Case 13 Southwest Airlines: How Herb Kelleher Led the Way

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CASE 13
SOUTHWEST AIRLINES: HOW HERB KELLEHER LED THE WAY
The U.S. airline industry experienced problems in the early 1990s. From 1989 through 1993, the largest airlines, including American, United, Delta, and USAIR, lost billions of dollars. Only Southwest Airlines remained profitable throughout that period. Herb Kelleher, cofounder of Southwest Airlines in 1971 and until recently its CEO, pointed out that “We didn’t make much for a while there. It was like being the tallest guy in a tribe of dwarfs.” (1) Nevertheless, Southwest Airlines has grown to the point of having operating revenue of $5.5 billion in 2002, which also was its 30th consecutive year of profitability. This is particularly noteworthy since Southwest flies to only 58 cities in 30 states, and its average flight length is 537 miles. (2) How did a little airline get to be so big? Its success is due to its core values, developed by Kelleher and carried out daily by the company’s 35,000 employees. These core values are humor, altruism, and “luv” (the company’s stock ticker symbol). (3) 

Southwest Airlines’ Unique Character and Success
One of the things that make Southwest Airlines so unique is its short-haul focus. The airline does not assign seats or sell tickets through the reservation systems used by travel agents. Many passengers buy tickets at the gate. The only foods served are peanuts, pretzels, and similar snacks, but passengers don’t seem to mind. In fact, serving Customers (at Southwest, always written with a capital “C”) is the focus of the company’s employees. When Colleen Barrett, currently Southwest’s President and Chief Operating Officer, was the Executive Vice President for Customers, she said, “ We will never jump on employees for leaning too far toward the customer, but we come down on them hard for not using common sense.” (4) Southwest’s core values produce employees who are highly motivated and who care about the customers and about one another.  One way in which Southwest carries out this philosophy is by treating employees and their ideas with respect. As executive Vice President, Colleen Barrett formed a “culture committee,” made up of employees from different functional areas and levels. The committee continues and meets quarterly to come up with ideas for maintaining Southwest’s corporate spirit and image. All managers, officers, and directors are expected to “get out in the field,” meet and talk to employees, and understand their jobs. Employees are encouraged to use their creativity and sense of humor to make their jobs and the customers’ experiences more enjoyable. Gate agents, for example, are given a book of games to play with waiting passengers when a flight is delayed. Flight agents might do an imitation of Elvis or Mr. Rogers while making announcements. Others have jumped out of the overhead luggage bins to surprise boarding passengers. (5) Kelleher, currently Chairman of the Board and Chairman of the Executive Committee, knows that not everyone would be happy as a Southwest employee: “What we are looking for, first and foremost, is a sense of humor. Then we are looking for people who have to excel to satisfy themselves and who work well in a collegial environment.” He feels that the company can teach specific skills but a compatible attitude is most important. When asked to prove that she had a sense of humor Mary Ann Adams, hired in 1997 as a finance executive, recounted a practical joke in which she turned an unflattering picture of her boss into a screen saver for her department (6).  To encourage employees to treat one another as well as they treat their customers, departments examine linkages within Southwest to see what their “internal customers” need. The provisioning department, for example, whose responsibility is to provide the snacks and drinks for each flight, selects a flight attendant as “customer of the month.” The provisioning department’s own board of directors makes the...
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