Wheels Up Herb Kelleher is the co-founder of Southwest Airlines and the most influential figure in its 35-year history. He knows everything there is to know about the company, its unique culture, its intense devotion to customer service, and its deceptively clever business strategies. And he’d be happy to talk about all of that. He’d be happy to talk about it a lot. By Joseph Guinto

erb Kelleher is going to tell three stories. They are all going to involve rope. You are going to think he is obsessed with rope. You are going to be tempted to suggest that he has a Hhang-up with rope. But that would be a silly thing to say. So you will resist. But this rope that he’s going on about, it’s important. It’s instructive about the life and career of the Wild Turkey-imbib- ing, chain-smoking chairman of the board at Southwest Airlines. First rope story first. It’s not so much a story as a quick lesson. Herb had a big lesson early in life. He was born in Haddon Heights, New Jer- sey, 1931. He was just 10 when the United States entered World War II. Both his brothers went to war. A year later, one was killed in combat. A year after that, his father died suddenly. His sister had moved to New York. So it was just Herb and his mother, Ruth, at home. She taught him something: Individuals matter. One person can make a difference. Sometimes, in small ways, but a difference, still. Small gestures matter. Specifically, pitching in for the war effort by, say, saving tinfoil

108 SOUTHWEST AIRLINES SPIRIT JUNE 2006 Wheels Up

for the armed forces. Or, collecting twine. ‘Come on, who cares about the twine? Are “At that point, the oldest dockworker “The fact that you saved twine didn’t pro- they nuts? Have they lost it? For crying out comes up …” It is important to interrupt, duce anything for you,” Herb says, “but loud are these people out of their minds?’ because Herb has leapt to his feet again. hopefully it produced things for the nation. “Well, it turned out that throwing the He hitches up his pants, more than navel And that’s what made it worth doing.” twine away was a big operation. So they high, stoops over, and starts acting like Second rope story. wanted to collect the twine and resell it. an elder curmudgeon. “He says, ‘What’s As noted, Herb grew up in Jersey. His They ended up making about $500,000 a going on here?’ And someone tells him, family was middle class. That meant year selling this used twine. That’s when ‘Well, we’re telling Herb we’re upset everyone worked. As soon as possible. I realized how little things aggregate and because they wouldn’t replace our rope. When he was 12, and legal to work, Herb become very big things, which is why, in And the guy says, ‘The rope is over there got his first job. He was branch manager business, you have to pay attention to the behind that barrel.’ And it was. Here I’d for the Philadelphia Bulletin. Primary little things. They are important.” spent an hour and a half with 20 people responsibility: Make sure the paperboys Important. Like the tinfoil from dur- who were very disgruntled with South- delivered the papers. Once, they did not ing the war. Like the other twine he col- west Airlines over a rope, and there it get delivered. It was August 15, 1945. It lected. Or, like the third rope. was. If that doesn’t send you a message was VJ Day. “So I was summoned down to “Sometimes it’s the little things that about the little things being important, Philadelphia,” Herb says. “I was nervous are wrong that aggregate into big prob- nothing will.” as heck. And they brought me in there lems,” Herb says. “That can start grating Herb reaches for a new cigarette and and said, ‘Why didn’t the papers get deliv- on you. I’ve been through untold expe- lights it. That’s how you know one story is ered?’ And I said, ‘Because it was VJ Day.’ riences that I could rattle on for hours over and another is about to begin. And they said, ‘OK.’ That was it.” about, situations at Southwest Airlines After the newspaper job, he spent where I’ve intervened because all of a sud- Is Herb a Hero? Ask a several summers cutting lawns with a den people seem to be very disaffected, Customer in Providence. friend. Two dozen a week, usually. Then, and it turns out to be over something or Southwest Airlines, a lot of stories throughout his college years, he worked fairly easily fixed, like not having enough Fare over. Thirty-five years of them. But at Campbell Soup doing, well, just about calculators so everyone can check out a lot of stories are just beginning, too. The everything. His father, Harry, who had simultaneously at the end of the day from company is almost unrecognizable today, been general manager there, had already their ticket counter.” compared with what it was just after Rollin passed on. But Herb knew the people, and Seriously. He could go on for hours King first brought the idea of a Texas-only they let him learn the business. “I had about this. He could go on for hours about airline to Herb Kelleher in 1967, and even a heck of an informal education there,” anything, really. Herb is like that. “Herb compared with what it was on June 18, Herb says. The lesson plan included time- can’t say hello in 15 minutes,” says South- 1971, when Captain Emilio Salazar pushed and-motion studies intended to increase west President Colleen Barrett, who has in the throttle on the inaugural flight of the factory’s efficiency. For instance, he worked with Herb for four decades. But, Southwest’s first 737-200 aircraft, bound studied which was the fastest way to put about the little things that bug people, he for Houston. Even the colors on most of the chicken into a can of soup. He also stud- could tell you about light bulbs not being planes are different. Canyon Blue is now ied what to do with all the twine the com- replaced and how people start distrust- more prevalent than Desert Gold. pany’s soup cartons were delivered in. ing the company over such a small thing. Some things haven’t changed. For Whoa! Herb jumps up off the couch to He could tell you about mats not being one, Herb is still here. He was the attor- tell the story. He’s in his office, the office purchased for customer service agents to ney back in the beginning. Working on of the chairman of the board at Southwest stand on for eight hours a day. He could go contract. Not getting paid for a lot of his Airlines. It’s smaller and squarer than on. And on. But, we’ll leave it at just this work. Fifty-one months of constant liti- you’d think the chairman of a $7.6 billion one story. “The funniest one ever was over gation before the first plane took off. Rul- company would occupy. But that’s fine by to the docks,” Herb says. “I hopped myself ings by the Supreme Court of Texas and Herb. He was never one for the trappings over there in the evening and talked to the U.S. Supreme Court, all involved. of power. Take the time, back during his the dockworkers. For an hour and a half Those early days inform the present. two decades as Southwest CEO, when he it’s, ‘Southwest Airlines really sucks; it’s a There were a few dozen employees in was called to an emergency meeting of a terrible company.’ So, I finally said, ‘Well, 1971. But their struggles are part of the business partner. He showed up in orange tell me what I can do.’ corporate personality now, part of what jams and a T-shirt. “Everyone was looking “It boiled down to the fact that they all 32,000 employees of Southwest repre- around, wondering who this crazy per- had a rope that they used to wrestle sent today. The mission, even with tens of son was,” Herb says. “They almost called drums, to get shipments off the trucks. thousands more workers, hasn’t changed security.” You can understand why. Right Well, they couldn’t find the rope and either. For Herb, for current CEO Gary now, he’s hopping up and down, waving nobody had replaced it. That’s what they Kelly, for Colleen Barrett, for all the exec- an ever-present cigarette in the air. He is were upset about. They weren’t asking for utives at headquarters, the job is to serve prancing — literally prancing —in front of a new dock or new lifts for the trucks. It the needs of the employees, who will, in his desk. He loves this rope story. was just their rope. So I said to the man- turn, take excellent care of the custom- “You can just imagine,” Herb says. “Here ager there, ‘Will you just go buy them a ers, which will, in turn, provide a good I am 18 years of age and I’m thinking, rope? Are you crazy?’ return for shareholders. That’s how it has

SOUTHWEST AIRLINES SPIRIT JUNE 2006 Wheels Up

always been at Southwest Airlines, even if them, ‘Which one is the Kelleher boat?’ of thinking. Still, he thinks there’s value few other Fortune 500 companies operate They weren’t paying a whole lot of atten- in talking about how the company has with the same order of priorities. tion at the time. But all of a sudden, one done well by doing good. It’s an impressive story. And Herb guy looked up at me and he said, ‘You’re “I gave a speech in Sacramento once loves to tell it. What he does not like to our hero.’ They were business gradu- at a convention there,” Herb recalls. “And do is tell his own story. Seems odd for ate students and had been studying the the thrust of my speech, which really sur- such a talkative guy, and for one who is company. prised them, was that you can do a lot of so revered. Consider: When CNN turned “It really surprised me. And this was good for the American people just by the 25 last year, the network did some anni- the only time that’s ever happened to way you do business. Look at Southwest versary specials. (Good idea, that.) In one, me, which is why it stands out so much Airlines. If you don’t think that going they ranked the top 25 business leaders in my memory.” into Providence and increasing the air of the past 25 years. Herb’s own business Just once? Seems hard to believe, espe- traffic in Providence, Rhode Island, 91 idol, Sam Walton, ranked second, right cially for a man who is sought out by busi- percent within a period of two months is behind Bill Gates. Herb was on there, too. ness schools across the country, by a man helping the American people, then you’re Seventh place. Two spots ahead of Alan that Texas Monthly named CEO of the wrong, because you’re not only enabling Greenspan. Interesting, given that Herb Century. But Herb says maybe too much people to conduct their businesses bet- gives a whole new meaning to “irrational is made about his role. “I think Southwest ter and more efficiently and economi- exuberance.” Airlines, and not Herb Kelleher, should cally, but you’re also giving them a host So, is Herb a hero of American busi- stand as an exemplar of what free enter- of personal opportunities that they would ness? Do people think of him that way? prise should be all about.” not otherwise have had and that are very He’s not sure: “I don’t know if they do or He’s careful on this point, too. He important to them. not. I never have asked them that because doesn’t want Southwest Airlines to “Just by the way you do business, you I’m afraid I’ll get a negative answer.” But seem, as he puts it, “messianic.” Yes, he’s can make a successful contribution to he does have a quick story on the subject. proud of Southwest. And, yes, he thinks the good of the American people, and “We were on a boat trip on the Snake there is much worth studying how the that’s what I think Southwest has done. River up in Jackson Hole,” Herb says. “I company has done business. But is That’s one of the things that our advertis- was walking through the weeds along Southwest, with its employee-first, cus- ing slogan was intended to manifest: ‘A the riverbank. I’m there with the guys tomer-friendly approach, the savior of symbol of freedom.’ We give you freedom. who are handling the boats, and I said to American business? Not to Herb’s way The freedom to fly and to carry out the

Story Time Random thoughts from the man everyone calls Herb NAME: Herbert D. Kelleher and Catholic. His father, Harry, was Irish and you’re one of those nerds who actually PERSONAL HISTORY: Born 1931, Haddon Presbyterian. The kids — there were four reads the prospectus, huh? You’re not Heights, New Jersey. Married 51 years. With — got to choose their own denomination. supposed to read it. You’re supposed to wife Joan has four children and nine grand- Herb chose Presbyterianism and attended use it as a basis for suing us if our stock children. a nearby church filled with German immi- goes down.’ EDUCATION: BA, English Wesleyan Univer- grants. “I was the only Irishman in the whole “Then I said, ‘In response to your ques- sity. JD, NYU. place,” he says. “And I tell ya, I could say tion, our new maintenance program is just WORK HISTORY: Clerked for New Jersey the Lord’s Prayer faster than anybody else a tiny piece in a very large mosaic.’ And Supreme Court from 1956 to 1959. Served in church. They were all slowed down by everyone is sitting there laughing because as an associate at Lum, Biunno & Tomp- their accents.” they know that I don’t know what the main- kins in New Jersey from 1959 to 1961 and THE KIDS TODAY, THEY’RE ALL ABOUT tenance program is. So, now, every time at Matthews, Nowlin, Macfarlane & Barrett LEARNING: “I was speaking to a business we get into a discussion where they think in San Antonio from 1961 to 1969. Helped school once,” Herb says. “They asked me I’m not quite giving the detail I should, found Oppenheimer, Rosenberg, Kelleher how we’ve become so successful. I told they say, ‘Well, Herb, I guess it’s just like a & Wheatley, serving as senior partner from them, ‘OK, I’ll tell you what it is — exactly.’ big mosaic. We’ll just put the little piece in 1969 to 1981. Was first legal counsel for Well, the notebooks opened, and the pens place and you’ll see the picture.’ ” Southwest Airlines and its predecessor, Air came out, and everybody was paying really WHY IS THIS MAN SMILING? “I was asked Southwest Co., from 1969 to 1982. Served as close attention. And I said, ‘Sometimes it’s to speak to a stress class at Southwest Air- chairman, CEO, and president of Southwest better to be Irish than smart.’ ” lines some years ago,” Herb says. “When I from 1982 to 2001. Relinquished duties of MONEY MAN: “I was in New York some walked in, the fella that was giving the class president and CEO in 2001. Has continued years ago. We were having a public offer- said, ‘Herb, you endure a lot of stress. Give serving as chairman. ing, and I was making the pitch. So, a us some tips on how to deal with it.’ YOU HAVE TO UNDERSTAND, THIS WAS guy in the back of the room raises his “So I said, ‘Well, I actually like it.’ And AN ODD PAIRING FOR THE EARLY 20TH hand and says, ‘Well, how about your new that was the last time I was invited to talk to CENTURY: Herb’s mother, Ruth, was Irish maintenance program?’ And I said, ‘Wow, the stress class.”

SOUTHWEST AIRLINES SPIRIT JUNE 2006 Wheels Up

things that are important to you in your The litigator was, of course, Herb. He really was no price elasticity in the air- business as well as your personal life.” worked day and night and day on the air- line business.” He burns a new one. line’s behalf. At first, he wasn’t doing so Oh, price elasticity. Right. Econ 101: well. The initial cases went against him. When price goes down, demand goes up. How a Writ of Mandamus Gave The company’s board was ready to give Airlines in 1971 had prices fixed by the Southwest Wings up. But Herb made a deal. He’d work for federal government. Everyone paid about e believes it, that “freedom” stuff. free, pay the legal costs himself. But they the same fare. So, if they assumed there HIt’s important to him. Important to had to let him keep trying, as long as it was no price elasticity, that meant they the whole company. Still today, South- took. He was too angry to quit. Too ide- figured if you dropped prices, people west asks that all of its workers have a alistic. You’d be tempted to say he was would not fly more. They figured wrong, “warrior spirit.” That’s because of Herb’s also too naïve. as evidenced by the 80 percent of adults personal slant, that his heroes, to para- Except he won. who have flown today in a deregulated, phrase Willie, have always been warriors. “It would have been easy at any point price-sensitive market. Patton. Churchill. The kind of heroes in time, as our investors disappeared, “Southwest Airlines has had an enor- “who didn’t need $42 million a year” to as the board said, well, we think they’re mous amount to do with that coming to sacrifice of themselves, he says. going to bleed us to death, we think we pass,” Herb says. “It’s a tremendous trib- Southwest also promotes the warrior ought to shut this thing down and just ute to our people.” spirit now because of how the company quit,” Herb says. “But I was enraged by OK, fine. But why did so many more got started more than 35 years ago. The the anti-competitive activities that the people start flying on Southwest? The spirit, Herb will tell you, “was forged in other carriers conducted against South- hot pants didn’t last that long, after all. the fires of litigation.” west Airlines, and, in a sense, it was a Was it just the cheaper flights? It couldn’t Ah, the litigation. Herb loves to talk fairly high-flown thing. I wanted to vin- have been the peanuts. Come on, Herb. about the litigation. There was so much of dicate the system so that the system Clear this up. it. Thirty different legal actions launched could produce the right results. “It’s more than just providing the by competitors between 1967 and 1971, “All we wanted to provide was better customer with value; it’s giving them all aimed at never letting upstart South- service at lower fares. That’s in the inter- an experience, giving people something west, um, start up. Injunctions. Lawsuits. est of the American people. It’s just not in they’re seeking psychically,” he says. All that. Two decisions were particularly the interest of your competitors. That’s Wait, psychically? Like ESP? What’s he crucial. One, in late 1970, came from the why I was so enraged. They were manip- talking about? U.S. Supreme Court. It refused to over- ulating the system — our adversaries “I don’t want people to get on a plane turn a decision of the Texas Supreme — to prevent that from happening.” and fly somewhere and get off and say, Court, which had ruled that Southwest ‘Well, there was that one.’ I want them could fly. The other big ruling came on Wherein Herb “Explains” Psychic to get off and say, ‘Well, that was pleas- June 17, 1971. It was one day before the Satisfaction and Crusaders ant; that was really memorable. That inaugural flight was set to depart Dallas’ hree and a half decades is a long was different than a lot of other flights Love Field. But Southwest’s competitors Ttime. Long enough for hot pants to I’ve taken.’ I want them to leave with had filed for one more injunction to keep come in style, go out of style, and come a smile on their face and communi- the newbie airline grounded. And they back again. Long enough to change an cate that smile to a lot of other people got it. So Herb went to Austin and pre- industry completely. When Southwest that they talk to. We emphasize that vailed on the state’s Supremes to issue a first took off in 1971, just 15 percent of because it’s good for our people, and writ of mandamus, an order that would the adults in the United States had ever it’s the hardest thing for competitors to prevent any and all lower courts from flown on a commercial flight. Fifteen imitate. They can get all the hardware. I issuing any new injunctions against percent. Today, about 80 percent of mean, Boeing will sell them the planes. Southwest. It was an unheard of deci- adults have flown commercially. Herb But it’s the software, so to speak, that’s sion. Getting a writ of mandamus from thinks about this a lot. He’s still amazed hard to imitate.” a state Supreme Court is like finding at the mind-set of his competitors in Psychic satisfaction works both ways, Bigfoot. People think you’re nuts if you 1971 on this issue. Herb says. Employees need it, too. That’s claim to have accomplished it. “For 40 years they had been in the why he tells them they’re warriors in a But Southwest got the writ. Before same mode, with regulation by the fed- crusade. Customers are getting their you knew it, the airline was back in eral government telling them what they psychic satisfaction, their “freedom to court. This time the fight was over the could charge, how many seats they could move about the country,” and employ- right to remain at Love Field. It had set have on their airplane, where they could ees are getting their psychic satisfaction, up not just flights to Houston and San fly,” he says. “So they really thought that too, by being defenders of that freedom. Antonio from Love, but also its corpo- only about 15 percent of the people in “It’s important to provide psychic satis- rate headquarters. “I guess for 10 years the United States wanted to fly and faction for your employees,” Herb says. you might say the most successful busi- would fly and that the other 85 percent “I think there are very many people in ness of Southwest Airlines was litigation,” were saying, ‘Well, we really don’t want the world who are looking for that. They Herb says. to.’ In other words, they said that there want to feel welcome, participative. They

SOUTHWEST AIRLINES SPIRIT JUNE 2006 Wheels Up

want to feel that what they are doing is enough, that’s not quantitative enough to use their travel agents’ reservations worthwhile, that it gives them a reach to be of value to us.’ systems, I said, forget it; we’ll develop beyond themselves.” “But, basically, we’ve said there are an electronic, ticketless system so travel some things that you can’t quantify agents won’t have to hand-write South- The Boys, They Say That I Am — intangible things that are exceedingly west tickets — and we won’t be held Buena. Hey, Macarena! valuable and that are, in some cases, hostage to our competitors’ distribution here used to be something called more valuable than the tangibles. The systems. It turned out that people from TSouthwest Airlines Days. Execu- difference being you can’t buy the intan- several departments had already gotten tives from other firms, about 300 a year, gibles.” together, anticipated such a contingen- would pay $100 each to come to South- cy, and begun work on a system, unbe- west and learn how the airline managed Herb Is Southwest knownst to me or the rest of our officers. its people and provided customer ser- uccessful companies often mirror That kind of initiative is possible only vice. They don’t do it anymore. Colleen Stheir top executives. If Apple Com- when people know that our company’s Barrett finally decided that enough was puter were a person, it’d be a lot like success rests with them, not with me.” enough. People ought to know the story Steve Jobs. Same with Microsoft and Bill by now, she figured. And, besides, there Gates, or maybe GE when Jack Welch ran were so many people working on putting it. Certainly Sam Walton and Wal-Mart. Southwest Days together that they were And, in the same way, Southwest Air- distracted from running the airline. Dis- lines is Herb Kelleher. But Herb doesn’t tractions from the core mission — even want you to say that. Really. He doesn’t distractions that cost $100 a head — are want you to say that so much that you’ll bad things in the land of Southwest. be lucky if you’re even reading this now. Still, Herb remembers many of those So, we’ll be clear. Southwest Airlines sessions fondly. Mostly that’s because comprises 32,000 employees. Most have the message was simple: Be nice. Maybe never inhaled Herb’s secondary smoke. not that simple. As noted, sometimes Yet, Southwest Airlines soldiers on just it’s hard to grasp what it is that makes fine. Still growing, still profitable, still Southwest Airlines so, ah, Southwest adding new 737s, all under the guidance Airlinesy. Maybe that’s why many people of CEO Gary Kelly. So, yes, Southwest came in confused and left dazed. Airlines is more than Herb Kelleher. Sure. “There was one guy from Switzerland Right. But, if you made a list of a dozen who came in, and they started off the adjectives that described Southwest, the session with the Macarena,” Herb says, same words would also describe Herb. again leaping to his feet, cigarette dan- And vice versa. Because Herb, simply gling from his mouth. “So, when the ses- put, is the personification of everything sion was over, they asked the guy what Southwest Airlines is about. he was going to do when he got back So what does Southwest do if some- to his company — how he was going to one does, as Herb often jokes, acciden- change it. And he said, in his accent, ‘Ve tally inject him with formaldehyde are going to tell everybody zey have to while he’s at his desk? Herb says not to do za Macarena.’ That wasn’t exactly the worry — Southwest will keep right on lesson that we were trying to get across.” going. He says the last five years, when OK. So you want to know what the he’s not been CEO, are proof of that. lesson really is? Well, too bad. Herb will For more proof, you can turn to an tell you, as best he can. He really will. But essay about Southwest Airlines Herb you won’t understand. The things that wrote for a business-to-business publi- have made Southwest successful, kept cation. Like a lot of what you learn when it successful, are so easy, but so not easy. you visit with Herb, this one paragraph, Figuring out the secret can seem like try- if maybe a little dated, is also instruc- ing to figure out the origins of the uni- tive: “In an organization like ours, you’re verse. What came before the Big Bang? likely to be a step behind the employees. And, what came before that? Makes your The fact that I cannot possibly know head hurt. Maybe that’s because there’s everything that goes on in our operation no secret to be found. — and don’t pretend to — is a source of “Everyone is looking for a formula in competitive advantage. The freedom, business like E=MC²,” Herb says. “But it’s informality, and interplay that people not a formula. It’s got to be emotional, enjoy allows them to act in the best spontaneous, and from the heart. And interests of the company. For instance, a lot of people’s reaction to that, and I’m when our competitors began demanding not criticizing, is, ‘Well, that’s not precise tens of millions of dollars a year for us

SOUTHWEST AIRLINES SPIRIT JUNE 2006