MIT Sloan Management Review Article on Cashing Out Excellence

When Southwest Airlines suffered a post-holiday meltdown in December 2022, the trigger was a bout of adverse weather. But the storm hit Southwest harder than it did most airlines. The company’s outdated computer systems collapsed, and years of underinvestment in technology, particularly staff scheduling systems, led to more than 16,700 flight cancellations over the holiday travel period. Amid the chaos, an executive’s memo demanding proof of illness for the use of any sick days indicated a lack of trust in employees. The scenario contrasts starkly with what the company was once celebrated for: the pioneering development of an alternative short-haul airline concept, an unrivaled commitment to employees, and a reliance on front-line decision-making, all of which had led to industry-best operational excellence and customer service and the highest profits in the history of the industry.

Southwest’s troubles are typical of a kind of leadership malaise we see in organizations that struggle to cope with disruptive events — such as the pandemic and its aftermath, which threw airports and airlines into operational turmoil and caused supply chains to collapse. To manage short-term appearances, these leaders and their predecessors had “cashed out” capabilities and allegiances they previously relied on to help them deal with unanticipated changes. It’s a practice that has become too common and too accepted: Values, qualities, and relationships that have been honed over many years and served as the foundation for earlier successes are exchanged for near-term monetary rewards — typically in the form of cost reductions and stock price improvements that prove to be ephemeral.

About the Author

Robert D. Austin is a professor of information systems at Ivey Business School and an affiliated faculty member at Harvard Medical School. Robert H. Hayes is the Philip Caldwell Professor of Business Administration, Emeritus, at Harvard Business School. Richard L. Nolan is a professor emeritus at Harvard Business School and the University of Washington.

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