Southwest Airlines Case - Essay Example

Q1. How did Southwest use Human Resource Management practices to ensure the success of their business model? A. Ever since its inception in 1971 Southwest Airlines has been a star. It has never suffered a loss, even during the turbulent years when almost 40% of the US Airlines either applied for bankruptcy for survival or became defunct. It is a low cost/low fare carrier that depends on its low fares, short hauls and the shortest turnaround times. The fares are at least 30% below its competition, maximum flight time is 65 minutes between two points, and shortest ground time that is routinely 15 minutes between landings and takes off of an aircraft. It has won the monthly triple crown 24 times for on-time performance, fewest lost bags and lowest number of customer complaints 24 times However the real reason of its success is its remarkable Human Resource Policy and its Organizational Culture. South west believes, and practices, that its employees are family and the culture is entirely informal. Teamwork is the watchword and practiced from top down. The entire strength of 14000 plus employees work with each other, help out each other, indeed reach out to comfort and support co-workers facing difficult times even in private lives. The company has nine labour unions but they are nowhere like their counterparts in other airlines. In the last decade there has been only one strike lasting six days by machinists. It has dominated the Californian skies for over two decades and now in 1994 controls 45% of the market share of aviation sector. It has the lowest cost per available seat mile in the industry at 7.1 cents that is 30% lower compared to its nearest rivals United and Continental. It is a lone operator that has no code sharing arrangement with any other airline and flies from point to point with no concept of hubs. People management has always fascinated everyone and various theories have been expounded to explain how people act and react in different situations. The primary image of an organization is akin to family, clan or tribe where relationships, needs, feelings and skills are the characteristics of its members. The objectives are empowerment, liberation, fulfilment and self actualization of both the individual and the group and the challenge is how to develop attitude to achieve this goal. There are three assumptions to all HR theories. Organizations serve human needs. People and organization need each other for this service. It is critical that people and the organization are in complete harmony to fulfil this purpose. Abraham Maslow (1954) described this in a hierarchical manner starting with human psychology, safety and security, belongingness, self esteem and finally self actualization. According Maslow employees have a basic human need and a right to strive for self-actualisation, just as much as the corporate directors and owners do and by this fulfilment the organization becomes stronger, competitive and profitable. Chris Argyris (1957) argued that conflict was an inherent part of the issue and the result of skill was monotony of work. This dehumanizes a person and leads to conflict. Frederick Herzberg (1959) propounds that there are indeed only two factors that motivate a person to work and they are hygiene and motivators like self actualization. Hygiene does not motivate but its absence will reduce motivation and a good hygienic environment enhances motivating factors like achievements, responsibility and advancement. He further states that increase in salary without better hygiene and the motivators will result in disaster. Negative or Positive attitude of the management is explained by Douglas McGregor (1960) in his theory X and theory Y. According to him a negative attitude of the management, theory X, presupposes that workers are lazy, passive, without ambition, willing to be led and resist change. Hence management is through control, coercion, threats and punishment. This results in low productivity, antagonism, unionism and subtle sabotage. In contrast positive management, theory Y, believes that people are motivated, active and interested, ambitious, prefer to lead and are interested in change. Hence management is through open systems, communications, self-managing teams and peer controlled pay systems. The result is high productivity, bonhomie and care for the organization. Most industries operate on the X theory and therefore there is the usual mistrust and struggle between the management and the workers. Unions are stronger and teamwork is only a byword. Self actualization is narrowed to self empowerment at the cost of others. The abysmal results are there for all to see. Bankruptcies and failures abound and productivity is at all time low. Southwest has adopted the policies as expounded by Abraham Maslow and Douglas McGregor’s theory Y, and extended them even further. The most valuable assets of any business are its people. This is one fact that is singularly recognised at Southwest. Therefore they have a crated a People Department instead of the HR department to give it a more humane face. Whereas in the aviation industry and indeed in other industries too, Human Resources represent a professional, structured and therefore very stiff-collared concept, at Southeast it means entirely the opposite. Integrity and ability to mix and not qualifications and skills are more valuable and get preference in hiring. More importance is given to the concept that the entire organization is a large family and therefore the hierarchy is only for recognition of prime responsibility and not for power. Normally the business concept is that customer is king, but at Southwest the employee as placed at par with the customer. They have empowered the employee to such an extent that he or she becomes an integral part and goes out of the way to preserve the company’s interest above their own. Where else can one find flight attendants cleaning the aircraft for a quick turnaround, pilots helping machinists shoulder to shoulder to ensure a trouble free flight, and top managers attending Gates or Reservations to assist smooth transition of passengers? All these activities are regularly performed at wages and salaries that are lower than the industry and work is for longer hours. In fact people are prepared to take a salary cut to join Southwest. The predominant factor is that since the concept of family has been introduced, a new dimension has been factored in. Family means fun, integrity, teamwork, shared goals and informal but disciplined atmosphere. This is the glue that binds the entire workforce and eliminates power struggles and conflicts. Everyone knows each other’s usefulness and instead of encroaching on someone’s space the attitude is of mutual respect. This attitude is not found anywhere else in the industry where power struggles between different work groups is most common. The result is enormous increase in productivity that compensates for the low fares and brings in profits. The huge success of Southwest is certainly the result of its human resources policy. Q2. What answers would you suggest Ann Rhoades gives to the questions in the last paragraph? A. In July 1994 the rivals United decided they had enough and decided on a business model that was unashamedly a copy of the Southwest operation plan. They decide to start an airline-within-airline on the West Coast by introducing low fares comparable to Southwest and high frequency of flights. They planned to bring down cost per available seat mile to 7.4 cents. They plan to do all what Southwest does and believe their frequent flyers will remain loyal as they want to add on miles for benefits. They call this the Shuttle and plan to increase the number of flights to 300 by the year end. As the operations are planned in the area that is dominated by Southwest it has become a cause of concern for them as it is likely to affect it in some way. Southwest has called for a meeting of its top executives, especially in Human Resources, to discuss how to deal with this new threat and devise strategies to surmount it. Southwest feel they have a serious threat from the announcement by United to float another airline that will be low fare/low cost like them. But the management at Southwest should take heart from the fact that their People Policy that has perched them on top will keep them there and should not be too perturbed by United’s latest move. They must recall that one year earlier in 1993 Continental had done the same on the East Coast by introducing low cost/low fare adventure calling it CalLite which has so far lost billions on a one year operations. This was due to the fact that they could not match the standards of operations that Southwest has set as a model. Of course this does not mean complacency. Southwest must improve on its People centric programmes even more and to make them even more caring to ensure that they remain on top. The business model that they have developed does not have room for ordinary retaliatory practices like introducing long haul and higher fares. However it may be profitable to make inroads in to United’s areas of operation, but with the same business model as existence will be a good move to unsettle the rivals. They must not fall into the trap of copying anything that their competition does. They must stand apart on their HR policy and performance and they will win the battle. This is the answer that Ann Rhoades’ should give to the management. Bibliography Argyris, C., (1960). Individual actualization in complex organizations. Mental Hygiene, 44(2), 226‑37. Herzberg, F., Mausner, B., & Snyderman, B. B. (1959/1993). The motivation to work. New Brunswick, NJ: Transaction Publishers Maslow, Abraham., Motivation and Personality, published in 1954 (second edition 1970) McGregor, D. (1960). The human side of organization. New York: McGraw Hill. Read More