those employees involved in the conflict are required to communicate with each other for the purpose of attempting to resolve the problem on their own. If they are unable to do so then management will step in to assist.
2. A meeting is held with both or all parties where they are allowed to state their issues in a controlled environment.
3. If the situation has yet to be resolved then managers hold what they refer to as a “Come to Jesus Meeting” where they engage in conflict management and resolution for an entire work day. Most if not all problems are resolved during this phase due to the constant dialogue between all parties and management.
Southwest Airlines addresses conflict as a team effort and makes sure that conflicts are handled immediately and appropriately to avoid a further escalation of conflicts. When a “Come to Jesus” meeting is deemed necessary, Colleen Barret, COO of Southwest Airlines says “We tell them this is not a disciplinary meeting. We are just moderators, the focus is on the employees” (Gittell, 2003, p3).
There are several different methods of conflict resolution that could assist Southwest Airlines further with handling conflicts in their workplace. One method that could end conflict between parties before they had to participate in the “Come to Jesus” meeting would be putting the parties in a team where they have to work together on a project. This could motivate and encourage them to put aside their differences for the benefit of the company and come together by collaborating and working towards a common goal. This would most likely end any competition between the parties and allow them to work matters out on their own.
Change Management Plan
The purpose of the change management plan is to define the steps used to identify and make necessary changes within the scope of a project (Collegiate Project Services, 2008). This section contains the change management approach, change control process and the roles and responsibility sections. The goal of the change management plan is implement procedures to effective manage change within the program to ultimately meet program goals (Collegiate Project Services, 2008). The program goals will be in-line with the CEO’s vision and the change management plan will also be a reflection of the CEO’s vision. The intended audience for this section is for the program and project managers and other senior leadership to support decision-making that is needed to manage change effectively under the organization vision.
The change management approach will establish the process and procedures for tracking, submitting, reviewing, evaluating, and final approval of change within a program or project. The CEO, Gary Kelly, will establish southwest Airlines change management approach. The major change for the company is to fully implement AirTran into the Southwest airline family. Southwest Airline new addition of AirTran needs to be seamless, within budgetary and time constraints, and in scope of the overall mission of Southwest Airlines. Gary Kelly’s end goal for the merger will be fully implement AirTran into one brand, one customer experience, and one flight schedule flying under the Southwest Airline flag (Southwest Airlines, 2013). This change allows customers to book flights for a combined 97 destinations including the international opened up by the merger of AirTran to the Caribbean and Mexico (Kelly, 2014).
Table 1: Roles and Responsibilities
Project Name:
Southwest Airline and AirTran Merger
Project Description Summary:
Southwest Airline purchase of AirTran into its network which will open up additional markets to the organization
Program Manager: Jeffrey Dietz
Responsible for the directing and managing all projects under the program to ensure the smooth transition of AirTran merger as a Southwest Airline company to fit the vision of the CEO.
Project Manager:
Trinece Henry
Responsible for the actual managing of the day-to-day operations of the merger of AirTran as a Southwest Airline company.
Change Management Manger:
Jonathan Alexander
Responsible for the documentation and tracking of changes within the program and projects.
Conflict Resolution Manager:
Aliyyah Simmon
Responsible for managing conflict and will assists project managers and other organization members to handle and
Resource Manager:
Shaun Sowers
Responsible for ensuring that the right personnel with the right resources are assigned to the right project within the program to achieve strategic business objectives.
Portfolio Manager:
Brandon Story
Responsible for the centralized management of portfolios within a program which includes collecting, prioritizing, authorizing and controlling projects to achieve strategic business objectives.
Resource Utilization Plan
Resource utilization is a critical aspect of project management because it organizes and defines employees’ tasks and schedule in the project plan. The resources utilization plan tracks the budget and costs of the project by assigning the employees rate and hours for their expected work. In addition, the resource utilization plan can be used as a metric to track project profitability, work efficiency and schedule efficiency. In addition, the plan can track an individual’s profitability and efficiency by calculating their utilization rate, which demonstrates how much of their time is being spent working on revenue generating projects. Another important metric that a resource utilization plan can measure is forecasted hours versus actual hours spent on a project to help improve utilization rates and increase project profitability. “Good utilization data allows companies to conduct capacity planning far more effectively than they’d otherwise be able to do because they have aggregated granular data on how effectively certain resources, skills, or expertise are being sold” (Holmes, 2013). Below is an example of a resource forecasting application.
Figure 2: Resource Forecasting
Holmes, Nicholas. “Utilization – The Key to Effective Project Human Resource Management” August 1, 2013. From http://www.precursive.co.uk/project-human-resource-management-utilization/
Southwest Airlines requires an efficient resource utilization plan for their employees and their fleet since they are a smaller, low cost airline. Southwest’s strategy requires high utilization rate of the fleet as well as lean and productive personnel, including elements such as efficiency in ground services and gate turnaround times. Operational simplicity assists with high resources utilization because Southwest only uses one type of plane, the Boeing 737. This keeps costs down related to pilot’s training, spare parts, inventory, and maintenance (Ala-Mutka, 2011).
Southwest’s success is dependent on its legacy systems that run numerous applications that support their operations. Their IT strategy aligns with their overall strategy by using only a limited number of vendors. This strategy is intended to help Southwest Airlines streamline operations, improve resource utilization, avoid paying for redundant functionality and more tightly integrate the systems that support its business. Any projects to upgrade or enhance legacy systems would require an effective utilization plan since resources are limited and the present processes must continue to operate while they are being improved upon. “Often, this means that a new process will be operating in parallel with the old process while the new process is being verified” (Harrington, 41). Project managers must be careful not to over extend resources.
Summary
A wise man once said, “if you fail to plan, plan to fail” and those words are so true. Every part of the program management planning process to include but not limited to strategic plan, portfolio management, selection criteria, conflict resolution plan, change management plan and resource utilization plan are vital to the success of a program. Southwest Airline made huge decision to acquire AirTran and the transition to merge to the two organizations, as one is large program. This is a larger scale of a program and it requires proper planning to execute the process seamlessly. In planning for a project of large-scale proper portfolio management to ensure that the projects within in the program are within the vision of the organization. Our research concluded that Southwest Airlines process and protocol are working due its success with the merger and current market share of US domestic market. As of now Southwest Airlines is the second by a small margin to Delta in the US.
Works Cited
Ala-Mutka, Jukka. “Low Cost Airline’s Strategy Model Analysis: Southwest Airlines” August 24, 2011. From http://jukkaam.wordpress.com/2011/08/24/swa-low-cost-airline-strategy-model/
Bender, Michael B. “A Managers Guide to Project Management: Learn How to Apply Best Practices” Pearson Education, Inc. 2010
Collegiate Project Services.
(2008). Project Scope & Change Management. Retrieved from Collegiate Project Service: www.collegiateproject.com/article/preliminary%20change%20management%20plan.pdf
Cooper, Robert G.; Scott J. Edgett; Elko J. Kleinschmidt (1998). Portfolio Management for New Products. Reading, Mass.: Addison-Wesley.
Gittell, J. (2003). The southwest airlines way: Using the power of relationships to achieve high performance. Summaries.com. Retrieved from: http://www.theclci.com/resources/thesouthwestairlinesway.pdf
Harrington, James H. “Business Process Improvement: The Breakthrough Strategy for Total Quality, Productivity, and Competitiveness” McGraw-Hill, Inc., 1991.
Harris Inveractive. (2013, February). Retrieved September 2014, from Harris Interactive: https://www.harrisinteractive.com/vault/2013%20RQ%20Summary%20Report%20FINAL.pdf
Holmes, Nicholas. “Utilization – The Key to Effective Project Human Resource Management” August 1, 2013. From http://www.precursive.co.uk/project-human-resource-management-utilization/
Kelly, G. (2014, August). Spreading Low Fares Farther. Retrieved from Southwest.com:
www.southwest.com/assets/pdfs/about-southwest/garys-greeting.pdf
McNamara, C. (2013, April). All about strategic planning. Retrieved September 2014, from Free Management Library: http://managementhelp.org/strategicplanning/
Southwest Airlines. (2013). 2013 Southwest Airlines One report. Dallas: Southwest Airlines.
Southwest Airlines. (2013, February 14). Southwest Airlines and AirTran Airways Begin Connecting Networks. Retrieved from Southwest Airlines: www.swamedia.com/releases/southwest-airlines-and-airtran-airways-begin-connecting-networks
Tatum, M. (2014, September 01). What is strategic capacity planning. Retrieved September 2014, from Wise Geek: http://www.wisegeek.com/what-is-strategic-capacity-planning.htm
Portfolio Management Plan
Prepared for: Southwest Airlines
Professor: Robert Kenmore
October 19, 2014
Prepared by: Team B
Jonathan Alexander
Jeffrey Dietz
Trinece Henry
Aliyyah Simmons
Shaun Sowers
Brandon Story
Table of Contents
Introduction 1
Southwest Airlines Strategic Plan 1
Southwest Airlines Strategic Capacity Plan 3
Portfolio Management Process 4
Project Selection Criteria 5
Program Management Plan 7
Conflict Resolution Plan 9
Change Management Plan 11
Resource Utilization Plan 12
Summary 14
Works Cited 15
List of Tables
Table 1: Roles and Responsibilities 12
List of Figures
Figure 1: Portfolio Management Process Flow 6
Figure 2: Resource Forecasting 14
Introduction
The following information …show more content…
is an overview of Southwest Airlines’ business management practices and how they relate to Portfolio Management. In the following paragraphs, the reader will be introduced to Southwest Airlines’ strategic plans, which include improved efficiency, improved customer satisfaction, and expansion into international markets. Other discussion points include Southwest’s portfolio management process, project selection process, conflict resolution plan, change management plan, and resource utilization plan.
Each of these subject areas will expose the reader to how Southwest Airlines plans to navigate their future to achieve their strategic goals with portfolio and project management plans, how they plan to get around stumbling blocks that may arise along the way by using conflict resolution and change management plans, and finally, the reader will get a glimpse at how Southwest Airlines tracks their progress by using a resource utilization plan. All of these plans were designed by Southwest executives to help the company become a dominant force in the airline industry.
Southwest Airlines Strategic Plan
Southwest Airlines’ strategic plan includes the primary initiative of integrating AirTran Airways, which they acquired in 2011, into one travel network, which allows Southwest to expand their low fare services into more markets.
Other major initiatives in their strategic plan include Rapid Rewards® frequent flyer programs, Fleet Modernization to the 737-800s, a New Reservation System, and International Capabilities (Southwest Airlines, 2013).
All of these initiatives are part of Southwest Airlines’ five-year strategic plan and are designed to increase Southwest Airlines’ market share by improving customer service and increasing customer satisfaction and overall efficiency. Rapid Rewards® is designed to increase customer satisfaction with airline rewards systems; fleet modernization will increase fuel efficiency and decrease greenhouse gasses; and the new reservation system is being put in place to enhance revenue management capabilities as well as other operational benefits to aid their expansion into international services (Southwest Airlines, …show more content…
2013).
According to McNamara, “strategic planning determines where an organization is going over the next year or more, how it 's going to get there, and how it 'll know if it got there or not” (p.1). Southwest Airlines is putting their plan into action, and they seem to know where they want to go. They are in the midst of their five-year strategic plan, which started in 2011. As of 2013, they have fully incorporated the Southwest and AirTran networks, allowing customers of both to book flights between the two carriers and travel between any of the 96 combined Southwest and AirTran destinations (Southwest Airlines, 2013).
Additionally, since the implementation of their rewards program, Southwest has seen increases in membership that have “exceeded expectations.” Because of this, customers of Southwest and AirTran redeemed approximately 5.4 million flight awards, which is up from approximately 4.5 million in 2012.
In 2012 Southwest Airlines ranked 26 of all companies in the U.S. in Harris Interactive’s The Reputations of the Most Visible Companies and had a reputation quotient (RQ) score of 74.6, which places them in the good to very good range of general public opinion (Harris Inveractive, 2013). Based on this, Southwest Airlines seems to be in good favor with the public and they carry an excellent reputation. Increased customer satisfaction means increased business. Southwest is on the path to achieve their strategic goals (Harris Inveractive, 2013).
Southwest Airlines Strategic Capacity Plan
The strategic capacity plan is a process that is used to balance the use of available resources, resulting in an optimum output that increases efficiency. In many corporations this involves a lot of attention to each step in the production process to ensure that little to no waste is created. There is an attempt to keep the cost of production as low as possible while maintaining the greatest quantity of goods and services that are produced and sold. “There are a number of factors that go into strategic capacity planning, including understanding customer demand and the ability of the company to adjust its operation to meet that demand” (Tatum, 2014, p. 1). There was no specific information found when searching for a strategic capacity plan for Southwest Airlines, but when reading through their annual report, one comes to the realization that Southwest incorporates their capacity plan into their strategic plan. This is based on how the strategic plan outlines how they are going to increase fuel efficiency by replacing old planes with newer models that have improved fuel economy, an initiative that started with their current strategic plan in 2011. As of their 2013 annual report, they plan to have 40 next generation planes in their inventory by 2014 and plan to have 547 next generation planes by 2027 (Southwest Airlines, 2013). Southwest Airlines has a number of initiatives that help them maximize use of available resources to increase profits. One initiative is fleet modernization, which includes upgrading their fleet to Boeing next generation 737 planes and Boeing 737 max planes. Another is their fuel initiative, which includes fuel planning and single engine taxiing. Both initiatives are designed to use fuel to maximum efficiency. All show Southwest Airlines’ dedication to improving efficiency in their fleet. Finally, the rewards program and improved reservation system shows their dedication to improving customers satisfaction (Southwest Airlines, 2013).
Portfolio Management Process
What is project portfolio management process? Project Portfolio Management (PPM) is the centralized management of processes, methods, and technologies used by project managers and project management offices (PMOs) to analyze and collectively manage current or proposed projects based on numerous key characteristics. The objectives of PPM are to determine the optimal resource mix for delivery and to schedule activities to best achieve an organization’s operational and financial goals ― while honoring constraints imposed by customers, strategic objectives, or external real-world factors (Rajegopal, 2007). PPM provides project managers in large, project-driven organizations with the capabilities needed to manage the time, resources, skills, and budgets necessary to accomplish all interrelated tasks. It provides a framework for issue resolution and risk mitigation, as well as the centralized visibility to help planning and scheduling teams to identify the fastest, cheapest, or most suitable approach to deliver projects and programs (Cooper, 1998 p. 2). In the early 2000s, many PPM vendors realized that project portfolio reporting services only addressed part of a wider need for PPM in the marketplace. Another more senior audience had emerged, sitting at management and executive levels above detailed work execution and schedule management, who required a greater focus on process improvement and ensuring the viability of the portfolio in line with overall strategic objectives. In addition, as the size, scope, complexity, and geographical spread of organizations’ project portfolios continued to grow, greater visibility was needed of project work across the enterprise, allied to improved resource utilization and capacity planning.
Finding information on Southwest Airlines’ project portfolio management process is not in the traditional sense. They have a Procurement Department, which is responsible for fuel management, facilities construction, and project management practices oversight - ensuring that they spend their valuable capital wisely. The procurement department works with suppliers, vendors and internal employees to ensure everyone is aligning with the company’s mission. Established in 1971, Southwest Airlines continues to be an innovative force in the industry, according to David Harvey, the airline 's senior director of network planning and performance. As Southwest has grown, there has been the need for much more cross-functional, integrated planning, now across 25 departments, Harvey said. "Our level of planning has ramped up and gone through a significant transformation." (Southwest Airlines, 2013)
Additional project management goals include coordinating and completing a new sophisticated reservation system, integrating Southwest 's recent purchase of AirTran Airways into its system and modernizing its aircraft fleet. To meet this demand Southwest Airlines has started to use to processes like Agile/Scrum to help run their projects more effectively.
Figure 1: Portfolio Management Process Flow
Project Selection Criteria
Benefit Measurement Methods can be considered a category of project selection methods, which employ various analytical as well as comparative approaches on how to select the appropriate project. Cost-benefit analysis, scoring models, benefit contribution methods, and economic models to name a few; are just some of the ways an organization determines the risk associated with selecting a project.
Aligning individual projects according to the organization’s overall strategic objectives may prove to be quite challenging. Certain tasks may be prioritized according to the interest of the project sponsor or management team without any rhyme or reason on a reactive basis; which can prove to negatively impact the project selection process. Without a method to prioritize the right project and tie any technological initiatives to specific business objectives; any collaboration efforts made by the team is misaligned and therefore a waste of time, effort and money (Unknown, 2013). To better identify and prioritize low-risk/high reward projects, streamline the company’s objectives and reduce operating expenses; it is imperative a business implements a standard scoring system and doesn’t deviate from it.
Depending on the organization, there are various scoring models to select from:
Number range and un-weighted
Using this model, a project will receive a point for each criteria met. Projects are chosen based on the total number of points. All criteria are assumed to be of equal importance
Range and weighted
Using this model, a project is scored according to a range (1-5) of criteria. This process allows for a more in-depth analysis of how a particular project aligns with goals.
Weighted
Using this model, the importance of each project is determined by how it impacts the organization based on the top priorities of the business. Each value assigned must equal one hundred percent (according to Gartner’s methodology):
Strategy (25%)
Financial (25%)
Technology (20%)
Process (15%)
Delivery (15%)
Program Management Plan
During the planning phase of a program, it is imperative the right people, methodologies and supporting resources are in place to deliver the project on time, within budget and to positively impact quality standards. In 2011, Southwest Airlines began a five year strategic plan to improve five critical areas of the business:
Integrate AirTran Airways into the Southwest Airlines portfolio
Improve the Rapid Rewards frequent flyer program
Modernize the fleet
Introduce a New Reservation System
Improve International Capabilities
Southwest Airlines is a company passionate about connecting consumers with what’s important in their lives. By addressing these targeted areas, revenue would significantly increase, the customer experience would be enhanced, associated unit cost would be reduced, the Southwest network would expand, positive attributes already affiliated with the Southwest brand would be sustained; Southwest Airlines will have the flexibility to manage the fleet’s needs from an economic, social and environmental perspective. The strategic goals set forth support continuous improvement designed to reduce operating costs, greenhouse emissions as well as assisting communities with recovering from natural disasters by providing a compassionate, humanitarian response to events (Southwest Airlines, 2013). Southwest Airlines is making strides to continue with forward movement with their five-year strategic initiatives. As referenced previously, Southwest acquired AirTran, which creates the opportunity for low fare itineraries with an emphasis in outstanding customer service, high quality, and low cost operations. The acquisition of AirTran directly supports the company’s strategy to attract more business travelers. Secondly, it opens up access to Atlanta’s Hartfield International Airport, the world’s busiest airport; provides expertise on international flights and expands its foothold in New York and Washington to directly compete with the perceived leaders in the industry- United, Delta, and Continental (Southwest Airlines, 2013).
In addition, connection capabilities between the Southwest and AirTran networks were fully deployed allowing customer to book itineraries between the two carriers. All 700 and 800 fleets were equipped with satellite-based Wi-Fi allowing Southwest Airlines to become the first carrier to offer gate-to-gate connectivity on personal electronic devices (Southwest Airlines, 2013). Other modifications such as maximizing the space inside the seating areas, updating the interior for a brighter color scheme, and installing more comfortable yet durable and eco-friendly seats were necessary to enhance the customer’s comfort, personal space and overall travel experience. Another process implemented, Southwest launched flight service beyond the United States extending service to Puerto Rico. These changes were made without negatively impacting employees through rifts and achieving their 41st consecutive year of profitability, which is a goal any other airline (Delta Airlines, United Airlines, or Continental) has yet to accomplish (Southwest Airlines, 2013).
After these changes were implemented, Southwest Airlines saw an improvement in their portfolio. The company’s overall profits increased by 93% to a whopping $805 million, there was a return on invested capital, total operating revenues were at $17.7 billion all despite a shaky economy. Southwest Airlines is hopeful they will remain on track to fully integrate Southwest and AirTran’s network and operations throughout the end of the year. Taking on AirTran’s international and remaining domestic markets and converging Southwest Airlines and AirTran’s frequent flyer programs into one rewards program is a priority for Southwest. Analysts have stated in the past Southwest was slow to adapt by failing to update its reservation software or not scheduling flights to leisure destinations frequently traveled and favored by Americans (i.e. Cancun or the Caribbean). To keep up with customer demand, Southwest Airlines is planning on launching full international service to Mexico City and the Dominican Republic at the end of the 4Q2014. These objectives are very important to maintain as newer rivals such as JetBlue Airways and Allegiant Airlines are threatening Southwest’s dominance in the low-fare trade thanks to efficient operations, lowers costs and attention to customer service.
Conflict Resolution Plan “Conflict resolution is the process through which the conflicting parties reach a settlement” (Sadri, 2013, p11). Due to the fact that conflicts in the workplace are destined to arise, conflict resolution is the solution to creating and maintaining a positive working environment. Without conflict resolution the organization would be in dismay, which would result in workplace indifference, low or lack of motivation from employees and ultimately high turnover rates. This is why conflict resolution is important in an every organization.
Southwest Airlines currently has a great approach to how they handle the conflict within their organization. They take several approaches to resolving conflict:
1. Those employees involved in the conflict are required to communicate with each other for the purpose of attempting to resolve the problem on their own. If they are unable to do so then management will step in to assist.
2. A meeting is held with both or all parties where they are allowed to state their issues in a controlled environment.
3. If the situation has yet to be resolved then managers hold what they refer to as a “Come to Jesus Meeting” where they engage in conflict management and resolution for an entire work day. Most if not all problems are resolved during this phase due to the constant dialogue between all parties and management.
Southwest Airlines addresses conflict as a team effort and makes sure that conflicts are handled immediately and appropriately to avoid a further escalation of conflicts. When a “Come to Jesus” meeting is deemed necessary, Colleen Barret, COO of Southwest Airlines says “We tell them this is not a disciplinary meeting. We are just moderators, the focus is on the employees” (Gittell, 2003, p3).
There are several different methods of conflict resolution that could assist Southwest Airlines further with handling conflicts in their workplace. One method that could end conflict between parties before they had to participate in the “Come to Jesus” meeting would be putting the parties in a team where they have to work together on a project. This could motivate and encourage them to put aside their differences for the benefit of the company and come together by collaborating and working towards a common goal. This would most likely end any competition between the parties and allow them to work matters out on their own.
Change Management Plan
The purpose of the change management plan is to define the steps used to identify and make necessary changes within the scope of a project (Collegiate Project Services, 2008). This section contains the change management approach, change control process and the roles and responsibility sections. The goal of the change management plan is implement procedures to effective manage change within the program to ultimately meet program goals (Collegiate Project Services, 2008). The program goals will be in-line with the CEO’s vision and the change management plan will also be a reflection of the CEO’s vision. The intended audience for this section is for the program and project managers and other senior leadership to support decision-making that is needed to manage change effectively under the organization vision.
The change management approach will establish the process and procedures for tracking, submitting, reviewing, evaluating, and final approval of change within a program or project. The CEO, Gary Kelly, will establish southwest Airlines change management approach. The major change for the company is to fully implement AirTran into the Southwest airline family. Southwest Airline new addition of AirTran needs to be seamless, within budgetary and time constraints, and in scope of the overall mission of Southwest Airlines. Gary Kelly’s end goal for the merger will be fully implement AirTran into one brand, one customer experience, and one flight schedule flying under the Southwest Airline flag (Southwest Airlines, 2013). This change allows customers to book flights for a combined 97 destinations including the international opened up by the merger of AirTran to the Caribbean and Mexico (Kelly, 2014).
Table 1: Roles and Responsibilities
Project Name:
Southwest Airline and AirTran Merger
Project Description Summary:
Southwest Airline purchase of AirTran into its network which will open up additional markets to the organization
Program Manager: Jeffrey Dietz
Responsible for the directing and managing all projects under the program to ensure the smooth transition of AirTran merger as a Southwest Airline company to fit the vision of the CEO.
Project Manager:
Trinece Henry
Responsible for the actual managing of the day-to-day operations of the merger of AirTran as a Southwest Airline company.
Change Management Manger:
Jonathan Alexander
Responsible for the documentation and tracking of changes within the program and projects.
Conflict Resolution Manager:
Aliyyah Simmon
Responsible for managing conflict and will assists project managers and other organization members to handle and
Resource Manager:
Shaun Sowers
Responsible for ensuring that the right personnel with the right resources are assigned to the right project within the program to achieve strategic business objectives.
Portfolio Manager:
Brandon Story
Responsible for the centralized management of portfolios within a program which includes collecting, prioritizing, authorizing and controlling projects to achieve strategic business objectives.
Resource Utilization Plan
Resource utilization is a critical aspect of project management because it organizes and defines employees’ tasks and schedule in the project plan. The resources utilization plan tracks the budget and costs of the project by assigning the employees rate and hours for their expected work. In addition, the resource utilization plan can be used as a metric to track project profitability, work efficiency and schedule efficiency. In addition, the plan can track an individual’s profitability and efficiency by calculating their utilization rate, which demonstrates how much of their time is being spent working on revenue generating projects. Another important metric that a resource utilization plan can measure is forecasted hours versus actual hours spent on a project to help improve utilization rates and increase project profitability. “Good utilization data allows companies to conduct capacity planning far more effectively than they’d otherwise be able to do because they have aggregated granular data on how effectively certain resources, skills, or expertise are being sold” (Holmes, 2013). Below is an example of a resource forecasting application.
Figure 2: Resource Forecasting
Holmes, Nicholas. “Utilization – The Key to Effective Project Human Resource Management” August 1, 2013. From http://www.precursive.co.uk/project-human-resource-management-utilization/
Southwest Airlines requires an efficient resource utilization plan for their employees and their fleet since they are a smaller, low cost airline. Southwest’s strategy requires high utilization rate of the fleet as well as lean and productive personnel, including elements such as efficiency in ground services and gate turnaround times. Operational simplicity assists with high resources utilization because Southwest only uses one type of plane, the Boeing 737. This keeps costs down related to pilot’s training, spare parts, inventory, and maintenance (Ala-Mutka, 2011).
Southwest’s success is dependent on its legacy systems that run numerous applications that support their operations. Their IT strategy aligns with their overall strategy by using only a limited number of vendors. This strategy is intended to help Southwest Airlines streamline operations, improve resource utilization, avoid paying for redundant functionality and more tightly integrate the systems that support its business. Any projects to upgrade or enhance legacy systems would require an effective utilization plan since resources are limited and the present processes must continue to operate while they are being improved upon. “Often, this means that a new process will be operating in parallel with the old process while the new process is being verified” (Harrington, 41). Project managers must be careful not to over extend resources.
Summary
A wise man once said, “if you fail to plan, plan to fail” and those words are so true. Every part of the program management planning process to include but not limited to strategic plan, portfolio management, selection criteria, conflict resolution plan, change management plan and resource utilization plan are vital to the success of a program. Southwest Airline made huge decision to acquire AirTran and the transition to merge to the two organizations, as one is large program. This is a larger scale of a program and it requires proper planning to execute the process seamlessly. In planning for a project of large-scale proper portfolio management to ensure that the projects within in the program are within the vision of the organization. Our research concluded that Southwest Airlines process and protocol are working due its success with the merger and current market share of US domestic market. As of now Southwest Airlines is the second by a small margin to Delta in the US.
Works Cited
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(2008). Project Scope & Change Management. Retrieved from Collegiate Project Service: www.collegiateproject.com/article/preliminary%20change%20management%20plan.pdf
Cooper, Robert G.; Scott J. Edgett; Elko J. Kleinschmidt (1998). Portfolio Management for New Products. Reading, Mass.: Addison-Wesley.
Gittell, J. (2003). The southwest airlines way: Using the power of relationships to achieve high performance. Summaries.com. Retrieved from: http://www.theclci.com/resources/thesouthwestairlinesway.pdf
Harrington, James H. “Business Process Improvement: The Breakthrough Strategy for Total Quality, Productivity, and Competitiveness” McGraw-Hill, Inc., 1991.
Harris Inveractive. (2013, February). Retrieved September 2014, from Harris Interactive: https://www.harrisinteractive.com/vault/2013%20RQ%20Summary%20Report%20FINAL.pdf
Holmes, Nicholas. “Utilization – The Key to Effective Project Human Resource Management” August 1, 2013. From http://www.precursive.co.uk/project-human-resource-management-utilization/
Kelly, G. (2014, August). Spreading Low Fares Farther. Retrieved from Southwest.com:
www.southwest.com/assets/pdfs/about-southwest/garys-greeting.pdf
McNamara, C. (2013, April). All about strategic planning. Retrieved September 2014, from Free Management Library: http://managementhelp.org/strategicplanning/
Southwest Airlines. (2013). 2013 Southwest Airlines One report. Dallas: Southwest Airlines.
Southwest Airlines. (2013, February 14). Southwest Airlines and AirTran Airways Begin Connecting Networks. Retrieved from Southwest Airlines: www.swamedia.com/releases/southwest-airlines-and-airtran-airways-begin-connecting-networks
Tatum, M. (2014, September 01). What is strategic capacity planning. Retrieved September 2014, from Wise Geek: http://www.wisegeek.com/what-is-strategic-capacity-planning.htm