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Does Employee Morale Increase Profits? - 2002-05-02

Is there a direct link between worker morale and corporate profits? A growing number of businesses believe there is. So, they are searching for ways to build trust with their workers.

Skills can be taught, says Southwest Airlines spokeswoman Beth Hardin. As a result, she says, when Southwest hires, the company cares less about a potential worker's capabilities than it does about that worker's attitude. "We're looking for someone who enjoys being around people and really wants to help make their travel process easier," she said. "That can be a reservation agent who is willing to provide extra information, or the customer service agent who pats someone's hand when they are nervous about flying."

That kind of special service earns Southwest employees many compliments. When the company receives letters of commendation about any of its employees, Beth Hardin says, the employee receives a personal note of thanks from the president of the company. "This company spends a lot of time appreciating its employees, even for the little successes," she said. "We also have a large stake, as employees, in the company in our profit sharing program. And, in our 31-year history, we have never had a layoff or a furlough. Our employees appreciate the length to which the company is willing to go to preserve their jobs."

Sloan School of Management Professor Tom Kochan says that kind of appreciation pays off. It creates high energy levels that raise the company's productivity and lower its costs, and an enthusiasm that draws customers who enjoy flying Southwest Airlines.

And, he says, Southwest's corporate culture is part of a trend. "Competitive pressures are requiring us to become more innovative, to produce a higher quality of service, to be more customer-focussed and to respond at the same time to tight labor markets and to shortages of skilled talent," he said. "All of this, I think, is creating an environment that, today, is requiring companies to be more responsive to both their workforce and to a demanding customer base."

Mr. Kochan says the "lean and mean" corporate outlook that accompanied company downsizings in past decades is increasingly being replaced these days by a caring corporate culture. "Organizations that build high trust in the workplace, and reward people for good performance really get a very significant payoff in terms of quality of work and innovation in the way services are delivered," he said.

Corporate culture may be changing, but, Mr. Kochan says, the corporate goal remains the same - to increase profitability.