Boeing just came off the best year in its history. And now it faces a crisis that could very well end the company. How can this be?
Last year, Boeing surpassed Airbus as the biggest aircraft manufacturer in the world. It snapped a five-year Airbus winning streak. It seemed Boeing was finally on a roll.
Arrogance Breeds Ignorance
When a company is on a roll, it begins to think it can do no wrong. Therefore, it begins to act like it can do no wrong. And then arrogance blinds it to things that can go wrong.
In Boeing’s case, the seeds of arrogance were sowed in the success of the 737 platform. It has dominated the aircraft market for decades. Boeing saw no reason why it couldn’t dominate the market for decades to come with its new 737 Max platform. It couldn’t imagine what could possibly go wrong, because everything was going right.
I’ve had experience with this. Every single time I think my business is humming along fine, I get blindsided by something I never expected. I’ve learned that when I start thinking like that, it is time to set my arrogance aside, dig in hard and find the crisis that is inevitably looming.
Don’t Believe Your “Bumper Sticker” Values
When an airline employee does something galactically stupid that makes the national news, the CEO automatically jumps to the defense of the employee before the facts are known. Why is that? Because they believe their “bumper sticker” values, which are usually a mish mosh of “we treat every customer with dignity and respect” or other such nonsense. These bumper sticker slogans may look good on an annual report but usually don’t reflect reality.
After the 737 Max crashes, whistleblowers came out of the woodwork to cite safety concerns. But Boeing claims to value safety and integrity. Boeing even has a policy called “speak up” that ostensibly creates an environment “where employees are comfortable raising concerns without fear of retaliation.” If that were true, why would whistleblowers even be necessary?
If you’re the CEO, don’t automatically assume your bumper sticker values are the real values of the organization.
I suspect that Boeing’s real values are all about profit. Profit at all costs. Profit above all else.
Profit Above All Else
Don’t get me wrong—the number one objective of any for-profit business is to make a profit. But if making a profit is subordinated to every other objective, such as product safety in Boeing’s case, people will start doing all kinds of strange things. Like cooking the books. Or engaging in “creative accounting.” Or fudging on safety reports. Always remember that people will behave the way they are measured and compensated to behave. Or in the way they are intimidated or threatened to behave. This is probably what is happening inside Boeing.
I once worked for a company that incentivized, encouraged, cajoled, threatened, and intimidated people to make the profit number above all else. Trust me when I tell you this starts at the top. The CEO sets the stage for how the whole organization behaves. And if he mandates profit above all else, as that mandate moves down the organization, it gets worse.
As an example, the CEO will say something like, “We have to make the profit budget, ‘no matter what.’” His direct reports probably won’t take that literally, and if you asked Boeing’s CEO whether it meant profit above safety, I bet he would say, “of course not.” But by the time it gets down to the troops, it literally means “no matter what.” The lower you get in the organization, the more literally the mandate will be interpreted. It means falsifying safety reports. It means covering anything up that could stop production.
The facts are, the 737 Max will account for nearly a half trillion dollars in sales in the coming years. If that disappears due to the safety problems, it becomes a life-threatening event. And you can be sure Boeing employees know that. They know their jobs will be lost. They know their year-end bonuses will be lost if they don't do everything they can to maximize profit. How do you think they will behave?
They won’t work any harder or faster because they can’t. But they can cut more corners and fudge more reports in an attempt to make the numbers.
If you are the CEO, be very careful what you mandate and how it will be interpreted and acted upon as it moves lower in the organization.
What Goes Down Must Come Up
The Boeing 737 is a platform originally designed in the ‘60s. It has outlasted later designs, including the 757 and 767. For cost and certification reasons, Boeing made the decision to leave the airframe as is and work around that platform, yet still incorporate bigger engines. That is what necessitated the MCAS flight control system, which is arguably the cause of the two crashes.
Mandates get interpreted and acted upon as they go lower in the organization. But so do concerns with the mandate as they rise to the top. With respect to extending the 737 platform, an engineer somewhere in the bowels of the organization probably said, “Don’t do it; this will compromise safety.” But by the time that concern rose to the top, it would have been restated as, “We can do it, but we will have to make some trade-offs.”
If you are the CEO, get down in the trenches and talk to the people that have concerns about your mandates. Don’t let their message get massaged and repackaged before it gets to you.
When You Make a Huge Blunder, Admit It and Move on.
Any media expert will tell you the worst thing you can do is not admit it when you have made a mistake. The bigger the mistake, and the longer you deny it, the more the media will hound you until you do. The story never goes away. In the annual shareholder meeting, the media repeatedly asked Boeing CEO Dennis Muilenburg if the 737 Max crashes resulted from a design flaw in the MCAS flight control system. He refused to acknowledge that possibility, so the media persisted. And they will continue to persist until he does.
I understand that Muilenberg must be very careful in what he says. If he simply admitted Boeing screwed up, the stock would take a dive and he would lose his job to boot. He must walk a fine line between the unvarnished truth and stock holder interests. But public opinion hates CEOs who won’t admit they were wrong. If the public can’t trust you to admit you did something wrong, how can they ever trust you when you say you were not wrong?
The problem gets worse. When the CEO won’t admit a mistake, what do you think the rest of the organization does? You guessed it—the rest of the organization will drink the Kool-Aid and not admit something was wrong either. And if the organization won’t admit something was wrong, how do they fix it? You can’t fix a problem you won’t even acknowledge exists.
One Final Word
Businesses are built or destroyed based upon values and culture. And culture is insidious, marvelous, and potentially destructive all at the same time. If you are a CEO, make sure you create what I call a culture by design, not default.
Steven Blue is president and CEO of Miller Ingenuity, a global supplier of high-technology systems for railroad worker protection. He is also a business transformation expert and keynote speaker whose five books include American Manufacturing 2.0: What Went Wrong and How to Make It Right, the bestselling Mastering the Art of Success and his latest, Metamorphosis: From Rust Belt to High Tech in a 21st Century World.