Firms of Endearment: How World-Class Companies Profit from Passion and Purpose (2nd Edition) by Rajendra S. Sisodia & Jagdish N. Sheth & David B. Wolfe

Author:Rajendra S. Sisodia & Jagdish N. Sheth & David B. Wolfe [Sisodia, Rajendra S.]
Language: eng
Format: mobi
Publisher: Pearson Education
Published: 2014-01-16T14:00:00+00:00

Making Stakeholders Partners Increases Success Potential

In the wake of 9/11, one of the most calamitous days in U.S. history, an unprecedented wave of bankruptcies swept the airline industry. As the airlines pursued layoffs and big pay takebacks to regain viability, management’s relationships with employees and their unions plummeted to new lows. Southwest Airlines was a notable exception. Alone among the major airlines, Southwest chose to ride out the storm without making any layoffs. And it never asked for any pay givebacks.

Kim Cameron, a University of Michigan business school professor, studied corporate resilience in the wake of 9/11. He found that “Airline companies that avoided layoffs and invested in preserving relationships... showed more resiliency than those that violated contractual commitments, instituted layoffs, and cancelled severance benefits. By foregoing downsizing, these companies created coping resources that enabled their employees to respond cohesively to the crisis in innovative ways and allowed organizational performance to return more quickly to pre-crisis levels.”4

But there is more to Southwest’s post-9/11 resilience than rejection of layoffs and pay cuts. Southwest experiences the same economic challenges as American, United, Delta, and other large airlines. However, for more than four decades, Southwest has come through every economic downturn without once having had a money-losing year. This in an industry that has lost more money than it has made.5 Remember (from Chapter 4, “Employees: From Resource to Source”) how Southwest faced selling one of its four planes in its early days? Frontline employees solved the loss-of-revenue threat by designing a way to have three planes do the work of four. When times are tough, Southwest employees rise to the occasion. So do the unions representing them.

Not long ago, a top airline analyst tried to explain to a gathering of MIT students how in an industry frequently beset by unprofitable years, Southwest never has a money-losing year. “Southwest is not shackled by traditional unions,” he told the students.6 But he was wrong. Southwest is one of the most highly unionized airlines in the U.S. What Southwest has going for it that none of its major competitors has is a strong partnership relationship with every stakeholder group. This includes its employees’ unions. Unions are stakeholders, too. Treating them as partners can be as profitable as doing so with customers and suppliers.

Most companies with unionized workforces view unions as hindrances. Southwest sees them as partners. This outside-the-box company, with the personality of a jester and spirit of love for all stakeholders (its stock symbol is LUV), has become the nation’s largest carrier of domestic traffic not in spite of unions, but in part because of them.

Southwest’s corporate culture is based on five basic principles laid down years ago by its longtime CEO Herb Kelleher:

• Focus on the situation, issue, or behavior—not the person.

• Maintain the self-confidence and self-esteem of others.

• Maintain constructive relationships with your employees, peers, and managers.

• Take initiative to make things better.

• Lead by example.

Note the “others-oriented” bent of those principles. Each principle conforms to Maslow’s description of self-actualizing personalities. In no principle is there a hint of the more prevalent command-and-control-guided business model.

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