Southwest Airlines: “Put Your Employees First”

My favorite, and perhaps the most famous concept from Jim Collins‘ Good To Great is the Hedgehog Concept:

Are you a hedgehog or a fox? In his famous essay “The Hedgehog and the Fox,” Isaiah Berlin divided the world into hedgehogs and foxes, based upon an ancient Greek parable: “The fox knows many things, but the hedgehog knows one big thing.”

The gist of this parable is that the fox, with all of his cleverness, speed, and agility, has no tactical advantage over the dowdy hedgehog, whose “one big thing” is knowing how to curl up into a needlish ball when the craftier fox tries to eat him for lunch.The hedgehog’s advantage is that he knows his one big thing, and stays true to this innate gift rather than trying to outfox a fox.

Southwest Airlines is unique within the U.S. airline industry for the hedgehog-like nature of its business model. It is renowned for the efficiency of its route network (point-to-point flying using secondary airports), the leanness of its aircraft inventory (one aircraft type — the Boeing 737 — in just three configurations), and its ability to hedge fuel prices (purchasing options on fuel at lower prices years in advance) in order to control costs. Southwest pioneered the low-fare segment of the airline industry, has the most fanatically loyal customers of any airline, and has been profitable every year since 1973.

Not bad for a smaller, non-union, domestic airline, eh? Well, it wouldn’t be, except that Southwest is now the second-largest airline in the world, by number of passengers carried; has the world’s fourth-largest fleet of aircraft; is heavily unionized; and will soon undertake international carriage.

So just what, then, is the secret of Southwest’s success?

I’ve already given it away in the title of this post, but have a look anyway at this CBS Interactive article, “Something Special About Southwest Airlines,” which appeared online (appropriately enough) just before Labor Day.

Among Southwest’s other credits is this: In the aftermath of 9/11, the company’s execs made a deliberate business decision not to furlough any employees. At the time, the magazine BusinessWeek quoted CEO James Parker as saying: “We are willing to suffer some damage, even to our stock price, to protect the jobs of our people.”

No matter. The share price of Southwest Airlines stock recovered much faster than either the S&P or Dow indices after 9/11. In 2003, Southwest was awarded the Corporate Conscience Award for Community Positive Impact in recognition of the airline’s post-9/11 no-layoff policy. Between 1999 and 2004, the company was named one of the “100 Best Corporate Citizens” by Business Ethics magazine.

(By the way: The Hedgehog Concept, as a business principle, applies equally as well to people as it does to companies.)