Q1: In this chapter, we explored several alternatives to layoffs as a means of reducing a labor surplus. Compare and contrast the list we generated with what was done at Southwest in the wake of the 9/11 attacks. How did the response at Southwest differ from other airlines? This case shows how a company, Southwest Airlines, was able to go against the normal cost-cutting measures of a layoff and not downsize employees even during an extremely difficult period in the Fall of 2001. Southwest Airlines has a strong focus on its employees and a no-layoff policy which is “one of the core values that underlie its human resource strategy” (p. 218-9). Downsizing of any kind would have undermined this strategy, so it was clearly not an option for the company. This was not the case with the other airlines. The case outlines “draconian cuts in both schedules and service” made by Southwest’s competitors even before the 9/11 attacks. After the attacks, over 100,000 employees were downsized by the other airlines (p. 217). Southwest’s alternative to layoffs was to cut costs through other ways. The company was able to rely heavily on its employees who were very productive and flexible (p. 218). High productivity equates to a cost savings for the company because it keeps the labor costs low. Some of this cost savings was passed on to consumers who were also looking to reduce their own costs during the economic crisis. Because of the commitment to its no layoff policy, the company was also able to leverage that job security for its employees into creative thinking (p. 218). The employees were able to parlay that innovativeness into ways to help the company cut costs without the fear of repercussions for making mistakes. Additionally, the commitment to the policy enabled the company to maintain its positive image, so when the economic crisis was over, they were able to recruit good talent and retain good customers. Other decisions were made to keep from downsizing employees at Southwest Airlines, even though these decisions had the potential to hurt the stock price. One of those decisions was to dip into the cash reserves to sustain the company through the lean time. The company had a billion dollars in reserve and no debt. Another decision was to delay the purchase of new planes and stop plans to renovate the company headquarters (p. 218).

Q2: Southwest Airlines’ “no-layoff policy” is an important component of its overall culture and strategy. In what ways does this no-layoff policy, which clearly hurts the airline in the short term, give Southwest a competitive advantage over other airlines in the long term? The first advantage that Southwest would have is a financial advantage. As stated earlier, the employees are highly productive which reduces labor costs. By passing along the savings to the customers, Southwest creates customer loyalty. This loyalty extends beyond the economic downturn into a long-term competitive advantage. Another competitive advantage that Southwest has is the retention of good talent and synergies within the groups. The company has invested time and resources into training employees with the hope of a return on the investment. Removing those employees during a layoff would eliminate the possibility of the payback on the investment. Additionally the employees that were laid off could seek employment at a competitor causing further damage to the company. In many cases the firms eliminated positions or resources that they simply could not survive without, and the firm had to rehire the individuals (p. 193). Southwest has a strong employee-focused reputation in the market with its “no layoff” policy. This company image is another competitive advantage that Southwest Airlines is able to leverage. This leverage extends beyond the current situation. The company will have an easier time recruiting and retaining employees in the future where job security will be a deciding factor for many resources in the market. Additionally, customers seek out brands that have a positive brand image and stay on as loyal customers in the future.

Q3: In this chapter, we looked at increased use of off-shoring, where jobs are moved from the United States to other countries where labor rates are cheaper. In what ways is off-shoring similar and different from a simple layoff? If there are some long-term benefits from avoiding layoffs, what might be the long-term advantages of trying to avoid off-shoring? Off-shoring is similar to a simple layoff only in the sense that both have a primary purpose to reduce costs for the organization (p. 198). This cost reduction can potentially be accomplished because of the lower labor rates in many other countries. Off-shoring is actually very different from a simple layoff. A layoff is a reduction of employees without replacing them whereas off-shoring is eliminating a position or department in the United States and then outsourcing that position or department in another country. Although, not relevant to this case, the chapter mentions several things that are advantages to avoiding off-shoring such as quality-control, security violations, and poor customer service experiences (p. 198). As stated earlier, Southwest Airlines has a policy that would prevent it from doing any type of layoff, and that would include downsizing local employees to hire employees in a foreign country. There are distinct advantages for Southwest to retain its current employees and not off-shore those jobs. The high degree of loyalty and productivity of the Southwest employees have enabled the company to realize cost savings. Again, the employees have added value to Southwest Airlines, so off-shoring would not make sense for the company.