It’s tough to make it in the airline industry these days. Rising oil costs, unpredictable economic conditions, security concerns, aging fleets, government regulation, and stressed customers and employees are just some of the challenges that have had major carriers rotating in and out of bankruptcy in recent years.
Throughout all this, Southwest Airlines has remained profitable, providing a success story in an industry short of them. So how does Southwest do it? To an outsider looking in, the answer comes down to its people.
“They have a very simplified operation compared to the rest of the industry, and they have very motivated labor groups,” said Robert Herbst, a retired pilot of 35 years who is now an airline industry consultant and founder of AirlineFinancials.com. “They hire very good people and they pay them; currently they’re the highest paid in the industry. Without a doubt, their employee management labor relations are a great reason why they have been as successful as they have been.”
Julie Weber, vice president of people at Southwest, confirms this. “Our people are our difference who will help us continue to thrive,” she said. “The airline industry is tough. With high fuel prices and competition, we need to hire the best people who naturally put others first, allow them to shine and help them develop their full potential.”
Jeff Lamb, Southwest’s executive vice president and chief people and administrative officer, is responsible for guiding this effort. “It’s a tough business,” he said. “We may be the last of the large airlines to be bankruptcy free. The key differentiator for us is our underlying philosophy of putting our people first.”
A prime example of this played out three years ago. In 2009, amidst massive job loss in the U.S., Southwest Airlines did not lay off or furlough any employees. “Financially it did not look good for us that year,” Lamb said. “We felt like it was going to be close to our first annual loss in 37 years.”
Southwest had a choice — either institute a costly “early out” program for workers nearing retirement or start mass layoffs. It opted for the former and had 15,000 employees enter into early retirement, helping avoid layoffs. Further, Southwest’s remaining employees spearheaded popular initiatives such as its Bags Fly Free and Business Select programs, as well as allowing pets on its flights.
“We preserved jobs, and in turn, our employees showed their warrior spirit by launching new products, winning more customers and providing the best customer service, and we emerged profitable during one of the most challenging times in airline history,” Weber said. Southwest posted a $99 million profit for the year.
The Flight Plan
Southwest’s goal for talent management is simple. The company wants to help all of its employees reach their full potential in a best-place-to-work environment, according to Lamb, who oversees a team of 2,000 within Southwest’s overall workforce of 45,000.
The airline makes achieving this goal as simple as possible by ensuring its external and internal brand messages are aligned. “Our business strategy is to provide a safe, efficient, on time, great experience in airline travel,” Lamb said. “It’s the same experience that we try to achieve in the office as well.”
Within its talent management delivery team, Southwest focuses on three key goals:
1. Be good at day-to-day HR functions. Southwest has embedded an HR business partner into each operational department. “So they need to help connect their business customers, their executives or whomever with access to basic HR services,” Lamb said.
2. Help solve business problems. Lamb drew an analogy to explain how this works. “If I came to see you and I was trying to sell you pictures of my kid, you might not be interested,” he said. “But if I brought pictures of your kids or dogs or whatever’s important to you and I had them on magnets and three-by-fives and eight-by-tens, you might be interested. So we really encourage our team to listen, think and solve their customers’ business problems.”
3. Be thought leaders on all things related to people strategy. Here, Lamb said, generational differences are key. “We want to provide thought leadership on what kind of training, hiring and on-boarding might be important to retain and help four or five generations work together effectively.”
To ensure the talent organization is working effectively, Southwest measures all kinds of key metrics around its HR functions, including costs per hire, quality of new hire, retention and promotion of high-potentials, compensation and time to productivity. The airline uses these measurements to continually evolve its talent management processes. “The old saying ‘what gets measured gets done’ is very true, so we try to measure everything we can that’s important,” Lamb said.
For example, if Southwest notices higher than average overtime logged in an operational group, it will work with that group to reduce overtime by increasing staffing or decreasing turnover. Key positions often get special attention. Lamb said the company sought to improve time to productivity for its ramp agents — the individuals who physically place bags on planes.
“We were running about 90 days from the time we got the order to fill to the time that they were identified, interviewed, run though background checks, drug tested, badged, trained and fully functioning,” Lamb said. “When you’ve got thousands of those positions and you’re filling hundreds of those every year, every day that it takes to get that person up and fully functioning is critical.” By looking at what cities were better or worse at various aspects of this process, Southwest was able to streamline the process down to 78 days.
Historically, Southwest’s turnover level runs below 5 percent, and last year it was at 1.5 percent, which was a surprise to Lamb. “I expected turnover to be really low in ’09 when the economy was sucking air and in 2010 maybe kind of coming back, but in 2011 to have your lowest voluntary turnover in a decade I think speaks volumes about the work our leaders are doing around managing their people,” he said.
Lamb also pointed to Southwest’s competitive compensation and benefits and high percentage of unionized workers as a testament to its talent management. “To have some of the highest paid, best benefited, highest union ratio in the airline industry but to remain profitable is basically because our people are highly productive and work really hard,” he said.
Fun in Flight
While flying Southwest, passengers may notice that its ground and air employees endeavor to make it an enjoyable experience, particularly via flight attendants’ somewhat irreverent announcements over the planes’ intercom systems. Lamb said this is because one of Southwest’s core values is a fun-loving attitude; the organization wants its employees to genuinely like each other and serve in a positive environment.
“It’s not always funny ha-ha — although we do have some comedians that fly — it’s more about not taking yourself or your job so seriously, and it does energize you,” he said. “If you walk around the halls and the airport and everybody you’re working with is frowning and negative, that’s exhausting. But if you’re laughing and at the end of the day, you’re having a good time, you’re a joy to work with.”
This is particularly critical given the industry that Southwest operates in, where pilots, flight attendants, ground crew, mechanics and ticket agents are in stressful situations and may have to deal with delayed flights, adverse weather conditions and irate passengers on a daily basis. “There are a lot of tough jobs out there, and the best thing that you can do to prevent burnout is create an environment that doesn’t add to the stress,” he said.
However, fostering such a joyful work environment is easier said than done. Lamb said he is often asked “How do you train your employees to be so fun, be so kind?” and that the answer is so simple it’s difficult not to be glib about it: “Well, have you ever tried hiring kind people?”
But how exactly does one do that? People in job interviews may not portray their actual selves because they’re trying to sell themselves to land a job. Getting around this is difficult, but Lamb said it’s not impossible. He cited an old West Texas saying; “What comes up in the bucket is usually what’s down in the well.”
“It really is a basic philosophy of trying to get people out of their interview mode to know who they really are — [to see] if you can find out what’s in somebody’s heart and then give them permission to be themselves,” he said.
To facilitate this philosophy Southwest involves its front-line employees in the hiring process; using its own workforce as a kind of check-and-balance system. “We can do all the behavioral-based interview techniques and screening questions and whatnot, but when it comes right down to it, if you’re interviewing somebody that you’re going to be working with, you’re not going to hire somebody you wouldn’t want to hang out with or go to lunch with,” Lamb said.
It’s not possible to follow this process for all positions, but the airline tries to as much as possible. Lamb said it is key for Southwest to maintain its culture long term, pointing out that last year the company filled more than 4,000 jobs — nearly 9 percent of the workforce overall — from outside the company. “You do that every year for a few years, which we have except for ’09, and you can really dilute the culture in a hurry.”
Herbst said a Southwest employee does not look like an employee at another airline; in fact he said the majority of Southwest personnel probably would not have been hired by the major legacy carriers. “Southwest hires a different type of people than what you generally see hired by the legacy carriers,” he said. “They’re just people-oriented, confident individuals. A majority of Southwest employees place the success of Southwest as a priority in their work ethics, whereas if you go to most of the other legacy carriers, the majority of their employees are looking at what’s best for the employee instead of the company.”
However, Herbst said he sees some challenges for Southwest going forward. First, he said the consolidation that’s been occurring in the industry during the last three years has created a significant amount of competition that Southwest has not experienced before. “You have Delta, which is going full blast now, and when United and Continental get their merger together they will be a very competitive force against Southwest, and then American and US Airways I believe going into the future will add to the competition against Southwest.”
Further, Herbst said Southwest’s economic picture is changing dramatically. “Southwest’s costs have accelerated much more than any other airline out there in the industry because their revenue minus cost margins have gone down drastically in just the last three years,” he said. “Their margins are down significantly, relative to the rest of the industry. It’s primarily on the cost side but their revenue has also got room to improve.”
But efforts to improve can be difficult for Southwest, which Lamb termed the blessing and the curse of the company’s long-term success. “We love it, we’re very proud of it, we try to talk about our history and carry that forward to preserve it, but yet at the same time anything that we try to change or improve was somebody’s good idea at the time, and it was a successful idea for the most part or we wouldn’t be doing it,” Lamb said.
For his part, Lamb said he isn’t too worried. “Talent management is always about doing something different, but if you’ve really done a good job, you’ve got a lot of people who are where they need to be in the right seat and growing and developing within that role.”
Daniel Margolis is a former editor at Talent Management. He can be contacted at firstname.lastname@example.org.