A Little Evidence of Southwest's Success

O'Reilly, C., & Pfeffer, C. (1995). Southwest Airlines: Using Human Resources for Competitive Advantage. Stanford, CA: Graduate School of Business, Stanford University.

This posting is about the Stanford University, Graduate School of Business Case study focusing on Southwest Airlines as an example of leveraging human resources into a distinct competitive advantage. Certainly, we've all hear lip service paid to the importance of people and probably, most of us, even view it as a cliché and just words without any substance. This is certainly the case more often than not but Southwest Airlines appears to be an example of a company that has done so and proved that a company's personality and intellectual capital, its people, can indeed be leveraged into a distinct competitive advantage.

As anyone familiar with human resource departments can attest, human resource issues are very important to businesses and typically consume a large amount of a company's time and energy. The question is: how to leverage a company's intellectual assets (people)?

Not to be underestimated is the fact that Southwest's workforce is very productive. Their turnaround time (arrival at gate to next departure) is about 15 minutes, as compared to an industry average of about 35 minutes. Also Southwest accomplishes this with great efficiency; they use fewer people at gate and a smaller ground crew. Harold Sirkin, an airline specialist with BCG said, "Southwest works because people pull together to do what they need to get a plane turned around. That is part of the Southwest culture. And if it means the pilots need to load bags, they'll do it." Southwest averages nearly forty percent fewer employees dedicated to an aircraft than industry average (81 vs. 130), a testament to their productivity. This means they need a smaller load factor (about 55%) on their planes to break even.

A little evidence of Southwest's success

When Southwest started, in 1971 with 198 people, Continental Airlines used every dirty trick in the book, including political, regulatory, litigious, etc. to make sure that Southwest did not get off the ground. An example is the Wright amendment (named after James Wright, then Speaker of the House). This amendment ostensibly was meant to encourage traffic through the new Dallas-Fort Worth hub (where Continental flew through) but effectively made the logistics of airline routes in and out of Love Field (where Southwest flew through) very difficult. This appeared to have backfired and made Southwest "mad" and even more motivated to compete and win; a culture which appears to continue into their competitive culture that persists today.

Before Southwest entered the Louisville-Chicago market, 8,000 people daily flew this route, after Southwest entered, 26,000 people flew this