The Triple Bottom Line
K: It’s all about having the right target—the triple bottom line,3 a compelling vision, and short-term goals and initiatives.
C: Slow down a minute, Ken. I have a sense of what the triple bottom line is, but what does it mean to you?
K: If you don’t mind, I would love to hear your philosophy first, Colleen.
C: All right. Our entire philosophy of Leadership is quite simple: Treat your People right, and good things will happen. When we talk to our People, we proudly draw a pyramid on the chalkboard and tell them: You are at the top of the pyramid. You are the most important Person to us. You are our most important Customer in terms of priority. Therefore, I am going to spend 80 percent of my time treating you with Golden Rule behavior and trying to make sure that you have an enjoyable work environment where you feel good about what you do, about yourself, and about your position within this Company. But if I do that, what I want in exchange is for you to do the same thing by offering our Passengers—who are our second Customer in terms of priority—the same kind of warmth, caring, and fun spirit. If you do that consistently, our Passengers will recognize how significantly different this is from the behavior they witness at other businesses, and they will come back for more.
If they come back often enough and become loyal Customers, they will tell stories about us to their friends. Then we’ll make money, which keeps your job secure and pleases our third Customer in terms of priority, which is our Shareholder—thus a win-win for all concerned.
Stop and ThinkK: Colleen, you nailed it. A Servant Leader’s energy is focused on not just the financial bottom line, but on three bottom lines: being the employer of choice, the provider of choice, and the investment of choice.
I recently read a wonderful thought from the Dalai Lama.4 He said that companies are living, complex organisms—not profit-making machines. Therefore, profit shouldn’t be the object of a company, but rather a result of good work. Just like a person can’t survive for long without food and water, a company can’t survive without profits—but no one would ever reduce the purpose and significance of human life to only eating and drinking.
Servant Leaders know that financial success is a byproduct of how their people and their customers are treated. I think we both believe, don’t we, Colleen, that:
Profit Is the Applause You Get
For Creating A Motivating
Environment For Your People
And Taking Care
of Your Customers
C: I certainly do believe that, Ken. In fact, thanks for making the order of importance the Southwest Way. I think one of the problems with some leaders in business today is that they act like there’s only one reason to be in business—to make money. They forget about their people and their customers.
K: I have a dream that someday there will be a list of “Fortunate 500” companies.5 Right now, Fortune 500 companies are all about size and volume. For a company to be a “Fortunate 500” company, it would not only have to be profitable but would also need to have passionate, empowered people and loyal customers. If the company missed its numbers one quarter, the stock price might fall, but only a few points if its people and customers were loyal and loved the company. Companies that should be slammed on Wall Street are those that not only perform financially below projections but also those whose people are not engaged and whose customers are not loyal.
“I always wanted to work for Southwest Airlines.
When I started working in the airlines,
that’s where I wanted to go.
I had to wait five years to get on with them
but it was well worth the wait.”
—Tom McClane, Phoenix Aircraft Mechanic
Employer of Choice
C: I buy what you’re saying, Ken. I think the goal of every company should be to be the employer of choice, the provider of choice, and the investment of choice. As you know, I think the entire success of a company begins with being the employer of choice. So let’s start there.
K: Being the employer of choice today is challenging. With highly mobile, competent workers in demand, employers must find ways to attract and keep their best people. Good pay is no longer the only answer. It’s true that some competent workers will go elsewhere for a higher wage; however, today’s workers generally want more than pay. They seek opportunities where they feel that their contributions are valued and rewarded—where they are involved and empowered, can develop skills, can see advancement opportunities, and can believe they are making a difference.
C: We’re so proud of our consistently low turnover rate. Combined voluntary and involuntary turnover has hovered around 5 percent for the past 25 years, and our voluntary turnover rate has always been 3 percent or less. This is truly incredible when you realize that turnover for the transportation industry as a whole has been in double digits for the last decade, with peaks ranging around the 20 percent mark.
We try in every way to let our Employees know they are important and are empowered to make a positive difference on a daily basis. That’s one of the reasons why, in our corporate headquarters in Dallas, there is a huge inscription on the glass elevator wall in our lobby that says:
The People of Southwest Airlines
are the creators of what we have
become—and of 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
a wondrous airline!
K: I know how central that is to your way of thinking, Colleen. That’s why I laughed out loud when I saw the sign on your office door that says:
I can only please one person per day.
Today is not your day.
Tomorrow doesn’t look good either.
My wife Margie says I have an unusual sense of humor. I think you might have one, too!
C: We do think it’s very important to always show a healthy sense of humor. We’ve told new hires the same thing for years—we want them to take our business seriously, but we don’t want them to take themselves too seriously. I hope all of our People know how central they are to any success we’ve had.
We often say that other airlines can copy our business plan from top to bottom, but Southwest stands apart from the clones because of our People and how we treat them. But I would still wager that if another company somehow managed to hire all of our fantastic People, that company might see its best performance but still wouldn’t match up to Southwest.
C: Because the new employer wouldn’t possess the Southwest Culture—the secret sauce, if you will, of our organization. That Culture motivates and sustains us. So, for many of us, being part of our Company is not just a vocation—it’s truly a mission. I don’t dictate the Culture; none of our Officers do. Rather, it stems from the collective personality of our People. And they are what make us the provider of choice in the airline industry.
Provider of Choice
K: It isn’t easy to be the provider of choice in today’s marketplace. Competition is fierce as new competitors emerge unexpectedly. Customers are more demanding because they have many more options at their fingertips. They expect to get what they want when they want it, and they want to have it customized to suit their needs. The world has changed in such a way that today the buyer, not the seller, is sitting in the driver’s seat. These days, nobody has to convince anybody that the customer reigns. People are realizing that their organizations will go nowhere without the loyalty and commitment of their customers. Companies are motivated to change when they discover the new rule:
Today
If You Don’t Take Great Care
Of Your Customers,
Somebody Else Will.
C: That’s for sure! So great Customer Service has to be top of mind for all of your People. We emphasize that all the time. I love the way you and Sheldon Bowles challenged us all to create Raving Fans®, not simply satisfied customers.6
K: We think enthusiastic Raving Fan customers make your business a great business. Today you can’t be content to simply satisfy customers. Raving Fan customers are customers who are so excited about the way you treat them that they want to brag about you—they become part of your sales force. Let me give you a simple yet powerful example of this, from an experience I had personally with your airline.
What usually happens when you call most airlines to either make or change a reservation? You get a recording that says, “All of our agents are busy right now, but your business is very important to us, so please stay on the line and we will be with you as soon as possible.” Then the music starts. You could be on hold for who knows how long, sitting and waiting to talk to a human being. Recently, I called Southwest to change a reservation. Normally at Southwest, a human being picks up the phone. This time, a recording said, “I’m sorry, our Customer Service Agents are all busy right now; but at the beep, please leave your name and telephone number, and we will call you back within ten minutes.” So that’s what I did. What do you think happened a few minutes later? My cell phone rang, and this pleasant voice said,
“Is this Ken Blanchard?”
I said, “Yes.”
“Ken, this is Bob from Southwest Airlines. How may I help you?”
Colleen, I’ve never had that experience with any other airline. How did you make that happen?
C: That’s a feature that’s available to all airlines. It’s called virtual queuing. It helps us handle our heaviest calling times without lowering our Customer Service standard.
K: Why would Southwest use such a feature when no other airline seems to be doing it?
C: We’re always looking for service capabilities that far exceed those of the competition, and that even exceed Customer expectations. Being called back by an airline? It was beyond most Customers’ belief. Yet we routinely try to do the unexpected so we can then enjoy the growth and good reputation generated by Customers like you, Ken, who have spontaneously joined our sales force by bragging about us.
We recognize that the publicity we get from stories our Raving Fan Customers share about how our Employees treat them is more valuable and revenue-generating than advertising. Here are a few examples:
Our Flight Crews are always thinking of creative ways to make flights interesting and fun for our Passengers. I think a lot of them must have colored outside the lines when they were children.
Dear Southwest,
I want to tell you about an experience I had recently that made me fall in love with you guys all over again. I was on Flight 3077 from San Diego to Denver when the flight attendant made an unusual announcement.
“Okay, folks,” he began, “I gotta be honest with you. It’s been a really long day for us. To tell you the truth, we’re tired.”
A few passengers giggled at that. These Southwest people were funny.
“Ordinarily,” the flight attendant continued, “this is the part of the flight when we announce that we’ll be passing out peanuts and crackers for you all to snack on. But as I said, we’re tired. So instead of passing them out, we’re going to put them in a big pile up here at the front of the plane. When the plane takes off, the peanuts are going to slide down the center aisle. If you want some, grab ’em.”
There were a few more chuckles from the passengers—including me—as we fastened our seatbelts and prepared for take-off. I assumed he was joking.
I assumed wrong. The flight attendant dumped an ankle-high pile of packaged peanuts into the center aisle. Thanks to the law of gravity, when the plane took off at a steep angle, those peanuts began sliding toward the back of the plane.
What an icebreaker! Everybody started laughing. People in the aisle seats grabbed peanuts and passed them over to passengers who stretched out their hands.
“You thought I was kidding?” the flight attendant asked over the loudspeaker. “LOL,” he deadpanned.
I only wish I could have videotaped the rest of that flight attendant’s performance, because it was better than many of the shows I’d seen at comedy clubs. I reached Denver feeling happy and hopeful about the human race. That’s a lot of value for one flight, which is why I remain a loyal Southwest fan.
—Customer M. Carroll Lawrence
We consider it a privilege to acknowledge the service of the brave men and women on active duty in our armed forces. It’s the very least we can do.
Dear Sir/Madam,
I am writing to comment and gratefully acknowledge the fine service my husband and I recently received on one of your planes.
My husband returned to Norfolk, Virginia, after being deployed in Iraq for one year. Our flight home from Baltimore to Long Island was the last leg of a long journey for him. This flight became an unforgettable, beautiful memory for us both.
Your employee, a flight attendant named Sandra, took the time and effort to not only thank my husband for his service but asked that everyone on the plane do the same before exiting by allowing us to get off the plane first. As we began to exit, the passengers clapped, thanked, and congratulated us. We both began crying during Sandra’s detailed announcement about my husband’s service and our life together, and continued crying as we made our way up the aisle of the plane. It was such a relief to finally believe that someone appreciated the sacrifices we, and our children, had made.
As touched as we were by what went on inside the plane, we were floored to find that your employees on the ground were waiting outside the plane to present my husband with a bottle of champagne as well as their thanks. I was extremely touched when one of the Southwest employees turned to me to say, “Let me also thank you for what must have been a difficult year.”
As we entered the gate area, every person waiting at the gate to depart stood and applauded the safe return of a man they had never met, based solely on the actions taken by Sandra.
Please extend our greatest appreciation for Sandra’s creation of our treasured memory, which will last a lifetime.
—Customers Deborah and Peter Ellison
Going out of their way to help a Customer in need is all in a day’s work for our People.
Dear Southwest,
I am writing to relay my deep appreciation for the care exhibited by one of your flight attendant, Dina A. I am an extremely fearful flyer and try to avoid it whenever I can. On July 3, I needed to fly alone to Chicago for a family funeral. Dina was the reason I was able to make it! She helped me talk to the pilots before we took off, sat with me for parts of the flight, and was a warm, supportive, and reassuring presence throughout. She never made me feel silly or ashamed of my fear. She was like a dear friend who knew all the right things to say. I hope you will pass along my deep gratitude to Dina. I will be forever grateful for her kind patience.
—Amy, a Raving Fan Customer
As a Mother, I can’t imagine anything more important than knowing my child would receive tender loving care if he needed to fly alone.
Dear Southwest Airlines:
I’m writing to thank you for the excellent service Southwest has provided our family. Our 11-year-old son has traveled several times with you as an unaccompanied minor, and it is always uneventful. Recently he once again geared up for a flight to grandma’s house. When the second leg of the flight was delayed, we got a call from him letting us know. It was a nice touch when the pilot came on the phone and let us know the exact situation and reason for delay. We were surprised the captain took the time to speak to us personally. We instructed our son to eat the snacks we had sent with him since dinner would be delayed, and not to get in the crew’s hair while they were grounded.
Imagine our surprise when we later found out that the captain took our son to dinner with the rest of the pilots to the airport McDonald’s. For an 11-year-old, hanging out with the pilots was really cool! The captain could have easily left someone to babysit our son while they got dinner, but by including him, it made his day.
Southwest has once again confirmed that it is a people-oriented, truly friendly operation. We will keep coming back.
—Customers Kristine and Glen Smith and son Nico
K: Wow! Those are great Raving Fan Customer Service stories. Keeping your customers happy is definitely one of the best ways to ensure that the cash is flowing.
Investment of Choice
K: That leads me to the third aspect of the triple bottom line—the investment of choice—which Southwest certainly has been for the past four decades. To me, the financial success of an organization is a function of revenue minus expenses. You can become more financially sound either by reducing costs or increasing revenues. Let’s look at costs first, because in today’s competitive environment, the prize goes to those who can do more with less.
C: Unfortunately, many organizations are deciding that the only way for them to manage costs and be financially effective today is to downsize. There’s no doubt that some personnel reduction is necessary in large bureaucracies where everyone has to have an assistant, and the assistant has to have an assistant. Yet downsizing is an energy drain, and it’s by no means the only way to manage costs. We started with a pared-down, efficient organization and have stayed that way, so downsizing has not been a big issue.
K: I applaud you for that, Colleen. You also do another thing very well: You treat your People as your business partners when it comes to managing costs.
Treating your People as your business partners is particularly important in uncertain times. I was blown away when I had the privilege of being at a meeting of all of Southwest’s key Leaders during the spell of sky-high gas prices in 2008. Gary Kelly, your Chairman, President, and CEO, was open with everybody about how this was impacting the financial bottom line, and he solicited everyone’s suggestions and help. It appears to me that, to your leadership, your People are your business partners. That philosophy certainly is not universal throughout corporate America. Why? Because most corporate leaders do not believe an important truth that the leadership at Southwest practices, which is:
If You Keep Your People Well Informed
And Let Them Use Their Brains,
You’ll Be Amazed At How
They Can Help Manage Costs
C: I am proud of the cost-cutting savings that have come from treating our People as our business partners. Let me give you some examples.
One of our Flight Attendants suggested we take our logo off our trash bags, which had been color printed—this saved us about $100,000 a year. Our Flight Attendants also noticed how many fresh lemons were going to waste on every flight because very few Passengers asked for them, so we eliminated lemons and have saved a lot of money that way. One of our biggest cost savings occurred when some of our Employees, on their own, built the www.southwest.com website, which saved hundreds of thousands if not millions of dollars. And an extraordinary example of our People helping the Company was during Desert Storm, when the cost of fuel was very high. Our Employees came up with a program called Fuel from the Heart, whereby they could sign up to have a certain amount of money withdrawn from each paycheck to help the Company with the cost of fuel.
K: Great stuff, Colleen—particularly that last one. So the key is to first treat your People as your business partners. Then they will trust you and want to help the Company manage costs.
C: We’ve certainly found that to be true over the years.
K: Let’s switch gears now. If you listen to your People and make them your business partners when it comes to managing costs, I’ll bet, if given the chance, they can help you with revenues, too.
C: They sure can. For example, Ken, I know you have been the beneficiary of a new Customer initiative called the Business Select Fare, which was an idea generated by Southwest Employees. This is focused on Customers who don’t mind spending a little extra money so they can be among the first fifteen Customers to board, ahead of almost everybody else, along with a few other perks.
K: Like a free drink! I’ll bet Business Select has brought in significant new revenue for you all.
C: You’d better believe it. That program has generated millions of dollars since we initiated it.
We think having our People help generate revenue ideas is so important, we formed a Grow Revenue Strategy Team in 2001 that carried on, in a more structured way, our tradition of listening to suggestions from Employees. This team consisted of individuals from several departments as well as our Executive Planning Committee. Over the years they implemented many revenue-generating ideas including our Early Bird fare, our Bags Fly Free program, our PAWS (Pets Are Welcome on Southwest) program, and our “cashless cabin” policy. Although the Grow Revenue Strategy Team doesn’t exist as such today, various task forces and special temporary committees have evolved from that Team that still listen and react to Employee suggestions. Ideas generated by our People over the years have influenced many important decisions ultimately made by our Executive Planning Committee.
So our People really are our business partners when it comes to not only managing costs but also increasing revenues.
K: I think your Bags Fly Free advertising campaign was a stitch. And that policy has generated even more Raving Fan Customers. I hear people bragging about not having to pay extra for baggage on your flights.
Southwest certainly covers all the bases of the triple bottom line: employer of choice, provider of choice, and investment of choice.