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Total Compensation
As a genuine philosopher, Mr. Lincoln has developed a Protestant style work ethics with truth in quality posited as the lynchpin of socially responsible as well as responsive strategy (Lincoln Company, 2014). According to his system, the customer instead of the shareholders is the ultimate stakeholder, who supposedly has well-articulated needs to be addressed with a set of high-quality products (Jackson, Schuler, Werner, 2012). If the market is price-efficient and there is no adverse selection, the product or solution will be accepted adequately. Thus, market efficiency enables all contributors, workers on par with administrative employees to share in the company’s earnings as well as risks. However, markets are not always information-efficient even under the conditions of perfect competition. Thus, Lincoln Company may have capitalized on its monopoly status earlier, but the long-enjoyed and sustainable market share has been earned through commitment to excellent quality and ongoing quest for efficiency.
In fact, cost reduction has not accrued in the way of wage minimization. On the contrary, the base wages have linked to market averages, with the implied piece rate remaining stable, and the year-end bonuses running as high as 80 percent of the annual wage. Although the latter ratio is variable with the bulk of excess earnings allocated to development and expansion rather than incentive bonuses, individual productivity and efficiency have affected the bonus base while simultaneously adjusting the effective multiplier. Furthermore, one might conjecture Lincoln did not care about outside stakeholders benefitting from tax proceeds implicitly as he did about staff as internal customers through trying to make bonuses tax deductible. However, that assumption does not support the base wage to sales ratio being far below the industry average, and is in line with the policy of not rewarding the absentees, explicitly or implicitly. In addition, based on the ownership-as-learning valley, his strategic HRM linking compensation to sustained performance has relied heavily on employee co-ownership to this day. In fact, three-fourth of the personnel control a 50 percent stake in the company. The fact means that each employee is encouraged to reveal ingenuity by means of an early suggestions system, which is merit-evaluated at the year-end. Additionally, workers are expected to make the ideas relevant to the company’s objectives to analyze how one contributes to the organization. In fact, contributions result to self-motivated leadership with firm morale and low turnover. The success is based on allocation of the human capital toward task-specific core competencies.
Lincoln’s going concern has fared as a wide-moat ‘cash cow’ for years due to the stable demand and exogenous factors other than technology having little impact on labor productivity. Contrary, Southwest Airlines faced turbulence and turnaround challenge since the previous crisis of the early 2000s. The 2000s crisis appeared because of fuel price hike and lower margins being just a few shocks forcing the company to retrench to the low-cost and economy class solutions. Thus, the strategy of SWA largely is the cost reduction and commuting network coverage, rather than the exceptional quality or unparalleled variety that the company has labored to secure core edge and interim-run strategic goals (SWA Website, 2014). The service sector exhibits a derivative and volatile demand pattern, which holds for the demand for labor as well. There is little the superior staff, flight crew included, can do about productivity causes that are mostly uncontrollable. However, external causes undermine morale and increases potential turnover. The fact that long-unemployed highly skilled personnel find their human capital dissipated urges labor hoarding in the industries with the lowest residual cushion to exercise. Profit sharing and stock options could be an overlap with a strategy of Lincoln, albeit aimed at countervailing the below industry base pay. The apparently higher weight of value at risk should be in line with the environmental challenges, with base pay linked to the uncontrollable dimension (Jackson, Schuler, Werner, 2012).
Benefits and Services
The company offers the pension plan, which may not prove portable or transferable in light of the visionary and authoritarian style aimed at commitment, and extra vacation subject to long-term employment record. However, the organization does not offer artificial executive ‘perks’ or favors and fringe benefits related to KSA and extraneous training, unless uniquely tied in to company needs. On the one hand, the system appears consistent with the overall vision and values, while endogenizing any separation between creative fulfillment and posterior rewards. However, the strategy does not prevent HVROI from translating into well-paid stock prices despite the alleged disregard for outside investors’ concerns. In any event, all of the incentives, training included, intend to make dominant organic growth and financing from inside the company.
Whereas Lincoln’s industry profile builds on scale economies, SWA face the necessity of maintaining the economies of scope. The strategy has HRM implications for team quality and applicable incentives are different, despite the invariably high operating advantage in both cases. The nature of the job calls for a greater focus and commitment in the airline operations, and ushers in the extra stress adding relevance to additional vacationing short of sabbatical leaves. The resultant skill deterioration and lower confidence need to recover during the vacation. Although little RD applies similar to the Lincoln instance, the MA parade leaves very little funds available for HRM allocation. The lack of funding implies the need for external financing at odds with an organic growth model at Lincoln.
Nevertheless, CRM does resemble the Lincoln-style fairness principle. Firstly, despite the friendliness of the Customer Service (somewhat foreign to low-end carriers), the first-come-first-serve does not correspond to often-sought emergency discrimination the customers would be willing to pay for. It is noteworthy that the service provider contributes largely to securing extra benefits to the personnel. Similar to Lincoln’s recognition of its people as the ultimate earning asset, SWA’s commitment to hiring and retaining the very best appears most trustworthy and incentives-compatible. In fact, it makes the entire difference, whether in monopoly market power or survival at stake. Cost leadership and proactive customer communication are closely intertwined when it comes to capacity utilization. Based on this assumption, similar to how Lincoln has discarded superfluous perquisites to its inner constituencies, SWA has provided a parsimonious bundle to its ultimate clientele, with rapport aimed at relevance selling. Importantly, the company has maintained a balance between formal organization and a ‘loose-tight’ employee participation scheme. The incentive framework of SWA is largely similar to the Lincoln model. Centralization taps the operations, CRM is far more relaxed, which provides for distinct incentives packages for the two employee groups. Moreover, this framework does not affect the value stream or team-generated complementarities or synergies.
Unionization
Lincoln did not appreciate free riders, albeit acting on behalf of an organized group of stakeholders. Although empathetic about the workers’ concerns about unscrupulous managerial practices, the LIMP system has centered on cooperation or the creation of shared value (Porter Kramer, 2011). The early system of suggestions and the Advisory Board established in the wake of the Depression could be thought of as a housed think tank. The assumption is based on the limited discretion or formal authority. The Advisory Board amounts to more than bargaining stewardship. On second thoughts, failure to contribute to the Employee Association deemed as a signal of free riding or shirking as embedded in the essence of LIMP design. Nonetheless, with a near-controlling interest on hand, unionization is redundant or restricted to the non-owner minority who are likely to be newcomers. In that event, the regular proxy fights and moral hazard pertaining to boards and rally gain relevance.
Southwest Airlines has been forced into litigant patterns for reasons other than union bargaining. The observation is that a monopoly like Lincoln opposes concentration or consolidation in the labor market. At the same time, it is more challenging for an operator in an intensely rivaled sector to allow for hard negotiations vis-a-vis the employees in an attempt at striking the careful balance between CRM, TQM, and morale. With sales as RPM and inventory as ASM, the yield and load factors are elements that the staff have little control over to bargain. In effect, the marketing management team has developed a product variety that amounts to the distance and unbundling options. At SWA, unionist bargaining is mostly replaced with the culture of informal care, derived from their CRM legacy. Thus, SWA renders the entire design consistent irrespective of absolute evaluation or comparative idiosyncrasy. The ‘attitude breeds attitude’ approach aims at stress mitigation and natural motivation by means of credible commitment signaling. In fact, the industry-low level of turnover suggests the decreased relevance of formal unionization (or strict delegation and tight hierarchy) in both the corporate instances. Opportunism is not acceptable, with mavericks being hired acting to enforce intergroup cooperation. Lastly, the diversity benefits superior teams in the manner of smart portfolio diversification or synergy-driven MA. It would appear that selection rates at each subsequent screening stage via personality tests and interviews multiplied by the acceptance rate at the end is proportionate to the low turnover.
References
Jackson, S.E., Schuler, R.S., Werner, S. (2012). Managing human resources (11th ed.) Mason, OH: South-Western.
Lincoln Electric Company. (2014). Corporate website. Retrieved from http://www.lincolnelectric.com/
Porter, M. E., Kramer, M. R. (2011). Creating shared value: How to reinvent capitalism and unleash a wave of innovation and growth. Harvard Business Review, Jan/Feb, 63-77.
Southwest Airlines. (2014). Company website. Retrieved from http://www.southwest.com/
