Compensation And Performance Management Business Essay


A good Human resource management system can enable the organization to pursue and achieve a vast array of strategic options. And the system should be developed according to the organization's generic corporate strategy. So in this case, Southwest Airline's HR management system is defined by its low-cost and service strategy. Be known as "The People Department", Southwest's human resources department holds a mission statement which is quite unique. The core of its mission statement is to deliver resources and services which are required by Southwest's employees to make sure they could complete their daily work. And by doing this, the company could be more competitive. Unlike those human resources groups in old days, Southwest's people department is to make its customers - Southwest employees happy and help them to success. Because human is the most valuable resource which is able to support the company's corporate strategy.

Culture - the Southwest spirit

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Company culture defines what a company is and what its employees believe in when they work for this company. This type of culture can affect employees' behavior in various ways. The culture of Southwest, be known as the Southwest spirit, can be concluded with providing good customer service, working hard, showing mutual respect to equality, paying extreme attention to cost, being dedicated, taking fun and family seriously. The Southwest spirit was first created by its founder and chairman, Herb Kelleher and then pervaded the entire company. Employees became self-motived because of this kind of culture. And that's why they are willing to help each other and make it possible for them to turn around an aircraft with fifteen minutes. Typical practices like that eventually resulted in cost saving. The Southwest spirit is wide spread across the whole company that you can feel it everywhere during every work process.

Compensation and Performance Management

Because of its low-cost strategy, the compensation at Southwest is not high when compare to other airlines. For example, southwest pilots earn $100,000 a year for flying 70 hours a month while pilots at United, American, and Delta average $200,000 a year for 50 hours a month. And average wage at Southwest is below market averages. Employees covered by contract are paid basing on seniority. Everyone would receive a raise for each year he or she has worked for the company. Employee will have low pay in the beginning and high pay after he or she gets seniority. Not only for those flight crews and other ordinary employees, this wage system also affects senior managers and even Kelleher himself. Officers don't have any club memberships or cars sponsored by company and stay in the same hotels as the crews do. These practices certainly decrease the operation cost of Southwest and make it more competitive. Despite its wage system, Southwest offers compensation in other forms to its employees which are based on its culture. For example, it offers a free space-available pass to any employee who is qualified. Southwest also budgets for parties and celebration for its employees and their families. Because of these, employees are able to keep good morale and work efficiently.

Southwest's people department continually feeds back performance evaluation information to employees to keep them focused and make them aware of how important that cost means to the company. Southwest encourages employees to help customers. The more customers are satisfied with its service, the higher possibility that they would fly Southwest again and bring revenue to the company.

Recruitment and Selection

To make sure the new hires would fit into the company's culture, Southwest's recruitment process is highly selective. It rejects more than 95,000 job applicants each year. In addition to basic working skills, a positive attitude and teamwork are what the entire recruitment process focuses on. Be as a very important channel where applicants could learn about the company, Southwest's eye-catching job advertisements reflect its culture and what kind of people the company is looking for. Southwest's culture is so attractive that most people take a salary cut to join this big family. It has spent a lot of time identifying the key components that comprise effective performance and behavior. The people department learns from the current employees to optimize their recruitment process. And to join this department an employee must first have line experience. The company prefers people without extensive industry experience so that they can pay less to save cost. Southwest notices that the applicants it rejects today could be its customers for tomorrow. Therefore, the recruiting process is designed to not make applicants feel inferior or rejected.


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Training is quite important to an organization's overall Strategy. Properly designed training programs could help to improve employees' performance and be the first time that employees get exposed to the company's culture. Because the Southwest only flies one type of plane, the fuel-efficient Boeing 737s, it helps to save money by shortening the overall training schedule and reducing the complexity of training program. Training helps to develop and improve the organizational health culture and effectiveness. It plays a big role in culture strengthening. By attending Southwest's University of People, employees are exposed to history, principles, values, mission, and culture of company. Teamwork and team building are being emphasized. Managers can take course on leadership, pricing, revenue management and how the business works. Training is virtually 100 percent internal because the employees know what exactly the Southwest spirit is. Southwest does not have any outsource training program at that time which means it don't need to pay a lot of money to those training agencies so that it can keep the cost at a lower level.

Organizational design and HR Planning

The organizational structure of Southwest is known for being functional. The values are considered as the cores of the organization include high quality service, cost effective practice, action and informal communication. Job specialization doesn't go as far as other airlines like it does with Southwest. For example, pilots would help to clean the aircraft so that the total turnaround time could be reduced which not only saves the operation cost but also helps to deliver on time service to Southwest's customers [i] . Managers are willing to discuss with front line employee. The kind of practice leads to a better understanding of the company and help them to response more efficient. For instance, the company has a program called "Day in the Field," a required program where officers spend a certain amount of time on the front lines. This program emphasizes the teamwork.

The objective of human resource planning is to avoid manpower shortages or surpluses and to match a certain job with an employee who has specific skills. Since a strong culture shared by everyone in the company means so much to Southwest and a high turnover will decrease morale, so Southwest try to keep a low turnover. And because of its low turnover and limitations in its labor contracts, Southwest uses few temporary or part-time employees.

It have a pool of retirees and people who want to stay at home, these are people who are familiar with Southwest's culture, so if there are emergencies, it will be able meet the demands.