Making Employees Owners

James F. Parker

One of the smartest and best things Southwest Airlines ever did was to share its success with its employees. The first year Southwest made a profit, in 1973, it celebrated its good fortune by creating the first employee profit-sharing plan in the airline industry. The airline made only $175,000 that year, but it chose to share what it made with its employees. Every year since, the company has shared a significant portion of its profits with its employees. The amount is determined by a formula based on pretax operating profit, and it is usually equivalent to about 25–30 percent of the company’s net profit every year. From a modest beginning, the value of the employees’ profit-sharing plan has grown to about ...