I Luv You Man: Gary Kelly’s Championship Strategy

It’s October 31, 2017 in Dallas, TX at Southwest Airlines headquarters. Employees are waiting for the chief executive to arrive. Gary Kelly, the fifth CEO in Southwest’s history, has been preparing for this encounter for hours. He finally walks the long corridor to face his team. As he breaks through a temporary paper barrier, hammer in hand, the crowd is delighted to see that the CPA-turned-CEO has arrived—this year dressed as Thor.

Southwest Airlines is a different kind of bird. It requires a different kind of leader.

For Kelly, the annual Southwest costume party isn’t just a silly photo op. It’s one way he stays connected to the Southwest team.

Kelly was born in San Antonio to middle-class parents. “My parents instilled in me a sense of duty. I try to bring that same sense of duty to the work that we do.” The man who would one day lead the largest U.S. airline (by passenger volume) didn’t fly until he was trying out for a college football scholarship at age 17. “My family was middle class. That was an extravagance that we just didn’t enjoy.” His first flight was on a Southwest jet. “There were only two other passengers on the plane. So I was quite sure that the company would never make it.”

Southwest Airlines was founded in 1967 by Herb Kelleher. Like Kelly, Kelleher did not have the typical background for running an airline. Kelleher was a liberal arts major in college and an attorney by practice. Kelly wanted to study oceanography. The University of Texas-El Paso, where Kelly received a football scholarship, did not have an oceanography program. He chose accounting instead.

Kelleher and Kelly have overseen a revolution in air travel over the last five decades. Southwest’s charge is to democratize the skies through friendly, reliable, low-cost air travel. The company’s impact on the communities it serves is described as the “Southwest Effect.” Where Southwest goes, competitors tend to reduce fares and air traffic increases.

Kelly joined Southwest as Controller in 1986. He was promoted to Chief Financial Officer three years later, at age 34. He rose through the ranks and became CEO in 2004. “When I was young, I was very ambitious. I thought Southwest would be a great opportunity. It turned out to be well beyond what I ever contemplated.”

In his 46-year career—32 of which have been at Southwest—Kelly cemented the basic fundamentals of team leadership as his top concern. “It’s all just caring about your people. You just have to find a way to make sure that they know. You have to tell them that you love them. But you also have to demonstrate that you love them. It creates a very powerful bond.”

Influence of Leaders in Gary Kelly’s Life

Forty-five years have passed since Kelly last walked the halls of his high school. This year, Gary and his high-school sweetheart and now-wife, Carol, returned for the football team reunion. Kelly reunited with his coach from decades ago. “It was just a wonderful opportunity for me to thank him after all these years, because I knew he cared about me.”

Caring is part of Kelly’s recipe for business success. Being a trailblazing leader is another. He looks to figures like Washington, Lincoln, and Churchill for inspiration. “I like historical figures a lot more than reading business books.”

Ultimately, the man he succeeded as CEO of Southwest Airlines made the biggest impact on Kelly’s life. “I don’t think there is certainly anyone in my life that’s had more impact than Herb Kelleher… He’s legendary.”

Investing in People

A winning team draws winning talent. Keeping a championship mentality is part of Southwest’s talent-management strategy. “We are very much into winning and being the best… This is a championship place.”

“My job is to be here to serve. I am here to serve our employees, who in turn are to serve our customers.” Kelly wants to develop fans as customers. He knows competent people with clear vision will deliver a superior product. Consequently, he focuses first on developing the team at Southwest.

Part of investing in people is spending time with them. “The team has a hard time operating as a team if they don’t all know the plays. You don’t know the plays if you don’t spend time together.”

Kelly believes that a culture of caring for people is one of the most effective tools for succeeding in business. “I believe in people. I believe in what we do here at Southwest.” The challenge of caring is that professional failures of subordinates are felt on a personal level. “That’s always very tough because you are invested in that relationship.” He cautions leaders not to “let those kinds of failures lead to cynicism.”

“We expect our leaders to care for our people and to inspire them, to set a vision for what success looks like in the future and to be realistic when there are gaps or deficiencies that need to be addressed.”

Leading through Change

Kelly never expected decades ago that his high-school football coach pushing him to play a new position on the field would begin to prepare him for leading through change.

“When the world changes all around you, it is not an option to continue to do things as before.”

Kelly has led Southwest through an era that bankrupted several competing airlines. The biggest challenge came in the wake of the 9/11 terrorist attacks, as fuel prices surged to near-historic highs. Southwest had been focused on short-haul routes, which are very fuel-price dependent.

“If we were to avoid layoffs and be competitive against the other airlines, we had to pivot.”

This pivot included acquiring Southwest’s nearest low-fare competitor: AirTran. The company added the 737-800 model to its operating certificate ahead of schedule and added trans-continental and international flights to become more competitive with other carriers.

The pivot appears to be working. Southwest reported profits of $508 million in the third quarter of 2017 and remains one of the most highly-awarded airlines in the industry.