If you missed our most recent article, we’re looking for companies that have been, and continue to be, “really great,” i.e., have beaten their industry performance for a generation or more since their creation until today. We are talking about three decades of real success. And we’re starting the series off with a company you’ve probably read an article or two about.

My friends at Harvard Business School have been telling me for years: Management ideas are great ideas, but they’re just that. If you want to prove what really drives bottom line results, you need research. We therefore test the validity of a management approach that we call Economic commitment. It’s about partnering with employees to serve customers profitably. Three years after the research began, we have shared the first convincing results in these pages. The question now is whether this research will stand the real test: time. Few managerial philosophies do. Here begins our longitudinal research.

Most of the really great companies we review are small to mid-sized, like the majority of companies I’ve coached in my career. Granted, most people think of Southwest Airlines as a big business. But of course, it didn’t start out that way, and a lot of important things happened that made its sustainable growth possible.

To be fair, I’ve been a Southwest (ticker symbol LUV) fan, investor, business coach, and client for decades, so I’m biased. But when a company generates superior returns for its owners and customers for more than three decades, I can’t look away. I don’t think any of us should. And if our research shows that economic engagement (defined by 5 key principles of customer engagement, economic understanding, transparency, compensation and employee participation) produces these kinds of superior results, how much economically committed is SWA?

Southwest began scheduled passenger service with three Boeing 737-200s in 1971 on just two routes: between Dallas Love Field and Houston Intercontinental Airport and between Dallas Love Field and San Antonio. Well-established competitors were Texas International Airlines and Braniff Airlines—neither offered easy travel for downtown passengers. SWA is committed to providing services from Love Field and engaging the customer with convenience.

The former president of the Southwest Pilot’s Union, SWAPA, never forgot the lesson – on his office wall he posted a stock from every airline Southwest has ever competed with. Most have gone bankrupt.

For its part, Southwest began profit sharing from the start of operations and received its first profit sharing payment two years later. Most recently, the airline offered 60,000 employees a profit-sharing bonus of $667 million. This means that eligible employees will soon receive 12.2% of their annual salary, which equates to approximately six additional weeks. economic compensation.

Gains like this are born out of struggle. The contestants were so determined to keep Southwest grounded before they even took off that they prompted a three-year legal battle; Braniff, Trans-Texas and Continental Airlines obtained a restraining order from the Travis County District Court that temporarily barred Southwest from initiating service. Then Braniff began what is commonly referred to as the “$13 war”. Southwest responded in two new ways:

• Southwest gave passengers from Dallas to Houston a choice — they could pay $13 for a ticket or pay $26 and get a free bottle of premium liquor. Since many passengers were businessmen with expense accounts, they gladly paid the higher fare. The offer has become one of the most popular promotions at Southwest, customer loyalty at a smart value point.
• With only 100 employees, everyone at SWA knew each other. One pilot suggested to President Herb Kelleher, “Why don’t we reduce our time on the ground by turning the planes around as quickly as possible?” This would mean coordination with ground crew, gate agents and pilots. But since it was a close-knit team, dynamic communication was essential. Pilots could now fly two additional flights a day from each aircraft, dramatically improving revenue and reducing costs. The idea came from the grassroots, drawn from the economic understanding of a front-line employee. The “quick turn” approach was born out of adversity but continues to this day.

In 1982 Braniff ceased operations and Texas Air was acquired by Continental. Southwest has grown steadily, winning the first Triple Crown Award (rated as having the best on-time performance, best baggage handling and fewest customer complaints of any major airline) in 1992, based on statistics from the Ministry of transportation. The fastest way to customer engagement turned out to be through transparency.

In the same year, SWA pilots signed an unprecedented ten-year agreement, freezing their pay scale for five years in exchange for a substantial number of stock options…economic compensation at a higher level. It was lucrative for the pilots, aligning their interests more with investors like me.

In 2004, things got personal – Southwest became a client of mine, with a common goal of advancing employees. economic understanding. The push was known as the “Plane Smart Business”. The pilots decided to start by focusing on productivity and fuel efficiency in the Orlando operations. Our primary contact was Mike Van de Ven, then vice president of finance and planning, now president of Southwest.

When SWA became transparent with employees on how the business was run, employees flooded management with ideas to drive profit growth. They introduced me to one of their “Cutting Edge” events; 30 to 40 union pilots converged on a particular terminal for a day, at their own pace, and performed ground crew work while the ground crew supervised. Of course, morale, team spirit and employee participation skyrockets. Even more valuable was the economic understanding earned by pilots.

During the global financial crisis of 2008, I had a particularly enlightening conversation with an employee of SWA. That morning I happened to be working in Dallas and flying southwest. On the television at the door, a local reporter was reading a list of massive airline layoffs. But they never mentioned Southwest. Feeling good as an investor, I expressed my relief to the gate agent. She smiled and said, “You want to know why we aren’t firing anyone? I nodded.

She continued: “A rainy day eventually comes. We’ve been preparing for it for decades. All the other airlines are in debt – they have no choice but to let people go. But we put money aside and now we’re spending it. In fact, we just opened new operations – would you like to know in which cities?” The gate agent sounded like a CEO. I was watching the demonstration economic understanding, transparencyand employee participation. She wasn’t a mercenary – she thought and acted like an owner. How could United or American compete?

Legendary Southwest founder Herb Kelleher has long since retired. Gary Kelly has just announced his retirement. As the company grows, the application of economic commitment will become more difficult. But it’s obvious that these philosophies are alive and well at SWA. Their performance remains unmatched in the airline industry. They are, since their creation, “really brilliant”. But perhaps they put it more eloquently on the Love Field banner (above). For my part, I cling to my stock of LUVs.