Southwest Airlines

Abstract The following paper is a reflection upon the research into Southwest Airlines. The research focused on the people management strategy of the company. The approach that is used to reward and motivate employees will be discussed in detail. The companys unique culture will be examined. The most appealing and concerning aspects of the culture will also be addressed. The companys ability to attract and retain employees will be examined as well. The greatest advantages and disadvantages will be covered. Specific recommendations for strengthening Southwest Airlines workforce strategy will also be included for discussion. The paper will close out with a conclusion that restates the main focuses of the paper.

Southwest Airlines People Management Strategy The Southwest Airlines mission statement to its employees states the following: We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer (About Southwest Airlines, 1988). The people management philosophy is based on the relational coordination theory. According to this theory coordination of employee talent occurs through frequent high quality communication. The theory calls for mutual respect, shared knowledge and shared goals in order to achieve the desired outcomes. It has been noted that relational coordination has significant positive impact on key measures of performance, including efficiency and quality (Hoffer-Gittell, 2010). This enables Southwest employees to have a relaxed and joyous environment that encourages productivity. Rewards and motivation As noted in module 5 lecture 1, motivating employees can be either financial or nonfinancial. Southwest Airlines financial motivation a 401K plan, profit sharing and employee stock purchase plan. The company matches every dollar of the employees 401K contribution up to 7.3% of their salary on a pre-tax basis. Each year the company shares its profits with the employees because without hard working employees there would be no profit. In 2010 there was a $32 million contribution to the profit sharing

program for employees as well as $150 cash bonus. Each year, the profit sharing calculation is based on percentages of employees wages. The employee stock purchase plan allows employees to purchase company stock with a 10% discount (About Southwest Airlines, 1988). The non-financial rewards include free flights on Southwest, discounted flights with competitors, employee recognition and the ability to influence companywide policies. Immediate family members of employees fly free to any destination that Southwest travels to. The discounted travel on competitor flights are subject to availability since some competitors to not participate. Each month the employee of the month is chosen and recognized by the company and placed on the companys website. The adoption of employee ideas can be seen with the adoption of the 10-minute turn around rule established in 1972. This rule is simple; planes make money while in the air, not sitting around. Company Culture The company culture at Southwest Airlines is a friendly laid back family atmosphere. The atmosphere promotes productivity and ingenuity amongst its employees. The companys culture is a direct reflection of the corporate culture. The corporate culture calls for employees to make it everyones responsibility and own it. Southwest has also created two culture committees to ensure that cultural standards are being met. The main focuses of these committees are to make sure the focus is kept on the culture (Oswald, 2009). The cultural components are also part of the expectations that leadership positions are expected to have. If an employee does not have the cultural values that Southwest

embraces, they will not be promoted to leadership positions. In the annual performance appraisals that employees receive, there is a section dedicated to the cultural expectations. It was not unusual to see former CEO Herb Kelleher checking luggage, joking with customers, booking flights or passing out peanuts on flights. It is this kind of mentality that Southwest has been able to use to differentiate it from its competitors. The fact that the CEO of the company had a sense of humor was the most appealing aspect of the company culture. It is not often that someone of that position will share laughs with the blue collar workers who make the company run. This same mentality that former CEO Kelleher had is inspiring on so many levels. It shows that even though he may have been the CEO, he was not too good to perform any task that the airline had. Kellehers personality and demeanor is a leadership trait that many current CEOs can learn from. The only concern of the culture that raises an issue is the integrity of the employees. If an employee makes a mistake they may be likely to use deception to avoid being punished for their mistakes. As the culture calls for a bubbly personality, an employee having a bad day may not get a promotion based on their issues. This not only seems unfair it is absurd since we all have days that we consider bad. Given todays economy, an employee should not be punished if they are not focused due to issues or concerns that are out of their control. Employee attraction and retention The employee attraction and retention can be traced to the companys innovative work and the strategies of its human resources department. The company does not put strong emphasis on the creation of formal organizational structures as seen in other

environments. The company instead focuses on an informal structure and encourages employees to participate. Their strategy has given them a dedicated workforce that is highly committed to customer service and high quality. The human resources development ensures that all employees are trained in major work areas. The employees also are encouraged to take employee relation courses, decision-making, stress management, career development and safety. Jack Welch points out that any strategy is dead on arrival unless a company brings it to life with people the right people (Welch, 2005). Southwest Airlines treats its employees right, and the employees reward the company with loyalty. The profit sharing plan was the first in the airline industry in 1973. According to Southwest Airlines, their current employee retention rate is 92.3%. During the times of September 11, 2001, more than 32,000 employees gave back some of their pay. They did this to help the company through a temporary difficult time. The competitive advantage that Southwest has over competitors is the benefits, which include free flights. During a time when the economy is in a recession, many people cannot afford travel by airplane. The employees can reap this benefit from day one of their employment (About Southwest Airlines, 1988). The percentage thats matched on employees 401K contributions are hard to match by competitors. They also have great medical and dental benefits for their employees. The disadvantage is that on front line jobs it is very likely that you will encounter unruly customers. It takes a great deal of patience to be able to separate this and not take work home with you. This disadvantage can also be seen as a pro because it teaches employees how to handle difficult and stressful situations. Learning to deal with difficult

people can be an asset in any industry. This is a soft skill that the employee can take with them wherever they may choose to go. Recommendations It would be recommended that Southwest Airlines extend the free travel to more than immediate family members. The extension would only be applicable when the employee accompanies the flying parties. This would increase employee moral as employees would be able to fly close friends to various vacation spots around the world free of cost. The limit on persons not family would be four per trip including the employee. Being able to share such a company benefit with other friends could be very beneficial to Southwest. It would also be recommended that every employee takes a two week vacation during the year to enjoy the free travel perk. These perk changes would be implemented to boost employee morale. Southwest has done an excellent job doing so thus far, but these additions will further reduce the turnover ratio. Conclusion The people management philosophy at Southwest Airlines is a strategy that they have been able to capitalize upon. This strategy has afforded the company the opportunity to reward and motivate employees while maintaining loyalty. The company culture has set them apart from their closest competitors. The culture along with strategic management has both attracted top performers and retained them. The recommended changes would further lower the turnover ratio from a mere 4% to less than 2%.

Bibliography About Southwest Airlines. (1988, Janurary). Retrieved February 19, 2011, from Southwest Airlines: http://www.southwest.com/html/about-southwest/index.html MBA 6220 People Management - Module 5 Lecture 1. (2011). 1-6. Fernandez-Araoz, C. (2007). Great People Decisions. Hoboken: John Wiley & Sons, Inc. Hoffer-Gittell, J. (2010, August 10). Relational Coordination: Guidelines for Theory, Measurement and Analysis. The Heller School for Social Policy and Management. Waltham, MA, United States: Brandeis University. Oswald, D. (2009, November 29). Corporate Culture Done Right - Southwest Airlines. Retrieved February 19, 2011, from HR Hero: http://blogs.hrhero.com/oswaldletters/2009/11/29/corporate-culture-done-rightsouthwest-airlines/ Welch, J. (2005). Winning. New York: HarperCollins Publishers, Inc.