Boeing, McNerney, And Change

Warren Bennis, in his book “On Becoming a Leader,” says this about leadership, “Leaders are, by definition, innovators. They do things other people have not or dare not to do.” This, a comment I heard from an old friend the other night, and an article this morning in the paper about Boeing has initiated a moment of reflection about the role of leadership within organizations.

Kurt Lewin once said, “If you want to truly understand something, try to change it.” I think that the work McNerney has done to change Boeing has indeed helped him to understand the many dynamics involved with a large organization.

Leaders learn from the past, but they also have an incredible ability to make things new. “Having learned from the past, they live in the present, with one eye on the future.” Like it or not, I think Jim McNerney has attempted to accomplish that leadership trait. Has this been well received by employees? It appears the results are mixed.

McNerney is approaching 65, which is the mandatory age of retirement. He has announced that he has no intention of retiring, but a 50 year-old man, Dennis Muilenburg, has been appointed vice chairman, president, and chief operating officer. So I would think that Boeing is in for another change.

The comment I heard the other night was about the work atmosphere at Boeing. It sounds tense, and it appears that management is cracking down on certain shop floor practices that the employees found desirable. The union workers are losing radios and other freedoms they used to enjoy. These are simple characteristics that point to a tense relationship between union and management. North Carolina, NLRB lawsuits, and moving Engineers to other parts of the country and world all point to management/labor problems within Boeing.

During this week’s investor meeting there will be discussion about financial results, as well as the succession plan for CEO. Over the last ten years Boeing’s stock value has increased by 80%, which reflects operational effectiveness. Boeing had to improve its operational efficiency in order to improve its margins. With over 11,000 airplanes on order between Airbus and Boeing worth billions of dollars, Boeing had to fix its production system. This has happened even with the problems associated with the 787.

The 787 program is still losing money and will do so until they have manufactured 1,300 airplanes. “Dreamliner production has increased to 10 each month, but the company is still losing money on each sold, having built around 200 so far. Boeing is able to account for that high cost by spreading it over 1,300 deliveries, allowing the company to book future profits as today’s earnings.” This does seem like creative accounting to me, but what happens if something happens between now and 1,300 airplanes, will they need to declare losses? This makes me wonder if we have a little Enron within the Boeing accounting system?

Whether the union like McNerney or not, he did create change in the company. He did learn from the past, live in the present, to create a new future. McNerney is an innovator, and I do believe what he has done has been good for the company. However, from this point on Boeing will need a new kind of leadership.

Muilenburg will face some of the same issues the Jeff Immelt did when he took over for Jack Welch. Welch was a hard act to follow. Welch turned a very large organization around making it more nimble, flexible and successful. I would argue that even though GE is still a powerhouse the Immelt has not accomplished as much as Welch. However, that may not necessarily be bad thing. Immelt stabilized the company and institutionalized the changes made by Welch. Muilenburg will need to do the same thing.

McNerney introduced change to Boeing, but in the process he has infuriated the unions. I don’t think he will be able to repair that by the time he retires, and I don’t think that is important. I think the Muilenburg will need to come in and stabilize and institutionalize the changes initiated by McNerney, and repair relationships to get the employees back on board. However, while he does this he will need to keep his eye on the future and financial margins.

Many are questioning whether Boeing and Airbus are manufacturing too many airplanes? China’s growth is slowing down so will airlines need 11,000 new airplanes? Who knows, but one thing I know change is a constant. Although Boeing‘s product life cycle is long, compared to a computer tablet, the environment does impact backlog. I am sure Boeing and its leadership are looking for the Black Swans that are out there.

Leadership is tough in the simplest of times, but when the company is in a dynamic environment it is even more difficult. Maybe that is why people feel that most organizations are not well led? Congrats to Boeing for its successes, but don’t rest too long on your laurels, or you will become the Lazy B again.

And that is my thought for the day!

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