Case inpoint

Southwest AirlinesHow InternalMarketingPilots SuccessFrontline employees help drivea unique brand of service quality.

By Andrew J. Czaplewski,Jeffery M. Ferguson, and John F. Milliman

"...Above all. employees will be provided thesame concern, respect, and caring attitude withinthe organization that they are expected to shareexternally with every Southwest customer."—from Southwest Airlines' mission statement

ALTHOUGH NEARLY EVERY corpo-

ration says its goal is to provide excel-lent service, evidence shows that theservice quality of many organizationslags below customer expectations. Thisis especially true in new e-commercecompanies. One of the fundamental rea-sons for these service quality problemsis the lack of commitment and skills ofthe frontline employees who are inter-acting with customers.

What is missing is a strategy calledinternal marketing, which involvestreating frontline, contact employees asinternal customers in the effort toencourage these employees to provideexcellent service for the end customer. Intoday's tight labor market, internal mar-keting is viewed as an even more impor-tant way to obtain, develop, motivate,and retain skilled and energized

employees who in turn provide highquality service.

Southwest Airlines provides anexcellent example for the successful exe-cution of internal marketing strategies.Its success in the highly turbulent airlineindustry has in large part been attrib-uted to its people, who provide consis-tently excellent service quality.Examples of that service include five"triple crown" awards in the '90s forlowest customer complaints, most on-time arrivals, and highest quality bag-gage service. While maintaining a topsafety record, the company also hasamong the lowest employee turnoverrates in the industry. In the most recentrankings by Fortune magazine.Southwest Airlines and Cisco Systemswere the only companies to be rated inboth the top-10 most admired compa-nies and the top-10 best places to work.Also, in a recent Consumer Rqjorts studyof the nine major domestic airlines.Southwest was the only airline to berated as offering below-market pricesand above-average service quality.

Perhaps what is most exemplaryabout this airline is that it uses highemployee morale and service quality asthe means to its excellent profitability.Southwest has been profitable everyyear since it first turned a profit in 1973and was the only major domestic airlineto be profitable in 1991, the worst yearever for the airline industry. An internalmarketing strategy appears to be a pre-requisite for building employee capabili-ties and motivation, which leads to |higher levels of service quality. In turn, ahigher level of service quality leads togreater customer satisfaction and reten-tion, higher sales revenue, and ultimate-ly greater profitability.

Implementation !The tactics for implementing inter-

nal marketing include offering a visionthat provides purpose and meaning tothe workplace, competing aggressivelyfor the most talented people, preparingemployees with the skills and knowl-edge they need to perform while at thesame time emphasizing team play, moti-

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vating individuals through measure-ment and rewards, providing freedomto excel, and ensuring that organiza-tional management understands theinternal customer (See Exhibit 1.) Eachof these areas is critical and providessynergy for successful Internal market-ing. Neglecting even one of these tacti-cal components can severely limit theeffectiveness of a comprehensive inter-nal marketing program.

Offer a vision. A central require-ment for successful internal marketingis providing employees with a clearvision worth pursuing. People want (1)to know how their work fits into thebroader scheme of business operationsand (2) to understand and believe inthe goal that they're working toward.As William Pollard of ServiceMastersays, "People want to work for a cause,not just for a living. When there isalignment between the cause of thefirm and the cause of its people, moveover because there will be extraordi-nary performance."

Southwest has a strong missionand vision that shape its corporate cul-ture, how it implements its businessstrategy, and how it treats its employ-ees. First, the airline emphasizes puttingemployees first, even before its cus-tomers, [n fact, a common mantra is"customers come second ... and still getgreat service." A core vision is the betterits people are treated, the better theyperform. Teamwork, serving others,and acting in the best interests of thecompany are central aspects of thiscommunity vision at Southwest.

Another core value of Southwest isan emphasis not only on the intellectu-al and skill-based aspects of work, butalso on emotional and humor aspects.

A portion of the airline's missionstatement says its customer servicewill be "... delivered with a sense ofwarmth, friendliness, individualpride, and Company Spirit." This ismanifested in the organization'sextraordinary focus on showing"heart," which translates to caring forits customers and employees. Whilethis may sound simplistic. Southwestappears to live this idea actively. Itmakes extensive use of customer suc-cess stories detailing how far the com-pany has gone to please its customers.Southwest is renowned for the humorits employees display, such as tellingjokes and greeting customers by pop-ping out of overhead luggage com-partments. Even the longtime CEO(and now chairman). Herb Kelleher, iswell-known for serving drinks to cus-tomers on flights as well as perform-ing skits and rap songs at internalcompany events. These values of asense of community, a strong compa-ny cause, and expression of emotionand enthusiasm create the basis of thevision offered to existing and prospec-tive Southwest employees.

Compete for talent. Southwestmakes extensive efforts to attract thevery best people. However, it definestalent differently than most companies.As a service organization. Southwestprefers to hire for attitude and thentrain people for specific skills. It strong-ly believes inherent attitudes cannot bechanged in people. To test for behaviorssuch as a sense of humor, ability towork with others, and friendliness,Southwest's interview process includesgroup interviews where applicants telljokes and role-play a variety of situa-tions to demonstrate teamwork and thecapacity to act spontaneously. Overtime, the airline's internal marketingefforts have created a culture that givesit an advantage over competitors in hir-ing the best people. Southwest canafford to be very selective because itreceives an extremely large number ofjob applications with little active adver-tising thanks to its reputation for beinga unique and excellent place to work.

Stress team play. Southwest placesspecial emphasis on preparing its peo-ple to perform and on teamwork. It

1J<eys to internal marketing success

Attracting,developing,motivating,

and retainingqualified

Cbmpete for talent

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Case i

considers employee training to be a con-tinuous process rather than a singleevent. Throughout their careers,employees are cross-trained on multiplejobs to enrich every employee's workexperience and to prepare them to per-form flexibly in different positions asneeded. In addition, employees arespecifically assigned to work with a sen-ior employee who serves as a mentor toprovide a clear demonstration ofSouthwest's service quality and to beavailable to answer questions.

Southwest also has extensive ongo-ing training to continuously improvework skills and reinforce the company'swork ethic. Flight attendants receivetraining not only on service quality, butalso on customer care. The airline seeksto continually underscore its servicequality message and culture to itsemployees. Recently, a committee of 100employees was set up specifically to

Strengthen its culture of hard work,high-quality service, humor, and fun.To give further symbolic and practicalvalue to the importance of customers.Southwest has created a position calledvice president of customers. The resultsof such programs are seen in the highlevel of teamwork. Some examplesinclude ramp agents helping to unloadbaggage, clean toilets, and stock theplane. Flight attendants also prepare thecabin for passengers. Even pilots andmanagers are encouraged to pitch in tohelp the other employees when needed.

Team play is particularly importantat Southwest because of the highdemands of service work and becauseits employees work longer hours thanemployees at most other airlines. Serviceproviders can become stressed by theserver role and become less caring, lesssensitive, and less eager to please. Tocombat tbis "service provider fatigue"

problem. Southwest emphasizes team-work among its employees. Employeesare encouraged to be responsive to fel-low employee needs first and then tocustomer needs. This spirit of assistanceinvolves everyone in the organizationincluding managers, pilots, and theCEO—all of whom are expected to pitchin when employees are overloaded. Allof these practices help employees sup-port each other to continually providehigh quality service in an otherwisestressful job.

Measure and reward. Measurementand reward for superior employee per-formance is a critical part of successfulinternal marketing. Rewards include notonly financial compensation, but alsoadvancement, recognition, and othernon-financial rewards. Southwestrequires a lot from its employees and inreturn provides them with a broadrange of significant rewards and rect)g-nition. In particular. Southwest is intenton rewarding the very best performerswithin the organization. The companyoffers compensation comparable to tbepay of other major airlines, includingfree travel for employees and Immediatefamily. In addition, it provides signifi-cant profit sharing, bonus, and retire-ment savings programs. Many employ-ees receive stock options, and collective-ly the employees own 11% of the com-pany. The stock options and profit shar-ing not only improve motivation, butalso help foster a keen sense of team-work and organizational commitment.

To complement its financial incen-tives. Southwest uses multiple non-financial methods to reward outstand-ing performers, including numerousrecognition and non-cash rewards. Inaddition. Southwest demonstrates deepcommitment to its employees by seek-ing to provide job security. To dateSouthwest has not had a single layoff

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and recently announced it has officiallyadopted a no-layoff policy. Southwestalso offers numerous celebrations fororganizational, team, and individualemployee accomplishments. Forinstance, celebrations are held when thecompany passes certain milestones orreceives industry awards and foremployee accomplishments such asexceptional job performance, length ofemployment, and service inSouthwest's community programs.Siiuthwest is considered a model com-pany for giving frequent spontaneouspraise on current behaviors and havingformal recognition programs to rewardpast behaviors.

Leverage the freedom factor.Many companies practice rule bookmanagement or have thick policy andprocedure manuals to facilitate control.However, this style of management canstifle initiative and prevent employeesfrom delivering personalized and unre-stricted service quality. Good internalmarketing involves giving serviceworkers the opportunity to create valuefor their customers and achieve recog-nition for themselves. While Southwestdoes have strong operating policies, italso empowers employees to maketheir own judgments and decisionsabout service. Southwest continuallyseeks to de-emphasize its hierarchy soemployees can make decisions and actto serve its customers. Southwestemployees, including flight attendants,customer service reps, and baggagehandlers, are encouraged to take what-ever action they deem necessary tohelp fellow workers and to meet cus-tomer needs—even if it means breakingcompany policies. The company'straining seeks to model this "loose-tight" approach by building on theSouthwest culture, but also encourag-ing independent thinking.

Measurement and rewardfor superior employee

performance is a criticalpart of successfulinternal marketing.

Know thy internal customer. Thebasis for the philosophy that customercontact employees are internal cus-tomers is that many times the "server isthe service." As such, companies musthave the right people serving customersand must ensure these employees are assatisfied as they want their external cus-tomers to be. Thus, for service firms,marketing research on internal cus-tomers is at least as important as mar-keting research on external customers.Southwest continually seeks input fromits internal customers. Focus groupswith employees are used to measureresponse to service and generate newideas. Southwest also has a unique rela-tionship with its labor union employ-ees. Instead of discouraging unions asmost companies do. Southwest encour-ages unionization and also encouragesunions to research pressing issues andmake proposals for improvements. Theunion is one more way to demonstratesolidarity among employees and to giveworkers an active voice in the organiza-tion. The company also uses formalemployee surveys on an ongoing basisas well as an active informal suggestionsystem to get feedback.

Reaping the RewardsAn integrated internal marketing

approach is the engine drivingSouthwest's unique brand of servicequality. The company demonstrateshow internal markehng can positivelyaffect three important levels of organi-

zational outcomes: employees, cus-tomers, and profits. Southwest's successis based in large part on its employeesand its extremely positive attitudes,high productivity, and strong customerorientation. In doing so, the employeesplay an instrumental role in helping theairline create its position of sustainablecompetitive advantage—being both alow cost producer and having high cus-tomer service quality.

In particular. Southwest illustratesthe importance of a corporate vision inproviding employees with a connectionbetween their work and a greater pur-pose in the organization. While mostcompanies only seek to engage theworkers through pay or through theirminds and intellect, successful internalmarketing offers a vision to create asense of spirit and emotion thatengages not just the mind, but also theheart of the employee. Finally,Southwest successfully implements itscorporate vision through its hiring,training, and rewarding practices toensure high levels of employee per-formance and service quality. •

About the Authors ' .Andrew J. Czaplewski is an assistant pro-

fessor of marketing and international

business at the University of Colorado at

Colorado Springs. He may be reached at

aczaplewski@mail.uccs.edu.

Jeffery M. Ferguson is associate dean of

the college of business and professor of

service management and marketing at the

University of Colorado at Colorado

Springs. He may be reached at jfergu-

so@mail.uccs.edu.

John F. Milliman is an associate professorof management and chairman of the man-agement department at the University ofColorado at Colorado Springs. He may bereached at jmiUima@mail.uccs.edu.

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