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Remembering Herb Kelleher

Jan 4, 2019 by Jack Stack 2 Comments

Herb Kelleher - Blog header

I was saddened to hear about the loss of Herb Kelleher, the founder of Southwest Airlines. I’ll never forget the time back in the early 1990s when I was invited to Texas to talk about the Great Game of Business with Herb and his team at Southwest. After I gave my talk, I figured everything I had shared about our open-book story wasn’t worth much given how big Southwest was and how many locations they operated out of. I wasn’t sure our Great Game system would work in a big company.

Then Herb stood up. He took over the podium and told his leaders that there were only five things that could take out their company: their five unions. I admit I was shocked because I didn’t know they were a union company. But Herb then told his team that the only way their airline was going to make it was if they could teach everyone, all ninety thousand people—including every union employee—how the company made money and generated cash.

Just a few months later, there was a front-page story talking about how Southwest Airlines and one of their unions had struck an unprecedented ten-year deal that included no wage increases in exchange for equity shares and profit sharing. By teaching people the business, Herb got them to understand the real wealth building opportunity was in stock options and profit sharing—not chasing higher wages.

Well, that story continues today. Every year, Southwest announces how much of its annual profits it shares with its thousands of employees—which works out to about an average of a more than 10 percent bonus for each employee—a practice that has continued for forty-five years and counting. Imagine that: an airline that’s been profitable for forty-five years. The amazing thing is that they credit the Great Game for helping them utilize the power of teaching every employee to watch the numbers—and how to have fun doing it.

Ann Rhoades, an early employee of Southwest and one of the founders of Jet Blue, has spoken at our annual conference, the Gathering of Games. Several times, she has talked about how the high-performance cultures of both airlines have been built on those principles—what they called “The Big Game.” She even tells a story about how she once had to lay someone off at Southwest. When Ann got the call from the union steward, he told her he was going to grieve the decision—but he also said she would win. He trusted her decisions because they were all using the same scoreboard; they were on the same team.

I guess we can say that Southwest has validated sharing a Stake In The Outcome can work in a union shop as well as in a big public company, right? Doesn’t it make you wonder whether the critics have anything left to hold onto when someone asks: Why isn’t every business run this way?

Of course, Herb Kelleher spent his entire life proving the critics wrong.

 

 

Topics: Open-Book Management

Jack Stack
Written by Jack Stack

Jack Stack is President and CEO of SRC Holdings Corporation, which remanufactures gasoline and diesel engines for the automotive and off-highway markets, distributes engine kits, manufactures power units and remanufactures electrical components, and conducts seminars and training programs specializing in all aspects of teaching people how to implement open-book management. SRC has sales of over $550,000,000 a year and currently employs 1,600+ people. He is known as the "father of open-book management", having developed the concept at SRC in the early 1980s. He is the author of two best-selling books, "The Great Game of Business" and "Stake in the Outcome," and working on a third book, Change the Game coming January 2020.

About The Great Game of Business

Our approach to running a company was developed to help close one of the biggest gaps in business: the gap between managers and employees. We call our open-book approach The Great Game of Business. What lies at the heart of The Game is a very simple proposition: The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the outcome. Let us teach you how to develop a culture of ownership, where employees think, act and feel like owners.