The Cost of Ignoring Employees? 120% Of Annual Income or $0.35 / Share, Southwest Airlines Discovers

The cost of ignoring employees can have extreme costs for the company. Servant leadership teaches the importance of listening to all stakeholders.
The Cost of Ignoring Employees featured image is of a business woman complaining about the ancient computer sitting on the table in front of her. Beside her, stand her boss, with hands covering their ears.

Southwest Airlines just agreed to a $140 Million settlement with the Department of Transportation over the meltdown of Southwest’s systems during December 2022 travel. The result is a case study in the cost of ignoring employees.

 

The root-cause of Southwest’s meltdown? Leadership’s failure to heed their employees. As a result, the company suffered massive failures from archaic IT systems their employees and unions had been begging them to replace for decades.

What Happened?

What began with a winter storm in 2022 rapidly escalated into a scheduling system meltdown. As a result, the airline had to cancel nearly 17,000 flights and leave an estimated 2 million passengers stranded, during one of the busiest travel times of the year​​.


For years, IT employees and union representatives had been complaining about the company’s antiquated technology systems. However, those warnings apparently went ignored, as the company prioritized other financial strategies, including paying dividends to shareholders​​​​.


The incident reflects a classic example of focusing too narrowly on one stakeholder group – in this case, shareholders – at the expense of others, notably employees and customers. This decision by Southwest leadership to ignore employees is surprising, given the company’s long history of servant leadership.

Southwest airlines union president speaks of their concerns with antiquated technology months before the December 2022 system meltdown.

Servant Leadership Lessons

Southwest has been the poster child for servant leadership advocacy from its founding. Co-founder Herb Kelleher adopted, advocated, and exemplified servant leadership principles for decades. Unfortunately, many of these problems began under Herb and were exasperated as time passed.

 

Had Southwest executives adhered to The Acronym Model of SERVANT Leadership®, the debacle could have been avoided, money saved, and customer trust retained. While many principles apply, we’ll focus on two: Nonpartisanship, and Thoroughness.

The Hard Costs of Ignoring Employees: Financial Fallout

The financial consequences of Southwest Airlines’ 2022 debacle were massive…

 

Total Costs: Total costs have been estimated by the company to be $1.1 billion
Income Percentage: That’s 120% of their operational income that year.
Per Share Impact: Or $0.35 per share
Operational Losses: They canceled nearly 17,000 flights

 

If you want to avoid such costs, remember to be nonpartisan and thorough, while balancing the priorities of all your stakeholders. In this case, it was clearly IT that had not been heeded. In your case it may be customers, accounting, or operations.

The Lesson

It’s no secret that balancing the competing demands of different stakeholder groups is a challenge. It’s hard work and requires great leaders. The best leaders, servant-leaders, balance the needs of all stakeholders.


Southwest remains our preferred airline. We expect they will learn from this lesson. Early indications, like expanded investments in IT and the addition of the CIO to the executive committee show promise. With these changes and a continued pursuit of servant leadership, hopefully this holiday season there will be no new technology debacles.

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