Why the Service-Profit Chain Still Matters: Lessons from Southwest Airlines
Over 30 years ago, the Service-Profit Chain was introduced as a groundbreaking principle in the Harvard Business Review. It connected the dots between employee satisfaction, customer loyalty, and profitability. Southwest Airlines (SWA) was its shining example—a company that put employees first, knowing that happy employees create happy customers, which in turn drive profits. But fast forward to today, and SWA’s story has taken a sharp turn. What once made them an industry standout has diminished, leaving them struggling to stay ahead in a sea of mediocrity.
So, what happened? And more importantly, what lessons can organizations learn from this?
The Rise: A Shining Example of the Service-Profit Chain
In the 1990s, Southwest was a unicorn in the airline industry. Herb Kelleher, the company’s co-founder and CEO, famously prioritized employees over customers. This wasn’t just a feel-good strategy—it was a brilliant business move. When employees are engaged, valued, and supported, they naturally go above and beyond for customers. SWA’s fun-loving culture and simple, low-cost operational model made it the most profitable airline in the U.S. at a time when other airlines were barely breaking even or losing money.
Employee empowerment was a cornerstone of this success. SWA’s management trusted their frontline employees to make decisions that would enhance the customer experience. Flight attendants, ground crew, and gate agents all felt like vital contributors to the company’s mission. As a result, SWA enjoyed customer loyalty that competitors could only dream of.
The Fall: Losing the Magic
But something has changed. Today, SWA feels less like the disruptive force it once was and more like just another airline. Sure, they’re still competitive in some areas, but the differentiation that made them great has faded. Why?
Operational Missteps: The December 2022 operational meltdown was a wake-up call. Outdated scheduling systems and poor crisis management left employees and customers alike in chaos. This was not the SWA of the 1990s, where operations ran like clockwork because employees were engaged and supported.
Cultural Drift: The once-legendary “fun-loving” culture has given way to a more corporate feel. Employees have reported feeling unheard and overworked, and union tensions have surfaced more frequently. It’s hard to deliver exceptional service when you feel disconnected from your organization’s leadership.
Strategic Shifts: Recent moves, like introducing assigned seating and premium options, show SWA’s attempt to keep up with competitors. But these changes also dilute the simplicity and egalitarian approach that once made them stand out.
The Service-Profit Chain and Employee Engagement
Here’s the connection: The Service-Profit Chain thrives on employee engagement. When employees feel engaged—when they believe in their work, feel valued, and have the tools to succeed—they deliver exceptional service. That service creates loyal customers who drive profitability.
But when engagement falters, the chain breaks. Employees who feel overworked and undervalued can’t provide the level of service that creates loyalty. And as customer satisfaction drops, so does profitability. It’s a vicious cycle.
The Takeaway for Leaders
If you’re a manager, executive, or leader, take this as your call to action: You have the power to strengthen the Service-Profit Chain in your organization. Start with your employees. Here’s how:
Empower Your Frontline: Trust your employees to make decisions and solve problems. Give them the autonomy and resources they need to excel.
Invest in Engagement: Engagement isn’t just about perks or paychecks. It’s about connection, purpose, and recognition. Create an environment where people feel seen and valued.
Prioritize Communication: Open, transparent communication is the lifeblood of an engaged workforce. Listen to your employees, act on their feedback, and keep them informed.
Why It Still Matters
The Service-Profit Chain isn’t just a theory; it’s a proven strategy for sustainable success. SWA’s rise—and their recent struggles—illustrate this vividly. For organizations that want to differentiate themselves, the lesson is clear: Start with your people.
At Love Monday Like Friday, I help leaders at all levels fix their employee engagement challenges. My work is about helping organizations—one team at a time—build better managers who drive engagement. Because when employees love what they do, they create extraordinary experiences for customers—and that’s the key to loving Monday just as much as Friday.
Let’s keep this conversation going. How does your organization foster engagement and build its own Service-Profit Chain? I’d love to hear your thoughts in the comments or connect with you to dive deeper into this topic.