The cofounder and chairman of Southwest Airlines tells why a firm’s people are everything.
Read the full article at: www.strategy-business.com
Last year, as I was waiting in line to board a Southwest flight from San Antonio to Dallas, a tall, white haired, older man caught my attention. He was waiting to board also, but not with his head bowed, obliviously focused on his phone as most of us were. No, he was talking and laughing – loud, full of energy, happy to engage with anyone around. He took a seat in the back of the plane and immediately started joking with the flight attendants and passengers sitting around him.
I confirmed his name to be sure, but from reputation I already knew this had to be the co-founder, Chairman Emeritus and former CEO of Southwest, Herb Kelleher. Now 86 and retired, he’s a beloved persona around Dallas and his Southwest Airlines, a favorite success story.
Known for his joie de vivre, humor and hugs, his Wild Turkey bourbon and chain-smoking, Kelleher’s management approach closely reflects the personality and values of the man and makes him unique in business, particularly, in the airlines industry.
“Remarkably, it’s the 43rd year in a row that Southwest has shared profits with its people, who also reportedly own about 10% of the company’s shares as well. The airline has also never laid anyone off or cut pay,” explained Darren Dahl, in his Fortune article this past July, “Why Do Southwest Airlines Employees Always Seem So Happy?”
In a 2004 interview to commemorate his receiving the Strategic Management Society (SMS) Lifetime Achievement Award, Kelleher explained the philosophy behind Southwest’s remarkable profit sharing accomplishment.
“When I started out, business school professors liked to pose a conundrum: Which do you put first, your employees, your customers, or your shareholders? As if that were an unanswerable question. My answer was very easy: You put your employees first. If you truly treat your employees that way, they will treat your customers well, your customers will come back, and that’s what makes your shareholders happy. So there is no constituency at war with any other constituency. Ultimately, it’s shareholder value that you’re producing.
“We have been successful because we’ve had a simple strategy. Our people have bought into it. Our people fully understand it. We have had to have extreme discipline in not departing from the strategy.
“We basically said to our people, there are three things that we’re interested in. The lowest costs in the industry — that can’t hurt you, having the lowest costs. The best customer service — that’s a very important element of value. We said beyond that we’re interested in intangibles — a spiritual infusion — because they are the hardest things for your competitors to replicate. The tangible things your competitors can go out and buy. But they can’t buy your spirit…Your spirit is the most powerful thing of all…
“I don’t know whether it was Calvin Coolidge or Bianca Jagger who said — they’re both thin, that’s why I get them confused — ‘the business of business is business.’ We’ve always said, ‘The business of business is people.’ ”
Amazing things happen when a company puts employees first, sticks to a simple strategy, and truly values the power of the human spirit. Just ask a Southwest employee.
Contact us and we can help you streamline your strategy and learn ways to put your people first.