This post is an excerpt from the book Sooner Safer Happier: Antipatterns and Patterns for Business Agility by Jonathan Smart, with Myles Ogilvie, Zsolt Berend, and Simon Rohrer.
787 Dreamliner Factory, North Charleston, South Carolina
Cynthia Kitchens was a quality manager at the Boeing North Charleston factory, which makes the 787 Dreamliner. According to an investigation by the New York Times in 2019, Kitchens said that her superiors penalized her in performance reviews and berated her on the factory floor after she flagged wire bundles rife with metal shavings and defective metal parts that had been installed on planes. “It was intimidation,” she said. “Every time I started finding stuff, I was harassed.” The Times found that in order to meet deadlines, managers sometimes played down or ignored problems, according to current and former workers.
According to that same Times investigation, several former employees said high-level managers pushed internal quality inspectors to stop recording defects. Some employees said they had been punished or fired when they voiced concerns. Workers filed nearly a dozen whistleblower claims and safety complaints with federal regulators, describing issues like defective manufacturing, debris left on planes, and pressure to not report violations. Others resorted to litigation, saying they were retaliated against for flagging manufacturing mistakes
According to a report from Bloomberg, another quality manager, William Hobek, filed a suit in 2016 claiming that he’d been fired after repeatedly reporting defects up the chain of command. When he complained, a supervisor replied, “Bill, you know we can’t find all defects.” Hobek called over an inspector, who quickly found forty problems, the suit claimed. Boeing settled the case out of court.
737 Factory, Renton, Washington
In December 2019, Ed Pierson presented testimony to the US House of Representatives committee looking at the 737 MAX. Mr. Pierson was a senior manager at the factory and a thirty-year-veteran of the US Navy. In June 2018, four months before the fatal Lion Air 737 MAX crash, he emailed the 737 program head, raising concerns over excess schedule pressure, workers fatigued due to too much overtime, and managers not role modeling desired behaviors.
Pierson said, “Frankly right now all my internal warning bells are going off. And for the first time in my life, I’m sorry to say that I’m hesitant about putting my family on a Boeing airplane.” He recommended that production pause to safely finish the unfinished planes.
This didn’t happen. In fact, according to a Boeing press release, in the middle of 2018, production of 737s increased from forty-seven to fifty-two planes a month.
Not satisfied with the response and two months after the first 737 MAX crash, Pierson wrote to the then CEO Dennis Muilenburg, the Boeing Board of Directors, the NTSB, the FAA, and eventually the media to flag his concerns.
In the subsequent dialogue with senior management, in February 2019, just one month before the second fatal 737 MAX crash, Pierson wrote:
. . . manufacturing managers were peppered with schedule-related questions and publicly criticized (berated) during daily status meetings . . . in front of 100+ colleagues. Executives routinely disregarded, bypassed, and/or ignored the technical advice of experienced senior managers. There were concerns that less experienced managers might model this type of leadership and communication style. . . .
There appeared to be absolutely no interest at the executive level in slowing or stopping the production line to give employees and our suppliers the chance to catch up. I recommended to the 737 GM to stop the production line. In a dismissive manner he told me “we can’t do that; I can’t do that.” I responded by asking “why not, I’ve seen larger operations shut down for far less safety issues.” He challenged me asking “like where?” I responded, “in the military and those organizations have national security responsibilities.” His response, “Well, the military isn’t a profit making organization.”
Tragedy struck again one month later in March 2019 with the fatal Ethiopian Airlines crash. While there is no direct link with the working conditions in the factory, it paints a picture of the culture and environment in the Renton factory where the 737 planes are built.
In a statement, Boeing said:
Importantly, the suggestion by Mr. Pierson of a link between his concerns and the recent MAX accidents is completely unfounded. Mr. Pierson raises issues about the production of the 737 MAX, yet none of the authorities investigating these accidents have found that production conditions in the 737 factory contributed in any way to these accidents.
In an interview with Bloomberg, Adam Dickson, who worked at Boeing for almost thirty years and was a manager of fuel systems engineering for the 737 MAX, said that managers felt heat to hit ambitious cost targets.
The sales team would sell planes for delivery four years out at prices the company couldn’t yet hit from an engineering standpoint—creating immense pressure throughout the organization to drive down costs. In 2016, according to the Bloomberg interview, Boeing started asking for specific time and cost reductions as part of managers’ performance evaluations.
And by 2018, Dickson says his superiors warned in “very directly and threatening ways” that pay was at risk if the targets weren’t met.
“It was a climate that didn’t reward people willing to challenge managers,” said Mark Rabin, who worked at Boeing for seventeen years in a flight test group that supported the 737 MAX and who was laid off in 2015. “It was pretty intense low morale because of all the layoffs—constant, grinding layoffs, year after year,” he says. “So you really watched your step and were careful about what you said.”
In an ethics complaint filed seven weeks after the second fatal crash of a 737 MAX, which was reviewed by The Seattle Times, a Boeing engineer whose job involved studying past crashes and using that information to make new planes safer said, “I was willing to stand up for safety and quality, but was unable to actually have an effect in those areas.” The engineer describes management as:
. . . more concerned with cost and schedule than safety and quality. . . . Given the nature of this complaint, the fear of retaliation is high, despite all official assurances that this should not be the case. . . . There is a suppressive cultural attitude toward criticism of corporate policy—especially if that criticism comes as a result of fatal accidents.
He wrote that co-workers told him in private they are afraid to speak up about similar safety concerns out of “fear for their jobs.”
In all of these reported cases, there is a lack of psychological safety, people are fearful for their jobs and afraid to speak up. It takes extreme courage to speak up in an environment of fear of retaliation.
On January 9, 2020, 117 pages of emails and instant messages were made available as part of the US House Committee investigation. Sara Nelson, the president of the Association of Flight Attendants union, said the messages revealed a “sick” culture at Boeing, noting that “the trust level was already in the toilet.”
Boeing said of the messages on the same day as their release:
We regret the content of these communications, and apologize to the FAA, Congress, our airline customers, and to the flying public for them. We have made significant changes as a company to enhance our safety processes, organizations, and culture. . . . The language used in these communications, and some of the sentiments they express, are inconsistent with Boeing values, and the company is taking appropriate action in response. This will ultimately include disciplinary or other personnel action, once the necessary reviews are completed.
I find the last sentence interesting. Rather than a humble reflection of the organizational culture and the cost and schedule pressure that incentivized and led people to behave how they behaved, there is a threat of disciplinary or other personnel action.
Even before the COVID-19 coronavirus pandemic, Boeing had been facing a number of issues, spanning commercial, military, and space. There were the two tragic 737 MAX crashes within five months of each other in which 346 people lost their lives. The aircraft had an undocumented system (MCAS) that repeatedly took control of the plane with a single point of failure reading from one angle-of-attack sensor. It was undocumented due to a desire to minimize cost and to keep pilot training requirements to a minimum.
Boeing had offered Southwest Airlines a rebate of $1 million per aircraft on an order of almost three hundred aircraft if flight simulator training was required. This rebate would have covered the cost to Southwest Airlines had expensive pilot flight simulation training been required. However, Boeing had created further financial pressure to minimize pilot training, in addition to competing with the Airbus A320neo.
Unfortunately it took two fatal crashes before all planes of that type were subsequently grounded, with Boeing and the FAA still asserting that the aircraft were safe, even after the second crash and after most of the rest of the world had grounded the plane.
The 787 Dreamliner production also had issues. It was late by three years and was billions over budget, costing an estimated $32 billion on an original approved budget of $7 billion.
An investigation by The New York Times in April 2019 showed that workers on the 787 in North Charleston were pushed to maintain an overly ambitious production schedule, and they were fearful of losing their jobs if they raised concerns. The 787 Dreamliner was grounded by the FAA in 2013 due to battery fires. Boeing had two airplane models grounded within six years. The last time that the FAA grounded an aircraft was the McDonnell Douglas DC-10 in 1979.
There have been issues with Boeing delivering a KC-46 Pegasus mid-air refueling tanker to the US military, $3 billion over budget, three years behind schedule and beset with technical issues, including lack of visibility for the last ten feet of the refueling boom, cargo fasteners coming undone during a flight, and chronic leaks in the aircraft’s fuel system, a problem especially bad for a plane that is supposed to perform aerial refueling.
In December 2019, Boeing’s Starliner crew space capsule failed an unmanned test flight due to an eleven-hour offset in the mission clock on board, plus additional potentially catastrophic software errors were detected after the launch and fixed from the ground. NASA labeled this aborted mission, during which the spacecraft was nearly lost two times, a “high-visibility close call.”
In March 2020, the US House Transportation and Infrastructure Committee in its preliminary investigative findings stated, “Cost, schedule, and production pressures undermined safety of the 737 MAX.”
The report continues:
A Boeing internal survey conducted in 2016 at the height of the 737 MAX’s certification activities, and provided to the Committee from a whistleblower, found that 39 percent of Boeing employees that responded perceived “undue pressure” and 29 percent were concerned about consequences if they reported potential undue pressure, painting a disturbing picture of cultural issues at Boeing that can undermine safety and oversight.
“We’ve all seen this movie before, in places like Enron,” Chesley B. Sullenberger III, the pilot who safely landed a plane on the Hudson River in 2009, said in an interview. “It’s not surprising that before a crisis, there are indications of real deep problems that have their roots in leadership.”
The origins of a profound pivot in corporate culture at Boeing can be traced back to 1997 and the acquisition of McDonnell Douglas. Or as some have called it, a “reverse takeover,” as it was McDonnell executives who ended up in charge of the firm. “McDonnell Douglas bought Boeing with Boeing’s money,” went the joke around Seattle.
Founded in 1916, Boeing was engineering-led. Its executives held patents, designed wings, and had engineering and safety in their DNA. Finance wasn’t a primary language. As late as the mid-’90s, the company’s chief financial officer had minimal contact with Wall Street and answered colleagues’ requests for basic financial data with, “Tell them not to worry.”
Bill Allen, Boeing’s legendary leader from 1945 to 1968, described his company’s ethos as: “To eat, breathe, and sleep the world of aeronautics.” By 1998, the then-CEO saw it differently: “We are going into a value based environment where unit cost, return on investment, and shareholder return are the measures by which you’ll be judged. That’s a big shift,” said Phil Condit.
“The important thing is not to get overly focused on the box,” the Boeing
CFO said in an interview. “The box—the plane itself—is obviously important, but customers are assuming the box is of great quality.” This was heresy to engineers, to whom the box was everything. It was enough to drive the white-collar engineering union, which had historically functioned as a professional debating society, into acting more like organized labor. “We weren’t fighting against Boeing,” one union leader said of the forty-day strike that shut down production in 2000. “We were fighting to save Boeing.”
In 2001, Boeing moved its head office from Seattle to Chicago, 1,700 miles away from their nearest assembly line. The isolation was deliberate. “When the headquarters is located in proximity to a principal business—as ours was in Seattle—the corporate center is inevitably drawn into day-to-day business operations,” Condit explained.
This was a very visible signal of the change in corporate culture, the opposite of “go see” or a Gemba Walk (“management by walking around”) as practiced at firms like Toyota.
The company that once didn’t speak finance was now, at the top, losing its ability to talk engineering. It wasn’t just technical knowledge that was lost. As aerospace analyst Richard Aboulafia said:
It was the ability to comfortably interact with an engineer who in turn feels comfortable telling you their reservations, versus calling a manager 1,700 miles away who you know has a reputation for wanting to take your pension away. It’s a very different dynamic. As a recipe for disempowering engineers in particular, you couldn’t come up with a better format.
Top engineers reported primarily to business leaders for each airplane model, and secondarily to the company’s chief engineer. With this structure, according to a Times report, engineers who reported concerns faced resistance from executives whose jobs revolved around meeting production deadlines. Employees in interviews described the old Boeing as a “democracy” that valued debate and a group approach to problem-solving. “In those days, ‘people were treated as people, not numbers,’” one worker is quoted as saying. After the merger, Boeing had become more authoritarian.
In 2000, Jim Collins, author of Good to Great and Built to Last, said:
If in fact there’s a reverse takeover, with the McDonnell ethos permeating Boeing, then Boeing is doomed to mediocrity. There’s one thing that made Boeing really great all the way along. They always understood that they were an engineering-driven company, not a financially driven company. If they’re no longer honoring that as their central mission, then over time they’ll just become another company.
At Boeing, “cost, schedule, and production pressures undermined safety of the 737 MAX” and there is a “culture of concealment,” according to reports. People are fearful to speak up. There is a lack of psychological safety. The pivot in corporate culture in 1997 took the firm from being engineering-led and democratic to finance-led and autocratic, treating the plane as a commodity.
Between 2013 and 2019, Boeing diverted 92% of operating cash flow to dividends and share buybacks to benefit investors and increase the share price. Since 1998, share buybacks have consumed $70 billion, adjusted for inflation. That could have financed several new airplane models. Meanwhile the production deficit on the 787 Dreamliner, as of the end of 2019, eight years after the first commercial flight, is $20 billion. The vast majority of employees undoubtedly want to do the right thing, but many appear to feel powerless.
In order to optimize for outcomes, organizations need to listen to employees at all levels, creating an environment free of fear and capable of acting on feedback. There should be a focus and incentivization on a balanced set of outcomes (over output), including quality, the flow of work, safety, happiness of colleagues and customers, as well as value. With a positive trend in quality, flow, safety, and employee engagement, such that improvements are sustainable (not through allegedly working eight weeks without a day off), cost and schedule will come down.
There should not, however, be a primary focus on cost and schedule. As the Boeing story has illustrated, the consequences can be disastrous. In addition to the tragic loss of life, and prior to the COVID-19 pandemic, the consequences for Boeing included their first annual loss in more than twenty years and the worst annual sales figures in decades, with more cancellations than new orders in 2019. An overt focus on cost has had the opposite outcome than desired.
Boeing’s chief executive, Dennis A. Muilenburg, who was fired on December 23, 2019, said in a speech in October 2019 that “it is critical we take a step back to humbly look at our culture.”
Keep reading in Sooner Safer Happier: Antipatterns and Patterns for Business Agility by Jonathan Smart, with Myles Ogilvie, Zsolt Berend, and Simon Rohrer.