Human Resource Management
Individual Submission
Date: 20th November 2018
Talent Management @
Southwest Airlines
Under the Guidance of
Dr. Pearl Malhotra
Submitted by
Shivam Shekhar (1711427)
Abstract
Southwest Airlines is the world’s largest low-cost airlines. Despite its focus on heavy optimisation of supply chain and
squeezing costs, they’ve never made sacrifices of resources when it comes to their employees or what they call people
of the company. The company has managed to foster an amazing culture within the organisation that demands
immense loyalty not only the people inside the organisation but also the ones outside, namely customers and
shareholders. Southwest ranked second on CNBC’s best places to work in 2017.1 This case will dwell into the intricacies
of Southwest’s culture and analyse how a low-cost airline has managed to keep their employees happy, despite being
in an industry which is full of crises.
Company Background
Southwest Airlines was founded in 1967 in Dallas, Texas. The company’s vision was to provide low-cost travel to all
domestic passengers without sacrificing the quality and promptness of the service. The company despite heavy losses
in the initial years posted its first profit and broke even in 1973.2 This is a feat in the airline industry where 90% of
other airlines are still loss-making. Since then Southwest has been profitable every year. The airline has grown over
the past few decades and has become one of the most loved airlines in the United States. The vision has now
transformed “To become the World’s Most Loved, Most Flown, and Most Profitable Airline.”3 Southwest is known to
make a difference in their positioning by the way they treat their employees, which they feel is replicated in excellent
customer service and loyalty.
Talent Management at Southwest
The management of talent and people at Southwest directly flows from the strategy. It is one of the most beautiful
examples of Strategic Human Resource Management. The idea emanates from the leadership, where CEO Herb
Kelleher believed that the power of people was the only thing that was sustainable and not replicable by others in the
industry.4 We will discuss in depth how Southwest manages its talent from the recruitment stage to training and study
the process in entirety to ensure maximum employee satisfaction and retention.
Recruitment and Selection
Being rated as one of the best places to work in, there were little issues for Southwest in getting a quality applicant
pool. A case in point is when Southwest called for applications for flight attendants in 2013. For 750 positions,
Southwest received over 10,000 applications from people in less than two hours of the release of advertisement.5 In
2013, the company had a total applicant pool of over 100,000+ people in which they hired about 1500 people.6
Southwest had a clear policy to recruit people with not only technical skills but also excellent people and relational
skills. Southwest believed that technical skills were somethings that could be quickly developed through a formal
course of training once they’re on board, while other softer skills were innate and precious possession of an individual.
Southwest looked for candidates who would generate enthusiasm and have an extrovert side to them.7 They were
driven by the motive to hire ‘people’s people’ and hence trained their external and internal staff to look for these kinds
of traits while assessing a candidate.
Regarding the selection procedure, they employed group interviews at various stages to expose personal attitudes of
people. There were situational tests for candidates. Candidates were assessed on parameters like work ethic,
commitment and sense of awareness. Most importantly, these situational tests gave the recruiters enough visibility
into an individual so that he/she could be a fit in the Southwest culture.8
Training
As mentioned above, the primary focus of Southwest were the personal attributes of a person. With a strong belief
that technical skills can be learnt on the job, Southwest had one of the most structured training programs and systems
in place for their employees. The company has specifically set up a learning centre named the University of People.9
Through this, Southwest provides support for its employees to grow both in their professional as well as personal lives.
It offers a course like software training, career development and some leadership training. In the year 2002, more
than 10,000 employees attended the sessions at the University of People.
Southwest also introduced a Management in Training (MIT) Program for its most promising employees to prepare
them to move into leadership positions. This was in line with its policy of having a closed system, where senior
management positions get fulfilled with people being promoted from entry-level positions. They avoided lateral
movements as they seemed to be sceptic about people failing to adapt to their culture at later points of their life.
What the program has done in stages and employees must clear each step to complete the program.
Some of the MIT 1 candidates move on to MIT 2 candidates, which is a six-month program that amplifies the
managerial experience and provides more in-depth executive training. All the candidates in the MIT 2 program are in
direct touch with vice-presidents of various divisions. They are given constant feedback and support to ensure proper
learning curve. Although the cost of the MIT program is very high, $25,000 per individual, Southwest never hesitated
to implement it despite its effect on bottom line. The CEO believed that an expense on people would reap higher
rewards on our top line of the company.
The MIT program ends with a camping trip and a simulation game. It is believed that simulations provide employees
real-world scenarios, in which they can experience and can come out as better leaders. At the end of the program, the
whole lot is taken on a camping trip, which is a unique concept. They feel that all the learnings have happened in a
controlled and familiar environment. Therefore, it is imperative for employees to learn to work in uncomfortable
environments and still manage to succeed. Additionally, it left the managers free to network and built stronger
relationships. 10 At the end of the program, they graduate are moved into senior leadership positions.
Partnership with Enspire Learning11 12 13
Southwest partnered with Enspire Learning to develop content for leadership courses at the University of People. They
introduced three courses and named them as challenges.
a. The Business Challenge focused on improving the business acumen and understanding
the drivers of financial success. More importantly, it helped employees transform their
qualitative insights into quantitative ones to see the impact of their decisions, to
enhance their decision-making process.
b. The Executive Challenge focuses on helping the employees see 50,000 feet view on
things. It enables and teaches them to see the big picture and train them crossfunctionally to make better leaders. Most importantly, this challenge teaches the value
of considering all the critical stakeholders of the organisation and how one decision
can affect different people differently.
c. The Management Challenge aimed at dealing effectively with people. It helped gain
insights on how to manage people and situations at difficult times. What were the
courses of action one must take when the stakes are high or when there is a dilemma
that one is caught in?
Culture
The culture at Southwest Airlines is exemplary. Some of the below facts are a clear indication of how the company has
managed to create a culture that has directly lead to the prosperity of the company.14
1.
2.
3.
4.
5.
Voluntary Employee Turnover – 2.4%
44 years of consecutive profitability
#1 lowest number of customer complaints
85% employees say they’re proud to work for Southwest
No layoffs, no furloughs in the entire history
Southwest has a dedicated Culture Services Department that champions their culture throughout the organisation.
The main philosophy behind their culture is that each employee matter to the organisation. The vital elements of their
culture are appreciation, recognition and celebration. They have created a USP for their organisation with their FunLUVing attitude. LUV is also the shortcode for Southwest airlines, which shows that it flows from the strategy.15
Open Book Management16
Southwest is one of the most prominent organisations that follow an open-book management system. An open book
system means that the company shared its financials and other relevant information with the employees and trained
their employees on how to interpret the information objectively. This helped in employees feeling valued and made
them emotionally connected with the company. Financial Education was one of the topmost priorities of Southwest.
It helped employees gain a sense of ownership and often people in the higher strata of the organisation invested in
stock options and became active shareholders cum employees.
No Layoff Policy
Airlines Industry has always been very focused on costs. Most of the companies even after decades have operations
have failed to break even. Additionally, they are also one of the sectors that employ many people. Therefore, during
times of crisis or recession, there are often layoffs of personnel at various airlines. The phenomenon is common across
countries, be it US or India. Southwest had a culture of strong employee job security. According to various studies, it
was believed that layoffs are the worst thing that can happen to a company and its culture.17 Southwest believed that
despite having pressures on the P&L, they avoided layoffs because they felt that in the long-term this goodwill would
help them to build their most significant asset which is their employees.
Analysis
Retaining and Attracting Talent
Southwest Airlines has kept a balanced view on all the four parameters for retaining and acquiring talent. It is no
surprise that is one of the best places to work in and get lakhs of applications each year. With low attrition rates, this
strategic view of HRM has helped drastically reduce costs in the long run and have given them a competitive
advantage. With its Southwest Citizenship18, the company has extended its motto of passion LUVing culture to outside
the organisation which has made a very positive impact on the customer side.
Creating a Competitive Advantage – People as Biggest Asset
The company’s belief in treating people as their most valuable asset has worked wonders for them. With such low
attrition rates and closed loop employee systems, Southwest has managed to create a competitive advantage over
other competitors. With its committed workforce, the collection of such individuals is rare and not imitable by the
competitors. The pool of talent has been developed over a long period, and the tacit know-how and collaboration
between individuals are excellent at Southwest.
Southwest as a true ‘Learning Organisation’
Southwest has managed to inculcate a culture of learning in all its employees. The learning not only is done through
formal course structures but there is a lot of experiential and learning from others involved. The MIT program is a clear
example of how one can engage employees to learn from within the organisation without outside intervention. More
importantly, Southwest actively seeks feedback on the learnings they were immersed in, which helps them to measure
it accurately and make future policies in line with the needs of the employees.
Stakeholder’s Perspective
Customers
Southwest Airlines was rated as 82/100 on the American Consumer Satisfaction Index19 in the travel industry, which is
the topmost in the airline industry. Southwest scored the highest in customer service experience score as well. The
CEO continues to emphasise that Southwest’s true business is customer service and not travel. Additionally, the
customers are loyal to airlines, and they’ve received the lowest number of consumer complaints per boarded
passengers, which is the lowest in the US.20 The performance is on point as Southwest boasts about 79% on-time
departures and arrivals.
To enhance and make the customer experience better, Southwest has used various tactics that have kept the
passengers loyal to the company. These practices range from standup comedies by their staff and fashion shows. The
staff does it voluntarily as they feel the connection to the vision and need to deliver a LUVing experience to the
customer. These practices are not a part of any SOP, but employees do it happily to serve their customers. Additionally,
one crew member decided to marry his girlfriend at the flight and Southwest made all the arrangements for them to
surprise the other travellers.21
Shareholders
The most important things for a shareholder are the stability of returns and the image of the organisation they are
associated with. Southwest has managed to balance both. With an amazing brand image, Southwest has posted 44
consecutive profitable years till date, which is a rarity in the airline industry. A lot of shareholders are employees of
the company and belong to the leadership and align themselves with the culture and work for better performance. 22
Government and Regulators
Southwest is one of the very few airlines in the US & Canada who has had zero passenger fatalities in their operations
since 1971.23 It is one of the safest airlines in the world despite being low-cost. The government and regulators have
never acted in the adversely against the company.
Challenges
The company has been doing great regarding retaining their talent. Most of the employees are happy. With an
average rating of 4.3 on Glassdoor, it’s a top company to work for as rated by employees. However, on closer look,
one can see some problems in the working culture that has led to employees leaving Southwest. Southwest has a
concept of mandatory overtime for their employees. When the going gets tough, an employee must do mandatory
overtime. The concept of overtime must be voluntary. With this policy, Southwest forces the unwilling workers to
stay at the company and work long hours.24
Recommendations
Need for Employee Rewards for Going Beyond Duties
As mentioned earlier, a lot of employees go out of the way to help and entertain their customers. These procedures
or work are not a part of the job description. Therefore, some co-employees feel that it is necessary to work in the
same manner and feel an obligation to work extra. Due to this, some employees face a lot of unrest in the organisation.
To avoid this, one can introduce special recognition and rewards system for employees who go beyond their duties to
increase customer experience. This will incentivise the ones who do it and reduce the unrest of people who don’t by
removing the peer pressure that was earlier being built.
Reduce Mandatory Overtime
To keep low costs while maintaining industry-leading wages25, Southwest recruited only bare minimum staff. Their
employee distribution across all functions was very lean to control costs. This led to often declaring mandatory
overtimes for the workers. Southwest should hire a bit more employees to handle capacity at peak loads. Forcing
employees to work overtime, leaves them in an unsatisfied state and ultimately leaving the organisation.
References
1
https://www.cnbc.com/2017/07/11/the-15-best-places-to-work-in-2017.html
https://www.swamedia.com/pages/1972-to-1977
3
https://careers.southwestair.com/culture
4
http://fortune.com/2013/01/14/southwests-herb-kelleher-still-crazy-after-all-these-years/
5
https://www.usatoday.com/story/todayinthesky/2013/12/30/flight-attendants-hiring-southwest/4248543/
2
6
Dwyer-Owens, D., & Ochel, J. (2015). Values, Inc.: How incorporating values into business and life can change the
world. United States: Beacon Publishing.
7
https://www.workforce.com/1995/06/01/how-fun-flies-at-southwest-airlines/
8
Bamber, Greg J. and Gittell, Jody Hoffer and Kochan, Thomas A. and von Nordenflycht, Andrew, Management and
Employment-Relations Strategies in the Airline Industry: Perspectives on Asia, Australia and the Middle East (2009).
9
https://www.clomedia.com/2003/09/04/southwest-airlines-employee-education-takes-flight/
https://www.corporatelearningnetwork.com/professional-career-development/articles/southwest-airlines-approach-todeveloping-leaders?ty-m
11
http://www.enspire.com/business-challenge/
12
http://www.enspire.com/executive-challenge/
13
http://www.enspire.com/management-challenge/
14
https://www.brioleadership.com/blog/five-culture-lessons-from-the-us-best-loved-airline
15
https://careers.southwestair.com/culture
16
https://peoriamagazines.com/ibi/2011/mar/employee-engagement-through-open-book-management
17
https://www.drinkcoffee.com/culture-company/
18
www.southwest.com/citizenship/
10
19
https://www.theacsi.org/industries/travel/airline
Annual Report, Southwest Airlines, 2017
21
https://www.usatoday.com/story/todayinthesky/2014/11/03/wedding-at-32000-feet-first-for-southwest-airlines/18401481/
22
Annual Report, Southwest Airlines, 2018
23
http://www.airsafe.com/events/nofatals.htm
24
https://www.glassdoor.co.in/Reviews/Southwest-Airlines-Reviews-E611.htm?countryRedirect=true
25
https://airwaysmag.com/business-finance/southwest-pilots-highest-paid-asm/
20