Strategic Reward Systems at Southwest Airlines

with the dawn of the 21st century,

technological, political, regulatory,

demographic and economic

forces unleashed in the past will

continue to exert pressures on

organizations to change to

ensure their survival and success.

Initiating and sustaining successful

change require considerable

thought and action on related

supportive structures and systems.

Organizations and their

subsystems, including critical

human resource management

systems, have to become increasingly

strategic to succeed in an environment that

is in constant flux. That is, functional and unit

strategies must be aligned with overall firm strategy

to enhance organizational effectiveness. It is

a widely held view that strategic compensation

systems, an integral aspect of human resource

management, are vital in ensuring desired

employee behaviors and enhanced firm performance.

1 This article provides an overview of

strategic rewards and a detailed discussion of

rewards at Southwest Airlines (SWA), including

implications for management.

The Need for Strategic Reward Systems

Traditional rewards systems usually have a large

proportion of the total package as base pay and

just a small portion tied to employee performance

as reflected in a periodic performance appraisal.

Such systems emphasize Tayloristic-type management

structures and systems, including functional

and hierarchical differentiation in organizational

structures, rigid supervisory control and

strict compliance with rules. The traditional

structures have changed considerably over the

past few decades and will continue to do so as

organizations