SHRM Assignment 2

Varsha Kulkarni (H048-15)

Answer 1:

Superio
r
Custom
er
Service

Lower
Cost

American Airlines
Service Improvement Process (SIP)
It was designed In a way to empower front line employees to resolve customer
conflicts and help them with vouchers of travel, food, lodging and cash keeping
customers happy
LEAAP and TEAM
LEAAP was meant to incentivize on time departure and avoiding baggage
mishandling for ramp service workers and on time resolution of maintenance
problems for mechanics.
This helped making customers satisfied.
South West Airlines
Keep internal customers happy
SWA kept its employees happy and motivated and gave them respect which
helped them keep external customers happy
Employees Empowerment
Employees do together what they need to get a passenger on board properly.
Incidents like taking care of customers dog for two weeks and escorting an
elderly passenger to next stop in order to ensure she was able to change planes
shows the Companys commitment towards customers.
SW airlines won the Triple Crown 24 times for:
On time Performance
Fewest lost bags; and
Fewest number of customer complaints

American Airlines
Employment Security:
Though the benefits and salary provided was less, AA provided employment
security.
This helped reduce the costs as well as improve the employee performance.
Wage Negotiations
The 1989 TWU negotiation resulted in a performance based reward system for a
smaller percentage increase in base wages.
Two tier Compensation
All employees hired under the new contract would start at significantly low wages
while existing employees continued under the existing agreement.

In exchange to permanent labour cost reduction, lifetime job security and

increase in the tenure of union membership were provided to existing union
members. Internal growth and two tier wages is mutually reinforcing package
which resulted in reducing average labour costs.
Merging the tiers
Agreeing to the trade unions and entering into a contract to increase the salaries
for pilots and reducing the merge point of co-pilots from nine to six years was not
in line with the low cost strategy.
However, the salaries that were given to front end employees was far less
compared to those of pilots. Also, the employees could note the paradox of
opposing Crandalls preoccupation with cost cutting while applauding his cost
containment strategy for helping to create rapid growth and opportunities.
Decentralisation-Pushing decision making downwards
As an approach to make a change in managerial culture, decision making was
pushed downwards and this increased information flow to employees.

SHRM Assignment 2
Varsha Kulkarni (H048-15)

Consequently many front line employees were operating without any direct
supervision thereby leading to lower costs
South West Airlines
Benefits
Southwest airlines contained labour costs by curtailing on benefits. They did not
offer club memberships, company cars and separate hotel stay for officers.
Recruitment
In order to contain the labour costs the SWA hired very less number of MBAs and
they preferred people without extensive industry experience, what mattered most
was the cultural fitment.
Also, below market wage were offered to clerical and management positions;
however there was enough flexibility option provided as an advantage where the
employees had an option of working for more hours to earn more.
Team Work
A culture of informal teamwork and helping each other was encouraged where
even a pilot could help in cleaning the aircraft or check passengers at the gate or
loading the bags.
This helped in maintenance of a turnaround time of 15minutes, despite the fact
that gates are manned by single agent and fewer ground crew.
This further helped them to spend an average of 11 hours in air daily as
compared to industry average of 8 and earn more revenue at low costs. Low fares
frequent flights help to increase passenger volume

Higher
Employe
e
Producti
vity

American Airlines
Commitment to leadership (CTL):
CTL was a program through which every employee would feel responsible towards
meeting the corporations business objectives. Increased information sharing and
joint decision making, helped increase the employee productivity through
increased accountability.
Achieving right balance between flexibility and rigidity helped employees become
accountable of their decisions.
The Peak Performance through Commitment (PPC) helped shift the supervisors
away from the punishing behaviour to coaching, counselling and recognition as a
means for motivating employee performance.
Cheap Travel
Employees were compensated with unlimited stand-by travel on AA flights on a
very cheap rate. The effect of pass on recruitment, retention and compensation
was profound.
The Quality of Work Life Program (QWL)
It was intended to make supervision less authoritarian. Supervisors were
encouraged to seek input from employees on decisions that affected them.
Due to this, front line employees increasingly found themselves simply operating
without direct supervision.
Presidents Conferences
The program was aimed to improve productivity and efficiency through extensive
communication and question and answer sessions.
South West Airlines
Leadership at Southwest
Herb got best out of employees who work for him. He created a culture of
inclusiveness and promoted professionalism to be worn lightly. Barrett, its human
resource professional also reflected the relaxed management style.
Recruitment:
It ensured that they are very much selective in its recruiting to hire highly

SHRM Assignment 2
Varsha Kulkarni (H048-15)
productive employees whose attitudes and behaviour matched with those of the
company.
They recruited employees who were team players and adaptable to the
environment of SWA so as to make them feel committed to their work.
Training Programs
Southwest had all in-house training programs. This helped their employees to
gather desired skills and use them in their daily work. It reduced the cost of
conducting programs outside.
New Hire Celebration: Induction program
80 hours of training for supervisors
The Climb: Outbound program
Friendly Trade Union and employee relations
In spite of the fact, there were nine unions at Southwest; Herb could get union
people to identify personally with the company.
There were hardly any clashes between the management and union and work
was carried out smoothly.

Answer 2:
American Airlines
HR Strategy
Keep the
customers
happy at any
cost

Explanation
The value that was followed to make
customers happy was- Never let a
customer leave the ticket counter
unhappy.
However the employees were not
granted enough empowerment to make
decisions
This resulted many a times in spending a
lot of money to make customers happy.
For e.g. When a customer lost baggage,
they gave her a brand new bag
The rewards included travel passes and
its perceived value far exceeded the
monetary compensation and biggest
benefit -lifelong Employment

Rewards and
benefits

Compensation
Strategy

After the new contract was agreed upon

in 1991, salaries that were paid to pilots
increased and the profit sharing
percentage went high up (2.6% to 6%).

Focus on
Quality of Life
issues

The Peak Performance through

Commitment (PPC) i.e. program that

helped supervisors moved the focus from
punishing to coaching and counselling.

Whether Sustainable or Not?

No
This only helped in proving that
some customers cannot be
made happy, you do anything
you can.

Yes
It was sustainable because the
employees would be sure of
their jobs and could focus more
on performance even in the
times of downturn
No
It contradicted the efforts of AA
to contain the labour costs
giving rise to internal inequity
due to wide gaps in the salaries
of pilots and front end
personnel.
Yes
It helped the employees
understand their performance
had failed to meet standard and

SHRM Assignment 2
Varsha Kulkarni (H048-15)
Decentralizatio
n

Through this strategy, AA tried to

increase the flow of information and
push the decision making down the
hierarchy.

HR Strategy
Keep
customers
happy but use
your common
sense

Explanation
The employees were given enough
empowerment to take their own
decisions in order to make customers
happy. However, the efforts made were
not supposed to contradict their low cost
strategy.

securing their commitment to

improving it
Yes
It reduced the need to employ
more supervisors reducing the
payment of higher wages

South West Airlines

Recruitment

While they recruited people, apart from

the competencies they took into account
the attitude and the cultural fit. They did
not recruit person who was not
comfortable with the environment

Compensation
Strategy

Benefits and
Rewards

Training

Due to the cost leadership followed at

SW airlines, the salary that was provided
to each employee was not at par with
the industry.
However, the opportunity was provided
to the employees to earn more wages by
working more.

No club membership, no company cars

and stay in same hotels for officers and
crew members.
The focus was on learning and not
blaming others.
The management is committed to
provide the employees equal
opportunities for growth.
Creativity and innovation are encouraged
The employees are given same respect
and caring attitude within the

Whether Sustainable or Not?

Yes
The employees felt the feeling of
being committed to their work
and customers.
It also helped them in using their
own discretion in helping the
customers and has
accountability of the impact of
their decisions
Yes
The rate of turnover gets
reduced since people feel
committed to their work and
their organization
Since peer recruitment policy is
followed, the feeling of
commitment towards team
increases and i productivity
increases
Because of comfortable and fun
environment, people like to work
effectively and loss of training
costs gets reduced due to low
turnover ratios
Yes
The employees do not work just
for the sake of working. They
work with a feel that the salary
they would get is attached to
the work they do.
Productivity of employees
increases
Yes
It leads to cost reduction
Yes
In a service industry people are
valuable assets and valuing
them will yield required results

SHRM Assignment 2
Varsha Kulkarni (H048-15)
Team Work

Leadership
philosophy

organization expecting to share both

within and externally.
The strategy here followed was that of
shared work.
It increased team building and cross
functional knowledge helped employees
do each others work.
Leaders helped disseminate the
information among all employees and
gave them freedom to make decisions
giving rise to innovative ideas.
They promoted each employee to spend
one day in the field doing frontline job.

Yes
Reducing costs will help achieve
low cost strategy

Yes
It promoted team building