The next generation of business executives will face a choice: What kind of companies do they want to lead? Will they lead organizations that will treat most employees as costs to be minimized — or ones where both employees and the company prosper together?
Business leaders have a choice in how they compete. The popular way this choice has been framed is between a “high-road” and “low-road” option.1 High-road companies seek to compete through high productivity, innovation, and quality customer service that both require and support high wages and good job and career opportunities for employees. The low-road strategy seeks profits and shareholder returns by minimizing costs and controlling labor in ways that keep wages low for most employees and/or independent contractors.
Two decades of research on high-road companies have documented their ability to achieve world-class productivity and service quality in industries as diverse as steel, autos, airlines, telecommunications, apparel, health care, computers, and semiconductors.2 More recent case studies are documenting similar patterns of success in smaller businesses in manufacturing, retail, and health care.3
Southwest Airlines Co., headquartered in Dallas, Texas, is often viewed as the prototype high-road company. Over the past 30 years, it has been the most profitable airline in the United States. From the time the company started flying in 1971, founder and former CEO Herb Kelleher decided he would compete differently than other legacy airlines. Rather than fight to avoid unions or treat them as adversaries, Kelleher accepted them but insisted they work in partnership with him by avoiding rigid work rules and fostering teamwork throughout the organization. The business strategy required that everyone in the organization work together to reduce the time from landing to the next takeoff. This effort generated the productivity that allowed Southwest to keep prices low while also providing good jobs and great customer service. It is not surprising that Southwest has often been rated as one of the best places in America to work.4
In almost every industry, there are some companies that are managed for long-term (not just quick) returns, have business strategies that stress great customer service, and figure out how to operate efficiently. Such companies draw on the talents of employees who identify with the organization’s mission. In retail, compare Costco Wholesale Corp. and Walmart.
Walmart has grown to become the largest U.S.