Leadership Lessons From Herb Kelleher and Southwest Airlines

Introduction: Defining Transformational Leadership

A leader is who one is, and a manager is what one does (Bennis, 2009). Innate strengths and abilities, perception and insight, a bias for action, and the capacity to motivate others through inclusion and rewards rather than punishment typify the highest-performing leaders. Many argue that these skill sets are innate in the most effective leaders, as such individuals can transform organizations rapidly through their words, actions, plans, and fulfilled commitments (Liu, Siu, & Shi, 2010). A true leader inspires trust and is willing to sacrifice more than they expect of their subordinates in order to attain a challenging goal.

Studies indicate that the highest-performing leaders are those with a very clear vision of what they are trying to accomplish and who demonstrate a willingness to sacrifice more than anyone else to reach the goals they have set (Wang & Howell, 2010). These are called transformational leaders because they completely redefine organizations in the process of attaining visions and objectives over time (Wang & Howell, 2010). All of the prerequisites of an exceptional, transformational leader can sound so idealistic that the characteristics associated with them appear unrealistic. It is not that these leaders never make mistakes; it is, however, how they manage to move forward through mistakes and failures. A transformational leader views mistakes primarily as learning experiences — failure becomes feedback pointing toward the right direction. Rather than seeing failure as a reason to quit, transformational leaders see it as validation that they are heading in the right direction (Ryan, 2009).

Why Herb Kelleher for a Study of Leadership

This mindset of seeing failure as feedback rather than a dead end pervades how Herb Kelleher views entrepreneurialism in general and Southwest Airlines specifically, as he has often mentioned in speeches given at colleges and universities (Lawless, 1998). Failure is not something to be covered up or lied about; it is something to embrace and learn from, which in turn cultivates a mindset of continual improvement (Ryan, 2009). This fundamental difference — seeing failure as a crucible of clarification rather than a reason to punish or misrepresent performance — sets the pace for a manager's transformation into a leader, a point emphasized in Dr. Carol Dweck's research on mindsets (Ryan, 2009). Herb Kelleher embodies this attribute, treating failure not as a dead end but as a means of finding the path forward. He has said that failure has a way of stripping away extraneous detail, forcing an even greater focus on results (Smith, 2004). This is one of the core aspects of the Southwest culture that liberates employees, freeing them to be themselves and embrace the creativity they bring to their jobs. The non-conformist attitude that pervades Southwest would not be possible without this aspect of the leadership structure and direction Herb Kelleher insists upon (Ryan, 2009).

Kelleher also created a culture rich with employee ownership — another key point he makes in many of the speeches he gives at colleges and universities (Ryan, 2009). As a leader, Kelleher insisted that every employee thoroughly understand the financial health of the company, how it was performing operationally, and what the airline's goals and objectives were. These same factors make Kelleher ideally suited for leading a business in a heavily regulated industry strongly influenced by labor unions (BusinessWeek, 1984). Herb Kelleher treats labor unions as equal partners in the success of Southwest and provides them with the opportunity to participate in many aspects of the company's social activities. He also gives union managers a thorough picture of how the company is performing and what raises the unionized mechanics, support teams, and pilots can expect (BusinessWeek, 1984).

The transparency and trust that have made Herb Kelleher so successful as a founder and CEO have also helped alleviate the high costs and often-stringent requirements unions can place on airlines. By creating a genuine partnership, Kelleher successfully transformed a potential adversary into an ally and contributor to Southwest's success (BusinessWeek, 1984). This relationship was tested during the dramatic downturn in air travel following the terrorist attacks of September 11, 2001, when the unions agreed to pay cuts — an almost unheard-of concession in union–management relations — to ensure Southwest could continue operating (Lubans, 2009). This remarkable concession was widely attributed to Kelleher's practice of giving union leaders a genuine sense of ownership in the airline. Today the relationship between Southwest and its labor unions remains collaborative and focused on shared objectives, and many airline industry experts credit this dynamic with a singular accomplishment: Southwest Airlines is the only U.S.-based airline to have never filed for bankruptcy protection.

Can a leader save a company? In the case of Southwest Airlines, the answer is an unequivocal yes. Kelleher's work to create alliances, partnerships, and relationships with stakeholders has had a very significant effect on the financial performance of Southwest.

Strategic Decisions That Redefined an Industry

In addition to the broad network of trust Herb Kelleher built with suppliers, employees, and labor unions, he had the insight to standardize on a single aircraft — a decision virtually unheard of at the time it was made (Lawless, 1998). Airlines typically maintained a wide variety of aircraft to serve the unique requirements of different flight segments and destinations. Southwest viewed this as a massive duplication of costs and, through financial analysis informed by Six Sigma quality management principles, determined that by using only the Boeing 737, it could trim costs by 60% or more in the first year alone (BusinessWeek, 1984). This decision also enabled Southwest to turn an aircraft around in as little as 15 minutes, an operational achievement still unmatched in the airline industry (Smith, 2004).

Herb Kelleher's vision for Southwest Airlines was to serve the common traveler, and as a result he was the first airline CEO to offer a single class of service and eliminate in-flight meal service. This further standardized the most costly airline processes and contributed to Southwest's long-term profitability. Kelleher also recognized early — from the airline's initial flights between Texas cities — that smaller satellite cities offered far greater opportunities for rapid growth than competing head-to-head with national airlines entrenched in major hub cities. American Airlines in Chicago, Delta in Atlanta, and United in New York were formidable competitors who worked actively to stifle Southwest's growth, as the Southwest model represented disruptive innovation in the industry (BusinessWeek, 1984). Despite competitors many times Southwest's size predicting the failure of a low-cost airline, Herb Kelleher forged ahead and, in a highly unconventional and non-conformist manner, completely restructured an entire industry. His innovations, including the development of the Low Cost Carrier (LCC) segment and the practice of fuel hedging as Southwest grew into a national carrier, continue to reshape the airline industry today (Wood, 2005).