Singapore Airlines Case: Managing Human Resources for Cost-Effective Service Excellence

Jochen Wirtz and Loizos Heracleous

Singapore Airlines (SIA) has managed and organized its human resources (HR) to achieve sustainable competitive advantage and outperform other airlines in its peer group for decades. The case describes the role of HR in Singapore Airlines’ simultaneous pursuit of the apparently conflicting objectives of service excellence and cost effectiveness through its approach to the recruitment, selection, training, motivation, and retention of its employees.

“At the end of the day, it’s the software, people like us, who make the real difference.”

Patrick Seow, senior rank trainer at

Singapore Airlines Training School and in-flight supervisor

“In Singapore, we always want to be the best in a lot of things. SIA is no different…a lot of things that we have been taught from young, from our Asian heritage…filial piety, the care and concern, hospitality, and of course, the most important part is trying, if we can, to do whatever we can to please the customer. And how do we do it? Sometimes, people just wonder, ‘How do you guys manage to do it with the limited time and resources on a flight,’ yet we manage to do it somehow. Call us magicians.”

Lim Suet Kwee, assistant manager of

Cabin Crew Performance Management and former senior inflight supervisor

HR AND COST-EFFFECTIVE SERVICE EXCELLENCE AT SINGAPORE AIRLINES

Over the past four decades, Singapore Airlines has earned a stellar reputation in the fiercely competitive commercial-aviation business by providing customers with high-quality service and dominating the business-travel segments. Singapore Airlines has been the most awarded airline in the world for many years. For example, it won the World’s Best Airline Award from the prestigious U.K. travel magazine Condé Nast Traveler 23 out of the 24 times it was nominated. It also won Skytrax’s Airline of the Year award three times over the past decade. These awards are a reflection of Singapore Airlines’ customer focus. According to Tan Pee Teck, Senior Vice President of Cabin Crew, “It’s not just consistency that we need to maintain, but also an overall elevation in the average standard of service to a higher threshold, because the expectations of frequent flyers especially will rise in tandem.”

‘One key element of Singapore Airlines’ competitive success is that it manages to navigate skillfully between poles that most companies think of as distinct: delivering service excellence in a cost-effective way. Singapore Airlines’ costs are lower than those of all other full-service airlines. In fact, its cost levels are so low that they are comparable to those of budget airlines. From 2001 to 2009, the airline’s costs per available seat kilometer were just 4.6 cents. According to a 2007 International Air Transport Association study, the costs for full-service European airlines were 8 to 16 cents, for U.S. airlines 7 to 8 cents, and for Asian airlines 5 to 7 cents per available seat kilometer. Singapore Airlines had even lower costs than most low-cost carriers in Europe and the United States, which ranged from 4 to 8 cents and 5 to 6 cents respectively.

A key challenge of implementing business-level strategies, such as effective differentiation at Singapore Airlines through service excellence and innovation combined with superior levels of operational efficiency, is the alignment of functional strategies such as HR, marketing, and operations with the business-level strategy. The focus of this case is on how HR practices, a crucial aspect of most service businesses, contribute to Singapore Airlines’ success by creating capabilities that support the company’s strategy.

Figure 1: The five core elements of SIA’s HR strategy.

Five inter-related and mutually supportive elements inherent in Singapore Airlines’ HR strategy, along with leadership and role modeling by top management, play a key role in SIA’s ability to deliver its business strategy of service excellence in a cost-effective way. Let us now take a closer look at how the five elements work and complement each other.

STRINGENT SELECTION AND RECRUITMENT PROCESS

HR strategy begins with recruitment, and Singapore Airlines adopts a highly rigorous and strict selection process. Senior managers emphasize the need for cabin crew who can empathize with passengers and are cheerful, friendly, and humble. Cabin crew applicants are required to meet a multitude of criteria, starting with an initial screening looking at age ranges, academic qualifications, and physical attributes.

The subsequent recruitment interviews comprise four rounds. In round 1 (10 applicants at a time), applicants are asked to introduce themselves and answer a question posed by the interviewers. They are assessed on their command of English, confidence, and grooming. In round 2 (six applicants at a time), the candidates are divided into two groups and given a topic to debate. Applicants are assessed on their ability to work as a team and present their arguments in a logical and convincing manner. For the second half of the interview, applicants are given passages to read so that their enunciation can be tested. In round 3, one-on-one interviews with management are carried out to assess the candidate’s aptitude and suitability for the position. In the final round, also called the grooming round, a uniform test allows the interviewers to assess the look of the applicant in Singapore Airlines’ sarong kebaya. This evaluation takes into account the posture, gait, and general appearance of the applicant in the uniform.

From the 18,000 applications received annually, only some 600 to 900 new cabin-crew members are hired to cover turnover rates of 10%. These include both voluntary and directed attrition and company growth. After the initial training, new crew members are carefully monitored for the first six months of flying. This is done through monthly reports from the in-flight supervisors throughout the probationary period. Usually around 85% of the new recruits are confirmed for an initial five-year contract. Some 10% have their probation extended, and the rest leave the company.

This meticulous selection process (with a selection rate of 3%-4% of the applicant pool) ensures with reasonable certainty that Singapore Airlines hires applicants with the desired attributes. Despite the stringent procedures and strict rules about appearance and behavior, many educated young people around the region apply to join Singapore Airlines due to the perceived social status and glamour associated with its cabin crew. Singapore Airlines’ reputation as a service leader in the airline industry and an extensive and holistic developer of talent enables it to have its pick of applicants. Many school leavers and graduates see it as a desirable company to work for. They also get the opportunity to move to more lucrative jobs in the other companies

after having worked with Singapore Airlines (typically for two or more five-year contracts).

EXTENSIVE INVESTMENT IN TRAINING AND RE-TRAINING

Singapore Airlines places considerable emphasis on training, which is one of the focal points in its HR strategy. According to a senior manager of HR development, “SIA invests huge amounts of money in infrastructure and technology, but ultimately, you need people to drive it. At SIA, we believe that people actually do make a difference, so the company has in place a very comprehensive and holistic approach to developing our human resources. Essentially, we do two types of training, namely functional training and general management-type training.” Almost half of Singapore Airlines’ expenditure is on functional training and re-training.

Even though training is often emphasized as a key element of success in service industries, Singapore Airlines remains the airline with the highest emphasis on this aspect. Newly recruited cabin-crew members are required to undertake intensive 15-week training courses – the longest and most comprehensive in the industry. Singapore Airlines’ training aims to enable cabin crew to provide gracious service, reflecting warmth and friendliness while maintaining an image of authority and confidence in the passengers’ minds. Singapore Airlines’ holistic training includes not only safety and functional issues but also grooming, gourmet food, wine appreciation, and the art of conversation. Even during economic downturns and crises, Singapore Airlines maintains its heavy emphasis on training. Goh Choon Phong, CEO of Singapore Airlines, said: “We will continue to invest heavily in the training and development of our people to bring out the best in them, even in the most difficult of times.”

As Singapore Airlines’ reputation for service excellence grows stronger, its customers’ expectations are raised even further, and this increases the pressure on its front-line staff. According to a commercial training manager, the motto of Singapore Airlines is: “If SIA can’t do it for you, no other airline can. The challenge is to help the staff deal with difficult situations and take the brickbats. The company helps its staff deal with the emotional turmoil of having to satisfy and even please very demanding customers without feeling that they are being taken advantage of.” Former CEO Cheong Choong Kong also commented, “To the company, training is forever and no one is too young to be trained, nor too old.”

Continuous training and re-training has been vital for sustaining service excellence at Singapore Airlines. Staff members are equipped with an open mindset that enables them to accept change and development and deliver the new services that the airline introduces regularly. The Singapore Airlines group has four training schools. The first is corporate learning, and the other three involve the core functional areas of cabin crew, flight operations, and engineering. Singapore Airlines’ Corporate Learning Centre (CLC) offers general management training under the purview of its HR division.

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CLC provides executive and leadership programs for all staff members with the objective of generating effective managers and visionary leaders. It also drives customer-service training and functional training for commercial areas.

Singapore Airlines’ training programs (about 70% of which are in-house) develop 12,000 people a year. Often, training is aimed at supporting internal initiatives such as the Transforming Customer Service (TCS) program, which involves staff in five key operational areas: cabin crew, engineering, ground services, flight operations, and sales support. According to a senior manager for HR development, “To ensure that the TCS culture is promoted company-wide, it is also embedded into all management training. The program aims at building team spirit among our staff in key operational areas so that together we will make the whole journey as pleasant and seamless as possible for our passengers. One has to realize that it is not just the ticketing or reservations people and the cabin crew who come into contact with out passengers. The pilots, station managers, and station engineers have a role in customer service as well, because from time to time, they do come into contact with passengers.” She also added, “But TCS is not just about people. In TCS, there is the 40-30-30 rule, which is a holistic approach to people, processes (or procedures), and products. SIA focuses 40% of the resources on training and invigorating our people, 30% on reviewing processes and procedures, and 30% on creating new product and service ideas.”

Singapore Airlines’ leadership and relationship management with its staff play a key role in the success of its training initiatives. As a project manager in the airline’s new service development program puts it, “I see myself first as a coach and second as a team player.” Singapore Airlines managers often assume the role of mentors and coaches to guide new employees.

Singapore Airlines also adopts a job-rotation approach that allows management to obtain a more holistic picture of the organization. Rotating to other departments every two to three years enables managers to develop a deeper understanding of operations in other areas of the organization. This practice promotes a corporate outlook and reduces the likelihood of inter-departmental conflicts. It also facilitates change and innovation, as people bring fresh perspectives and approaches to their new roles. Constant job rotation is a core part of employee learning and development.

BUILDING HIGH-PERFORMANCE SERVICE DELIVERY TEAMS

The nature of the working environment on board requires people to work effectively as a team to deliver service excellence. In fact, effective teams are often a prerequisite to service excellence. In view of this, Singapore Airlines aims to create esprit de corps among its cabin crew, The 7,700 crew members are formed into “wards.” Each ward consists of about 180 crew members led by a “ward leader,” who acts as a counsellor to guide and develop the other members. Ward leaders issue newsletters for their teams and organize face-to-face sessions and activities with their ward members.

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These activities include inter-ward games, overseas bonding sessions, and full-day engagement sessions on the ground.

Each ward leader learns about their ward members’ individual strengths and weaknesses and acts as a counselor to whom they can turn for help or advice. These ward leaders also play the roles of “inflight auditors,” who often fly with the teams to inspect performance and generate feedback that can aid the team’s development. According to an assistant manager of training, “Team leaders are able to monitor and point out what can be improved in the crew; team leaders are the ones to evaluate the crew, monitor staff development, staff performance, and supervise them. They see the feedback and monitor the performance.”

According to Sim Kay Wee, former Senior Vice President of Cabin Crew, “The interaction within each of the teams is very strong. As a result, when team leaders do staff appraisal, they really know the staff. You would be amazed how meticulous and detailed each staff record is, even though there are 7,700 of them. We can pinpoint and staff’s strengths and weaknesses easily. So, in this way, we have good control, and through this, we can ensure that the crew delivers the promise. If there are problems, we will know about them and we can send them for re-training. Those who are good will be selected for promotion.”

In addition, Singapore Airlines organizes activities that reach out to the wider crew population. The management staff have frequent interactions with crew members at the Control Centre (where crew members report for work) over food and drinks. The senior crew members are invited for full-day engagement sessions with the management.

Singapore Airlines’ cabin crew also engages in some seemingly unrelated activities. An example is the performing-arts circle for talented employees, which raised over half a million dollars for charity during the biennial cabin-crew gala dinner. Currently, there are 30 diverse groups whose activities cover arts, sports, music, dance, and community service. These interest groups provide and avenue for crew members to come together to pursue their passions outside work and to further develop team spirit. The company believes that such activities encourage empathy for others, an appreciation of the finer things in life, and camaraderie and teamwork. It therefore supports cabin-crew members who set up interest groups.

EMPOWERMENT OF THE FRONT LINE TO DELIVER SERVICE QUALITY

Over time, the soft skills of flight crew and other service personnel get honed, leading to service excellence that is difficult to replicate not only in terms of how the service is delivered but also in terms of the mindset that supports this delivery. Virtually all outstanding service firms have legendary stories of employees who recovered failed service transactions, walked the extra mile to make a customer’s day, or averted some kind of disaster for a customer. A senior manager of crew performance shared such a story:

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This particular passenger was a wheelchair-bound lady in her eighties [who] was very ill, suffering from arthritis. She was traveling from Singapore to Brisbane. What happened was that a stewardess found her gasping for air owing to crippling pain. The stewardess used her personal hot-water bottle as a warm compress to relieve the passenger’s pain and knelt to massage the lady’s legs and feet for 45 minutes. By that time, the lady’s feet were actually swollen. The stewardess offered her a new pair of flight-support stockings without asking her to pay for them. She basically took care of the old lady throughout the trip, seven to eight hours. When the old lady got back to Brisbane, her son called the hotel in which the crew were staying to try and trace this stewardess to thank her personally. He then followed up with a letter to us. I don’t know if training contributes to it, or if it is personal. I mean, you don’t find people who’d do this purely as a result of training, I think. We find the right people, give them the right support, give them the right training, and with the right support, people will do this kind of thing.

Such thoughtful actions are part of the culture at Singapore Airlines. According to a senior manager of crew performance, the crew members “are very proud to be part of the SIA team, very proud of the tradition and very proud that SIA is held up as a company that gives excellent care to customers. So they want to live up to that.”

Employees need to feel empowered in order to expend discretionary effort and make decisions independently. Front-line staff members frequently have to handle customers on their own, since it is not feasible or even desirable for managers to constantly monitor employees’ actions. At Singapore Airlines, senior management emphasizes that staff members must have a clear concept of the boundaries of their authority. It is also the responsibility of the management to communicate and explain these empowerment limits. Empowerment of the front line is especially important during service-recovery processes and in situations where customers have special needs.

MOTIVATING STAFF THROUGH REWARDS AND RECOGNITION

Rewards and recognition are key levers that any organization can use to encourage appropriate behavior, emphasize positive as well as undesirable practices, and recognize excellence. Singapore Airlines employs various forms of rewards and recognition, including interesting and varied job content, symbolic actions, performance-based share options, and a significant percentage of variable-pay components linked to individual staff contributions and the company’s financial performance. It keeps base salaries low by offering employees bonuses of up to 50% of their annual base salary. This formula is hardwired and depends on the airline’s profitability. The numerous international accolades received by the airline over the

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years, including “Best airline,” “Best cabin-crew service,” and “Asia’s most admired company,” serve as further sources of motivation.

The company also holds company-wide meetings and circulates newsletters to keep staff updated about latest developments. As an assistant manager of cabin crew performance noted, “It’s about communication. For example, if we add a new service at check-in, we will talk to the people involved before, during, and after implementation. We will discuss the importance and the value of it and make sure everyone is aware of what we are doing and why. It helps to give staff pride in what they do.”

Communication also aids in recognizing service excellence. Staff members who go the extra miles receive recognition through honors such as the annual CEO Transforming Customer Service (TCS) Awards. A former senior vice president of cabin crew stressed the importance of recognition: “We know that a pat on the back, a good ceremony, photographs, and write-ups in the newsletters can be more motivating than mere financial rewards; hence, we put in a lot of effort to ensure that heroes and heroines are recognized for their commitment and dedication.”

Finding the right people and creating a service-oriented culture are essential. A senior manager of crew performance said, “Here, there are some intangibles. I think what makes it special is a combination of many things. First, you’ve got to ensure that you find the right people for the job, and after that, training matters a great deal: the way you nurture them, the way you monitor them, and the way you reward them. The recognition you give need not necessarily be money. I think another very important ingredient is the overall culture of cabin crew, the fact that you have people who really are very proud of the tradition. And I think a lot of our senior people – and it rubs off on the junior crew – take pride in the fact that they helped build up the airline; they are very proud of it and they want to ensure that it remains that way.” Another senior manager of crew performance added, “Among other contributing factors is a deeply ingrained service culture not just among the cabin crew but also in the whole company. I think it goes back to the early 1970s, when the airline was set up. A very, very strong service culture throughout the whole organization, very strong commitment from top management. We take every complaint seriously. We respond to every compliment and complaint. We try to learn from the feedback; it’s a never-ending process.”

Singapore Airlines’ reward and evaluation system is highly aligned with the desired behaviors. The key element is “on-board assessment,” which encompasses image (grooming and uniform turnout), service orientation (crew’s interaction and passenger-handling capabilities), product knowledge and job skills, safety and security knowledge and adherence to procedures, and work relationship (spirit of team work). For the crew member in charge, the additional factors of people-management skills and pre-flight briefing sessions are very important. The Appendix provides information on how cabin crew members are evaluated.

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Singapore Airlines offer average pay by Singaporean standards, which is low by global standards. Occasionally there have been disputes between the Singapore Airlines group management and the labor unions. In 2007, the airline was in the spotlight again when the Air Line Pilots’ Association Singapore (ALPA-S) disagreed with the management’s proposed salary rate for pilots flying the Airbus A380. The case had to be settled by the Industrial Arbitration Court.

BEYOND HUMAN RESOURCES

For four decades, Singapore Airlines has managed to achieve what many others in the aviation industry can only dream of – cost-effective service excellence and sustained superior performance. Understanding the underpinnings of Singapore Airlines’ competitive success has important implications for organizations in general. One of the key implications concerns strategic alignment, particularly the aligning of HR practices to the company’s competitive strategy.

At Singapore Airlines, the HR management practices outlined above enable the development of service excellence, customer orientation, adaptability, and cost consciousness. In turn, these capabilities support the company’s dual strategy of differentiation through service excellence and low cost.

The Singapore Airlines experience highlights how training and development should be employed in order to achieve a holistically developed work force that can effectively support the company’s strategy. Key questions for leaders therefore include, What sort of behaviors and attitudes do our reward and evaluation systems encourage? Are these aligned with what is needed to support our strategy? Do we train and develop our people in a way that develops the right capabilities to support our strategy? Do we go beyond technical training to address attitudes and ways of thinking?

No organization can stand still. The recent socio-economic crises at the macro level and the fast growth of high-quality full-service airlines in the Middle East (e.g., Emirates, Etihad, and Qatar Airways) as well as Asian budget carriers (e.g., AirAsia) at the industry level mean that Singapore Airlines not only needs to sustain its focus on achieving cost-effective service excellence but also re-examine and re-invent some ingredients of its recipe for success.

QUESTIONS

Instruction: You need to indicate the word count of each question at the end of the answer.

1. Provide a synopsis of the Singapore Airlines (SIA) case, with at least 400 wordcounts.(25 marks)

2. Discuss what is so special about the FIVE (5) elements of Singapore Airlines’ (SIA) successful HR practices. Provide ONE specialty of each component in relation to services. Besides textbook, you also need to support your discussion with at least five Human Resource Management and/or Services Marketing journal papers. The word count must be 1000 or more.

(25 marks)

3. Despite evidence that such HR practices help service firms achieve higher company performance, many organisations have not managed to execute them as effectively. Why do you think that is the case?

Provide FIVE (5) reasons in your justification. Besides textbook, you also need to support your discussion with at least five Human Resource Management (HRM) or/and Services Marketing journal papers. The word count must be 1000 or more.  (25 marks)

4. If Singapore Airlines (SIA) merges with Malaysia Airlines (MAS), what do you think the implications of Singapore Airlines’ human resource management

(HRM)?

Discuss FIVE (5) implications of the SIA staff’s services to customers. Beside textbook, you need to support your discussion with at least five related journals. The total word count of your discussion is 1000 or more.

(25 marks)