The Power of Upper Limits: How to Set Goals That Actually Work, Even In the Face of Uncertainty and Chaos




  • — August 16, 2019

    In 1979, Howard Putnam, CEO of Southwest Airlines at the time, faced a complex problem and a difficult decision on the new direction to steer his company. [1]

    The deregulation act passed in 1978 opened the gates for a flood of new competitors in the airline industry, leading to a drastic fall in fares.

    But this would only be the beginning of a wave of uncertainty and disruption for airlines.

    From 1972 to 2002, just about every bad scenario you could think of crippled the airline industry: fuel shocks, strikes, recessions and the 9/11 terrorist attacks.

    In the early 1990s alone, the airline industry lost nearly 13 billion dollars, high profile airlines went bankrupt and hundreds of thousands of workers were laid off.

    And yet, despite the chaos, Southwest Airlines did not lay off a single employee.

    In fact, over the 30-year period, not only did Southwest Airlines generate profits each year, but it also performed 63 times better than the general stock market. [2]

    The puzzling question then is: Why did Southwest Airline survive and thrive in an extremely complex, uncertain and disruptive environment and other companies didn’t?

    The Power of Upper Limits: How to Set Goals That Actually Work, Even In the Face of Uncertainty and Chaos

    The drastic difference in growth between Southwest airlines growth versus the average of their competitors.

    The Power of Upper Limits

    “The greatest danger in business and life lies not in outright failure but in achieving success without understanding why you were successful in the first place.”

    ? Robert Burgelman

    In the book, Great by choice: uncertainty, chaos and luck—why some thrive despite them all, strategy researcher, Jim Collins, reveals Putman’s final decision to:

    “Do the same thing that you are already doing well…and do it over and over again.” [3]

    Unlike their competitors, Southwest Airlines set upper limits on their business growth and had the discipline to turn down opportunities.

    For example, in 1996 alone, over 100 cities begged for Southwest airline services, but they only chose to work with four. [4]

    Despite being a publicly traded company, Southwest was willing to sacrifice growth for the sake of maintaining a high level of performance and customer service.

    In addition, Southwest set upper limits on how the business operated.

    These included, flying only 737 planes, providing no food services and no interlining.

    These upper limits were specific, actionable, and most importantly, sustainable over decades.

    Now, compare this to how we typically set goals and plan to achieve them.

    We often begin by setting goals with lower limits, but no upper limits of what we can sustain i.e I plan to read at least 5 books each month, write 1,000 words a day, workout four times a week and generate 100,000 dollars in revenue.

    But then, once we’ve hit the goal—even though we couldn’t sustain it—we set a bigger goal, which eventually leads to complexity, overwhelm and failure.

    If instead, we set goals with upper limits, it becomes much easier to figure out what’s truly important to focus on and stick to our goals over the long run.

    For example:

    If your goal is to build a profitable business that lasts, your upper limit could be a maximum of 10 clients each year and 50 employees.

    If your goal is to improve and maintain a high level of performance at work, your upper limit could be a maximum of 7 working hours each weekday and none during the weekends.

    If your goal is to get and stay in shape, your upper limit could be a maximum of 3 workout sessions each week.

    By setting upper limits to your goals, you’ll not only solve complex problems quickly and make better decisions, but you’ll also maintain high levels of performance and achieve long-term success, no matter the level of chaos and uncertainty around you.

    Do Only What You Can Sustain

    We live in a world obsessed with “stretch goals,” quick results and fast growth.

    We want more. We want it faster. And we want it now.

    But the Southwest Airlines story is one of many examples to remind us that in the long run, bigger and faster isn’t always better.

    And more often than not, slow and steady wins the race: it pays to stick to doing only what you can sustain and nothing more.

    It is only those who can resist the temptation to add more to their plate when times are good, that will ultimately survive and thrive when times are bad.

    When in doubt about how to set your goals, ask yourself this question: can I sustain this for the next 10 years?

    If the answer is no, create an upper limit that will turn your answer into an emphatic yes.


    FOOTNOTES

    1. Howard D. Putnam with Gene Busnar,TheWinds of Turbulence (Reno, NV: Howard D. Putnam Enterprises Inc., 1991), 8, 12-14, 302.

    2. “Southwest Airlines Co.: Presentation by Howard D. Putnam, President and Chief Executive Officer, Before the Dallas Association of Investment Analysts,” Wall Street Transcript, May 28, 1979; Jon Birger, “30-Year Super Stocks: Money Magazine Finds the Best Stocks of the Past 30Years,” Money Magazine, October 9, 2002; Southwest Airlines Co., Fiscal 1976 Annual Report.

    3. Howard D. Putnam, “Southwest Airlines Co.: Presentation by Howard D. Putnam, President and Chief Executive Officer, Before the Dallas Association of Investment Analysts,” Wall Street Transcript, May 28, 1979; “Texas Gets Bigger,” Forbes, November 12, 1979.

    4. “Southwest Airlines Co.,” Wall Street Transcript, May 28, 1979; “Texas Gets Bigger,” Forbes, November 12, 1979, 88-89; Charles O’Reilly and Jeffrey Pfeffer, “Southwest Airlines: Using Human Resources for CompetitiveAdvantage (A),” Graduate School of Business, Stanford University, case study #HR-1A (Palo Alto, CA: Graduate School of Business, Stanford University, 1995).

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