5 things I find very interesting about the Boeing downfall

Laetitia@Work #70

Hi everyone,

I live in Ottobrunn (a Munich suburb) that is home to a huge Airbus production site. The house I live in was originally built for an Airbus employee! So perhaps I’ve read more about Boeing and its downfall because of it 😉 The thing is, I was not originally very interested in the giants of the aerospace industry. I am not one of those who scrutinise aircraft sales (or car sales for that matter) to determine the health of the economy. In fact, I believe we should fly less because planes produce too much greenhouse gas. I wish we’d stop subsidising a mode of transport that has costly externalities for us all (and the planet).

Nevertheless my proximity to a big Airbus site, and the fascinating articles on the subject of Boeing, made me follow with attention the American saga around Boeing and how this flagship of American industry was squandered in less than two decades.

Boeing, once celebrated as a cornerstone of American industrial prowess, is facing a huge crisis. The troubles began with two tragic crashes involving its 737 aircraft (resulting in hundreds of deaths). A flawed flight control system was one of the serious shortcomings in Boeing's engineering and safety protocols. But interestingly, the technical problems are the symptoms of much deeper corporate issues. Over the years, the company's culture shifted from prioritising engineering excellence to focusing on financial performance and shareholder value. Internal reports and whistleblower accounts indicate that safety concerns were regularly overshadowed by cost-cutting measures and production targets.

Now the company’s reputation is severely damaged. There’s also less trust in airlines and regulators. The last leadership changes have not had any impact: current CEO Dave Calhoun faces criticism for not addressing the systemic issues within the company. He will step down in the near future.

So here are 5 things I find very interesting about the Boeing fiasco.💡👇

#1. Optimisation & mindless transactions destroy responsibility

Owning the result of your work isn’t just about having shares in the company you work for. It’s about being a craftsman and caring about the work. But Boeing got rid of all its best craftspeople because they were thought to be “too expensive”. Instead they negotiated lower costs with a series of opportunist suppliers.

Of course suppliers can (and do) care about the quality of their work. But this outsourcing was done primarily to cut costs, not to access the unique skills of specific suppliers. It fostered a purely transactional mentality on both sides and made cost-cutting the alpha and the omega. Many of the suppliers in turn rely on subcontractors to cut costs too.

As a mere hub of transactions, the company no longer gathers people who feel responsible for the outcome. It no longer has an engineer(craftspeople)-centric culture that focuses on details and loves perfection.

This is not just the story of Boeing. It’s the story of a lot of companies that have outsourced and “optimised” financially. Many companies have sacrificed the quality of their production. But when planes are concerned, it literally kills people. In the aviation industry, even minor errors lead to severe consequences.

#2. If you outsource everything, you lose your process knowledge

Process knowledge is the understanding and expertise related to the specific steps, methods, and techniques used to accomplish something within an organisation. This knowledge is essential for ensuring productivity and consistency in operations. When employees have access to deep process knowledge, it reduces errors and optimises resource use.

Process knowledge drives innovation and continuous improvement. Employees can identify areas for improvement and act on them. Their understanding of how things work also facilitates effective training and development, which reduces the learning curve for new employees who can perform well (more or less) from the start. It plays a critical role in risk management by helping to identify potential risks and develop mitigation strategies. In regulated industries, process knowledge also ensures compliance with legal requirements, protecting the organisation from legal issues and penalties. 

In short, process knowledge is a vital asset that doesn’t solely rely on talented individuals but also on all the invisible ways they share information and knowledge within the team. Boeing lost its process knowledge.

“What happens when we stop the flow of knowledge up the stack? I think that the weakness of the US industrial robotics sector is instructive. The US has little position in making high-end precision manufacturing equipment. When it comes to factory automation systems, machine tools, robot arms, and other types of production machinery, the most advanced suppliers are in Japan, Germany, and Switzerland. I think the reason that the US has little position can be tied directly to the departure of firms from so many segments of manufacturing. How do engineers work on the design of automation systems if they don’t have exposure to industrial processes?” (Dan Wang, How Technology Grows)

#3. Here’s how a corporate culture can become sick

Corporate cultures can become dysfunctional when core values and priorities shift towards short-term financial gains at the expense of innovation, safety, and employee welfare. At Boeing, the merger with McDonnell Douglas in 1997 marked the beginning of a cultural shift, and decline. The new leadership emphasised cost-cutting and outsourcing, leading to a focus on financial optimisation over engineering excellence. The betrayal of Boeing’s original values and culture created a malaise. (Do you remember when it used to be “If it’s not Boeing, I’m not going”?) The shift resulted in a toxic environment where safety standards were compromised, and trust within the organisation eroded. 

“The company’s last three CEOs have managed to comprehensively trash what was, arguably, the greatest corporate reputation in the history of business. They have sown the wind and they are now reaping the whirlwind. Boeing will never again be what it once was. It’s really too bad for all those great engineers and designers and workers who were betrayed by the pure greed and stupid short-term thinking of top management. Boeing will never again be what it once was. Poor old Bill Boeing must be turning pinwheels in his grave.”

“Your culture is how your company makes decisions when you’re not there. It’s the set of assumptions your employees use to resolve the problems they face every day. It’s how they behave when no one is looking. If you don’t methodically set your culture, then two-thirds of it will end up being accidental, and the rest will be a mistake.” (Ben Horowitz)

The "managerist" approach adopted by Boeing's leadership prioritises short-term shareholder value. The company's long-standing commitment to safety is now long forgotten. This transformation also damaged employee morale and trust. As cost-cutting and outsourcing became prevalent, employees felt increasingly alienated and undervalued. Thus Boeing's story serves as a cautionary tale for other companies. It highlights the dangers of adopting a corporate culture that loses sight of its core values (in pursuit of short-term financial gains).

👉Also read Everything that’s wrong with modern management. Laetitia@Work #10

#4. Quality control in a zero-mistake paradigm requires redundancy (inefficiency)

Quality control requires unwavering commitment to safety, continuous oversight, and the willingness to invest in robust processes and technologies. In high-stakes industries like aviation or nuclear energy, quality control operates in a zero-mistake paradigm. Otherwise people die. The Fukushima disaster and the issues with Boeing's 737 MAX highlight the catastrophic consequences of lapses in quality control and oversight.

Interestingly, when it comes to quality control in a zero-mistake context, you need redundancy! You need several people to control things. You need double-checking. You need multiple parts to serve the same function (so when one stops working the whole thing doesn’t collapse). In short the highest quality and quality control cost money because it can’t be perfectly cost-effective. Redundancy, or having multiple layers of checks and backups, is essential to prevent catastrophic failures. 

A few examples? Aircraft are equipped with multiple engines (so when one fails, there’s a remaining engine to ensure safe landing). Flight control systems are duplicated. Nuclear reactors are equipped with multiple cooling systems. Redundant power supplies ensure that systems remain operational during outages. Multiple safety procedures are in place. You get the idea.

In aviation, prioritising maximum efficiency leads to devastating consequences because it’s incompatible with safety. I had never understood this so clearly: efficiency can be profoundly unsafe! (Besides redundancy you also need better regulatory and security protocols but that’s another matter).

#5. The whole Boeing situation is ripe for a glass cliff scenario

The term glass cliff is used when women or minority leaders are appointed to leadership positions during times of crisis, often setting them up to fail. Dave Calhoun, Boeing's CEO, announced his intention to step down at the end of 2024. His tenure has been marked by such significant problems (the 737 MAX crashes among other disasters) that the company will long remain under intense public scrutiny. So being the CEO of such a company is bound to be like walking in a minefield!

Stephanie Pope, currently serving as Boeing's Chief Operating Officer, has recently been appointed to lead Boeing Commercial Airplanes. The change came as the company attempted to navigate its more recent challenges and stabilise its operations. She is also a possible contender for the CEO position.

Let’s face it, one of the main explanations for the glass cliff is the search for a scapegoat. Since the probability of failure is high, many of those who usually hold power are more reluctant to take on the role. And it’s easy to give a position of power to someone different because that way, there’s someone to blame! It’s quite convenient to have a woman captain at the helm of a sinking ship, so she can be accused of all the problems if the ship goes down. Our Western culture retains strong traces of the biblical narrative that places the original sin on a woman (…) In organisations, it’s not much different. Women are easily blamed when things go wrong, whereas men are more often credited when things go well. A study titled "You’re Fired!" published in 2020 in the Journal of Management revealed how taking on a leadership role is riskier for women. Comparing the dismissals of 641 American CEOs between 2000 and 2014, the study showed that women were much more likely to be fired than their male counterparts. And while "high levels of performance" can protect male CEOs, researchers found that they do not offer the same protection to women. (My article in French about the Glass Cliff).

🚀 📣 Caroline Taconet, Katerina Zekopoulos and I have released 2 new episodes of our podcast Vieilles en puissance, at the intersection of three themes: age, money, and women (in French).

The 5th episode, with Lucile Quillet: Quel est le prix à payer du couple ? 🎧

The 6th episode, with Marion Leturcq: Pourquoi les inégalités patrimoniales augmentent ?👇

👉 SUBSCRIBE NOW TO THE VIEILLES EN PUISSANCE NEWSLETTER!

---

💡Check out the latest articles I wrote for Welcome to the Jungle: Workplace anxiety: Navigating the future of work in an anxious world, Why recruiters should hire more ex-freelancers (in English), Du Covid au JO : 4 leçons d'adaptation à un monde changeant, Comment la révélation des écarts de salaire vous fait perdre vos meilleurs talents (in French).

🎙️ There are a few new Nouveau Départ episodes! Mangeuses : les femmes et la nourriture, c'est compliqué (with Lauren Malka), Le sport (et les JO), c’est politique (with Clothilde Sauvages) 🎧 (in 🇫🇷). Subscribe to receive our future podcasts directly in your inbox!

🎙️ Samuel Durand and I recorded a few new “Work Buddies” podcasts: L’offboarding, pourquoi c’est essentiel ?, Comment tu te formes ? 🎧 (in 🇫🇷)

Miscellaneous

✈️ Suicide Mission. What Boeing did to all the guys who remember how to build a plane, Maureen Tkacik, The American Prospect, March 2024: “Swampy was mired in an institution that was in a perpetual state of unlearning all the lessons it had absorbed over a 90-year ascent to the pinnacle of global manufacturing. Like most neoliberal institutions, Boeing had come under the spell of a seductive new theory of “knowledge” that essentially reduced the whole concept to a combination of intellectual property, trade secrets, and data, discarding “thought” and “understanding” and “complex reasoning” possessed by a skilled and experienced workforce as essentially not worth the increased health care costs. CEO Jim McNerney, who joined Boeing in 2005, had last helmed 3M, where management as he saw it had “overvalued experience and undervalued leadership” before he purged the veterans into early retirement.”

😔 Loneliness Is a Problem That A.I. Won’t Solve, Jessica Grose, The New York Times, May 2024: “Why I worry about chatting with bots as a potential solution to loneliness is that it could be an approach that blunts the feeling just enough that it discourages or even prevents people from taking that step off the couch toward making connections with others. And some research indicates that a lack of human touch can exacerbate feelings of isolation. One 2023 paper by researchers at the University of Stirling expresses this more holistic view of loneliness quite eloquently, describing the emotion as “an embodied and contextualized sensory experience.”

If you want safety, welcome redundancy!