Southwest Airlines Chairman and CEO Gary Kelly, BBA ’77, waxed philosophic about leadership and his experiences in the top spot at SWA during a conversation with Professor George Gau September 24. Ethical leadership was the theme of the event, the first of three McCombs Leadership Forums planned for this semester.

Kelly emphasized how important caring for people is at the airline he has run since 2004 when he became CEO. In 2008 he became chairman, following the retirement of founder Herb Kelleher. “Southwest Airlines is family-like, which implies love,” he said. The pervasiveness of this warm corporate culture is even captured in its stock ticker symbol: LUV.

As the company’s leader, Kelly said he strives to balance three important areas of focus for the company: low cost, customer service and a focus on people. He acknowledged that the strong customer service culture was deeply embedded when he arrived at SWA in 1985. “All good stories about Southwest Airlines are because of an interaction someone had with one of our people. We share stories [about customer service triumphs] and celebrate those events,” he said. “They happen over and over.”

Communication is a key piece of being a leader, he said. Kelly, who previously served as CFO, is an accountant by training. When he became chairman and CEO, he said he found it to be very different than being a financial technician. “God gave us two ears and one mouth,” he said, noting that communication is largely about listening. “Leaders need to know when to listen and respond.”

Despite being the only profitable airline since its inception in 1972, SWA has experienced the global economic downturn during the past several months. But Kelly is circumspect. “To focus on great profits only isn’t sustainable,” he said, while a focus on good service, efficiencies (such as having only one type of aircraft in the entire Southwest Airlines fleet) and safety will lead to profits. As an example of SWA’s different way of doing things, Kelly explained that Southwest employees are the highest paid in the industry, while Southwest executives are not. The company’s leadership agreed early on during the crisis not to have raises for executives but to give them to employees. “Good leaders take care of employees first,” he said.

Even so, some employees have been very unhappy about changes in their schedules or compensation as a result of adjustments to a shrinking business travel market, he said. Allowing people to express their views in a respectful way is part of leading through change. “It helps to be humble, to prepare for the unexpected, be graceful and quickly adjust to the new reality,” he said.

All of this focus on employees doesn’t negate the need for people to meet expectations in their jobs, he said. “We have checks and balances in place,” he said. “It’s about having the right expectations, setting the right example and not straying ethically.” He used pilots as an example: “Pilots say flying an airplane is easy; it’s dealing with people over and over again that’s hard,” Kelly said. “That’s the real test of ethics.” He noted that his early position with Arthur Young (now, Ernst and Young) gave him a great ethical foundation.

Kelly also observed that a strong sense of self is important in a good leader. “You must fit with the team and the culture, but you must be yourself,” he said. “Herb Kelleher is our legend, and I’m comfortable with that. My joy is seeing Southwest Airlines do well.”