Joe Nocera’s column in the New York Times today is a terrific analysis of the contribution that good training and a positive work environment make to a company’s bottom-line. In contrasting Southwest Airlines with American Airlines, he points out the difference between an airline that is highly profitable and an airline that is losing money, is in trouble with its unions, and would rather upset its customers (e.g., $15 to check a bag) then improve its services.
Quoting Southwest’s founding CEO Kelleher, Nocera wrote:
“You have to treat your employees like customers,” he told Fortune in 2001. “When you treat them right, then they will treat your outside customers right. That has been a powerful competitive weapon for us.” As he stepped away from the company this week, his line didn’t change.
“We’ve never had layoffs,” he told me the day before the annual meeting, sitting on the couch of the single messiest executive office I’ve ever seen. “We could have made more money if we furloughed people. But we don’t do that. And we honor them constantly. Our people know that if they are sick, we will take care of them. If there are occasions or grief or joy, we will be there with them. They know that we value them as people, not just cogs in a machine.”
The Southwest example teaches us that many factors contribute to a successful company and all need constant attention over time. Southwest treats its employees well and has an ongoing commitment to employee engagement. However, they also keep to a sound business strategy (i.e., low fares and exceptional customer service for a target market), do not try to squeeze unions during contract negotiations, use their planes and pilot time efficiently, save money on fuel through hedging purchases, give stock options to employees, and grab new routes and customers wherever they can. Southwest doesn’t do just one thing right; they do a lot of things right. Even when its good name was threatened last year by airplane inspection problems, the way they handled the situation preserved their image and their customers.
Other airlines (and many other companies) look for the magic bullet to decrease costs or increase revenue. They usually rely on ticket pricing, but they do this at the expense of many other factors that could make them successful, including employee training and engagement. The result is that passengers are becoming more and more unhappy with the airline industry (except for Southwest Airlines). In complex systems it’s never one thing that makes the difference.