That the link between people and business enterprise is inextricably linked is no better exemplified than in the ultra-competitive, customer-exposed airline business. The fact that the time-honoured HR phrase “hire for attitude, train for skill,”1 came from none other than Herb Kelleher, the founder of Southwest Airlines, speaks volumes. In a market of the stressed and the folding, Southwest Airlines is a company with top performance in its sector. Contributor Jean-Marie Dru, Chairman – TBWA Worldwide & author of Thank You For Disrupting: The Disruptive Business Philosophies of the World’s Great Entrepreneurs
Thousands of leaders have taken Herb Kelleher’s advice, more or less successfully, depending on the single-mindedness with which they have followed it and have hung the heavy mantle of responsibility for commercial competitiveness around HR’s shoulders. One well known example is Tony Hsieh, the founder and CEO of Zappos. He followed Kelleher’s guidance to the letter. Hsieh is convinced that happy employees put everything into giving their customers maximum satisfaction. He talks about “happiness management” and he has written a book about his approach called Delivering Happiness. “Employees first”2 should not be seen as just a management adage or a sort of value-added accessory. This concept is at the very heart of Southwest Airlines’ unmatched success. Naturally, the company’s performance relies on its business model, which does not have a central hub, boasts the industry’s fastest equipment rotation, and offers a single-class cabin. Yet, Southwest’s flamboyant founder stressed that the airline’s performance also owes a lot to the company’s strong corporate culture and, in particular, to the priority given to its employees’ fulfilment. Over the past several decades we’ve witnessed the disappearance of carriers such as Pan Am, TWA, Eastern Airlines, Air America, Northwest Airlines, Pacific Southwest Airlines, and New York Air, to name but a few. At the same time, Southwest has seen its market capitalisation grow twice as fast as the S&P 500. Its sales have reached $37.2 billion in 2017 and it employs more than 56,000 people. On top of all this, the company has never laid off a single employee since its creation in 1971, despite operating in a highly volatile industry.
“It would be easy to imagine that offering the best service at a lower cost would mean putting pressure on salary. At Southwest Airlines, the opposite is true. The company’s employees are the best compensated in the airline industry”
The U.S. airline sector is often criticised for having unfriendly staff and mediocre service. Southwest is an exception. Its personnel, whether flying or on the ground, is seen as being open, concerned, always ready to do their best. This clearly comes from the company’s “hire on attitude” philosophy. For candidates, character is given more importance than experience. Julie Weber, Southwest Airlines’ HR director, makes a point of recruiting only people who have what she calls a “warrior spirit.”3 Our agency worked for Southwest and our people have witnessed that this is still the case. When Southwest Airlines recruits, they are not looking for the right experience, but for the right mindset. Herb Kelleher believed that “the essential difference in service lies in minds, hearts, spirits, and souls.”4 This is the guiding line that defines Southwest’s behaviour. He thought that his company’s culture gave it a real competitive advantage. The competition can buy physical things, but it cannot purchase the spirit of a company, which serves as an everyday inspiration to its employees. It’s an asset that competitors cannot duplicate.
It’s important to remember that Herb Kelleher imposed this point of view at a time when shareholder value – i.e., maximising shareholders’ equity – was the top priority among nearly all corporate boards. Optimising earnings per share was supposed to drive all the company’s strategies and initiatives. Herb Kelleher went against the grain. He was one of the first to invert the order of priorities and he summarised his thoughts in a brief manifesto: “Your employees come first. And if you treat your employees right, guess what? Your customers come back, and that makes your shareholders happy. Start with employees, and the rest follows from that.”5 In return, what Herb Kelleher expected from his people was a perfect blend of energy, enthusiasm, team spirit, self-confidence, and tolerance of stress. He wanted the people in the company to think and act like entrepreneurs, like owners. Ann Rhoades, president and founder of the consulting firm People Ink, spent much of her career at Southwest Airlines, where she served as Chief People Officer. When hiring, she used to ask applicants this intrusive question: “Tell me about the last time you broke the rules.”6 The emphasis given to recruitment reminds me of the chief executive of another U.S. company. No matter what was on the agenda, he started every meeting by asking present staff the unnerving question: “Who did you recruit lately?”
Another primary value at Southwest Airlines is its famous sense of humour. Some Southwest flight announcements have gone viral on social media because they are so funny. The company believes humour is a great way to build bonds with its customers, so if you don’t have a sense of humour, don’t try to get a job at Southwest Airlines. I know of no other company that makes humour an essential requirement for recruitment. This leads us to the most important point. By prioritising its employees, Southwest Airlines provides a better quality of service, which has allowed it to be one of the first companies to disrupt the “low cost = low experience” equation. Herb Kelleher was one of the few who improved the status of low-cost services. He understood that low cost does not have to lead to compromises on quality. Since Southwest’s success, many others have rushed into the path he traced. Low-cost companies now deliver great customer experience in every sector of activity: cars, hotels, banking, insurance, travel – the list goes on. A blogger7 has recently stated that frugal has become the new cool.
Southwest’s business model is truly virtuous. It would be easy to imagine that offering the best service at a lower cost would mean putting pressure on salary. At Southwest Airlines, the opposite is true. The company’s employees are the best compensated in the airline industry. In addition to their salaries, they benefit from several forms of profit sharing and stock-option schemes. As a result, by placing staff interests ahead of shareholders’ short-term returns, Southwest Airlines has maximised its long-term value for the benefit of its shareholders.
For many business leaders, setting the strategic direction is perceived as the noblest task. Executing action plans and tracking their evolution is often seen as an obligation that requires fastidious diligence. Academics and business writers have always given a preeminent place to strategy. Yet without operational excellence, it doesn’t matter how clever the strategy is. What turns a strategy into a winning strategy is, without question, the operational quality—the execution.
As Peter Drucker said long ago, “Strategy is a commodity, execution is an art.”11 It’s the execution over time that validates the strategy. The most successful company leaders are often acknowledged for their brilliant forward thinking. They would better be congratulated for their tenacity in implementing the chosen strategy and for the way they have piloted its execution.
Herb Kelleher certainly adhered to this point of view and liked to say, “We have a strategic plan. It’s called ‘doing things.’”12 He never allowed himself to become bogged down by too much strategic thinking or analysis paralysis. He believed that all he needed was an overall framework. Nothing more. And he came up with something very basic. For Southwest Airlines, his vision and the basis for this framework was simple; low cost, superior service, people first. This framework approach gives a long-term horizon. It liberates from the contingencies of the moment. At a time when everything is created, deployed, and measured in real time, strategy and execution are one. Sequential thinking, which requires putting strategy first and execution second, is becoming more and more outdated, even irrelevant. Today’s business relies on a constant back and forth between the two.
- Gallo, Carmine (September 10, 2013). “How Southwest and Virgin America win by putting people before profit,” Forbes.com.
- Kelleher, Herb (November 30, 2012). “I am American business: Herb Kelleher,” CNBC.com. Interview available at https://www.cnbc.com/id/100000634.
- Weber, Julie (December 02, 2015). “How Southwest Airlines hires such dedicated people,” Harvard Business Review website.
- Brown, Joel (January 13, 2016). “30 intelligent Herb Kelleher quotes,” Addicted2Success.com.
- Trammell, Joel (2014). The CEO Tightrope: How to Master the Balancing Act of a Successful CEO. Texas: Greenleaf Book Group Press.
- Carbonara, Peter (August 31, 1996). “Hire for attitude, train for skill,” Fast Company.
- Rohac, Dalibor (April 24, 2013). “Conspicuous frugality: is cheap the new cool,” TheUmlaut.com. Available at https://theumlaut.com/conspicuous-frugality-is-cheap-the-newcool-1225b9fe314 (accessed December 18, 2018).
- Yann Le Galès (June 18, 2018). “Jean-Michel Guillon, Michelin: ‘nous développons la responsabilisation,’” Le Figaro.
- McCarthy, Niall (May 2, 2018). “America’s best large employers [Infographic],” Forbes.com.
- Bellemare, Carole (June 12, 2018). “Jean-Michel Guillon, chez Michelin, consacré ‘DRH de l’année 2018,’” Le Figaro.
- Pasha, Riz (n.d.). “117 greatest Peter Drucker quotes of all time,” SucceedFeed.com. Available at https://succeedfeed.com/greatest-peter-drucker-quotes (accessed December 18, 2018).
- Lucier, Chuck (June 2004). “Herb Kelleher: the thought leader interview,” Strategy+Business, issue 35.
- Ignatius, Adi (March–April 2017). “We need people to lean into the future,” Harvard Business Review.