Herb Kelleher� the founder and former CEO of American icon Southwest Airlines � used to say: �We place our employees first�.
That�s a fairly extreme thing to say though, especially in corporate America, that you do not place your shareholders first.
Of course he would always be quite quick to continue: �Because if you have happy employees, you will get happy customers, and if you have lots of happy customers, shareholders will inevitably become quite happy to�. Now you could be inclined to say �ah, so it�s all the same; at the end of the day all parties� interests are aligned�. In the long run that may be true, but in the short run such an �employee orientation� � the choice of who comes first � can lead to rather different decisions than a �shareholder value orientation�. And at Southwest they do put their money where their mouth is; they for instance provide perfect job security. Consider, for example, Southwest�s response to 9/11, which triggered a global airline crisis, prompting many companies to execute the hatchet on their employee head-count:
Southwest Airlines� current President and COO (Colleen Barrett) said: �Southwest has not had a layoff in its thirty-year history and is not contemplating one now� (after which employees collectively organised an internal giveback effort, called �Pledge your Luv�, offering up to thirty-two hours of pay during the last quarter of 2001).
In contrast, US Airways paid $35 million in lump-sum retirement benefits to its former top three executives, while 12,000 employees were laid off and pilots agreed to $565 million in concession in their own retirement plans. Rakesh Gangwas, briefly chairman and CEO (who received $15 million of the 35 million) declared, a few days before resigning, that �the September 11 attacks had allowed the airline to restructure and downsize in ways that would have been impossible otherwise�.
Of course US Airways filed for bankruptcy in 2003, while Southwest recovered in less than a year.
Placing employees first may be suboptimal in the short run but in the long run it�s a different picture. You don�t become a better organisation by having �better shareholders� (whatever that may be). You can most definitely become a better organisation by having better employees. Truly prioritising the well-being of your employees just might pay off financially in the long run too. Loyalty, trust, extraordinary effort, etc. are reciprocal things; we give it to those from whom we receive it. And organisations and employees are no different.