August 11, 2022
TPL Insights: Building Peak-Performance Cultures #131 – Stakeholder Engagement and Clarity in a Time of Crisis
By Rob Andrews based on personal research
Southwest Airlines is a company to which we’ve paid close attention for decades. Herb Kelleher, the airline’s cofounder and first CEO practiced all nine principles we’ve observed in organizations that perform at the very top of their sectors, all of which have built cultures of peak performance. The principles continued under Gary Kelly, now Chairman, and Bob Jordan, current Southwest’s Chief Executive Officer.
That said, no organization, regardless of its cultural prowess, is immune from disruption around runaway inflation, talent shortages and global conflict. The organizations in our Total Performance Leadership study are as diverse as the hardships they’ve weathered and include all capital structures and industry verticals.
Their behavior, that is to say their response to crises, is however surprisingly predictable. Leaders in these organizations that have built powerful cultures can be counted on to communicate proactively and with clarity.
During the height of COVID-19, Gary Kelly, then CEO of Southwest, outlined the specific steps the company planned to take to prevent furloughs and layoffs through 2021 after PPP had run out. In July, Southwest Airlines had committed to no furloughs or layoffs through the end of the year. However, the fate of Southwest’s employees beyond this 2021 was unclear.
The urgency to communicate a strong message to employee stakeholders was clear. Kelly had said multiple times throughout the Covid-19 pandemic his goal was to prevent any furloughs or layoffs for the company’s roughly 65,000 employees. Southwest had never conducted an involuntary furlough or layoff in its nearly 50 years of flying, a point of pride for Southwest leadership.
In absence of another six months of financial aid the airlines lobbied for — which was still currently being negotiated in Washington — Kelly delivered a message to employees clearly explaining Southwest’s plans to trim costs enough so that furloughs or layoffs could be prevented. He laid out the simple strategies that were implemented at that time. In a message delivered on October 6, 2020, Kelly made the following announcements:
– Effective immediately, Kelly’s salary was to be reduced to $0. It would be that way through the end of 2021.
– Southwest’s board of directors’ cash fees that had already been reduced by 20% would continue through 2021.
– Senior executives’ base pay had already been slashed by 20%, and that would continue through 2021.
– Effective Jan. 1, all employees in remaining leadership roles would have salaries cut by 10% for the duration of 2021. On Jan. 1, 2022, pay would snap back to previous levels. A similar approach would be taken for non-contract employees.
In addition, Kelly said the company would begin approaching union leaders about concessions, with the goal being to avoid furloughs.
Like his predecessor, Herb Kelleher, he focused on the airline’s people and their needs.
Gary attempted to rally employee support for these measures by underscoring the dire circumstances facing the industry. “You all have done a heroic job in the most challenging of times. I could not be prouder of you. Don’t give up now. Don’t ever give up. You’ve worked too hard, you have persevered. We can fight our way through this. We can save every job. Fifty years from now, they will look back and say, ‘Those employees of 2020, they were really something. They saved Southwest Airlines and they saved each other’s jobs. Truly, that was Southwest’s finest hour.’”
Effective leadership is critical from the boardroom to the hangar and is about connecting with your constituents so they feel you know where you’re going, you believe what you’re saying, and there is something in it for them.
Our research and methodology suggest there are eight essential elements of an effective leadership message.
Background Connection: Your first task is to make the shift from “you and me” to “we”. Clearly, Kelly establishes strong connection with his workforce and lauds them for their hard work, loyalty and a job very well done.
Vision: What is the future state? People want to know you have a vision and what it is. What might it look like next year? In five years? How do we want the world to see us? How do we want to feel about the work we do? Gary speaks of this in his wrap-up.
Strategy: What will it take to get there? Stakeholders care less about the details of a plan, and more about the existence of a plan, and that it is already underway. Gary described a simple and effective approach to effectively deal with the current pandemic.
Implications: What does this mean for us? Stakeholders want to understand the impact on them. Where there is a vacuum, employees will fill it by making up their own stories. Gary spoke candidly of specifics and other temporary pain points, as necessary, in the short term.
Urgency: Why the rush? Stakeholders will cling to a flawed, broken system rather than venturing in to the unknown. Change requires a credible call for urgency, especially this year.
Rewards: What will make this all worthwhile? Will the rewards be shared among those who expended the effort? Leaders need to acknowledge individual and group contribution and design reward systems in which everyone wins.
Hardball Issues: What issues or concerns stand in our way? Stakeholder groups are different, but each is listening for evidence that you understand the challenges at hand: from inadequate resources to the unknown implications of Covid-19. Gary acknowledges the challenges and asks his stakeholders to unite with him while Southwest works through them.
Communicating with clarity starts with a decision, and a formula. One need not be highly educated, charismatic, or well-traveled to be deliver an effective leadership message. What’s needed is a message the lands with your constituents, so they know you believe what you’re saying, know where you’re going, and that there’s something in it for them.
If this material causes you to want to improve the way in which your leaders communicate, give us a call.
Consultants in Retained Search & Leadership Advisory