How do you make applying performance management fun? I recently saw how it can be done - in an enjoyable but effective way. And who else would make implementing performance management fun but Southwest Airlines (SWA), the air carrier that built its business on making flying fun. I learned how it is doing that at the recent CFO magazine Corporate Performance Management conference in San Francisco. I was privileged to be one of the conference presenters. My talk was more of the Isaac Newton approach. You know: The world is a big machine, and what executives want is to have the levers, pulleys and dials to drive their organizations to higher value. But the presentation by Laura Wright, senior vice president and chief financial officer of Southwest Airlines, described what I was saying but with a much more human approach.

The Early "Underdog" Days at Southwest Airlines

Wright initially explained the background that led to Southwest's pursuit of its flavor of performance management. From 1970 to the mid-1990s, SWA, the underdog to the major air carriers, operated with a survival instinct. It followed its strong culture of legendary high customer service while remaining a low-cost airline. In the late 1990s, however, its fast growth and geographic expansion beyond airports exclusively located in Texas caused continuous cost creep. Profit margins declined. Worse yet, its growth success was reducing its underdog spirit. Some sort of change was needed. Led by the finance department, it began to automate reporting systems so that relevant information could get to the right people at the right time.

Then 9/11 occurred.

It threw the airline industry into a tumble. People reduced their flying, and unplanned costs related to airport and airline security climbed. Southwest's stock price dropped. Managers believed they were losing control and clarity. They made changes but did not know whether their changes were working. Wright said that at that point, "We could not fix what we could not see."