Herb Kelleher: Managing in Good Times and Bad | Summary and Q&A

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July 27, 2009
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Stanford Graduate School of Business
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Herb Kelleher: Managing in Good Times and Bad

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Summary

This video features a conversation with Herb Kelleher, the co-founder and former CEO of Southwest Airlines. Kelleher discusses his background, the origins of Southwest Airlines, and his philosophy of putting employees first. He also shares insights on innovation, building strong relationships with labor unions, and the challenges of the airline industry. Kelleher emphasizes the importance of passion, serving others, and maintaining a positive work-life balance.

Questions & Answers

Q: How did Kelleher and his wife decide to move to Texas?

Kelleher and his wife decided to move to Texas after he joined a law firm in San Antonio that specialized in nurturing entrepreneurs. They were attracted to the entrepreneurial spirit in Texas and saw it as a great opportunity.

Q: How did Southwest Airlines challenge the established airline industry in the United States?

Southwest Airlines challenged the established airline industry by offering low fares and focusing on flights within the state of Texas. They took advantage of a loophole in regulations that only controlled fares on interstate flights. By offering low fares and serving smaller airports, Southwest Airlines disrupted the traditional airline market.

Q: How did Kelleher approach the priority of employee satisfaction over customer satisfaction and stockholders?

Kelleher prioritized employee satisfaction over customer satisfaction and stockholders because he believed that taking care of employees would lead to happy customers and, in turn, satisfied stockholders. He wanted to create a company culture where employees felt valued and motivated to provide excellent service. He also recognized that by treating employees well, they would be more likely to treat customers well.

Q: Can the spirit of innovation be taught or is it innate?

Kelleher believes that the spirit of innovation is innate but can be nurtured and inspired through exposure to innovative thinking. He suggests that college-level entrepreneurship courses can be helpful in igniting this spark and learning from the pitfalls of starting something new. However, he also notes that it is important for individuals to have a genuine passion for being innovative and not just follow the crowd.

Q: How did Southwest Airlines continue to turn a profit after the 9/11 attacks when most other airlines were losing money?

Southwest Airlines was able to continue turning a profit after the 9/11 attacks because they were well-prepared, both financially and operationally. They had the lowest cost per available seat mile in the US airline industry, a strong balance sheet, and high liquidity. They were able to adapt quickly to the new regulations and conditions, making adjustments without canceling flights or resorting to layoffs.

Q: How did Kelleher foster strong relationships with labor unions?

Kelleher fostered strong relationships with labor unions by treating them as partners rather than adversaries. He recognized the importance of labor unions and their political constituency. He invited union leaders to company events, addressed their issues promptly, and involved them in the hiring process. By showing respect and valuing their input, Southwest Airlines was able to maintain a positive relationship with labor unions.

Q: How did Kelleher balance work and personal life?

Kelleher balanced work and personal life by working long hours (around 16 to 18 hours a day) but making sure to attend all important events in his children's lives. He would often go back to the office after family events or work on weekends to maintain this balance. He didn't require a lot of sleep, which allowed him to dedicate more time to both work and personal obligations.

Q: How did Southwest Airlines manage to stay focused and deliver simplicity and quickness?

Southwest Airlines focused on simplicity and quickness by constantly fighting against bureaucracy and hierarchy. They resisted the temptation to overstaff or complicate processes. Kelleher emphasized the importance of being responsive to employees and customers, removing unnecessary barriers, and maintaining a laser-like focus on the company's mission.

Q: Can other airlines successfully imitate the Southwest Airlines business model?

Southwest Airlines has seen two generations of imitators, but the key to success lies not just in imitating certain tactics, but in replicating the entire mosaic of Southwest Airlines' culture and strategies. The imitators who understood and embraced the core principles of Southwest Airlines, such as low fares and simplicity, have been more successful.

Q: What advice does Kelleher have for young people starting their careers?

Kelleher advises young people to be open-minded, curious, and inquisitive. He suggests not confining oneself to a specific field or career path and to continuously learn from others and different books. He also stresses the importance of approaching work with passion, serving others, and maintaining a positive and balanced perspective on life.

Takeaways

Herb Kelleher's leadership philosophy at Southwest Airlines centered around putting employees first, fostering innovation, and building strong relationships. He believed that by taking care of employees, they would provide excellent service to customers, leading to customer satisfaction and positive financial results. Kelleher emphasized the importance of being prepared for crises, maintaining simplicity and quickness, and nurturing a passion for serving others. His approach to work-life balance involved working long hours but prioritizing family events and personal obligations. Kelleher's advice for young people starting their careers is to stay open-minded, curious, and always strive for excellence.

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