A well-dressed, well-groomed man stood up in front of a packed audience in Van Munching Hall’s Frank Auditorium. Taking the chief executive’s mantle in early 2001, Jim Parker saw Southwest Airlines (NYSE: LUV) through one of the industry’s most trying periods.
His speech, at times tinged with melancholy memories and, at others, sparkling with refreshing humor and wit, revealed the secrets of Southwest’s success.
The company took off in 1971, after a litigious courtroom battle. Southwest had found a loophole to operate an interstate airline without subjection to federal regulations (safety standards notwithstanding, of course), as all national, interstate carriers in that era were tightly regulated.
Obviously, the creation of another airline threatened the soaring profits of the largest corporations in the industry. After its victory, Southwest was finally flying three crafts through Texas, albeit at an operating loss for its first two years.
Despite these losses, Southwest initiated “the airline industry’s first profit-sharing program,” according to Parker. Then, in 1973, the company posted its first profitable year, and remained that way until the events of September 11th.
“It’s hard to measure the soul of a company,” said Parker in his speech.
Confronted with the immediacy of the 9/11, he said Southwest had to make difficult business decisions with expedience. This juncture, however, is where Southwest’s proverbial soul meets body.
While other airlines hastily rescheduled flights to maintain their company cash flow, Southwest promised a full refund to all customers who asked. After the flight restrictions were lifted days later, the industry cut 20% of routes and staff, but Southwest kept all her birds and people in the sky. In fact, it grew.
The company’s “secret ingredient,” as Parker sees it, is its people. Southwest even demolished the long-held truism that big unions are bad for big business: despite being the most unionized in its industry, Southwest Airlines became the largest domestic carrier in the United States.
Southwest’s unrelenting dedication to its employees and customers paid unexpected dividends. Parker relates a story about opening mail in the corporate office soon after September 11th. He had prefaced the story by sharing that the decision to offer full refunds was “dumb,” and if all customers had accepted this offer, it would have put the company out of business.
“I remember opening envelopes and seeing dollar bills fluttering out,” Parker said. “People were sending us money to keep us in business.”
Parker notes that such a relationship with a company is typically unheard of, but the passengers’ experience with employees created this culture, what he calls “the individual touch of people who want to do the right thing.” This culture is the fabric and spine of Southwest that Jim Parker sought to create.
“You hire for attitude, and train for skills,” he said, with a laugh.
At the end of his speech, he remarked that a question often posed was how he settled the competing interests of shareholders, customers and employees, and which group he would put before the others.
“Employees,” he responded without hesitation.
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