Case Study : Southwest Airlines: Positively Outrages Leadership

When Southwest Airlines first taxied onto the runway of Dallas's Love Field in 1971, industry gurus predicted it would be a short trip to bankruptcy for the Texas-based airline. But the first short-haul, low-fare, high-frequency, point-to-point carrier took a unique idea and made it fly. Today, Southwest Airlines is the most profitable commercial airline in the world.

But it took more than a wing and a prayer for Southwest to soar to such lofty altitudes. It took a maverick spirit. From the beginning, Southwest has flown against convention. Southwest's fleet of 737s, considered by many the safest in the industry, still makes only short hauls to 45 cities. The average flight distance is 394 miles.

The airline does not give seat assignments and the only food it serves passengers is a "snack pack." But what Southwest may lack in amenities, it seems to more than make up for in what could be called positively outrageous service. "FUN" is the company's mandate! Leading the way is founder and CEO, Herb Kelleher. "Herb Kelleher is definitely the zaniest CEO in the world," Libby Sartain, vice president of Southwest Airlines' People Department, admits. "Where else would you find a CEO who dresses up as Elvis Presley, who's on a first-name basis with 20,000 employees, and who has a heart as big as the state of Texas? His style has fostered an atmosphere where people feel comfortable being themselves, where they can have a good time when they work."

Legendary for his love of laughter, Kelleher calls his unique leadership style management by fooling around. "An important part of leadership, I think, is enjoying what you're doing and letting it show to the people that you work with," Kelleher reveals. "And I would much rather have a company that is bound by love, rather than bound by fear." Kelleher's philosophy has been enthusiastically embraced by a workforce that is 85 percent unionized. "Southwest's culture is designed to promote high spirit and avoid complacency. We have little hierarchy here. Our employees are encouraged to be creative and innovative, to break rules when they need to in order to provide good service to our customers," Sartain explains. "If you create the type of environment that a person really feels valued and they feel they make a difference, then they're going to be motivated. That's the type of environment we create here for our employees," Rita Bailey, Southwest's director of training, adds.

Beginning with its new-employee orientation, the airline nurtures entrepreneurship by grooming a workforce of leaders. "You can do whatever it takes to keep this airline on top," an orientation instructor tells his class of newly hired staffers. At Southwest Airlines' University for People, future managers and supervisors attend a course titled "Leading with Integrity." Through a series of role-playing exercises, employees learn that trust, cooperation, mutual respect, and good communication are the components of success. "An organization that has an esprit, that does things cooperatively and voluntarily rather than through coercion, is the most competitive organization you can have," Kelleher asserts. These guiding principles have earned Southwest Airlines the distinction of being named one of the ten best companies to work for in America.

Employees are valued and recognized in many ways for their achievements. Perhaps the most prestigious is Southwest's "Heroes of the Heart" award. Each year, one outstanding department has its name tattooed on a Southwest Jet. Southwest was the first airline to offer stock options to its employees. Today, employees own approximately 10 percent of the company.

In the lobby of Southwest Airlines' corporate headquarters is a prominent tribute to the men and women of Southwest. It reads, "The people of Southwest Airlines are the creators of what we have become-and what we will be. Our people transformed an idea into a legend. That legend will continue to grow only so long as it is nourished by our people's indomitable spirit, boundless energy, immense goodwill, and burning desire to excel. Our thanks and our love to the people of Southwest Airlines for creating a marvelous family and wondrous airline."

1. Describe some of the factors needed to reengineer corporate thinking that Southwest Airlines already exhibits. Compare and contrast these factors to those that other businesses must study and analyze. Do case outcomes help other businesses to make good decisions?

2. What specific elements of a corporate entrepreneurial strategy are apparent within Southwest Airlines? How can a small business owner learn from this and apply the information and outcomes to his or her own company?

3. Has Herb Kelleher structured a climate conducive to entrepreneurial activity? Why or why not? Has this changed over time? Support your answer.