Performance Is the Only Path Out of the Company’s Priority-Driven Crisis
3/27/24 – – The Boeing Company, experiencing severe reputational turbulence, announced this week that its CEO, chairman, and head of its commercial airplanes division will be deplaning. The executive shakeup is in response to a quality control crisis that took off five years ago after Boeing 737 MAX planes crashed in Indonesia and Ethiopia killing 346 people.
Chief Executive David Calhoun will step down at the end of the year. He replaced his beleaguered predecessor Dennis A. Muilenburg in 2020. Neither fulfilled commitments to fix manufacturing issues and win back public, industry and investor trust.
The continuing saga illustrates crisis prevention and response concepts discussed in “The Crisis Preparedness Quotient” and in several posts on this blog. Most relevant is the role skewed priorities can play in creating crises.
Winning at All Costs Is a Losing Strategy
A damning Congressional report released in September 2020 confirmed that Boeing, facing mounting competition from energy-efficient Airbus models, rushed its 737 MAX into service. Summarizing the findings, Representative Peter DeFazio (D-OR) stated:
Our report lays out disturbing revelations about how Boeing—under pressure to compete with Airbus and deliver profits for Wall Street—escaped scrutiny from the FAA, withheld critical information from pilots, and ultimately put planes into service that killed 346 innocent people.
Intense performance pressures, as well as improper incentives and rewards, can lead even highly respected companies like Boeing to do bad things. Whenever the end justifies the means, crises are right around the corner. Examples of this all-too-common corporate pitfall abound:
- Volkswagen engineers installed software in diesel engines to cheat emissions tests at the same time the company was pursuing the audacious goal of beating GM and Toyota to be the top-selling global automotive manufacturer.
- Facebook ignored clear signs of trouble as it chased exponential growth by connecting more and more people with little regard for the nature of the discourse on its platform.
- Wells Fargo’s retail bankers opened sham accounts to achieve unrealistic, hour-by-hour sales targets to deliver unsustainable growth.
There’s nothing wrong with tackling big projects or setting lofty goals. But a win-at-all-costs strategy inevitably leads to trouble. Boeing’s historic culture of safety and excellence evaporated when managers installed “countdown clocks” throughout company facilities to assure that unrealistic deadlines were met. The Congressional report warned that:
Continuing on the same path it followed with the 737 MAX, where safety was sacrificed to production pressures, exposes the company to potentially repeating those mistakes and to additional reputational damage and financial losses.
Boy, did they get that right.
In just the last few months, a door on an Alaska Airlines Boeing 737 MAX 9 blew off in flight, a wheel fell off a United Airlines Boeing 777 on takeoff in San Francisco (crushing a Tesla in a parking lot below), and a former Boeing quality manager turned whistleblower was found dead, apparently from suicide, the day before he was scheduled to testify in a case he brought against the company for allegedly retaliating when he reported quality and safety issues. The value of Boeing stock has declined about 25 percent since January.
So, what can Boeing’s replacement management team do to pull the company out of its tailspin?
Performance Is the Only Path to Crisis Recovery
In a message to employees sharing the news of his year-end departure, lame duck CEO Calhoun said this:
The eyes of the world are on us, and I know we will come through this moment a better company, building on all the learnings we accumulated as we worked together to rebuild Boeing over the last number of years.
As is the case with most crises, the only path to recovery is performance. And the Federal Aviation Commission is making sure Boeing will finally make good on its promises of reform, demanding that the company submit within 90 days a “comprehensive action plan.” After FAA administrator Mike Whitaker met with Boeing leadership on Tuesday, he issued this statement:
Boeing must commit to real and profound improvements. Making foundational change will require a sustained effort from Boeing’s leadership, and we are going to hold them accountable every step of the way, with mutually understood milestones and expectations.
It’s now up to Boeing’s new leadership team and employees throughout the company to perform.
Companies and organizations can avoid the nightmare of priority-driven crises by embracing and continually reinforcing a clearly articulated purpose and ethical culture. Strong internal checks and balances help, and it’s important to set more qualitative, rather than purely quantitative goals.
As the painful, ongoing Boeing case study illustrates, sacrificing quality and safety for short-term growth or profit can shorten careers, destroy enterprise value, and kill a lot more than a good reputation.
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