SECTION A: COMPULSORY

QUESTION 1: (40 MARKS)

CASE STUDY

Southwest Airlines: Focused on Take-offs, Not lay-Offs

In the summer of 2001, the airline industry was facing severe problems due to slumping
business travel and vacationer demand. In fact, Northwest Airlines announced
draconian cuts in both schedules and service; Midway Airlines declared bankruptcy in
August of that year, citing a “calamitous” decline in air traffic. However, as bad as things
were, they soon got worse.

The September11, 2001 terrorist attacks on New York and Washington DC devastated
the whole nation, but few segments of the economy felt the impact as dramatically as
the already struggling airline industry. Even after reducing scheduled flights by more
than 20 percent, most planes were taking off with fewer than half their seats filled, and
airline shares lost a third of their value on the stock exchange. Most airlines needed to
cut costs drastically in order to make ends meet, and over 100,000 employees were
eventually laid off from American Airlines, United Airlines, Continental Airlines, and
America West.

Southwest Airlines bucked this trend however. Indeed, despite the regular ups and
downs of the airline industry, in its 30 years of operation, Southwest had never laid off
employees; remarkably, it was able to maintain this record even during the difficult Fall
2001 period. Southwest’s no-layoff policy is one of the core values that underlie its
human resource strategy, and insiders stress that it is one of the main reasons why
Southwest workforce is so fiercely loyal, productive and flexible.

(Cont...)

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The high productivity of these workers keeps labour costs low, and these savings are
passed on to consumers in the form of lower prices that are sometimes half those
offered by competitors. High levels of job security also promote a willingness on the part
of Southwest employees to be innovative on the job without fearing that they will be
punished for any mistakes. Southwest also finds that satisfied employees help create
satisfied customers and can even help in recruiting new employees when economic
conditions are conducive to growth.

In order to keep this perfect no-layoff record in 2001, Southwest executives assembled
into an emergency command and control centre in Dallas and brainstormed methods
other than layoffs that could reduce costs. Decisions were made to delay the planned
purchase of new planes, as well as to scrap ongoing plans to renovate the company’s
headquarters. The company which had no debt and over a billion dollars in cash, also
leaned heavily on this “rainy-day” fund to help get through tough times. It was a difficult
and painful process, but as CEO Jim Parker noted, “We are willing to suffer some
damage, even to our stock price, to protect the jobs of our people.”

(adapted from: Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2008) Human
Resource Management: Gaining a Competitive Advantage 6 th Ed. McGraw-Hill.pp 217-
218).

Required:

(a) Describe the Human Resource Planning process. Support your answer by using
examples from the case. (20 marks)

(b) “Southwest’s no-layoff policy is one of the core values that underline its human
resource strategy”. Based on information provided in the case, discuss Southwest’s
decision not to utilise the downsizing stragegy. (20 marks)

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 SECTION B: ANSWER ANY TWO QUESTIONS

QUESTION 2: (30 MARKS)

(a) What are the costs that need to be borne by organisations when planning to
recruit new employees. (22 marks)

(b) Explain what you understand by scenario planning. (8 marks)

QUESTION 3: (30 MARKS)

Briefly describe the Human Resource Forecasting techniques. Use suitable examples to
substantiate your answer.

QUESTION 4: (30 MARKS)

(a) The world economic recession is not over yet and the organisation is facing
financial problems. Line managers are complaining of a shortage of human
resources in nearly all departments. Orders from foreign markets are confirmed
for the next 3 months only. What HR strategies would you take to address the
problem in the short term? Give reasons for your answer.
(16 marks)

(b) If the usual orders are received and confirmed for the next three years, what HR
strategies would you take to address the problem for the longer term? Give
reasons for your answer.
(14 marks)

***END OF QUESTION PAPER***

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