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ICMR Center for Management Research

Richard Branson/Herb Kelleher – Leaders Extraordinaire

This case was written by Sarvani V, under the direction of Mukund A, ICMR Center for
Management Research (ICMR). It was compiled from published sources, and is intended to be
used as a basis for class discussion rather than to illustrate either effective or ineffective handling
of a management situation.

2003, ICMR Center for Management Research

ICMR, Plot # 49, Nagarjuna Hills, Hyderabad 500 082, India

Email: [email protected].
www.icmrindia.org
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Richard Branson/Herb Kelleher –

Leaders Extraordinaire
“I never went into business solely to make money, I always said that I wanted to be the best, rather than
the biggest. And at the end of the day, it all comes down to people. Nothing else even comes close.”
- Richard Branson, CEO, Virgin Group.
“I have had the great fortune of earning a living doing something I love, I welcome the chance to
give something back, especially to future entrepreneurs.
- Herb Kelleher, Chairman, Southwest Airlines, USA.

OF INSANELY SANE & MAVERICK LEADERS

Picture the owner of a $ 5 billion business empire consisting of over 200 companies around the
world. Now think of a man who holds the record for being the fastest to cross the Atlantic ocean by
boat, the first to cross the Pacific, the first to cross the Atlantic in a hot air balloon; Think of a man
who dressed himself up like a bride to launch a new company. A difficult juxtaposition indeed. That
is, till one mentions the name of Britain‟s (and one of the world‟s) most successful entrepreneur,
Richard Branson (Branson), and CEO of the Virgin group of companies.
Knighted for his valuable services to entrepreneurship, Sir Branson was well known for making
successful businesses out of many „crazy ideas.‟ Many people believed that Branson could make
„everything and anything‟ into a profitable business and that too in the most unorthodox ways.
Though Branson claimed not to be in business for the money, the fact that almost all Virgin
companies were profitable helped a lot. Perhaps nobody has ever had so much fun in doing business
and creating empires worth billions than Branson did.
Well, almost nobody. The CEO of the fourth largest airlines in the US, was well known for his
unconventional ways of conducting business. Dressing up as Elvis Presley for a Halloween party and
driving a Harley Davidson motorcycle to a company picnic were just some of the things that
differentiated him from the run-of-the-mill CEOs. Though many Southwest Airlines observers could be
unaware of these two incidents, almost all of them would have heard of Herbert D Kelleher‟s (Herb)
legendary arm-wrestling contest with one of his rival CEOs to settle a business dispute.
Herb is often referred to as one of the most appreciated entrepreneurs from the US. Known as the
„most loved leader,‟ Herb‟s practice of doing business with an element of fun had become very
popular. His eccentric behavior was often appreciated by his peers. An industry executive once said
“Herb is crazy, I was at an executive retreat with him once – he kept everyone up all night drinking
and talking.”
Under Herb‟s leadership, Southwest Airlines won many awards and rewards, including the
Department of Transportation‟s „Triple Crown‟ for best baggage handling, best on-time
performance, and fewest customer complaints. The company had posted profits continuously for 29
years since 1973, in spite of two major industry downturns. Industry observers attributed this success
largely to Herb‟s „unorthodox personality and engaging management style.‟ Commenting on his
leadership the CEO of Allied Signal, Larry Bossidy, said, “Herb Kelleher represents a rare mixture
of business acumen and personal character, Herb is not only a brilliant strategist, he is the heart and
soul of one of America‟s most beloved companies.”

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Branson and Herb are undoubtedly two similar manifestations of a leadership style that believes in
doing things the fun way (Refer Exhibit I for a look at the eccentricities of the two leaders). The two
leaders also present a study in contrast: Branson spread the Virgin brand across numerous
businesses; Herb led an extremely focused and single business operation under the Southwest
Airlines brand.

RICHARD BRANSON – A LOONY LEADER

Born in 1950 in a traditional Christian family, Branson was not a brilliant student. As a boy he was
a shortsighted dyslexic1, had a tough time memorizing and reciting text, and performed terribly at
standard IQ tests. But he was very good at sports and was seen as someone with the desire to succeed.
According to analysts, since his childhood, Branson had a thirst for success and a special quality to
connect with people. This was what enabled him to energize the ambitions of others so that they also
could rise to realize their dreams.
As a teenager (17 years), frustrated by the rules and regulations of his school (Stow School), Branson
and his friend Jonny Gems started a student magazine called the „Student.‟ They started out with
just four pounds given by Branson‟s mother. The magazine captured the student activism of the late
1960s and featured celebrities. Soon after the release of the first issue in 1968, the headmaster of the
Stow School complimented both Branson and Gems and said, “Congratulations, Branson. I predict
that you will either go to prison or become a millionaire.” The first edition was so impressive that
BBC tracked down Branson and made a documentary called „The people of tomorrow.‟ This
recognition helped Branson and his magazine grow.
Branson‟s entrepreneurial success continued when he opened a mail order record retail business and
named it „Virgin.‟ When asked about why he chose the name „Virgin,‟ he replied, “I was a virgin
in business.” Even this venture was highly successful. Later on he opened a record shop at
Oxfordstreet in London. In 1972, Branson started a recording studio at Oxfordshire. Virgin recorded
its first artist Mike Oldfield‟s „Tubular Bells‟ in 1972, which went on to sell more than five million
copies. The Virgin Record Company signed on many superstar and music group such as Genesis,
Phil Collins, Peter Gabriel, Simple Minds, The Human League, Bryan Ferry, Culture Club, Janet
Jackson, Steve Winwood, Paula Abdul, Belinda Carlisle and The Rolling Stones. By the early 1980s,
„Virgin records‟ was rated among UK‟s top six recording companies.
In 1984, one of Branson‟s friends suggested starting a passenger airline service between London
and New York. The idea was labeled as crazy by Branson‟s colleagues because it was too
ambitious and difficult. However, much to their surprise and horror, Branson decided to pursue
the idea and established Virgin Atlantic Airways. Branson‟s vision was to introduce an airline
that would offer high quality service to both economy and business class customers at competitive
prices.
Within three months from the date it began, Virgin Atlantic‟s first flight took off for Newark, New
York, amidst cheers from celebrities, friends and media representatives on board the flight. Virgin
Atlantic went on to become a very successful venture and the second largest international air carrier
in UK. To further spruce up the airline‟s services, Branson sold off Virgin Music to EMI for $1
billion and ploughed the same into Virgin Atlantic. Over the years, Virgin Airlines came to be
regarded as the most „fun-loving,‟ „distinctive,‟ „highly innovative‟ brand, and was admired greatly
for its „friendliness,‟ „intelligence‟ and „integrity.‟ Under Branson‟s management Virgin became
a very powerful brand. It seemed as though any venture with the Virgin name was guaranteed to
succeed.

1
A learning disorder marked by impairment of the ability to recognize and comprehend written words.

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Virgin became the third most recognized brand in Britain and was reportedly all set to become the
world‟s first global brand name. Branson described Virgin as, “A brand name that is known
internationally for innovation, quality and a sense of fun – this is what we have always aspired to
with Virgin.” Over the years, Branson expanded his empire to include businesses like books and
software publishing, international „Megastore‟ music retailing, film and video editing facilities, and
hotels and nightclubs (Refer Table I). These businesses employed about 25000 people around the
world.
Table I
Companies under the Virgin Brand*
Virgin Trains Virgin Bride Virgin Healthcare Virgin Travelstore
Virgin Atlantic Virgin Active Virgin Home Virgin Wines
Virgin Travelstore Virgin Atlantic Cargo Virgin Incentives V2 Music
Virgin Mobile Virgin Balloon Flights Virgin Limobike Arcadia Ltd.
Virgin Express Virgin Books Virgin Limousines Babylon
Virgin Megastores Virgin Cinemas Virgin Money Caroline 2
Virgin Blue Virgin Cosmetics Radio Free Virgin Hems
Virgin Holidays Virgin Credit Card Virgin Space Limited Edition
Virgin Cars/Bikes Virgin Drinks Virgin Student Ltd. Sound and Media
Virgin.net Virgin Experience Virginstudent.com The Roof gardens
Source: www.virgin.com

* This is not an exhaustive list.

Branson always tried to ensure that the launch of new Virgin companies attracted as much media
attention as possible. This publicity made his companies very popular. His highly innovative and
outrageous publicity stunts were covered extensively in the media globally. For instance, he dressed
up in full bridal finery to launch Virgin Bride and appeared almost naked at the launch of Virgin‟s
cellphone services. At the launch of Virgin cola in the US, aimed at challenging Coca- Cola, he
drove a tank up to the Coke sign at Times Square.
Many people felt that though unconventional, his stunts did a lot of good for his companies. Branson
dared to do things that others regarded as impossible. Commenting on this he stated, “My interest in
life comes from setting myself huge, apparently unachievable challenges and trying to rise above
them.”
This unusual way of doing business extended much beyond the launch of companies. Branson relied
on his instinct; he never followed traditional methods of conducting business. In 2002, Branson
locked horns with the owners of Sydney airport (Australia) when they reportedly backed out of a
verbal agreement regarding access to terminal space by Virgin Blue. Branson stated that he had
received a verbal agreement from the former chairman of the airport for access to over 18 terminal
spaces before the airport was privatized in June 2002.
The ownership was transferred to a consortium led by Macquarie Bank, Australia, which had
questioned the agreement. Branson responded by threatening to paint „Macquarie: What a Bunch of
Bankers‟ on the tailfins of Virgin Blue planes. He even sought the help of New South Wales State
Supreme Court. Branson argued that paying higher fees to Macquarie would result in higher fares
for the customers. He eventually succeeded in procuring the rights to use 12 terminal points at
Sydney airport.

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The success of a Virgin company was the result of several factors like the powerful brand image of
Virgin, the personal reputation of Richard Branson, the management style of virgin companies, and
network of friends, partners and other contacts. The Virgin group had a very uncomplicated
corporate hierarchy, which discouraged bureaucracy. The group did not even have a global
headquarter! Traditional corporates felt that this was a very blunt style of management: however,
many believed that these were the very factors that made Virgin a success.
Branson‟s unique entrepreneurial and leadership style allowed him to manage diverse businesses
without prior expertise in any one of them. His reasons for entering a new business were often very
unpredictable and at times downright strange. For instance, when he launched Virgin Bride upon a
suggestion from a flight attendant working in his company.
Branson possessed a distinct skill of problem solving. He was able to convince a reluctant Mike
Oldfield to perform on stage at a concert that was intended to create visibility for his new album
„Tubular Bells‟ and to Virgin records2. Branson took him out for a drive in his car and asked him
whether he would like to keep the car, inspite of it being his wedding gift. Branson was thus able to
persuade Mike to perform at the concert. Mike performed and the album became a huge hit selling
more than five million copies in Britain.
Branson gave great importance to earning the goodwill of accountants, customers, bankers and all
those who worked for him. Commenting on this Branson said, “To be successful, you have to be out
there, you have to hit the ground running, and if you have a good team around you and more than a
fair share of luck, you might make something happen.” He ran his businesses without any big
corporate offices and did not conduct many board meetings. Branson usually kept his offices small
and got work done by continually inspiring employees and encouraging them to accomplish their
dreams.
A report on Virgin‟s website stated, “Our companies are part of a family rather than a hierarchy.
They are empowered to run their own affairs, yet other companies help one another, and solutions
to problems come from all kinds of sources. In a sense we are a community, with shared ideas,
values, interests and goals. The proof of our success is real and tangible.”

HERBERT D KELLEHER – THE FUN GUY

Herb studied law and graduated from the New York University in 1956. He worked as a clerk for a
New Jersey Supreme Court justice for many years and later joined a Newark law firm. Attracted by
the opportunities in Texas, Herb shifted his base to Texas. In 1966 Rollin W King (Rollin), a Texas
businessman, approached Herb with a new idea: starting an airline that would offer the lowest fares
ever. The idea was to make people fly at the quickest possible time and at the cheapest possible rates.
Although many thought that they were pursuing an impossible dream and wondered how a no-frills
airline would work, the two went ahead with their plans.
The company was named Southwest. As it operated only within the state of Texas, it did not have
to follow the ticket prices stipulated by the Civil Aeronautics Board, which meant that it was not
constrained by Federal price regulations. Sensing the potential of Southwest, airlines like
Continental Airlines, Barniff and Texas International tried to prevent Southwest‟s launch through
litigation. They argued that the state could not afford another airline. Herb, being an attorney and
now a partner as well, fought the case for Southwest and won.
Soon after, Southwest received permission to operate and it launched its first flight in 1971. The company
had only four planes and less than 70 employees. The concept of a no-frills, short-distance flight service
took time to find acceptance and revenues did not match the company‟s expectations. As

2
On the day of the concert Mike had decided not to perform. All the tickets for the concert had already
been sold.

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a result, Southwest faced severe financial problems. Herb was faced with a choice – either lay-off a few
employees or sell-off one of the planes. Though laying-off employees would have been the easier way
out, Herb chose to sell one of the planes. By doing so, he exhibited a great sense of trust in his employees,
something that became the hallmark of Herb‟s leadership style. Southwest reportedly never laid-off any
employee, even in the toughest of business conditions.
Herb took measures to upgrade Southwest‟s services so that it could attract more customers and
improve its financial performance. Southwest had one of the friendliest labor-management
relationships in the airline industry. As a result, initiatives such as bringing down the gate turnaround
time3 from 55 minutes to 15 minutes could be successfully undertaken. Herb‟s leadership and
management skills played a major role in Southwest‟s growth over the years. 4 He was not the only
leader in the company, he was one among many – most of whom he had personally groomed. He
encouraged employees to take their own decisions as well as help their colleagues do so. He believed
that leadership was not a preserve of a single person but a style of functioning that must be practiced
by every single person at all organizational levels.
Both a supportive and participative leader, Herb showed great concern for employees‟ professional
and personal needs. He consulted employees before making any professional decisions because he
felt that employees who had actually dealt with a situation were often in a better position to decide
what was the best thing to do rather than the top level management. Consciously acting more as a
friend than a boss, Herb always tried to set an example for others in the company.
He always tried to help out Southwest customers and employees in many different ways. When a
school teacher in Dallas told him that none of her students had ever flown in an airplane, Herb took
the entire class on a free trip to Austin and also gave them a tour of the capital. In another instance,
when Herb noticed that mechanics on the late-night shift were not able to participate in company
picnics, he organized a 2 a.m. barbeque for them with himself and some pilots volunteering as chefs.
Herb stood apart from many other great leaders who exhibited similar traits because he always
introduced an element of fun in whatever he did. For instance he would arrive at company gatherings
on a bike and dressed casually in jeans and T-shirts. Herb did not mind making jokes about himself
in a constructive manner. He would even sing rap songs that made fun of him. In spite of his
intellectual self he always humbled himself and projected a down-to-earth image. He once
commented, “Because I am unable to perform competently any meaningful function at Southwest,
our employees let me be CEO. That is one among many reasons why I love the people of Southwest
Airlines.”
He emphasized the need to constantly keep in touch with customers. On many occasions Herb flew
in his own airlines to simply talk with customers and find out whether they found the service good
enough or to find ways to improve the service. Commenting on the important role of customers,
Herb said, “We market ourselves based on the personality and spirit of ourselves. That sounds like
an easy claim but, in fact, it is a supremely dangerous position to stake out because if you are wrong,
customers will let you know – with a vengeance. Customers are like a force of nature: you cannot
fool them, and you ignore them at your own peril.”
Herb never believed in making long-term plans; he believed in making successful short-term plans.
He examined the social trends and to see where Southwest would fit in. Herb also made sure that
information on his company was accessible to everyone. He did not hesitate to talk of the factors
that contributed to Southwest‟s success to customers, students, teachers, magazines and other
3
Turnaround time covers the period between the airplane‟s inbound arrival at the gate and its pushback for
the next departure. During this period, passengers must disembark, baggage must be uploaded, the airplane
must be reloaded (new baggage), and the next lot of passengers must be seated.
4
Under Herb‟s leadership, Southwest posted profits continuously for 29 years. The company posted a net
income of $ 511 million in 2001 and $ 603 million in 2000.

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media. The company avoided running on the traditional hub and spoke model.5 It flew only Boeing
737 planes and avoided becoming a member of other airlines computer reservation system thus
saving millions of dollars. This strategy had been so successfully applied that it was almost
impossible for others to copy.
Herb worked as though he were working for „a cause‟. Inspired by him – even his employees worked
for „a purpose‟. Quite naturally, Herb Kelleher was the most loved leader of Southwest Airlines.
His maverick nature along with his distinctive style of dealing with business situations won him
many accolades. Perhaps his biggest reward was a message he received from his employees on
Boss‟s Day (Refer Table II).
Table II
Southwest Airlines Employees – the Boss‟s Day Letter

In 1994, some 16,000 Southwest Airlines employees drafted a special Thanksgiving note and
raised a sum of $ 60,000 to publish a full-page advertisement in USA Today (newspaper) on
Boss‟s Day thanking him for his efforts. The advertisement read as follows: “For remembering
every one of our names. For supporting the Ronald McDonald House. For helping load baggage
on Thanksgiving. For giving everyone a kiss (and we mean everyone.) For listening. For running
the only profitable major airline. For singing at our holiday party. For singing only once a year.
For letting us wear shorts and sneakers to work. For golfing at The LUV Classic with only one
club. For out-talking Sam Donaldson. For riding your Harley Davidson into Southwest
Headquarters. For being a friend, not just a boss.”
Source: www.s-t.com

LEADERS & ENTREPRENEURS

Both Branson and Herb established successful businesses and both proved that anything was
possible and that it just took a little nerve to get started and keep the spirit going till the mission was
achieved. Both leaders displayed entrepreneurial traits and were lauded for their leadership styles.
Several studies6 revealed that successful leaders/entrepreneurs are pragmatics who work hard to
achieve their goals, display superior conceptual abilities, are emotionally stable, and are often well
educated. Herb and Branson may not have been academic geniuses, but they were definitely
intelligent, hardworking and practical leaders.
Branson created a universally recognized brand signifying his superior „corporate entrepreneurship‟
capabilities7. He actively embraced new ideas while cashing in on the Virgin brand name.
Consequently Virgin was viewed as a brand that could successfully carry the weight of any company
on its shoulders. On the other hand Herb had a very focused approach towards building an
organization which stands as an epitome of his leadership style and speaks volumes about how he
created the most well known airlines in the US.

5
The hub and spoke model is used by a majority of domestic US airlines. The model‟s hub is a large, popular
city and the spokes are the smaller cities around it. US airlines usually have 3-7 hubs and passengers
wishing to fly between two non-hub cities have to change flights in a hub city. This model helps provide
frequent services to many cities, but involves high infrastructure costs, which are reflected in high ticket
prices.
6
As stated in the book „Entrepreneurship- New Venture Creation‟, authored by David H. Holt.
7
Corporate Entrepreneurship is also known as Intrapreneurship, which happens when innovations occur inside
an already established organization.

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Entrepreneurs stand apart from the rest of the crowd by doing unexpected things. Robert Heller‟s
book „Effective Leadership‟ describes entrepreneurs as „people who spot and take a new business
opportunity, are inspirational leaders who know that it is vital to accept the risk of failure to achieve
anything worthwhile.‟ In other words, entrepreneurs are people who generally do not do things that
are done in the ordinary course of business. Herb and Branson were extraordinary people who
identified opportunities (that were risky by nature) and executed their ideas in innovative and
successful ways.
Herb and Branson displayed what may be termed as „Enterpreneual Leadership.‟ They were not
successful all by themselves – they were able to garner support from their investors, employees,
customers and suppliers. To fulfill their visions, they had to make people work towards their goals
as a cohesive whole – and perhaps, this is their greatest achievement.

QUESTIONS FOR DISCUSSION:

1. Examine the leadership and entrepreneurship styles of Herb Kelleher and Richard Branson.
What traits are common to both leadership and entrepreneurship. Discuss how the personal
attributes of these two leaders led to the creation of two of the most well regarded brands and
corporate cultures in the world.
2. Comment on the „publicity stunts‟ of Branson and the „funny‟ acts of Herb in light of the ethical
dimensions of leadership and entrepreneurship.
3. Would Virgin and Southwest Airlines enjoy the same goodwill and popularity after Herb and
Richard step down? What challenges would their successors face in leading the companies?

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Exhibit I

A Look at the Eccentricities of Branson & Herb

Branson announcing the comeback of DJ Chris Branson catwalking dressed as a bride to

Evans to Breakfast Time Radio on Virgin (1). launch the one-stop wedding store Virgin Bride
(2).

Branson launching Virgin cola at Times Branson greeting „Minnie Mouse‟ on Virgin‟s
Square, New York (3). inaugural flight from Manchester to Orlando (4).

Herb after the arm-wrestling contest held to Herb in different „roles‟ (6).
settle a business dispute (5).

Herb, portrayed with a tattoo „Still Nuts‟ on Herb rides a Harley Davidson motorcycle (8).
the cover page of his biography, „Nuts‟ (7).
Source(s): www.news.bbc.co.uk (1-4), www.southwest.com (5-7), www.terracom.net (8).

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Additional Readings & References:

1. Labich Kenneth, Is Herb Kelleher America‟s Best CEO?, www.fortune.com, May 2, 1994.
2. Downer Lesley, Branson‟s American Invasion Airlines, Apparel, Cola, Insurance,
Records, Spirit..., www.business2.com, December 1996.
3. Board Street Journal, Interview With Richard Branson, Part I (Virgin Atlantic),
www.caribbeanavenue.com, September 30, 1998.
4. Huey John, The Jack and Herb Show, www.business2.com, January 1999.
5. Ivins Molly, From Texas, With Love and Peanuts, www.dke,org, March 14, 1999.
6. Fischer Terrill, Laughter Can Be Cheap Cure For Workplace Ills, www.bizjournals.com,
February 10, 2000.
7. 1992 Profile, www.cbsnews.com, March 1, 2000.
8. Wells Melanie, Red Baron, www.forbes.com, March 7, 2000.
9. Magazine Names Southwest‟s Herb Kelleher CEO of The Year, www.aviationcareer.net,
June 9, 2000.
10. Glick Bryan, Virgin Plans Mobile Revolution, www.itweek.co.uk, September 21, 2000.
11. Regnier Pat, Middle Aged Virgin, www.time.com, March 5, 2001.
12. No Frills Pioneer Kelleher Steps Down, www.advantage2000.com, March 19 2001.
13. Koenig David, Kelleher to Resign as Southwest Chief, www.advantage2000.com,
March 20, 2001.
14. McConnell Ben, Evangelist of the Month: The Wild, Flying Turkey With Wings,
www.webashandlake.com, July 2001.
15. Southwest Airlines Founder Herb Kelleher, Donates $4 Million To The University OF
Texas At Austin, www.bus.utexas.edu, August 23, 2001
16. We Weren‟t Just Airborne Yesterday, www.iflyswa.com, March 11, 2002.
17. McCombie Helen, The World‟s Best Known Virgin,
www.businesssunday.ninemsn.com.au, April 21, 2002
18. Millington Andrew, Best of British, www.oxfordstudent.com, May 2, 2002.
19. Sir Richard Branson, The Guardian, www.media.guardian.co.uk, July 8, 2002.
20. Coy Peter, Wendy Zellner, The Airlines Caught Between a Hub and a Hard Place,
www.bbusinessweek.com, August 5, 2002.
21. Virgin Blue Over „Bunch of Bankers‟, www. guardian.co.uk, August 30, 2002.
22. Capell Kerry, Reed Stanley, Dawley Heidi, Richard Branson‟s Virgin Success,
www.johnshepler.com.
23. Kim Eun, Liggin Fred, McKinney Genita, Norris Keith, Owens Sonya, Southwest Airlines,
25 Years of LUV, www.cbpa.louisville.edu.
24. Kelleher Herb, A Culture of Commitment, www.advantage2000.com.
25. Stacey Graham, Richard Branson: Entrepreneur Adventurer, www.stars.com.
26. Lessons From Richard Branson, Virgin Billionaire, www.cpinternet.com.
27. “I Honestly Think BBC Has The Right Balance”, www.bbc.co.uk.

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28. Richard Branson, www.ltbn.com.
29. Can Anyone Replace Herb? www.library.northernlight.com.
30. Holt. H. David, Entrepreneurship-New Venture Creation.
31. www.askmen.com.
32. www.pbs.org.
33. www.nutcweb.tpc.nwu.edu.
34. www.chiefexecutive.net.
35. www.virgin-express.com.
36. www.virgin-atlantic.com.
37. www.virgin.com.
38. www.southwest.com
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