Southwest Airlines was formed in 1971 to serve inter-city routes in three Texas cities.
By 1998, it had grown to approximately 24,000 employees serving 25 states with
approximately 2,500 flights per day. Southwest operates as a low-cost, no-frills but high
customer service airline flying point-to-point, rather than establishing the hub-and-spoke
system common to its larger competitors. A key to its success is the achievement of low
turnaround time—the time required for a plane to land and take off again—which
requires a high level of teamwork, coordination, and flexibility among different
employees and occupational groups. To accomplish this advantage, the company works
hard at maintaining a culture that emphasizes flexibility, family orientation, and fun. It
has been highly successful, generating profits each year since it was founded and
realizing significant appreciation in the value of its stock over the life of the company.
Southwest’s quality and productivity serve as benchmarks for the industry. It
consistently ranks at the top of the various quality measures—including on-time
performance, baggage handling, and customer complaints.
Employee Relations
Nearly 90 percent of Southwest’s workforce is organized into nine unions.
Four—the pilots and three small technician unions—are independent organizations. The
flight attendants and ramp workers are represented by the Transportation Workers
Unions (TWU), the customer service and the reservation agents are represented by the
International Association of Machinists (IAM), and the mechanics and cleaners are
represented by the Teamsters (IBT). The company has enjoyed highly cooperative and
peaceful labor relations since its founding. Its founders were not opposed to unions and
essentially invited them into the organization. However, management has also worked
hard to ensure that the unions maintain the same objectives as the company, avoiding
highly adversarial relations.
There are no formal union-management structures or processes for consultation
and representation beyond negotiations and grievance procedures. However,
management keeps the union representatives informed of new developments. One
example is when the company decided to implement a flexible benefit plan; it met with
union leaders and indicated the plan would be an add-on to the existing contractual
provisions and therefore did not require negotiations. Union leaders also initiate
dialogue, as they did when raising questions over how the company was implementing
the Family and Medical Leave Act. Several union leaders questioned the procedures,
and briefings were held to clarify how the company was complying with the Act. Other
issues around which informal consultations have occurred include workers’
compensation administration policies.
The primary channel for employee input is the company’s open-door policy, in
which employees with questions are encouraged to write to Herb Kelleher with their
concerns, suggestions, or questions. These letters forwarded on a daily basis to
appropriate managers to prepare a response. All letters receive a response—in fact,
sometimes middle managers are concerned with being bypassed by these inquiries or
complaints. However, this avenue is widely used, because management does follow up
on them. “It’s part of the culture,” said one manager.
Top managers also visit four or five stations each year to meet with employees.
With no pre-arranged agenda, these meetings serve as another opportunity for
management to learn about employee concerns and for employees to bring problems to
management’s attention. These visits also introduce new managers to the airline’s
cultural norms.
Southwest also maintains a “culture committee,” comprised of 127 members from
different parts of the company. Each year, the Executive Vice President meets with
groups of employees to elicit issues and problems of greatest concern. From these
meetings, priority issues are identified, and small teams are formed to work on them.
Examples include: problems of employee burnout among individuals in a job for a long
period of time; a “New City” committee that goes to each new city Southwest serves to
educate new employees about the values of the company; and the “Back to Basics”
team, which sponsored an essay contest to describe what makes Southwest work. The
team chose a series of essays that were integrated into a book with an accompanying
video that is now given to every new employee. These committees are all staffed by
volunteers working on their own time.
In short, the values of the company and its practices are implemented by
developing the culture of empowerment and family values, not through any formal
representative forums or structures.
Summary and Implications
Southwest has used its human resources as assets for achieving and sustaining
a competitive advantage. Moreover, it has communicated this intention to its internal
workforce, to its customers who expect a highly motivated and friendly workforce and
high levels of service, and to an external investment community that continues to value
the company highly, as indicated by its favorable price/earnings ratios. Southwest
accomplishes this success largely through the leadership and culture established by
Kelleher and the managers he has hired and promoted. It also does so with unions that
embrace the company’s culture and have not pursued demands for a role in the
management or governance process or jointly-run programs at the workplace.