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  • Good people are essential for success.
  • Keep the product and the process simple.
  • Deliver the most reliable service at the lowest cost.
  • Invest the time to connect with employees and customers.

These are the basic tenets fueling the phenomenal success of Southwest Airlines, according to "Core Values Amidst Change: A Conversation with Southwest Airlines' Top Management Team," a new working paper written by HBS assistant professor Jody Hoffer Gittell, MIT professor R. John Hansman, and MIT doctoral student Anne E. Dunning. The willingness of Southwest employees to invest time to connect with one another — from top managers down to front-line service representatives — may well be the essential value that sets Southwest apart from other major U.S. airlines, according to the authors.

Gittell and Hansman conducted a group interview with ten top executives at Southwest as part of the Global Airline Industry Program at MIT, an initiative examining how major commercial airline carriers are facing the challenges of their rapidly changing industry.

Staying on top of an industry facing more regulation (including the Airline Passenger Bill of Rights), new technologies, increasing traffic, a changing labor force, and heightened competition is a tremendous challenge. During the interview, Southwest's managers said that they have to constantly reinvent their processes to adapt to the changing environment. In every aspect of its business, the authors found, Southwest has sought to simplify procedures, boost innovation, and keep costs down while retaining a high degree of teamwork, communication, and coordination across functions.

While its top-ranked customer service ratings have established its reputation as the "nice" airline, Southwest is much more than a legion of smiling flight attendants. Founded in 1971, Southwest has "literally transformed the U.S. airline industry, particularly since reaching critical mass in the early 1990s," assert the authors. Known for its low fares and high reliability in short-distance travel, Southwest ranks first in on-time arrivals and baggage handling and has the least number of consumer complaints per passenger filed with the U.S. Department of Transportation. It gets its planes in and out of the gate faster than other major U.S. airlines and serves more passengers per employee.

Keeping the product and process simple has resulted in innovations like ticketless seating and online reservations, as well as snacks-only food service. This has not, as critics predicted, precluded Southwest from introducing a coast-to-coast service with the same simplified product.

To keep fares low, Southwest works to control costs, as opposed to cutting costs. But that doesn't mean Southwest isn't investing in itself. The company's willingness to spend time and money on people and equipment is evident in its low rate of employee turnover; the high ratio of supervisors to front-line employees (1:10, compared with the industry average of 1:20); the longer average time spent in recruitment of employees; and the emphasis on cross-functional teams. With 80 percent of its employees unionized, Southwest also invests time in creating strong relationships between management and union leadership. "We have been successful in negotiations when we go in asking how much we can pay employees rather than how little we can pay," stated Southwest's VP and general counsel Jim Parker.

As for the changes that technology brings, Southwest has one foot in the future and the other in the past. In addition to its pathbreaking use of online booking and electronic ticketing, the airline maintains a relatively young fleet of Boeing 737s — and no other models — to save money, increase reliability, and boost efficiencies since pilots and crews need only focus on the requirements of a single type of plane. But management confesses that Southwest lags behind in getting internal systems to work together with other airlines and, culturally, has not adopted e-mail and voice mail as a means of dealing with customers and each other. "We resist nonhuman interfaces," commented John Denison, the carrier's EVP of corporate services. "We want our customers to talk to human beings, but we have adapted to the Internet world."

Growing slowly and deliberately has served Southwest well, the study concludes. And taking the extra time to re-cruit and train staff, to use technology carefully, to control costs through simple innovations, and to make relationships a high priority have proved to be a winning combination.

Alumni may request copies of working papers by calling 617-495-6852 or by visiting the HBS Division of Research Web site at www.hbs.edu/dor.

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