A Case Study Linking Employee Needs Satisfaction & Organizational Capabilities to Competitive Advantage

:Shruthi Das

In the Beginning

Founded in 1971 by Rollin King and Herb Kelleher

The United States most successful low-fare, high frequency, point-to-point carrier.
The only major United states airline to earn a profit throughout the early 1990s Having one of the most successful airline stocks Being the only airline to ever win the industrys triple crown measures of Customer satisfaction Bob Miner Larry Ellison

Ed Gates

Bruce Scott

Southwest Airlines has a distinct Fun and Luv Culture.

So employees capture more than average value even though they are paid industry-average wages

Employees Work Hard

Employees treat passengers Well

Southwest gets a superior cost position

Southwest gets a superior service position

Southwest gets high utilization Financial Success Strengthens the culture

We draft great attitudes. If you dont have a good attitude, we dont want you, no matter how skilled you are.
Kelleher says, Talking about Southwests recruiting

Conventional strategic approaches to Airlines

Competitors - Hub & spoke networks - Sophisticated Customer segmentation - Information via computer reservation systems. Southwest did not have any of the above ascribed rather gave more importance on Employee commitment. The role of employees in the operation of an airline tends to be viewed as a possible disadvantage to be avoided, rather than a possible advantage to be pursued.

Another approach to Airline strategy

Value analysis Examine the creation of value.

The Value Chain Buyers Willingness to pay Firms price Firms Cost Suppliers Opportunity Cost The portion of Value Captured The Buyer The Firm The suppliers The Suppliers

Willingness to Pay
Providing higher level of service(defined as reliability conformance). Offering frequent departures to and from its cities. Amusing its passengers.

Price & Cost

Price
Offer lowest( or equivalent) airline fare in a specific market.

Cost
Most significant costs an airline incurs is personnel. Southwest pays its employees at mean industry levels and offers good benefits by industry standards. Its in-the-air & on-the-ground employees are highly productive, reducing unit labor cost.

Opportunity Cost

Opportunity cost for an individual is the minimum amount of remuneration for a given amt of effort.

Creation of value through Organizational Capabilities

A business s ability to establish internal structures & processes that influence its members to create organization specific competencies and thus enable the business to adopt to changing customer and strategic needs.
- Irich & Lake

Conversion of Value through Organizational Capabilities

Operational processes. Behavioral Norms derived from the Southwest Culture.

Three steps to Competitive Advantage: Creation of value Conversion of value Capturing of the value for the shareholders via its ability to set a price floor due to it low cost position.

Strategies.

Southwest Airlines
A simple, consistent strategy Aligned and consistent HR practices

Long-term perspective on employment

Stability Job design Training and development Careers

Compensation

Performance-based Ownership Compressed wages

Value in Southwest Airlines

Created through employee needs satisfaction Converted to customer and shareholder via organizational capabilities. Captured by the firm as a result of its cost advantage and superior service.

 Thank you!