1 VIDEO CASE LUV IN THE WORKPLACE: SOUTHWEST AIRLINES You feel the difference the first time you fly Southwest Airlines (stock symbol: LUV). Employees are friendly and funny. They joke with passengers, but are helpful whenever needed. That’s not always the case with airlines these days, especially since September 11, 2001 and the extra security and fall-off in airline revenues. Southwest is the only consistently profitable major airline. Other carriers try to imitate Southwest, with some success, but Southwest still leads the way. It has the best service record for baggage handling, the least customer complaints, the best safety record, the lowest workforce turnover, and the best labor relations. The latter is somewhat surprising because the airline’s workforce is 85 percent unionized. Nonetheless, Southwest continues to outshine other companies in the industry for some reason. Why? The video offers several explanations, but perhaps the most important is that Southwest focuses as much on pleasing its workers as it does on pleasing its customers. The relationship between management and workers, historically, has not always been so pleasing. That’s the reason there are unions in the United States. Unions fought for improvements in the minimum wage, overtime pay, workers’ compensation, severance pay, job safety, and child labor laws. Workers today often forget the debt they owe unions for making such improvements in working conditions. Today, labor contracts include the terms and conditions under which labor and management will function over a set period of time. If an employee has a grievance, he or she can go to a union representative to have it settled. If settlement is not forthcoming, a formal grievance process is in place to reach a satisfactory conclusion. Such procedures seem straight forward and mutually satisfying. The truth is, however, that labor and management often fail to reach a labor 2 contract. In such cases, union workers may resort to a strike—that is, a work stoppage. They may also picket or call for a boycott of a company and its products. Management may lock employees out of their jobs or hire temporary workers (called scabs) to replace union workers while they are on strike. In short, tensions can develop between both sides that become quite heated. In these cases a mediator may be brought in to make suggestions as to a fair and equitable solution. An arbitrator can also be used; both sides are bound by the arbitrator’s ruling. How did Southwest avoid such labor problems? Southwest begins its close cooperation with employees by bringing them to its University for People. The New Hire Training Course gives them a history of Southwest and the importance of employees to that history. The training looks at failed airlines of the past that at one time were large, effective, and profitable. Employees today are less concerned about wage increases and work conditions and are more concerned about employee benefits and job security, the latter being especially important in the airline industry. That does not mean, however, that Southwest does not pay well or provide great benefits. Benefits include child-care and elder-care referrals, a counseling service and a catastrophe fund for those who get caught in dire emergencies. The airline “hires for attitude and trains for skill.” Skills can be learned and Southwest helps people attain their goals. Many employees even bring their spouses to work for the firm as well. A good company with good employees is a winner today, even in highly competitive and hard-to-make-money industries like the airlines. Thinking It Over: 1. Discuss how the labor-management relations maintained by Southwest have provided a significant benefit to the organization. 3 2. Describe why you would or would not like to work for an organization such as Southwest. Identify the primary reason associated with your choice. 3. Labor-management relations have a history for being adversarial in nature. Discuss methods used by Southwest to diminish this adversarial relationship. Have these methods proven to be beneficial to the organization? To the employees? Explain.