How Southwest Achieved 4.5% Turnover While Paying Less Than The Competition

In 1993, turnover at Southwest Airlines was less than half the rest of the industry's: just 4.5%.

Here's the part that should get your attention. Southwest wasn't paying top dollar to keep those people. Ann Rhoades, who ran the People Department at the time, puts it plainly: "When I got to Southwest, we didn't have that much money."

And Southwest wasn't just keeping people. It was attracting them. That same year, 98,000 people applied for 2,700 openings. (Thirty-six candidates for every seat.) [Source: 1995 Stanford GSB case on Southwest's People Department.]

And the numbers didn't stop at HR.

During Ann's years there, Southwest was the only major airline to turn a profit in 1990 and 1991.

It won the industry's Triple Crown (best on-time record, best baggage handling, fewest complaints) in 1992 and again in 1993. No other airline had done that for even a single month.

Harvard and Stanford both turned it into a business school case study.

And three years after she left, Fortune named Southwest the #1 best company to work for in America.

Ann went on to build JetBlue's culture from day one with David Neeleman, spent 15 years on its board, wrote the book Built on Values, and now runs PeopleInk.

Her explanation for all of it? Culture is not an HR project. It's an operating system with five parts… and most companies build the first one, hang it on a wall, and never get to the rest.

In this live season finale, host Anita Grantham gets Ann to answer the question every HR leader is actually asking: What does it take to get things done the right way?

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This episode was the season finale, and it was recorded live, in front of a room full of HR leaders.

It weirdly bookends the season in a way we didn't plan.

In Episode 1, SHRM CEO Johnny C. Taylor Jr. told us that only 10% of the Fortune 250 CEOs he polled genuinely love working with their CHRO.

Ann heard that stat on the way in. She brought it up twice in the episode. "I disagree with that darn 10%. It's gonna drive me nuts now."

Her disagreement isn't that the number is wrong.

It's that it's unacceptable.

Her career shows what a trusted CEO–CHRO partnership can look like: a People leader who understands the operation, tells the truth, and connects culture to business results that matter.

Culture is not an HR project. It is an operating system that should produce better performance—and leaders should be able to measure it.

Here are six ways Ann turns that idea into action.

Ann started somewhere most culture conversations don’t: business operations.

"Working with the CEO means that we have to understand that HR really needs to be part of the system. When they say you have to be part of the business, they don't mean just understand the financial situation. You have to understand operations.”

She means that literally. Before anyone can join her HR teams, they have to spend time in operations first.

For example: Joanna Geraghty, JetBlue’s current CEO (and the first female CEO of a major airline) got her start in HR. But before she started her HR job, she spent her first 60 days in the field.

Geraghty later became president and COO, and in 2024 became the CEO.

At Southwest, Ann's entire team met with the COO and the heads of operations every month. The agenda revolved around one question: how do we help you get the results you need?

In order for you to help get the company from where it currently is to where you want it to be, you have to understand how the business works, what each leader cares about, and what issues they deal with.

Otherwise, you won’t have the trust to act as a true advisor, and you’ll likely miss the mark with any initiative you roll out.

This is the most important concept Ann shared with HR leaders who want to have an impact: "Culture is not an HR project. Culture has to be operationalized, and it has to result in a higher level of performance. It is not soft. It is not unmeasurable."

The strategic logic: You can't connect culture to performance if you don't know how performance gets made. An HR leader who has worked a reservation shift or sat in the ops meeting can connect culture to throughput, error rates, customer experience, and turnover—the measures the rest of the executive team already uses. Ann's rule turns "be a business partner" from advice into an onboarding requirement.

What do you do when you and the CEO disagree?

Ann says, "If you're a partner, you start talking. And if you aren't a partner, you sit there and fume and talk about, 'Well, this isn't working,' or you leave. Partnership means it's a 50/50. Ask them, 'What do I need to do to help you be successful?'"

(This is reminiscent of Johnny C. Taylor, Jr.’s story asking his CEO, “What don’t you like about me?”)

Remember, "Being a CEO is a lonely job. How many people evaluate a CEO or tell them the truth?"

One example involved Herb Kelleher and about 10 station general managers. As Southwest grew, turnover crept up in certain cities.

Ann evaluated every station GM.

About 10 of them (all longtime employees who’d been with Herb since the beginning) weren't living the values, and the surveys had been saying so for a while.

Herb resisted letting them go. "Ann, I just can't do it. They have been with me forever."

She brought him the survey data, station by station.

He got angry…

Then he called her back.

"Let me do it one by one, and let me see if we can't change some of it, but if we can't, I'm gonna agree with you." And then: "I appreciate you telling me, 'cause people should've been telling me this before."

Understanding what your CEO needs, and then being honest with them is the way to create a true partnership.

The strategic logic: It’s hard for a CEO to get an unfiltered view of what’s going on in their business. Delivering the truth with data and without drama is how a People leader becomes a trusted partner. "You become more valuable when they know you're gonna tell them the truth."

Nearly every company Ann works with puts some version of “integrity” on its values list. "Integrity, trust, honesty. It always becomes one, right?"

The real test comes the first time living that value gets expensive.

At JetBlue, two of the best people on the ramp were involved in an accident that cost $100,000.

→ One came in and blamed the other.
→ One came in and took full ownership.

Both had been involved.

Ann told David Neeleman one of them had to go. David, who liked both of them, said, "One? You have to let both of them go."

"I said, 'No. One lived the value and admitted it and literally had the integrity to tell us the truth […] You stand up for those that live the values.”

Legal told her to fire both. She let one go.

"We never had a problem with it."

Another example: The JetBlue president hired a longtime friend from Continental. The president was godfather to the employee's children, but the employee wasn't performing or living the values.

Ann told him it was time to let him go.

The president couldn't do it, so he asked Ann to.

When it was done, the rest of the team came to them and said: "We wondered if you were really gonna lead with values."

Ann's summary: "Culture is a collection of behaviors of an organization, and when a leader does not behave in that way, those values aren't worth the paper they're written on."

The strategic logic: Values are tested in public. Every employee watches how the company handles the high performer who lies and the executive's friend who coasts, and updates their beliefs about what's actually rewarded. One visible enforcement teaches the culture faster than a year of posters. One visible exception teaches it faster still, in the wrong direction.

Southwest had three reservation centers — call centers full of people working shifts 24 hours a day.

Average turnover in a reservation at that time was 25%.

But there was one reservation center that was an outlier with 6% turnover. So Ann's team went to find out what its manager did differently.

"We found out there was one behavior by that res center manager that was so different than all the rest. Every single day, the first thing she did when she went in the door was she went and talked to every employee. Before she left on the second shift, she talked to every employee. Her assistant manager, first thing they did when they came in, was to talk to every employee."

Ann calls this re-recruiting. The idea is simple: every day, it’s your job to convince each employee that they want to work here.

So, Ann duplicated this behavior at all reservation centers, and saw the same results across the board.

And THAT is what systematizing culture looks like.

The strategic logic: Retention is a lagging indicator of a thousand small manager behaviors, and most companies try to fix it at the wrong altitude, with programs and perks.

Ann's approach is process engineering: find the manager with the anomalous result, isolate the behavior, replicate it. It is also strong evidence that pay is only part of the retention story. The manager with 6% turnover wasn't paying anyone more than any other location.

"I've never believed that we should sit in a room and design the benefit packages. I have always been a believer that we need to ask people what they need."

At JetBlue, the Speak Up survey kept surfacing the same complaint: people weren't excited about benefits.

The People team was confused, because they thought the package was great. So they asked a different question. Not "how do we rate?" but "What is it you would like that you are not getting?"

The response was unexpected: Pet insurance.

"Do you know, we got it. And they love it. And guess what? It doesn't cost us one penny because the pet insurance company wanted to have another 24,000 people."

This wasn’t a one-time experiment.

When JetBlue launched, pilots wanted stock, flight attendants wanted more per hour, and mechanics wanted something else again.

So JetBlue built three packages (before the technology existed to make that easy).

"Our turnover was in the single digits when airlines' turnover is typically double digits."

Same principle, smaller stakes: JetBlue asked customers what they'd change.

"We hate your coffee."

They had been serving fancy coffee from Seattle, because they thought customers would like it.

Turns out they wanted Dunkin' coffee.

Switching saved $100,000 the first year.

"It sounds simple, you guys. It is simple. It's one-on-one leadership. Figure out what they want and figure a way to give it to them."

The strategic logic: Total rewards is one of the largest line items an HR leader influences, yet much of it is allocated by assumption. Asking turns guesswork into demand data. In Ann's examples, pet insurance cost the company nothing, and switching coffee saved money.

Ann believes if you want a high-performance culture, everyone needs to know the numbers. Every day.

At JetBlue their key metrics are visible everywhere.

Every employee’s workstation or phone displays the previous day's results in red, yellow, or green on KPIs like on-time performance, baggage delivery within 14 to 16 minutes, turnover, and customer satisfaction.

If you can get immediate feedback on what you’re not doing right, you can change behavior.

And if you’re getting immediate feedback that your actions are helping your team hit its goals, you can keep it up!

But this doesn’t just matter on the front lines.

For 15 years, Ann sat on JetBlue's board. The agenda for board meetings was often 100 pages long, 50 of them finances.

She noticed that the section in the agenda for the people was always last.

"I talked to the CEO and the chairman of the board and said, 'We never get to it.' So we started moving it to the front of the board meeting."

The order changed the conversation. "They started asking more questions about the people side. What is the turnover? How are you getting the A players?"

The people are now at the top of the agenda on every board she sits on.

But how do you get a bunch of results-oriented achievers to stop and recognize people — especially when they’re not hardwired to do so?

Ann’s answer is simple. "Put it in the bonus."

JetBlue wrote recognition and people stats into the bonus plan for the CEO and every leader.

"All of a sudden, it had more impact."

Why recognition specifically?

Because JetBlue has a rule: within 24 hours of a resignation, a manager sits down with the person to find out why.

"What we found out is consistently they say, 'I wasn't recognized for my performance,' consistently, and they didn't think anyone cared about them. How simple is that, right?"

(Nectar's research points in the same direction: 83.6% of employees say recognition affects their motivation to succeed, and 81.9% connect recognition to how engaged they feel.)

The strategic logic: Where a metric sits in the deck signals its importance and impact on the business. People metrics presented at the back of the agenda say "outcome." At the front, they say "driver."

And what's in the bonus is what gets done. Ann's two moves are the same move at two altitudes: make the people numbers unavoidable to the board, and personally expensive to ignore for every leader.

Ann Rhoades is the rare People leader whose entire career is a library of case studies.

If you run People at a mid-market company, this episode gives you a blueprint full of practical ways to connect culture to business performance.

Start with the one that costs nothing: Learn the operations of the business. Walk the floor. Then build from there.

SHRM is a member-driven catalyst for creating better workplaces where people and businesses thrive together. As the trusted authority on all things work, SHRM is the foremost expert, researcher, advocate, and thought leader on issues and innovations impacting today's evolving workplaces. With nearly 340,000 members in 180 countries, SHRM touches the lives of more than 362 million workers and their families globally. Discover more at SHRM.org.

We turned Ann’s operating system into a Toolkit for YOU! SHRM members can access the toolkit here:

Southwest and JetBlue’s cultures aren’t seen as “nice to have” or “cute, not crucial.” They are a key ingredient of the business strategy, because they have a direct impact on how well the strategy is executed.

Nectar helps leaders like you create a culture system that drives performance, so values become visible, caring becomes the default, employees feel more accountable, and leaders can see what is actually happening across the employee experience.

Check out AANA’s story to see how we can help a company like yours:

See Nectar in action:

She said it at the end of the episode while answering Derek Miner's question about leading with heart in an age of AI.

Her point: use technology to create more time for the work only people can do—care, listen, recognize, and lead one-on-one.

Ann's culture crush is Herb Kelleher.

The stories are the kind that only get told about a few CEOs.

Boarding an American Airlines flight to open the Baltimore station, and watching the crew move American's own CEO out of first class so Herb could sit up front, because the employees wanted time with him.

Getting on a flight without his ID or wallet, because "they just let me on because they know me."

When he passed in 2019, the celebration of life was held at the Dallas Cowboys' stadium, because so many employees wanted the day off to say goodbye.

Ann's takeaway: Herb was strategic, tactical, and operationally brilliant at the same time, and "sometimes people are only one of those."

"He was the model for what I hoped to be as a leader."