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In March 1992, two CEOs face off in Dallas to settle a trademark dispute with an arm-wrestling match. Herb Kelleher, head of Southwest Airlines, loses to the head of Stevens Aviation. He gets to keep the disputed slogan anyway, in exchange for a $5,000 donation. The event is called “Malice in Dallas.” It says more about this company than any mission statement. An example of the Team Principle of Identity.
Three Values and a Ticker Symbol
Situation
Southwest is founded on March 9, 1967, by Herb Kelleher and Rollin King, initially as Air Southwest Co. Flights begin on June 18, 1971, between Dallas, Houston and San Antonio. On the stock exchange the company trades under the ticker LUV – a nod to its home airport, Love Field, and a statement of intent. The company defines three values: Warrior Spirit, Servant’s Heart and Fun-LUVing Attitude. Kelleher, CEO from 1981 to 2001, champions a clear order of priorities: employees first, then customers, then shareholders.
Connection to the team principle
The Team Principle of Identity says: shared values turn “I” and “the others” into a “we.” For that to work, the values have to be few and fit into everyday language. Anyone can remember three terms, from the baggage handler to the pilot. And they describe behavior, not just good intentions: fight, serve, have fun. Anyone who works at Southwest can tell you how to recognize “one of us.”
Values That Cost Something
Situation
The values don’t stay on paper. Since 1973 employees have shared in the profits. By the company’s own account, it hires for attitude first and skills second. Colleen Barrett, originally Kelleher’s secretary and later the company’s president, is regarded as the guardian of the culture. Operations fit the picture: a single aircraft type, the Boeing 737, and fast turnarounds at the gate – Southwest is credited with inventing the ten-minute turn. In 1998 Fortune magazine names Southwest the best company to work for in the United States.
Connection to the team principle
An identity becomes credible when it drives decisions: whom you hire, how you share profits, who watches over the culture. At Southwest each of these questions had an answer that fit the three values. The 1992 arm-wrestling match fits the same pattern: the boss himself shows what warrior spirit and fun mean. Values are modeled from the top or not at all.
47 Years of Profit – and a Caveat
Situation
From 1973 to 2019, Southwest turns a profit for 47 consecutive years, in an industry littered with bankruptcies. When Kelleher dies in 2019, more than 5,000 current and former employees attend the memorial service in Dallas.
Connection to the team principle
It is tempting to turn this into a simple equation: strong culture, therefore profit. That has not been proven. The cost model and other factors also contributed to the company’s success, and much of what is known about its culture comes from the company’s own self-portrayal. Research, too, urges caution here. In a 1994 meta-analysis, Brian Mullen and Carolyn Copper found a significant but small relationship between cohesion and performance – and the stronger effect ran from success to cohesion rather than the other way around. Winning brings people together. At Southwest the two probably reinforced each other.
When Decisions and Values Diverge
Situation
In December 2022 flight operations collapse, and more than 15,000 flights are canceled. A year later comes a record penalty of $140 million. In 2024 the activist investor Elliott acquires a stake of more than 10% and forces an overhaul of the board. February 2025 brings the first layoffs in the company’s history, about 1,750 corporate jobs. Free checked bags end on May 28, 2025, and open seating on January 26, 2026.
Connection to the team principle
Whether these steps are the right ones economically cannot be judged from the outside. For the team principle, something else matters: a company that has defined its identity so clearly through values will be measured against them. Every decision that can be read as a break with the past raises anew the question of who “we” are. A strong identity is an asset. It is also a promise that has to be kept.
Key takeaways
Key Lessons
- Limit yourselves to a few values in everyday language. What nobody knows by heart shapes nobody.
- Make the values the yardstick for hiring. Skills are easier to acquire on the job than attitude.
- Model the values visibly – even at your own expense, and ideally with humor.
- Don’t be quick to credit success to culture. Success strengthens cohesion at least as much as the other way around.
- Before making tough decisions, check how they square with your stated values, and address contradictions openly.
Summary
For decades, Southwest Airlines showed how three clearly named values can create a “we” that runs through hiring, behavior and the business model. The company’s success had several causes, and it in turn fed cohesion. The past few years provide the reverse test: where decisions seem to contradict the stated values, the identity itself is up for debate. Shared values turn many into a “we” – as long as they are lived.