Employee's always right

The world according to the late Southwest Airlines CEO, Herb Kelleher. Also, 7 other things worth knowing today.

Feb 06, 2023

Quick note … we had some drama in the comments section over the weekend. Not worth mentioning if you didn’t see it, but as a result I’m going to restrict the comments to paid/premium members until I figure out a better solution. Thanks for understanding. You can always just reply to this email if you’d like to share your thoughts directly with me.

Sometimes where you stand depends on where you sit.

Case in point: Southwest Airlines. I’m going to say something nice about the airline today—well, more to the point, about its rather legendary late CEO and cofounder, Herb Kelleher.

The timing might seem a bit odd since Southwest passengers are still angry after a Christmas holiday season that saw a massive number of canceled flights, and the airline is still trying to regain customer trust.

But maybe that makes now an opportune moment to look back at the choice that Kelleher once said all leaders have to make.

Do this, he said, and you'll succeed. Make the wrong choice, and things go bad. As Kelleher explained in an article he wrote in The Journal of Lending & Credit Risk Management in 1998:

Years ago, business gurus used to apply the business school conundrum to me:
"Who comes first? Your shareholders, your employees, or your customers?"
I said, "Well, that's easy … employees come first.”
That really is the way that it works, and it's not a conundrum at all. Your employees should be your first customers, and it's very important to communicate that to everyone.

See what I mean? If I were an employee at Southwest back then, part of me would respond: Heck yes, Herb! Employees first!

But, if I were a customer, as I very often was a decade or more ago, I might think: Heck no, Herb! Customers first! We’re the ones paying for all of this!

And, if I were an investor—well, I’d probably want to be first in that case, too.

Kelleher’s point, he went on to say, is basically that you should put employees first, because it’s like dominoes:

“If employees are treated right, they treat the outside world right.”
Thus, “the outside world uses the company's product again.”
“That makes the shareholders happy.”

Anyway, after all the failures around Christmas and the angry passengers, Southwest employees were pretty vocal about what they thought went wrong: bad weather, yes, and very outdated computer systems. But also—their words—a culture that no longer put employees first.

"The Southwest of old is gone," Casey Murray, president of the Southwest Airlines Pilots Association, told NBC News. "It's now threats and intimidations to motivate, instead of the old Southwest with a heart."

On Facebook, Larry Lonero, who says he's been a pilot for Southwest for over 35 years, tied things directly to Kelleher’s management theory, in a post with more than 150,000 likes, comments, and shares:

Herb Kelleher was a very operationally oriented leader. Herb … always had his pulse on the day-to-day operation and the people who ran it.
That philosophy flowed down through the ranks of leadership to the frontline managers. We were a tight operation from top to bottom. We had tools, leadership, and employee buy-in. Everything that was needed to run a first-class operation.

After Kelleher's retirement, however, Lonero said things changed:

[A]s time went on, the operation began to deteriorate.
...
We were a motivated, willing, and proud employee group wanting to serve our customers and uphold the tradition of our beloved airline … But we were watching in frustration and disbelief as our once amazing airline was becoming a house of cards.
Herb once said the biggest threat to Southwest Airlines will come from within. Not from other airlines. What a visionary he was. I miss Herb now more than ever.

There’s probably a bit of nostalgia going on here—and the best kind, really, when you find yourself pining for a time that you remember with vivid emotion, but that maybe didn’t quite actually exist.

Still, I think there’s something to this domino theory. As Kelleher, who passed away in 2019, put it all those years ago:

You can't abuse or maltreat an employee and then say, "Now I want you to put on a big smile and go outside and entertain and charm the passengers." The employee's heart has to be in it to make it sincere and real.

What do you all think? Employees first? Customers? Investors? Other stakeholders I’m not even thinking of? What works best? Let us know in the comments. (As noted, comments are limited to premium subscribers for the time being.)

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Understandably by Bill Murphy Jr.

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