My name is Evan Carmichael and I believe that the fastest and most effective way to build a business is to model the strategies of people who have already done what you’re trying to do. I call it Modeling the Masters. My last post with over 25 was 3 Success Tips from Anita Roddick (The Body Shop).

Today we're going to look at how a young lawyer who seemingly had it all bravely left his job to start his own business. He had to fight over 30 lawsuits and nearly went out of business but he stuck with it and created one of the most respected companies in America. This is the story of Southwest Airlines co-founder Herb Kelleher and the top 3 lessons that you can learn from his success.

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"Your people come first, and if you treat them right, they'll treat the customers right." - Herb Kelleher

Herb Kelleher (born March 12, 1931) is the co-founder and former CEO of Southwest Airlines. After graduating from law school he did what every new lawyer dreamed of. He clerked for the Supreme Court Justice, joined a law firm, and became partner at a firm in his wife's home state of Texas. He should have been on top of the world but he was instead itching for a new career as an entrepreneur. One evening Kelleher was having drinks with a client, Rollin King, and that night the two used a cocktail napkin to hatch a new business, Southwest Airlines.

Using Kelleher's legal experience and King's business background, Southwest Airlines was set up to run only in Texas to avoid having to follow federal price regulations. Kelleher had found a legal loophole and his competition didn't appreciate it. Kelleher had to fight off over 30 lawsuits before Southwest Airlines was even able to get a plane in the air. But they prevailed and bootstrapped their way from a company with only 4 planes to being one of the most admired companies in America.

Southwest is consistently named one of the top five Most Admired Corporations in America by Fortune magazine, which also called Kelleher perhaps the best CEO in America. It has never experienced an in-flight fatality and continues to enjoy growing success. Southwest is also the only airline to have over 30 consecutive years of profit, despite the terrorist attacks of September 11, 2001, which threatened the rest of the industry. In 2001, Kelleher resigned as CEO and president of Southwest due to a personal battle with prostate cancer.

Action Item #1: Put Your People First

Any successful entrepreneur will tell you how important it is to have a good team running your business. Employees who are skilled at what they do and love their work will take you places you might only dream about right now. Treat them as people, give them opportunities, show them how they are adding value, and give them something to believe in and your business growth will explode.

Kelleher believed in the power of having employees who loved working for his company. He paid attention to their needs and made them feel important. He also made everyone have a share in the business' success. Southwest implemented the first profit-sharing plan in the airline industry in 1974. Employees owned 13 percent of the company’s common stock. All of Southwest’s employees, from the janitors to the pilots, receive stock options.

According to Kelleher: “I always felt that our people came first. Some of the business schools regarded that as a conundrum. They would say: Which comes first, your people, your customers, or your shareholders? And I would say, it's not a conundrum. Your people come first, and if you treat them right, they'll treat the customers right, and the customers will come back, and that'll make the shareholders happy... We’ve always tried to be sensitive to the needs of our people and recognize the things that are important to them in their personal lives... At Southwest Airlines, you can’t have a baby without being recognized – getting communication from the general office. You can't have a death in your family without hearing from us. If you're out with a serious illness, we're in touch with you once every two weeks to see how you're doing. We have people who have been retired for 10 years, and we keep in touch with them. We want them to know that we value them as individuals, not just as workers. So that's part of the esprit de corps... If you come here, you'll be happy.”

Action Item #2: Focus Everyone on Customer Service

Customer service is increasingly becoming one of the most important differentiating factors for companies. For a lot of businesses there really isn't all that much that is different in the products or services that they are offering compared to their competition. How do you stand out? Wow your customers with service. Make them love doing business with you so they come back and tell their friends. Have everyone on your team be as supportive as they can towards your customers and your marketing strategy will take care of itself.

At Southwest, people are encouraged to go the extra mile, and then some, to help their customers. There is the man who had a heart attack at the airport, who was then accompanied by a Southwest employee to the hospital. The employee stayed with the man all night and called his wife to update her on his status. Then, there is the passenger who left the airport only to find a flat tire on his car. Moments later, a Southwest employee was changing it for him, despite the fact that the man informed him he had never flown with Southwest.

According to Kelleher: "We have the best customer satisfaction record, based on Transportation Dept. statistics, of any airline in America, the fewest complaints filed per 100,000 passengers carried. So you’re not just getting low fares, you’re also getting wonderful customer service... We have a People Dept. That’s what it deals with, so don’t call it Human Resources – that sounds like something from a Stalin five-year plan. You know, how much coal you can mine. We say everybody is a leader, no matter what your job is. We want you to focus on customer service - and not just to the outside world - customer service to the inside world. If [employees] pollute our other people internally and they in turn savage the people who are doing the work outside, the whole company has just rotted."

Action Item #3: Hire the Right People

If you're going to have a company that puts its people first and grows through repeat customers and referrals you're going to have to do a fantastic job in hiring the right people. Know what type of personality you need in new hires and don't settle until you've found the best person for the job. Once you say you're going to settle for less than the best, that's what happens to your entire business.

In the hiring process at Southwest, many applicants are made to take personality tests. In one example, the vice president of Southwest’s People Department was having difficulty finding a new ramp agent. Frustrated, she went to Kelleher to ask for advice. She said she was embarrassed that she had already interviewed 34 candidates for the position. Kelleher told her to interview 134 people if that was what it would take to find the person with the right attitude for the job.

According to Kelleher: "We have a good many MBAs, but we look at them for attitude as well. We will hire someone with less experience, less education, and less expertise, than someone who has more of those things and has a rotten attitude because we can train people. We can teach people how to lead. We can teach people how to provide customer service. But we can’t change their DNA." One day, Kelleher received a letter from one of Southwest’s ramp agents in Oklahoma. It read, “Herb, I’m on to what you’re doing…You’re making work fun – and home work.”

True Story

In the beginning, Southwest had just four planes and 70 employees. All of the legal battles had left the company on the verge of closing down. It forced Kelleher to make a difficult decision: he had to either sell one of the planes or lay off some of his employees. He chose to sell the plane. In return, Kelleher asked his employees to cut gate turnaround times from 55 to just 15 minutes. They pulled it off and Kelleher had clearly set the culture for his business.

More Quotes

"I learned it by doing it, and I was scared to death."

"Sometimes you need a little courage too just to buck popular opinion."

"The important thing is to take the bricklayer and make him understand that he’s building a home, not just laying bricks."

What Do You Think?

What have you done to put your people first? How have you gone out of your way to help your customers? What part of Herb Kelleher's message impacted you the most? As always, I’d love to hear your thoughts if you leave a comment below!

Evan Carmichael

To learn more check out my list of Herb Kelleher articles or my website, EvanCarmichael.com.