Jun, 2016

Nuts! by Kevin and Jackie Freiberg

The Big Idea
Southwest succeeded by focusing on profitability over market share and by taking the time building a fun and positive culture. Doing this likely slowed down their growth but also resulted in top customer service ratings, top safety record, very low employee turnover, and 40+ consecutive years of profitability

Key Takeaways

Chapter 1: Nuts? You Decide
-Southwest maniacally avoids following industry trends
-Results: profitable since 1973, steady growth, little debt, low fares, productive work force, low employee turnover, highest customer ratings, highest on-time, best safety
-mission: make air travel affordable for everyone
profits are required to fulfill the mission

Chapter 2: Goliath Meets David
-the early years of fighting for survival (against litigation and recession) gave Southwest a tenacity that is now a part of its culture

Chapter 3: The Battle Heats Up
-in order to be different, Southwest chose a strategy of low fares + superior service
-Southwest advertised its underdog position heavily in the early days

Chapter 4: A Maverick Emerges
-early employees had an intense work ethic and drive to win
existing competition was conventional, businesslike, and bland
-Southwest’s outrageous personality partially resulted from desperation
-Southwest’s ad agency delivered campaigns meant to be outrageous
-employees were allowed freedom to get the job done
-management spent a lot of time with employees
-Southwest hired people who were fun, as well as hard working, smart, reliable
-the early fight-for-survival mentality didn’t just breed a can-do, inventive spirit; it also brought everyone very close — like family

Chapter 5: Flying in the Face of Conformity
purpose: to make a profit, achieve job security for every employee, and make flying affordable for more people
-strategy to achieve that purpose: best service and lowest fares to the shortfall, frequent-flying, point-to-point traveler
-Southwest Airlines (unlike competitors) never strayed from its strategy
profits are more important than market share
-clear strategy led to clear tactical decisions: point to point >> hub and spoke, avoid congested airports, target overpriced markets, use only 737, keep boarding simple, serve no meals, constantly improve turnaround times
think ahead and be frugal

Chapter 6: Professionals Need Not Apply
hire for attitude, train for skills
-Southwest hires a certain type of person: light-hearted, fun, enthusiastic

Chapter 7: Kill the Bureaucracy
-Southwest moves fast and is opportunistic
stay as lean as possible to avoid bureaucracy and sluggishness
-in a lean organization, poor performance is impossible to hide
-communication is face-to-face and on a first-name basis
-meetings are short and action oriented
simplification decreases costs and increases speed
-it all boils down to a thousand little things that help people solve the problem of how to turn the planes faster
-Southwest financial results are open to any employee
-times change and companies that don’t adapt will not survive
-changing times offer an opportunity for companies that can adapt and move quickly
-Southwest doesn’t do traditional strategic planning; instead they perform future scenario planning
-Southwest trusts its employees to do their jobs and that helps it adapt so quickly
-Southwest positions itself as an underdog to convey a sense of urgency and instill competitiveness to employees

Chapter 8: Act Like an Owner
employees who are also owners care a lot more about the bottom line
-hire entrepreneurial self-starters
-Southwest has a profit-sharing plan for all employees, investing 15% of pretax operating profits, some of which is used by employees to buy stock
-today employees own about 12% of the company

Chapter 9: Learn Like Crazy
-learning is key to Southwest’s success
hire voracious readers
-hire people who listen more and ask more questions than they talk
-encourage people to understand others’ jobs accelerates learning (pilots <> ground staff <> ramp agents)
-employee newsletter, LUV Lines, shares stories and lessons, teaches employees about financial performance

Chapter 10: Don’t Fear Failure
-always be experimenting
remove the fear of rejection and people will be willing to experiment more
-do more of what works, learn from what doesn’t work
experimentation solidifies an action-oriented, get-it-done culture
-experiments led to new cost-savings, new features, happier customers

Chapter 11: One Great Big Family
-shared struggle to survive fostered a close-knit family-like culture that still remains
Southwest core values: profitability, low cost, family, fun, love, hard work, individuality, ownership, legendary service, egalitarianism, common sense, simplicity, altruism,
Southwest philosophy: employees are number one, think small to grow big, manage in the good times for the bad times, irreverence is okay, it’s okay to be yourself, have fun at work, take the competition seriously but not yourself, hire for attitude and train for skill, Southwest is a service company, do whatever it takes, always practice the golden rule
-Southwest norms: be visionary, celebrate everything, hire the right people, limit committees, keep a warrior spirit, keep multiple scenarios, minimize paperwork, feel free to be informal, move fast, dare to be different

Chapter 12: Keeping the Spirit Alive
-Southwest is a family
-Southwest celebrates its people through photos, news clippings, letters in the hallways
-Colleen sends birthday cards to all members of the Texas legislature
-Colleen sends personalized birthday gifts to employees
-Herb tells great stories
-Culture Committee formalizes these practices
-Walk a Mile in My Shoes helps reinforce culture and keep people connected across functions
-Helping Hands directs employees to temporarily help overworked employees elsewhere

Chapter 13: The Art of Celebrating Milestones
-take time for outrageous celebrations of milestones
-celebrations: build relationships, create shared history, helps envision the future, recognize milestones, reduces stress, inspires and motivates employees, builds self-confidence and removes fear, mourns the loss associated with change

Chapter 14: Celebrating Big People With Big Hearts
people love awards and public recognition
-must be authentic, must raise people’s self-esteem, must be done right, must appeal to all the senses, must be seen as an investment, must be cost-effective

Chapter 15: Still Nuts After All These Years
always have fun
-business casual clothes only
-costumes when appropriate
-good-natured pranks to lighten things up
-fun games and contests for employees or customers (worst drivers license, holes in socks)
-having fun = productive employees, low absenteeism, low turnover, more creativity and innovation

Chapter 16: Luv
-people need to be loved and accepted
-display patience and commitment to employees and customers
spend more time with your people and less time with other CEOs — Herb
when your employees know you care, it’s easier to offer constructive criticism
-share your appreciation for employees hard work
-love comes without conditions, however approval must be earned
-Colleen has little patience for habitual mediocrity
-employees are rarely fired for technical skill but anyone who mistreats an employee is history

Chapter 17: Compassion for Community
-community service starts on a local level
-eg: disaster relief, Ronald McDonald house, holiday charity, neighborhood makeovers

Chapter 18: Unconventional Advertising
-Herb arm-wrestled another airline CEO to resolve a dispute => great PR for both companies
-Southwest uses the underdog story to turbocharge marketing and advertising
-10 core advertising principles: make advertising entertaining, use advertising to keep the company’s spirit alive, match the message and media with the company’s strategy and culture, take the competition seriously but not yourself, make flying fun, make every employee a living advertisement, model the company’s values for employees, under promise and over deliver, make creativity a team effort, build credibility in everything you do

Chapter 19: Customers Come Second
-the customer is not always right
Herb is not afraid to ask problem customers to fly another airline
-talk to your employees, don’t just offer them a suggestion box
-track both customer complaints and customer compliments
great customer service is understanding (intellectual) + empathizing (emotional)

Chapter 20: Employees Come First
-trust your employees to use good judgement instead of rigid policies
executives lead by example with good customer service themselves
-no job is too mundane, Herb loads baggage the Wednesday before every Thanksgiving
-Southwest respect front-line employees enough to share performance and financial information
-Southwest publicly celebrates outrageous customer service stories in Luv Lines

Chapter 21: Leaders Leading Leaders
-there is no heroic leader at Southwest
-there are leaders at every level of the company
leadership is not getting what you want, it’s getting people to want what you want because they share your purpose, vision, and values
-leadership does not come from titles or positions, it comes from ability to influence
-integrity is doing what you say you’re going to do
-Southwest has a reputation among suppliers, government, customers for doing what it says it’s going to do and that trust gives it an advantage over competitors
-do your research and be more prepared than your competitor
-love your people and they will follow you
-listen more than you talk
a group of people inspired by a common vision and purpose is incredibly powerful

Chapter 22; Leadership From The Inside Out
employees are proud to be part of a company culture that values them as people not positions or roles
employees understand that their job security is inextricably tied to the company’s performance
-for most employees, Southwest is not a job, it’s a crusade, and a fun one
-customers are also treated like people, not numbers
-employees take care of each other through compassion and an independent charity to help other employees in short-term need
-leaders recruit and groom other leaders to succeed them

Chapter 23: Go Nuts!
people want work that is meaningful, so your company needs a purpose
people want to have fun, so don’t take yourself so seriously
when you believe in people, they will rise to greatness
dare to be different, yes there are risks but the payoff is worth it
culture is more important than strategy and operations
choose service over self-interest