Southwest Airlines has been a model of admiration for the airline industry and businesses from around the world combined. Southwest Airlines is a rag to riches story that has had to fight for everything it has become. Before Southwest was able to take on its first passengers, they had to fight competitors in the court system for nearly three and a half years. In 1966, Fortune Magazine states, “A San Antonio lawyer, Herb Kelleher, founded Southwest with one of his clients (now a Board member) over drinks at a local bar” (62).
Southwest was started in a bar on a cocktail napkin. Fortune Magazine quoted Mr. Kelleher, “it was at the St. Anthony’s Club in San Antonio, Texas that Rollin King came to me with the idea of starting a low-fare airline in Texas” (64). Southwest did not make its maiden voyage until 1971 – From a napkin to the airways with their runway in the Court system. When Texas Aeronautics Commission authorized Southwest to fly, their competitors grounded them within the Court system with continuous litigation for three and a half years. The litigation went as high as the Supreme Court.
Finally, on June 18, 1971, Southwest Airlines took off, with President Lamar Muse, offering flights to Dallas, San Antonio and Houston. The dream of a low-fare, no-frills, customer oriented airlines had finally been realized. They have had some turbulence, but it has grown and expanded ever since. In 1973, Southwest Airlines stated they had their first profitable year. Southwest has not looked back since. They have built a reputation for doing business their own way, not the normal way of doing things. Today Southwest has grown to the fourth largest airline in the United States.
Southwest’s Home Page on the Internet states “Southwest has one of the newest fleets in the airline industry. ” Since 1973, Southwest has done something unprecedented, especially in the airline industry – it has not had a year or quarter where it has lost money. The sky’s the limit for this airline. Southwest Airlines started building its success and a strong strategic management process early in its inception as a company. Stephen Robbins defines strategic management process as “A nine step process that involves strategic planning, implementations, and evaluation” (90).
This process really started forming in 1973 when there was a change in upper management. Co-founder Rollin King and then president Lamar Muse had disagreements about business, which drove co-founder Herb Kelleher to submit a letter of resignation from the Board. Southwest’s upper echelon ignored that letter – best move that company ever made – and voted Lamar Muse out of control. The Board went to Herb Kelleher and asked him to be Chairman and CEO. Mr. Kelleher’s reaction as told to Forbes Magazine was “I was working for Southwest on the outside – in the courts.
I hadn’t worked much on the internal operations” (65). Mr. Kelleher was a lawyer and didn’t know much about business. After much thought, Kelleher said he would be Chairman, but no CEO, and suggested they hire Howard Putnam from United Airlines to be Southwest’s CEO. Hiring Putnam kind of backfired for Kelleher as he says “I sort of served a three year apprenticeship with Howard. He was new to Southwest and he asked me to handle many of the internal things” (66). In my belief, this is the time when Southwest started to take notice of its employees and their importance.
Not only was Southwest growing but so was Kelleher. He was transforming from a lawyer to a businessman. The biggest help for Kelleher at that time was something his mother told or asked him, Kelleher told Fortune Magazine. She asked, “this is a real conundrum: who comes first, your employees, your shareholders, or your customers? My mother taught me that your employees come first. If you treat them well, then they will treat the customers well, and that means your customers will come back and your shareholders are happy” (240-1).
Kelleher was learning business, but the most enjoyable part to him was that he got to know people a lot better, he took time and met with employees from every phase of the company; i. e. , customers, Flight Attendants, Mechanics, Baggage Handlers, and Customer Service/Ticket Representatives. He learned, examined, and listened to everyone he could. Kelleher believed “you’ve got to take the time to listen to people’s ideas. If you tell somebody no, that’s an act of power and, in my opinion, and abuse of power. I don’t want to constrain people in their thinking” (71).
This is the biggest asset that Southwest has. They have always valued their employees’ ideas and worths over money and profit. Southwest as a company has accomplished a feat that exemplifies that belief! They have never furloughed (laid off) any of their employees. A Teamsters leader once walked in to negotiate a new contract and said “we don’t need to talk with you about job security” (71). Southwest’s company loyalty to their employees has made them stronger and saved them money. The trust and security of Southwest employees shows in how they do their job.
The employees know that they have a future if times are good or bad — a bond of loyalty that is hard to break. This bond has led Southwest in becoming “one of the most unionized companies in the airline industry” reports N. P. R. S. Wade Goodman. It helped the company to sign an unprecedented, ten-year, labor agreement with their pilots in 1995. Most contracts are for a maximum of three to five years. Southwest believes that the front line employees are their most important assets. Kelleher’s beliefs are that their characteristic of organization is an upside down pyramid.
Robbins defines organization as “a systematic arrangement of people brought together to accomplish some specific purpose” (3). With operatives (employees/laborers) and managers, Kelleher believes upper management and he are actually the low men (people) on the totem pole. The front-line employees/operatives are highest up on the pole because without them, Southwest would not get customers or function as a business. Southwest strive for excellence has brought and will continue to bring unprecedented actions and firsts for some time to come.
The level or pride their employees have grows, as their employees are also part owners of their company. Southwest is the first company to offer their employees a stock option purchase plan. Now their employees have a vested interest in what they do. The fact sheet from Southwest says, “today their employees now own ten plus percent of their company’s stock. ” This unbound employee loyalty shows first hand in its day-to-day operations, the employees go out of their way to stay on time and to accommodate and help their customers.
Andre O. Schwage, CEO and President of Satmetrix Systems, a software analysis company of customer satisfaction and service in many industries today, said “Southwest Airlines’ consistently high customer ranking is just further evidence of the strong reputation it has created with it’s customers – making people feel as if they are part of the Southwest Airlines family. ” This was as Southwest was receiving an award for Best Customer Service in the transportation industry. The success of Southwest is all a reflection of company goals and management. One journalist said Southwest’s major reason for success is their depth in management.
Herb Kelleher was CEO of Southwest from 1982 to the start of 2002 and voted #1 CEO in America more than once by a couple of publications. Although he has released his reigns, Southwest Airlines has not lost a beat, even in times of hardship and despair. This is thanks to what some say are the children of Kelleher – James Parker and Colleen Barrett. James Parker has been working for Kelleher for more than 15 years and Ms. Barrett was Kelleher’s secretary before Southwest was even thought of. The foundation is well cemented to go on in the future. Colleen Barrett has been a valued asset from the start.
Although some still call her Kelleher’s secretary, her reaction is “I liked being a secretary. ” Kelleher says, “Ms. Barrett has nurtured and produced a culture which is truly exempt – where people feel cared for – she has earned the trust of the company’s employees. ” James Parker has worked for Kelleher for many years and his beliefs are very similar. Kelleher says, “Parker, 54, is exactly the kind of leader Southwest needs. Parker’s plan as CEO is to stick with the blueprint – keep Southwest the low-fare, no-frills airline it has always been” (77).
So far, so good. Southwest is still on top and the only airline to profit in every quarter since 9-11. Fortune Magazine says “Jim Parker probably has the toughest job around today: replacing Herb. Just to make is job a little harder, the airline industry is facing the most severe economic downturn in years” (78). I could go on for a bit with more on the aspects of business management and company profile of Southwest Airlines. Unfortunately, I must wind things up for now (hopefully I can expand on this in future classes).
I was really impressed with Southwest Airlines and surprised about their history. Their rag to riches story got to me, along with their company hierarchy and foundation. From fighting just to start business to being one of the few profitable companies in their industry. This exemplifies their desires to grow, to do things their way, not the expected way, and be the leader in groundbreaking strategies and business plans. The sky’s the limit for this high-flying company. As I leave, following is a list of some more facts and accomplishments that really impressed me.
