How to fix Boeing, according to a former Airbus technology chief
By the end of the year, Boeing will have a new CEO. They will need to lead an aggressive cultural transformation on a massive scale–the company has over 170,000 employees of whom about 50,000 are engineers–and in record time.
The modern air transportation system is nothing short of miraculous. Airplanes are some of the most complex feats of engineering created by humans, and yet thousands of them fly daily with so few incidents that flying is one of the safest modes of travel, second only to taking an elevator (and safer than walking, not to mention driving). It is not a miracle but a meticulously accumulated set of engineering principles, quality processes, and operating procedures–all underpinned by a set of cultural mores to ensure that they are faithfully and intelligently implemented. This cultural element is the magic ingredient. And it is what’s broken at Boeing.
Take, for example, the tragic crashes of two Boeing 737 MAX aircraft a few months apart in 2018 and 2019. A key aviation engineering principle is that safety-critical systems cannot have a single point of failure. Boeing engineers convinced themselves (and the FAA) on paper that the MCAS system, which was found to be the culprit, was not safety-critical. Of course, it turned out to be. This is an engineering error–but more importantly and systemically, it is a failure of culture: The right people should have felt empowered to question the right assumptions at the right time.
The recent in-flight loss of a door plug on another Boeing 737 MAX Alaska Airlines flight looks to be a quality process error (although the investigation is ongoing). Most probably. the process itself wasn’t wrong–it just wasn’t followed. Again, culture is almost certainly the culprit. In February, a Congressionally-mandated panel of experts convened in the wake of the earlier MAX crashes released its report on Boeing safety systems. It wrote that “[t]he Expert Panel observed a disconnect between Boeing’s senior management and other members of the organization on safety culture.”
What happened to Boeing’s culture and how to fix it
For the last two decades, Boeing has undergone a deliberate transformation from an engineering-driven company to one more focused on business results. Harry Stonecipher, Boeing’s CEO in the early 2000s, famously quipped: “When people say I changed the culture of Boeing, that was the intent, so that it is run like a business rather than a great engineering firm.”
Stonecipher’s successor, James McNerney, took this even further: “Every 25 years a big moonshot… and then produce a 707 or a 787–that’s the wrong way to pursue this business. The more-for-less world will not let you pursue moonshots.”
Delivering shareholder value is not inherently antithetical to a strong product and safety culture. But shareholder returns cannot be perceived as coming at the expense of the employees, the product, or the company’s long-term mission.
I have three concrete suggestions for Boeing’s board and new CEO. These come from my own experience in the Airbus C-suite. Neither Airbus's culture nor its products are flawless. But the European company has consistently gotten three things right: the profile of the people at the top, a focus on its employees, and the willingness to make bold bets.
The new Boeing CEO needs to be an airplane geek, not a bean counter
Boeing should fill the C-suite and executive ranks with like-minded people who love the product and Boeing’s mission to build great airplanes.
C-suite discussions should revolve not just around free cash flow and EBITDA, but around new products, features, customer feedback, and–importantly–the nitty gritty of safety issues. And it can’t be forced or faked. Because Boeing’s products are so unique, the leadership team must have a genuine passion for them.
If product and safety are routinely the top priorities at the board and C-suite level, the whole company will feel it. This is something that Airbus has done well. Its last CEO insisted on parachuting out of Airbus’ new A400M transport plane and piloting a stratospheric glider. The current one is a former helicopter flight test engineer. The CEO’s office and corporate board room has a panoramic view of the runway where Airbus planes are tested. There is a distinct “AvGeek” aura at headquarters. I’ve witnessed first-hand aerospace CEOs who are bean counters and others who are airplane geeks. The difference is stark, it cascades quickly through an organization, and it matters.
Make all employees shareholders
While Boeing need not apologize for emphasizing shareholder returns, it should signal to employees that it is not at their expense but in their best interest.
Today, equity compensation at most large industrial companies is limited to executive ranks. The private equity firm KKR deployed a strategy at a handful of companies in its industrial portfolio of giving all employees–including shop floor hourly workers–a meaningful ownership stake in the business. The results were staggering. An HBS case study on one such company reported an immediate 8% jump in EBITDA margin while halving the safety incident rate and improving product quality.
Making employees think like owners made them take greater personal responsibility for improving company operations and delivering a good product. It will also improve union relations, which has historically been a sore point for Boeing. Airbus, of course, has no choice in the matter. It’s an employee-first culture by virtue of French and German labor laws. Every major decision has to be painstakingly negotiated with employee representatives. I recall a conversation with a very senior Airbus executive where he challenged my “very American” assertion that the purpose of the company was to deliver shareholder value. After I pontificated about the famous Dodge v. Ford court case which enshrined this as a principle of U.S. corporate law, he scoffed. “What is its purpose then?” I asked. “To create good European jobs,” he replied.
Commit Boeing to a bold new goal
The development of the last new Boeing airplane–the 787–was launched two decades ago (and the aircraft is now also coming under scrutiny after a whistleblower reportedly called for its grounding). The 737 was designed over a half-century ago (the original 737-100 first flew in 1967) and has morphed into today’s MAX through more than a dozen derivative designs making incremental improvements. This has been a deliberate strategy to monetize the existing franchise and avoid the expense of a new design. Such a strategy is not sustainable and, as Boeing is learning the hard way, is ultimately detrimental to shareholder value.
The MCAS system at issue in the MAX crashes, for instance, was a direct consequence of the 737 lacking a modern digital flight control system. It is also demotivating to the employees who went into aerospace to build some of the world’s coolest products, help tackle big audacious problems, and be on the bleeding edge of human innovation to be working with ancient tools on the same airplane their parents might have helped design.
What might such a bold new goal look like? Aviation’s dirty secret is that the industry’s CO2 emissions are set to increase significantly in the coming decades, as traffic growth far outpaces incremental improvements in airplane efficiency. Boeing has hidden behind carbon offsets and so-called “sustainable” aviation fuels–where a fraction of the CO2 emitted when burning the hydrocarbon is recaptured during the fuel production process–to greenwash its product portfolio. This approach has allowed the company to avoid the expense of building a new airplane. But in doing so, Boeing ceded the lead in developing clean flight technologies such as hydrogen, flex-fuel, hybrid-electric, and open rotor to Airbus, which has been only too happy to pick up the mantle as the industry’s innovator.
Challenge Boeing to deliver a true-zero-emissions airplane in the time it took the U.S. to land a man on the moon (incidentally, this was a moonshot in which Boeing played a significant part). The employees will love it. And they will almost certainly deliver.
My dream job growing up was to be chief engineer at Boeing. I fantasized what my new airplane would look like, devoured books about legendary airplane designers, and ordered every piece of Boeing swag in its online gift shop. And while my career took me to the planemaker on the other side of the Atlantic, I feel a deep fondness for the American icon that is the Boeing Company–and sadness at its current malaise. I am confident that it can regain its magic by putting airplane geeks at the helm, giving its employees a direct stake in the company’s success, and making a bold, ambitious bet on the future.
Paul Eremenko is a former Chief Technology Officer at Airbus and at United Technologies.
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