A long time ago, I got some very good advice about values when you start a company. It went like this:
Don’t create a culture in which the only reward for hard work is more work.
Instead, celebrate your wins both big and small. Recognize team members when they achieve milestones. When you have the opportunity, throw parties and give bonuses.
Sure, some people have a limit for the kind of “mandatory fun” that some businesses wind up building into their culture.
But, overall, if you can encourage joy and connection and pride in your organization, that’s a powerful thing to have –and usually well-worth what it costs to get there.
With that, let’s talk about Southwest Airlines. Because this week Southwest announced that ahead of some major changes in the airline’s operations looming –getting ready to get rid of the open seating model is the big one–the airline is trying to cut costs.
Among the things the airline outlined:
- Suspending most summer internships.
- Pausing hiring and promotions in its corporate offices.
- Skipping the annual Southwest Rallies events that date back to the 1980s.
“Every single dollar matters as we continue to fight to return to excellent financial performance,” Southwest CEO Bob Jordan reportedly wrote in a memo to all staff.
The move comes in the wake of a messy fight with an activist investor, Elliott Investment Management, which tried to replace Jordan last year.
Southwest settled by giving up five board seats and Jordan stayed as chief executive, but there are still big pressures to increase profitability.
Jordan’s memo continues:
You’ll begin to see and feel efforts related to our cost initiative in the coming weeks, including some hard decisions I’ve had to make.
One example–we’re further limiting discretionary spending this year, and I’ve made the tough decision to cancel the 2025 Rallies that were planned for Dallas and Phoenix, along with the big screen events across the system at AMC Theaters.
I’m disappointed that we won’t gather to kick off our plan for the year at Rallies, celebrate our accomplishments, and spend time together in person.
The timing simply isn’t right when we’re striving for cost discipline and focusing on a leaner organization that’s closer to the work, closer to the frontline, and closer to our Customers.
We won’t get the latest Southwest earnings report until the end of the month. At the end of October they reported lower profits than a year ago, but a bit higher than Wall Street had expected.
And Jordan says that “costs … have outpaced our revenue growth,” so maybe some belt-tightening is in order.
But, as a symbol, I don’t think you could do much worse than flat-out canceling a big, annual event that you use to “celebrate our accomplishments, and spend time together in person.”
In fact, here’s a video from a year ago, when Jordan introduced the 2024 Southwest rallies, calling them a “cherished, 40-year-old tradition, and “a massive event.”
Next to the open-seating arrangement that Southwest is giving up, one of the key things that made Southwest different from its competitors was its culture.
You could see it in the way flight attendants interacted with passengers.
Find me another big U.S. airline where cabin crew could make jokes about how, in the event of an emergency, passengers traveling with more than one child should choose which child to help first with their oxygen mask based on “future earning potential.”
Or a line about what to do in the event of a water landing on a flight between Houston and San Antonio (besides swimming pools, you won’t find much water between Houston and San Antonio).
It could be a bit corny sometimes, but you felt like the employees were having fun.
Heck, way back when, the late co-founder and CEO of Southwest, Herb Kelleher, used to say explicitly that he put employees ahead of shareholders and customers.
“My response was heresy at that time,” Kelleher once said. “I said employees come first and if employees are treated right, they treat the outside world right, the outside world uses the company’s product again, and that makes the shareholders happy.”
Of all airlines, Southwest is the one where a a big, company-wide party like the rallies is most keyed in to the culture.
As Gary Leff put it in reporting at View From the Wing, this isn’t a matter of telling employees that they need to band together to save the company from bankruptcy.
Instead, it’s about a “fight to return to excellent financial performance.”
Put just slightly differently, that’s about as close to a 180-degree turn from the old Kelleher mantra as you could get, putting shareholders first, and employees (and one assumes, customers) far behind.
I don’t know what it costs to put on the rallies each year. I’ve asked Southwest, but haven’t heard back.
But almost whatever the annual bill is, I’ll bet it’s costing Southwest a lot more in culture not to hold them.
