Human Research Management - Southwest Airlines

Q u e s t i o n s:

Distinctive culture – what does it mean? Describe SWA organizational culture. How is SWA organizational culture connected with SWA business strategy?

What makes Southwest employees so highly motivated and flexible despite the fact that they are 84% unionized?

Strategic HRM: Put SWA HRM concept in the frame of HRM Harvard model. Recognize management philosophy as one of situational factors. Shortly describe each of four aspects (HRM Policy Choices) SWA HRM.

Sourcing: Describe SWA way of sourcing people. What is your opinion about SWA way of sourcing people?

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1. “I've tried to create a culture of caring for people in the totality of their lives, not just at work. There's no magic formula. It's like building a giant mosaic – it takes thousands of little pieces… The intangibles are more important than the tangibles. Someone can go out and buy airplanes from Boeing and ticket counters, but they can’t buy our culture, our spirit de corps.” Herb Kelleher, CEO Southwest, Wall Street Journal, 8/31/99.

Southwest Airlines (SWA) organizational business strategy principles are based on their culture. In return, their culture (influenced by their managerial philosophy, vision and type of organization) motivates people to ensure the Company’s success. SWA has a soft HR management strategy approach - employees are the most valuable Company’s asset and its competitive edge (metaphorically, the “heartbeat” of business functioning). The fundamental business strategy of SWA and the spirit of their people have never been changed throughout the years.

SWA’ business strategy is defined by low cost leadership (low fares, low labour costs, fuel efficiency, controlled maintenance costs, low commissions, competitive supplies, economies of scale, …), but by service excellence and customer loyalty too, as well as by employees’ flexibility, supported and implemented through corresponding HR policy and practice. The employees are encouraged to take initiative, to make their own decisions, to undertake their own efforts, to assume responsibility and to operate even outside the formal structure of the Company. All together, the SWA’ strategy concept is simple but extremely difficult to attain – to hire adequate people, provide great service and offer low fares. Employees’ job satisfaction (job security, competitive wages), loyalty, dedication, cooperative spirit, high productivity, teamwork are the key elements to maintain low costs, build a unique culture, and make company successful.

The organizational culture was shaped by Kelleher’s leadership. Kelleher treated all the employees as a lovely efficient and loving family, putting in prime position the community. His daring personality had strong influence on the culture’s characteristics, outrageous service initiative, hard-work, high-energy, fun, local autonomy and creativity. Colleen Barrett created “Culture activities” departments, while “Culture Committee” was made up of representatives from those departments, and was dedicated to nurturing such (people’s) culture. Among other, SWA’ culture is also reinforced by: trainings at their festive learning centre “University of People”, encouragement of in-flight contests, and recognition of personal initiative. Even before the customer one, SWA put at the first place the relationship with employee, giving them so all latitude and encouragement they need to do their jobs better than commonly thought possible (rewarding their positive efforts, achievements and initiatives in many different ways, placing on “wall of fame” photographs of employees taking part at company’s events, customers’ letters, news articles, etc.). In this respect, illustrative may be the Colleen Barrett’s introduction of practice of sending birthday cards to all SWA employees. In 1989, the Fortune magazine named SWA to be “the best company to work for” in America.

While articulating their vision, SWA strategic leadership defined the basic value system, which they made transparent through their culture.

We could say that SWA practically fairly closely follows the key organizational values taught by Ann Rhoades: a) to be compassionate (to internal and external customers); b) to have a positive attitude; c) to want to work and to use common sense; d) to have a great sense of humour (humour reduces stress); and e) not to be an elitist.

Unique culture and favourable labour contracts (with rather flexible job description in there that are accepted by their local trade unions) are ...

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While articulating their vision, SWA strategic leadership defined the basic value system, which they made transparent through their culture.

Unique culture and favourable labour contracts (with rather flexible job description in there that are accepted by their local trade unions) are the keys of SWA competitive advantage towards other airlines. SWA organizational culture is transparent, but very difficult to replicate. It is unique and based on distinct characteristics and/or competences [such as first profit sharing plan (1974), approx. 85% unionized employees, member of Fortune 500, one way airfare, leader in low customers complaints, best on-time performance, best baggage, handling]. Have the same organizational mind turns to be prerequisite for being a successful competitor to SWA. Described culture helped SWA to face most various challenges (including the 11th September terrorists’ attacks, where Southwest’s response laid emphasis on taking care of employees and relative relationships). The Company expects from their employees to live at the “Southwest way” – which is to have a warrior spirit, servant’s heart, and fun-loving attitude. Such philosophy and values have depicted the SWA culture for past 38 years). Herbert D. Kelleher, co-founder and chairman of the Company, described the culture as glue that holds its organization together, underlining that it encompasses beliefs, expectations, norms, rituals, communication patterns, symbols, heroes, and reward schemes, that it is a way of life.

2. “Even unionized, labour relations are ''excellent'' - Southwest people are helpful, everyone helps out to make the job done. Pilots help flight attendants pick-up the plane between flights, ramp service agents (baggage handlers), notice the condition of the planes, and pilots sometimes carry luggage, especially if it means achieving an on-time takeoff.” Ann Rhoades

SWA used

The above described circumstance is the distinctive quality of SWA. As it belongs to one of the nation’s most unionized industries, there is no wonder that substantial majority of SWA employees as well, are organized in labour unions (latest data operates with the figure of 87% of SWA employees being unionized). However, cooperation between employees and management was substantially facilitated thanks to motivating corporate organizational culture. Of pivotal importance was Kelleher’s success in persuading the unions to give up narrow job classifications and restrictive work rules (which often impede workers productivity) and to accept flexible employment practices. Thanks to it, employees could be engaged to perform broader functions and it would be possible to cross-utilize crew members, to achieve a record turnaround time, and to save money (e.g. from the time a plane lands until it is ready for takeoff it takes approx. 20 minutes for SWA, while the average of other airlines is 40-60 minutes). In order to ensure employees “ownership” for Company’s everyday operations, SWA regularly involves employees’ representatives and union officials in strategic business planning and HRM processes related to staffing and other issues, while, at the same time, interconnect employees’ compensation / salary schemes to Company's business success / results.

SWA’ strategy, unique and powerful culture (esprit de corps), managerial philosophy, HRM practice – all together promote motivation, flexibility, high labour productivity, and contribute to Company’s high quality customer service, while keeping labour and other costs under control. Company is deeply concerned about employees well being, and is sincerely committed to provide them with job security. Once hired, SWA provide a development and supportive work environment that gives employees freedom to be creative, initiative, responsive, and responsible, making so positive difference in common interest. Being well aware of the fact that nothing hurts the company as layoffs, Kelleher managed SWA to be well known / characterized as no-layoff policy. Such policy not only provides additional security for the employees, but also their strength, loyalty, trust and motivation. Besides those and many other incentives as to keep their employees motivated for their job, SWA even provide the profit sharing plan for their employees (see the previous page). Quite descriptive in this context may be Johan Magretta: ''If employees are happy, satisfied, dedicated and energetic, they will take real good care of the customers. When the customers are happy, they come back. And that make the shareholders happy''.

3. “The people of Southwest Airlines are the creators of what we have become and what we will be. Our people transformed an idea into a legend.”

H. Kelleher, Chairman Emeritus

The first concept of HRM - Harvard Model, is characterized as situational, and represents the basic framework for HRM. HRM itself is determined with two factors - stakeholders and situational factors. It is evaluated through HR outcomes and long-term consequences. The managerial philosophy, as one of situational factors, is the basic system of values which directly shapes the organizational culture.

SWA follow soft approach to Human Resource Management, meaning that they consider HR to be the most valuable asset of the Company. SWA management philosophy is characterized by three key principals - cost control, customer service and position that employees come before customers. CEO Herb Kelleher, by explaining SWE’ success, makes clear: “you have to treat your employees like your customers. When you treat them right, then they will treat your outside customers right…You have to take the time to listen to people’s ideas…You don’t want to constrain people in their thinking”.

SWA HRM policy choices are its activities and decisions that crate the nature of organizational and employees relationship. Those policy aspects are:

A. Employee influence – SWA Managers and executives follow an open door-policy, actively listening to employee concerns, options and suggestions for reducing costs and improving work efficiency. Employee-led initiatives are common (e.g. pilots were helpful in developing new protocols for takeoff and landing that save fuel). Those are facilitated by the circumstance that SWA employees enjoy substantial authority, decision-making power, as well as opportunities to make innovations. They are encouraged to take individual responsibility for certain actions, as they are aware that won’t be punished if it eventually doesn’t work out. Employees’ initiatives can also be taken when together with unions’ officials and managers participate in decision making process on various topics (such as strategic planning, or staffing issues). The circumstance that SWA “Personnel department” is renamed to “People department” speaks for itself in regards to importance and value placed on employees.

B. Human resource flow; In flow is based on planning characterized with short-term actions and tactical manoeuvres as to meet competitive requirements. SWA recruit and select employees – for attitude, and train them – for skills. According to Kelleher, SWA “(We) can train people to do things are concerned. But there is one capability we do not have and that is to change a person’s attitude. So we prefer unskilled person with good attitude…” SWA recruit employees by means of newspaper advertisements, career fairs, and Internet job listings. Many candidates apply because of Fortune listing of SWA – being one of the best companies to work for in America. Recruitment ads were designed to capture attention of people having “Southwest’s personality profile” defined as “customer service focused, extroverted with a good sense of humour, unselfish, motivated to help, community spirited and team-work oriented, different in their thinking”. All job applications are processed by the People Department. Selection is based on group interviews and presentation exercises, while another round of interviews consists of individual interviews with experienced working employees (peers), recruiter and department representative, who follow principles of targeted selection. Peers have specific importance in the selection process as after interviewing candidates they make recommendation to hire to the Department. Internal flow – evaluation of employees’ performances and potentials practiced by SWA bases on analysis of their individual and group work performance results. It also concentrates on the analysis of their behaviour (whether in accordance with job rules, management philosophy and organisational culture). SWA is well-known for internal promotions (actually, 80% of all promotions are dealt with internally), where employees can either apply for higher ranking position or to be recommended for it). SWA’ own University for People (comprising of two campuses) provide cross-trainings, as well as number of different professional development programmes. Out flow – SWA value its employees, they never lay them off. So, practically, employees can either leave the Company following their own decision, or to be retired.

C. Reward systems – Compensation schemes are tied to Companies’ success, they are performance-based and vary by employee’s position. Overall compensation level(s) at SWA are still competitive. Their pay scales are close to industry average and its benefit packages are relatively good when compared to other airlines. But, it is worth mentioning that SWA introduced (back in 1974) the profit sharing plan for senior employees, the first such plan in US airline industry. In 2001, SWA had 12 different stock option programs for various employee categories. Company’s stock ownership also characterizes the compensation scheme at SWA. All employees are entitled to profit sharing, what is the form of retirement program, too.

D. Work systems – It is permitted for employees to be engaged to perform broader job functions. They are so cross-utilized crew members, and it facilitates achieving a record turnaround time and relative savings (pls. see the page 3).

4. ''...hire and train people to fit into its culture and mirror the Southwest spirit''. SWA: ''Culture, values and operating practices'', p. 59, Thomson & Gamble

The core answer to this question is that personal values must be in line with organizational values (culture). It is the SWA’ key for success in sourcing people. SWA takes a rigorous consequent approach in hiring new employees. In my opinion, following the HRM soft approach, such way of sourcing people is crucial for achieving real competitive advantages.

SWA use their unique hiring process, named “Peers screened candidates and conducted interview”, which practically results in working pilot hiring new pilots, or working gate agent hiring new gate agents (pls. see previous page). Actually, SWA screens its top employees in specific job function (e.g. pilots, baggage handlers, ground crew members, or other), identify their relative common strengths / qualities, and afterwards use those qualities to identify best suited candidates during the interview process (called “targeted selection”). SWA hire for attitude as much as for aptitude (''We want people who do things well, with laughter and grace''). Sourcing people executed in such manner, turns to be the SWA’ competitive advantage.

Through this plan and others, SWA employees own about 10 percent of the Company stock.

SWA have rather reduced hierarchical structure, as there are only four levels of management between a frontline supervisor and the CEO.

SWA even encourage nepotism, as amongst their employees there are 400 married couples.