In this episode of Evan Carmichael’s Modeling the Masters series, the host profiles Herb Kelleher, the co‑founder and former CEO of Southwest Airlines. Kelleher, a successful lawyer who clerked for a Supreme Court Justice, left his high‑paying legal career after a night of drinks with client Rollin King, using a cocktail napkin to sketch the idea for Southwest. Exploiting a legal loophole that allowed the airline to operate only within Texas, Kelleher fought more than 30 lawsuits before the first plane took off. The company grew from four planes and 70 employees to a consistently top‑rated, profit‑making airline, never experiencing an in‑flight fatality and maintaining 30+ years of profitability even after 9/11. The video distills Kelleher’s approach into three actionable lessons for entrepreneurs: (1) Put your people first – exemplified by profit‑sharing, personal care for employees, and a culture that values every individual; (2) Focus everyone on customer service – stories of employees going beyond the call of duty, a People Department that treats staff as leaders, and a philosophy that internal service drives external satisfaction; (3) Hire the right people – rigorous personality testing, hiring for attitude over credentials, and a willingness to interview many candidates to find the right fit. The episode closes with a vivid anecdote of Kelleher selling a plane to keep staff employed and demanding a cut in gate turnaround time from 55 to 15 minutes, cementing the culture of accountability and operational excellence. The host encourages viewers to apply these principles to grow their own businesses.
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Hi, I'm Evan Carmichael, and welcome to another edition of Modeling the Masters. I believe that the fastest and most effective way to grow your business is to model the strategies of people who've already done what you're trying to do. So today we're gonna look at how a young lawyer who seemingly had it all left his high-paying job to venture into the unknown and start his own business. He had to fight over 30 lawsuits to get his company off the ground, but he made it through and eventually became one of the most respected CEOs in America. This is the story of Southwest Airlines founder Herb Kelleher and the top 3 lessons that you can learn from his success.
Herb Kelleher 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 a 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 able to run only in Texas to avoid having to follow federal price regulations. He 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 5 most admired corporations in America by Fortune magazine, which also called Kelleher perhaps the best CEO in America. It's 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 11th, 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.
Herb Kelleher was frustrated with his job and was brave enough to leave it all for the unknown to start his own business and eventually became one of the most respected CEOs in America. To help you grow your business, here are 3 action items that you can learn from Herb Kelleher.
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're 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's success. Southwest implemented the first profit-sharing plan in the airline industry in 1974. Employees own 13% of the company's common stock. All of Southwest 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, 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 2 weeks to see how you're doing. We have people who've 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're 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's the man who had a heart attack at the airport, 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's a 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'd never flown with Southwest. According to Kelleher, "We have the best customer satisfaction record based on Transportation Department statistics of any airline in America. The fewest complaints filed per 100 passengers carried." So you're not just getting low fares, you're also getting wonderful customer service. We have a People Department. 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 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 gonna 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's 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.
So remember, put your people first, focus everyone on customer service, and hire the right people. To finish up this video, I wanted to share one of my favorite true stories about Herb Kelleher and some of his best quotes.
"Vamos a volar!" In the beginning, Southwest had just 4 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.
Thank you for joining me for another edition of Modeling the Masters. If you like the video and want to see more, please give it a thumbs up. I'd also love to hear your thoughts and feedback if you want to leave a comment under the video. And stay tuned for the next episode.
