Southwest Airlines' Pay-For-Performance System

Pay-for-performance is an incentive program that encourages employees to work hard and help accomplish company goals, as their ability to do so is linked directly to their pay grade. (Berman, Knight & Case, 2013) The employees that are more effective are given higher pay than those who are not able to perform at such a level. While there are both proponents and critics of this system, it seems that its true success depends on the organization itself. With this in mind, the following essay will examine Southwest Airlines’ mission statement before looking at pay-for-performance and determining whether or not such a system is right for this company.

Mission Statement

The mission statement of Southwest is as follows: “The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.” (Southwest Airlines Co., 2015) This mission statement reflects the belief that Southwest holds that the key to effective success in the airline industry as a low-cost competitor lies not in its price offerings but in its ability to make customers feel satisfied and loyal to the company.

(Gini& Green, 2013) The organization clearly prides itself on its customer service by ensuring employees are happy and motivated to make others happy as well. Thus, effective customer service and satisfaction for Southwest can be broken down into two mission-critical goals. The first mission-critical goal is that the airline has efficient operations ensuring that flights are rarely delayed and the planes are used safely.

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The second mission-critical goal is that interactions with customers by employees are positive and make the consumer feel as though their concerns are being heard and responded to.

Strengths and Weaknesses of Pay-for-Performance The biggest strength of pay-for-performance lies in the fact that it has the potential to motivate employees to work hard and achieve goals that the company holds important. (Berman, Knight & Case, 2013) Because most people are motivated by their pay, if they see a direct correlation between their performance and the amount they are paid, they are more likely to work hard in order to achieve high levels of performance. The biggest weakness of pay-for-performance is that it can often be difficult to implement in a given system. For instance, pay-for-performance would be very easy to implement in a sales department because there is a clear metric (sales numbers) that can be used to determine how well someone is performing their job. However, there are many other departments, such as human resources, where the metrics for success are not so clearly defined. Thus, implementing pay-for-performance in human resources would be tricky and might come down to personal opinions, which are subject to bias.

Recommendation Given that Southwest Airlines has such a large emphasis on customer service, it is not recommended that they adopt a pay-for-performance plan. Customer service can be difficult to measure and may come down to chance in terms of which types of customers (angry or agreeable) approach specific employees. Furthermore, a great deal of the success that Southwest has experienced has been due to their close-knit internal culture. (Gini& Green, 2013) Adopting pay-for-performance could lead to conflict and a great deal of competitiveness among the employee base, causing the fun, friendly internal culture to deteriorate.

Conclusion

While pay-for-performance can be an effective motivation tool. It is important to recognize that it is not a one-size-fits-all solution to creating motivation in an organization. (Berman, Knight & Case, 2013) The metrics which are used to evaluate performance must be examined prior to implementing such a system to determine whether or not they are objective and truly do measure performance.

References

1. Berman, K. Knight, J. & Case, J., (2013). Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean. Boston, MA: Harvard Business Review. Gini, A. & Green, R.M., (2013).
2. Ten Virtues of Outstanding Leaders: Leadership and Character. Chichester: John Wiley & Sons. Southwest Airlines Co., (2015).
3. About. Southwest.com. Retrieved fromhttps://www.southwest.com/html/about-southwest/.