FLYING IS NOT INHERENTLY DANGEROUS, JUST INHOSPITABLE TO MISTAKES
Image courtesy of Southwest Airlines
Overlooking the obvious, and the economics of decency
I recently was reading about the 50th anniversary of Southwest Airlines, the LUV airline. It’s a pretty remarkable story. Even before getting a plane off of the ground, the upstart airline spent three years in litigation, brought by Braniff Airlines.
At that time, flights, routes and fares were all governed by federal regulations...except if your flights were all in-state. In that case, those rules didn’t apply.
The consequence was a lower operational cost structure. It was an open attempt to suppress competition, a strategy that allowed Southwest to ultimately prevail. It just took the Supreme Court to do so. Free of litigation… but also broke, Herb Kelleher, Rollin King, and Lamar Muse managed to acquire three planes from Boeing and the rest, as they say, “is history.”
Herb Kelleher was adamant from the start that the people that worked for Southwest were it’s most valuable asset. How many times have you heard that from an organization and how many times have you rolled your eyes when you did? Well, in this case, someone meant that.
It was a simple principle.
“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.” —Herb Kelleher
This is a classic demonstration of the Economics of Decency.
How did they get those kinds of people in their organization?
They had three fundamental qualities they sought in every hire:
A servant’s heart
A warrior spirit
A fun loving attitude
Everything else, they trained for.
How many mediocre, or worse, businesses have you walked into? You know, the ones where self interest drove the business? You were just a target.
I remember my sales days, long enough ago that cold calls were “knocking on doors”, so to speak. I would talk to the receptionist about who I should see and already start to have a pretty good sense of what kind of place it was.
Another example of what we are calling the economics of decency is Whole Foods. John Mackey was so successful with the culture he built, he started a movement, Conscious Capitalism. John is a Capitalist to his core, just a different type.
Value your people, empower them and the rest will follow.
Just like Herb.
Mackey captured his story, and his movement, in the book Conscious Capitalism, written with co-founder of the movement, Raj Sisodia. It’s a pretty good read.
Conscious Capitalism is founded on four principles:
Conscious leadership
Stakeholder orientation (not just shareholders; all stakeholders)
Conscious culture
Higher purpose
Well, Craig, what are the economic benefits of decency?
Glad you asked. At an annual conference, which included a couple of hundred of the companies that have taken this commonsense approach to business, Sisodia said that he looked at 28 companies that he thought did the best job of this. Of the 18 public companies (data available here) they averaged a factor of 10.5X what the S&P did, for over a decade.
What about Southwest?
I can give you a few data points. They have consistently had the lowest turnover of any airline. They have never had a layoff. They have made a profit every year since they were in business, except last year (2020). During the 2020 pandemic, they did not lay anyone off. Meanwhile, the other airlines layed off 92,000 employees. In 2021, Southwest is back in black, while the other airlines are still well under water.
In fairness and full transparency, I need to tell you that Kelleher and Mackey had an advantage. Their organizations were founded on and driven by a purpose. A purpose they lived in everything they did.
Whole Foods: to nurture people and the planet
Southwest Airlines: to give people the freedom to fly
There is a lot of evidence that the economics of decency are superior to the economics of business as usual. However, let’s just take a simpler approach. Look at your own experience.
When you deal with a store, a supplier, an organization, or even a neighbor, are you more responsive when you feel like they genuinely want to help? Does it matter if you feel genuinely acknowledged ? Are you more likely to go back as well as tell your friends? By contrast, when you don’t get that, what is your experience?
It’s not just a more simple way to do business. It is shown to be more profitable. And it just feels better. I know it does for us.
Have a great week and thanks for reading. We always appreciate your comments.
Cheers,
Footnote: Southwest’s One Heart community program is sponsoring a program to create “A million acts of kindness.” Let’s participate and share the effects of paying it forward.
Resourse: Special thanks to Haley Rushing at The Purpose Institute, who helped Southwest airlines and Whole Foods with their purpose, which now is the inspiration to businesses everywhere.
Fundamental #8: SERVICE IS 360
We serve each other, our customers, and ourselves when we serve the community. Demonstrate making a difference.
