Reference no: EM132734025

Problem 1: Describe what actions the company took that set it apart as Strategic HR. Compare or contrast these actions with your own organization's HR functions. How could these, or similar actions be effective in your own organization?

Strategic HR Management at Southwest Airlines

• Southwest Airlines (SWA) was one of the most successful airline companies in the 1990s. Throughout the decade, it was the only major domestic airline to turn a profit, and it consistently outperformed its competitors in customer service. A key factor in the success of SWA has been its unique corporate culture and the HR management practices that have been developed as part of this culture. These practices are integrated with one another and directly developed under founding CEO Herb Kelliher and maintained as part of Southwest's competitive strategy of delivering low costs and superior service. These HR practices create shareholder value through employees via low turnover and high productivity and allow employees to experience significant job satisfaction.

• Southwest's success centers around a "value cycle": Southwest first creates value through its HR practices for employees; this value is then converted, in part, to customer value via the design of specific operating processes and then captured through the provision of low costs and superior service relative to competitors. This cycle of creating, converting, and capturing value is unique among not only airlines but also labor-intensive organizations, in general. Other airlines have traditionally competed by creating barriers to entry via the development of hub-and-spoke networks and by sophisticated customer segmentation and information processing via computer reservation systems.

• Southwest sees its competition not as other airlines but rather the automobile. Most of its flights are "short-haul" (less than 90 minutes) and involve quick turnaround of planes at the gate and the use of less-congested airports. The company also restricts its growth relative to the rate at which it can hire and train new employees who fit with the company culture.

• Southwest practices an alternative strategy called value analysis. Here, a value chain is created for the buyer, firm, and supplier. SWA does this by increasing its passengers' willingness to pay, decreasing the price passengers are charged, decreasing its own costs, and reducing employees' opportunity cost. SWA increases its passengers' willingness to pay by providing a higher level of service than its competitors, offering more frequent departures, and amusing its passengers, which makes the end of a long workday more entertaining. SWA also attempts to offer the lowest airline fare in a specific market. This allows SWA to differentiate itself from competitors that offer a relatively generic service.

• Personnel is one of the most significant costs an airline incurs. At SWA, however, employees are more productive than at other major airlines. Most SWA employees are directly involved in moving passengers from departure to destination as gate agents, ramp agents, baggage handlers, flight attendants, or pilots. The result? An average airplane takes 45 minutes to turnaround: SWA averages only 17 minutes.

• SWA can turn around its aircraft in 17 minutes for three reasons. First, it uses standardized aircraft-737s only. Second, no meals are provided on flights, enhancing efficiency and reducing costs. Finally, the airline has designed its work systems to allow cross-functional coordination by all its employees. From the moment, an SWA flight touches down until the minute it clears the gate, every member of the flight and ground crews does everything necessary to get the next flight segment out on time.

• Southwest has a culture that stresses "LUV" and "FUN." "LUV" refers to one of the company's core values, involving respect for individuality and a genuine concern for others. "FUN" refers to the company's philosophy of employees enjoying themselves at work and creating an atmosphere that allows customers to also have fun. FUN and LUV are critical elements of SWA's culture and are embedded in the hiring process, with prospective employees being asked to describe their most embarrassing moment. FUN and LUV are also critical components of SWA's compensation system. Actual salaries are at the industry average, but most employees consider SWA's work environment to be a form of nonmonetary compensation.

• SWA uses a variety of HR practices to create its unique labor force. Starting with a rigorous selection process, employees are paid an average compensation, combined with significant nonmonetary awards. Employees treat one another well, and there is a focus on ongoing training and development. Employees' are also constantly solicited. The nurturing, ongoing development of the organizational culture is critical to Southwest's competitive advantage.