By Mitchell Schnurman
mschnurman@star-telegram.com
Are happy employees a luxury that some companies simply cannot afford?
Or are they the most important asset, the difference between success and failure?
Two hometown favorites, Southwest Airlines and American Airlines, couldn't offer a starker contrast in both approach and outcomes.
Dallas-based Southwest has put employees first for 40 years, refusing to impose layoffs, pay cuts or furloughs, even during the darkest times. Labor costs have risen to become the industry's highest, and the company is pushing for more productivity, not concessions. Southwest remains profitable, but margins have narrowed so much that it's slowing growth plans by delaying the delivery of new planes.
At Fort Worth-based American, management and labor have been clashing for decades in good times and bad. Now in bankruptcy court, the unions have repeatedly pushed for a merger with US Airways, and thousands of employees have signed petitions stating they have no confidence in current management. Last week, one union expert testified that a merger was inevitable, and the unions' full-throated support has given the US Airways bid real traction.
By losing employees, American executives may well lose the company.
Nearly every business talks about the importance of its people, and judging by these two examples, the lesson seems clear: Nurture your workers, no matter what the cost.
Except that much of corporate America rejects that idea in practice, and the bottom line often defies it. Reports last week, for instance, said Hewlett-Packard plans to cut at least 25,000 jobs. While earnings growth has slowed and the stock price has faltered, H-P made almost $16 billion in the past two years. It obviously doesn't embrace the Southwest model.
In the airline business, United and US Airways have a history of labor relations as bad as American's. They've also been through multiple bankruptcies, cutting pay, benefits and staff. Yet each carrier has managed to turn around results and post solid profits in the past two years.
That's because networks, with higher revenue and lower costs, are more important than employee morale, even in a customer-contact business like air travel. While United workers continue to complain and pilots post scathing reviews, the carrier is producing stellar results. In 2010 and 2011, parent company United Continental earned $1.1 billion, 72 percent more than Southwest.
"No matter how much animosity there is between labor and management, airlines often produce very good results," said Bill Swelbar of the MIT International Center for Air Transportation. "Customers may overhear complaints, but generally people do a very good job every day. Even if morale is lousy, people in the aviation industry have a tremendous sense of pride in their work."
In 1997, President Bill Clinton ordered an end to a strike by American pilots, and two years later, the company had to go to court to stop a pilots' sickout. Despite such hostility and turmoil, American earned nearly $2.5 billion from '97 to '99.
While profits don't require that workers feel good about their company, better morale and engagement can make a difference. A 2010 Gallup analysis of 32,000 businesses showed that the most engaged employees added 16 percent to profitability. They also stayed on the job longer and engendered more customer loyalty.
"They show up for work, they please customers, they build a safer environment, they produce higher-quality products -- and those things accumulate to affect financial performance," Jim Harter, Gallup's chief scientist of workplace management, told a Gallup magazine.
After talking with thousands of workers, Gallup identified 12 issues that best predict employee performance, and none included pay raises or bonuses. For many decades, researchers have known that such incentives don't provide lasting motivation, said Michael Cole, who teaches leadership at Texas Christian University's Neeley School.
"The good feeling wears off, and everything resets," he said.
So what lasts? Cole said three things energize a workplace for the long run: When employees feel as if they have control over their work, are contributing to a larger purpose and have a chance to learn and grow.
Senior leaders can help create that environment, although issues often intervene. There are more growth opportunities when a company is expanding (Southwest) than when it's contracting (American). And because companies have life cycles, retrenchment is necessary at times.
"Corporate cultures have good years and bad years, too," said John Sumser, a career and workplace expert for
Glassdoor.com. "My advice to every company is to avoid layoffs. Employee satisfaction may stall, but layoffs will rip morale to shreds."
Glassdoor, a social jobs and career community, ranks companies on a five-point scale based on anonymous online reviews by employees. Southwest stands apart with a 4.2 rating, and its employee morale was rated even higher.
American scored about the same (3.0) as United and US Airways. But its greatest weakness, according to 224 reviews, is senior leadership. CEO Tom Horton doesn't have a separate score yet, but his predecessor, Gerard Arpey, had an approval rating of 41 percent.
Approval rates for United and US Airways CEOs are at least 25 percentage points higher. Southwest's CEO scored twice as high as Arpey.
If American's future were decided by a popularity contest, it wouldn't be a contest at all.
Mitchell Schnurman's column appears Sundays and Thursdays.817-390-7821Twitter: @mitchschnurman
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