Southwest’s New Approach to Performance Management

Bonnie Endicott – Director Talent Management, PeopleLorelei Windeler – Talent Development Manager, People

July 28, 2020

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• Southwest history

• Business problem trying to solve

• Phases of solution

• Where we are headed

Agenda

Lorelei Windeler

Talent Development Manager

Southwest Airlines

Bonnie Endicott

Director Talent Management

Southwest Airlines

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Southwest History

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Southwest in Recent Years

In 2019, Southwest Airlines was the largest carrier in the United States1

1 Based on the U.S. Department of Transportation's most recent reporting of domestic originating passengers boarded

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Our History Prepares us for What’s Ahead

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Planning

People and critical business

decisions resulting from talent

activities:

• Leadership development

• Employee development

• Promotions / Compensation

• Workforce plansPerformance Management

Continuous performance feedback

to Employees:

• 1:1’s

• Check-ins

Talent Activities

Opportunities to discuss

talent throughout the year:

• Succession planning

• Talent review

• Calibration

Business Priorities

• Corporate Strategy

• Workforce Plan

• Annual Operating Plan

We Knew Where We Wanted To Go – Integrated Talent Development

Employee experience

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What We Were Solving For

Our SolutionOur Opportunities

Continuous feedback model

Launch Check-ins

Create a coaching culture

Employee Experience

• Employee expectations

• Traditional performance management model

• Millennials expectations

Business Needs

• Pace of our business

• Flexibility as the business changed

• Talent strategy and business strategy

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Performance Appraisals Employees and Leaders can both have angst when it comes to performance appraisals

“Am I going to get an

Outstanding or a

Solid? I think I did

Outstanding, she

never said anything

different?”

“I need to

remember

everything I have

done all year”

“I wonder if my

goals from the

beginning of the

year are still

relevant.”

“I got feedback in

February on a

presentation I did, will

she bring that up again

in my PA?”

“I have so many

PA’s to complete, it

is going to take

forever to finish”“Am I being

fair, did I

remember

everything he

did”

“The goals my Team set

at beginning of the year

don’t align to where the

business is currently”

“How is he

going to react to

the feedback in

the appraisal”

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• Stressful

• Performance Appraisals are event

• Employees want growth and development

• Process heavy

• Business needs are continually changing

• Generational differences

Research & ResourcesWe spent a significant amount of time doing research, speaking to peers in the field and attending

conferences to learn and validate what we were thinking

What we learned

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Summary of our learning on what all

Employees want:

• a sense of purpose in the workplace.

• leaders who act as coaches and guide

development.

• frequent feedback that enables adjustments to

get where they want to go.

70%Are engaged when their Leader focuses on

their strengths

Gallup Study: How Millennials Want to Work and Live

59%SWA Employees receive regular feedback from their

Leader that helps them improve their performance

2018 SWA Employee Survey

All Talent Wants

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• Integrated talent management

• Formalized “Check-in”

• Director level and above Check-in

• Customized form with metric

• 2019: + 2 Operational

Departments ~3000 Employees

total

Pilot Program

Employee Experience

• Performance Development

• Quarterly check-in

• 2017: +3 Departments

~800 Employees

• 2018: +4 Departments

~1600 Employees total

December 2020

• Check-ins are our PM process

• Framework defined

• Formalized accountability

• Senior Leader adoption

• Majority of non-union

transitioned ~7200 Employees

Our Journey to Evolve Performance Management for Non-Union

EmployeesOur journey started in 2017 and can be broken into three phases, Pilot Program, Tone at the Top and

Standardization of Performance Management

Standardization of

Performance Management

Check-ins are the way

Tone at the Top

Focus on business needs and

expanding the Pilot

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Phase 1: Quarterly Check-in Pilot

Pilot Program

Quarterly Check-ins7 Departments, ~1600 Employees from the traditional end-of-

year performance appraisal to a continuous feedback model

Simple Focused conversation on past 90 days and align on priorities

for next 90 days

TransparentClear expectations and understanding of reward for contribution

FrequentMotivate through continuous feedback and coaching

Business Drivers

Challenges arising from traditional performance appraisal

model of performance management; one-time event,

stressful, “lag” vs “lead”

New generation highlighted the way we all want feedback,

validated by our survey results

The Check-in process was first piloted in 2017 and has evolved to include nine departments spanning

Commercial, Operations, and Enterprise Management

We wanted to change the focus from performance

management to performance development

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Phase 1: What did we learn?

88%Satisfaction of Check-in based

on initial pilot group of ~1600

• Check–in vs traditional PA

• Priorities vs annual goals

• Rating vs no ratings

• Senior Leader buy-in

• Cross–functional collaboration

• Consideration of business drivers

• Integration

Employee Experience

Business Needs

7 Departments, ~1600 Employees

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Phase 2: Tone at the Top

Sr. Leader Performance Management

Launched performance check-insDirector and above level from the traditional end of year

performance appraisal to a continuous feedback model

Aligned to business drivers by

establishing performance

measurements Identifying cost, quality, and productivity metrics

Set the foundation for a coaching

culture Check-ins enabling career development and performance

improvement opportunities

Business Drivers

We needed Senior Leaders to experience and buy in

to new process

We needed to align our talent strategy and integrate it

with the business strategy

We needed to validate the continuous feedback model

design would work within our Operational

Departments

The Check-in process for our Senior Leaders rolled out in 2019 and added two Operational Departments to the

pilot program

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Phase 2: What did we learn?

93%Senior Leaders that have utilized

the Check-in process to date

• Empower Employee

• Initial Check-in

• Check-in framework

• Individual priority alignment to business drivers

• End-of-year wrap up

• Reporting and accountability

Employee Experience

Business Needs

9 Departments, ~3000 Employees

273 Senior Leaders

Tone at the TopCEO is doing Check-ins

More normalized performance

distribution for Sr. Leaders

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The traditional end-of-year

performance appraisal

90% Past Performance

10% Future Focused

A coaching culture

facilitated by Check-ins

10% Past Performance

90% Future Focused

From Here To Here

Once per

Quarter

Collaborative

Form

Expectation

Alignment

Performance

Rating

Employee and

Leader both

Participate

Stored in System

of Record

Phase 3: Standardization of Southwest Performance ManagementIt’s about the conversation, development, collaboration, and priority setting

Framework

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Performance Management - Current State Supporting two tracks of Performance Management practices today

~7200Employees using the Check-in process to date

~2400Employees still on the traditional PA process to date

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Evolving to Continuous Performance Management

My Performance

How I show up

My Productivity

How I work

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THANK YOU!

Learn more at www.southwest.com/promise