Southwest Airlines Strategy - Essay Example

Southwest Airlines Strategy Background Southwest Airlines (SWA) has always been considered the benchmark in the airlines industry for having an excellent workforce. SWA achieved success not from economies of scale but the airline is known for its very productive, very motivated and unionized workforce (Bacon, 2001). SWA’s strategy is based on exemplary levels of service – ensuring that the passenger and his luggage arrive on schedule at the same location, and they are able to provide pleasant, friendly service at all points of customer contact. They encourage individuality and they encourage leadership. The most striking feature in SWA strategy is its fast turnaround time compared to all of its competitors. Changes in the external environment continue to exert pressure on organizations to change to ensure their success and survival (Singh, 2002). Under the circumstances the case is primarily concerned with how SWA manages to keep its HR strategy in synchronization with the business strategy of maintaining the fastest turnaround when the external pressures change. Southwest Airlines has fought challenges since its inception and it exists despite the regulated and protected markets (Pfeffer, 2005). Initially competitors tried to ensure that SWA was not allowed to fly at all but since this effort failed, there were restrictions imposed on SWA to fly out of Dallas-Fort Worth international airport. SWA was restricted to fly out of the newly-constructed Love Field. They were allowed only short-haul, point-to-point flights to close-in airports. SWA was not a member of any of the big computerized reservation systems, used no unique process technology, and was essentially a low-cost no-frills airline. Despite all these constraints and restrictions, the airline attained success which is primarily due to its highly motivated and productive workforce. They have fewer employees per aircraft, fly fewer passengers per employee and have more available seat miles per employee. Because of the highly motivated workforce its turnaround time is much less compared to competitors which also enhances its productivity in terms of equipment utilization. SWA has achieved the Triple Crown (best on-time performance, fewest lost bags, and fewest passenger complaints—in the same month) nine time, which is a rare feat. Employees-first approach/corporate culture The employees always come first with the company and the customers a respected second (Miles & Mangold, 2005). While the company does not follow the customer-first approach they do expect the employees to extend the same warmth and respect to the customers that they themselves receive. A failure is accepted as natural and pardonable at SWA (Bunz & Maes, 1998). They are encouraged to take responsibility for their acts and celebrate mistakes as well as triumphs. The organizational culture demonstrates good employee-management relations. They treat all employees as a part of the family. SWA is one of the most heavily unionized airlines with approximately 81% of its 33,000 employees covered by union contracts. The culture of the firm and the dedication to the employees sees the airline through any obstacles and challenges (Singh, 2002). The secret of company’s success is its people. There is a high level of employee involvement in decision-making and even the recruitment procedure follows the match/fit policy. Excellent communications Management commitment, customer-focus and employee-involvement are the critical success factors in any organization but the airline industry is beset with communications problems. When external pressures change the old hierarchical command and control structures must give way to delayered organisations that improve communications and bring management closer to employees and customers, contend Applebaum and Fewster. In the face of competition, organizations need to keep in constant touch with their employees. SWA constantly surveys its employees and unions to identify their perceptions and solicit ideas about how to run the company (Applebaum & Fewster, n.d.). Unions are encouraged to research problems and present solutions while the employees are encouraged to be creative. Training To meet the challenges and pressures posed by external factors, the supervisors, managers and executives have to undergo training every year (Bunz & Maes, 1998). This serves as a great motivation tool too. Their way of motivating employees is to give them challenging work for which they accept responsibility. The corporate culture and the corporate goals are refreshed into the minds of the employees. The working environment is relaxed in which the workers enjoy performing their jobs. In addition to the annual training, the managers at SWA have to spend one day every quarter doing front-line job (Pfeffer, 1996). This experience ensures the management-employee contact increases; it teaches the management the content of the different jobs. Being constantly in touch with the front-line jobs helps the management to devise/amend/alter strategies to cope with the numerous challenges in the industry as the situation is ever-changing. Strategic focus Another strategy that ensures SWA is able to meet the challenges of the external pressures is that their focus is on achieving the bottom line rather than worrying whether its structures and processes are in place (Kochan, 2004). SWA business strategy was to fly as a low-cost carrier. In line with this business strategy, the airline signed a ten-year contract with the pilots with no wage increases for the first five years and then stock options plus a 3 percent annual wage increase. When the market for low-cost carriers expanded and the demand for pilots increased, the pilots at SWA engaged in industrial action demanding higher wages (Bacon, 2001). The company faced problems recruiting pilots. It was the effective HR policies at SWA that brought the company out of the dilemma. Added to the HR policies is the personal intervention of the CEO and co-founder Herb Kelleher who encourages employees to be very informal and have fun. He personally acknowledges births, deaths, anniversaries and other events in the lives of the employees. This has encouraged the employees to pitch in whenever necessary and in the case of the pilots, they can often be found checking passengers at the airport (Sadri & Lees, 2001). This is the reason of the faster turnarounds of the SWA aircrafts. Corporate culture enables an organization to give it the competitive edge. The HR policies in isolation do not provide the competitive advantage but several other factors have to be taken into account. They understand what is needed from the employment relations system and they accordingly design so as to achieve and reinforce the behaviors needed. The HR professionals at SWA are skilled in working with the union leaders and the executives. This is how they are able to engage the workforce and the union leaders in the process of serving the customers efficiently, flexibly and with high-quality, which is in line with their organizational goals (Kochan, 2004). Teamwork Another reason for faster turnaround times of the SWA is its very efficient team work. They have been successfully able to inculcate team work from ticket agents to re-fuelers to pilots (Schneider et al., 2001). Team work is SWA’s hidden weapon. Their philosophy is to lay emphasis on team work and community; the employees feel they are a part of the cause and the employees feel empowered. Employees are allowed to express opinions freely and make suggestions (Bunz & Maes, 1998). Reward system The reward system at SWA supports and reinforces the airline’s philosophy. In addition to the salary, the airline offers variable compensation and recognition programs that are integrated with the things leaders and people do on a day-to-day basis (Singh, 2002). Their strategy is to retain valued employees and ensure long-term commitment. The airline industry is full of conflicts but SWA has kept it at the minimum level because of an environment of trust and compromise. Employees and executives have the same opportunities for stock ownership. Profits are shared equally based on employee earnings and company profits. Those who work longer hours or fly extra trips receive a larger share of the profit-sharing payouts. The reward system is aligned with the organization philosophy and strategy. This has helped to reinforce the values that are essential for sustained success of any organization. Conclusion SWA has been able to bring about changes in its employee-management relations as external pressures have mounted. Most notable are their annual training programs, quarterly one-day front-job experience, and their communication and motivation techniques. The employees are encouraged to be involved in decision making and not rebuked when they commit mistakes. Mistakes are a part of the learning process and are celebrated with equal triumph. Team work is another advantage at SWA where employees feel a part of the airline and feel empowered. Offering stock options and larger share of profits based on work input works as a motivation tool despite the workforce being highly unionized. The management equally participates in all activities which enable them to get the support of the employees when needed. The corporate culture and work environment are conducive to growth. The employees in turn show compassion towards the customers and the same warmth and respect they receive from the company. Thus the airline’s employee-centered approach has been the root cause of its success and helps in maintaining the fastest turnaround in the industry. Despite attempts, no airline has been able to match the success of SWA. References: Applebaum, S. H. & Fewster, . M. (n.d.). Human Resource Management Strategy in the Global Air line Industry – A Focus on Organisational Development. Available from: http://www.touchbriefings.com/pdf/12/avia031_p_apple.pdf [accessed 14 June 2008] Bacon, N. A. (2001). Competitive Advantage Through Human Resource Management: best practices or core competencies? Human Relations 2001; 54; 361 Bunz, U. K. & Maes, J. D. (1998). Learning excellence: Southwest Airlines’ approach. Managing Service Quality Volume 8 · Number 3 · 1998 · pp. 163-169 Kochan, T. A. (2004). Restoring Trust in the Human Resource Management Profession. Asia Pacific Journal of Human Resources 2004; 42; 132 Miles, S. J. & Mangold. W. G. (2005). Positioning Southwest Airlines through employee branding. Business Horizons (2005) 48, 535—545 Peffer, J. (1996). When It Comes to “BestPractices”- Why do smart Organizations occassionally do Dumb Things? Organizational Dynamics, Summer 1996. Peffer, J. (2005). Producing sustainable competitive advantage through the effective management of people. Academy of Management Executive, 2005, Vol. 19, No. 4 Sadri, G. & Lees, B. (2001).Developing Corporate Culture as a Competitive Advantage. Journal of Management Development. Vol. 20. No. 10. pp. 853-859 Schneider, B. (2003). The Human Side of Strategy: Employee Experiences of Strategic Alignment in a Service Organization. Organizational Dynamics, Vol. 32, No. 2, pp. 122–141, 2003 Singh, P. (2002). Strategic Reward Systems at Southwest Airlines. Compensation Benefits Review 2002; 34; 28 Read More