Southwest Airlines President Emeritus Colleen Barrett on the Power of an Ownership Culture

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At the keynote presentation of the 2009 Employee Ownership Conference in Portland last month, Southwest Airlines President Emeritus Colleen Barrett reaffirmed what most of the audience already knew: Employee ownership works. It’s definitely not the only factor in the company’s success, but employee ownership has been a key component of this workforce-focused company that has proven resilient in an unstable industry.

Southwest was founded in 1971, and despite stiff resistance from its competitors the company made its first profit in 1973. That same year, it announced a profit-sharing plan because “it was the right thing to do,” says Colleen, “which was unheard of in our business.”

Today Southwest is one of the most recognizable employee ownership companies in the nation and one of the world’s most profitable airlines, posting a profit for the thirty-sixth consecutive year in January. It’s the sixth largest U.S. airline by revenue and maintains the second-largest passenger fleet of aircraft among all of the world's commercial airlines.

“I think of Southwest as a huge grassroots effort,” says Colleen, who has been with the company since its inception and stepped down from her role as president last year. “We’re the David versus Goliath of the industry. At the beginning, our competitors did everything they could to stop us. We knew no one cared about the infrequent flyer, so we took advantage of that. We did things louder and bigger, Texas-style."

Employee ownership fits with Southwest’s unconventional practice of putting employees first, based on the premise that satisfied employees make for satisfied customers. “We’re really a customer service company that just happens to provide airline transportation,” says Colleen.

Together with Southwest co-founder Herb Kelleher, Colleen was instrumental in building and creating an ownership culture that focuses on “hiring for attitude” and treating employees “like family, with care and respect.” Her commitment to treating employees as the number one customer is a core practice throughout Southwest. Throughout her long and distinguished career she has been consistently recognized as one of the most powerful American businesswomen, but among Southwest employees she says she’s known as “mom.”

At any given time, 13 to 15 percent of Southwest’s stock is owned by its employees through a profit-sharing plan with the option to purchase additional stock. “Employees feel like owners because they are owners,” says Colleen. “Ownership is one of the things our employees are most proud of. How can you expect people to have passion and excitement for what they do if they’re not owners? We’ve had flight attendants and mechanics leave Southwest as millionaires.”

“Everything is negotiated,” says Colleen. “We give employees the opportunity to criticize and question us. Southwest doesn't often need to conduct surveys or hire consultants to determine what we are doing wrong or well. The employees tell us face-to-face year-round. We have open books, we’re transparent and we’re all-inclusive in telling employees what’s happening."

Southwest’s commitment to employee involvement is apparent in its proactive relationships with unions. “We’re 86-percent unionized, which most people are shocked to hear because we have a long history of good employee relations. Union negotiations are sort of like raising teenagers. If you have good relationships from day one, you can work things out. In the end, everyone understands that what is best for either group is going to be best for the company. We’re respectful of each other’s top priorities. We bring unions in at the front of discussions so we can all see where we’re coming from, whether we agree or not.”

“Another thing that’s unique about Southwest is its sense of humor,” says Colleen. "We use words that corporate America doesn’t. Our stock exchange symbol is LUV. We give employees a lot of freedom. We don’t want them to be cookie-cutter copies of each other. When most people go to work, they take off their personal demeanor. Then they go home and act like themselves again. We hire people for their individuality, and we want to share that with the passengers. We test for a sense of humor. We want them to laugh. We watch their interactions with others outside of the formal interview. You can train anyone to move a bag from one place to another. A team mentality is what we’re looking for.”

With 66 locations and 35,000 employees, Colleen says “we can’t be the size we are without some bureaucracy, but employees are encouraged to make decisions based on the specific situation, regardless of any regulations we may try to come up with. First and foremost, everyone practices the golden rule – if you know the golden rule, you don’t really need to know our mission.”

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