Stan Sorscher, a former Boeing engineers and now a Labour Representative at the SPEEA (Society for Professional Engineering Employees in Aerospace) is the author of a letter, reproduced in full below, which he posted to the Seattle Times
In it he says Boeing’s cost-cutting culture is to blame for production problems with the 737 MAX and other planes:
- “The cost-cutting culture is the opposite of a culture built on productivity, innovation, safety or quality”
- “Boeing’s experience with cost-cutting business culture is apparent”
- “Production problems with the 787, 747-8 and now the 737 Max have cost billions of dollars, put airline customers at risk, and tarnished decades of accumulated goodwill and brand loyalty”
It’s the first time since the grounding of the Max that a senior figure in Boeing’s engineers union has spoken – though investigations into two fatal Max crashes are incomplete, evidence of engineering errors have surfaced – errors that were not discovered in testing
Sorscher points to a major change in Boeing’s internal culture in the late 1990s – before that time, the company was focused on the performance of its products – this was the era of the bold bet on the 747 – it was also a time when a little plane called the 737 got its start, became Boeing’s best-seller and remained so over many iterations
In the 1990s, Boeing put workers at the center of its performance-driven universe – the plane of that era was the 777 – it was a time of partnership between workers and executives as they learned together how to produce the plane, and many engineers speak of this period as the most fulfilling in their professional lives
But all that changed with the 787 program in the late 1990s – Boeing reset the playing field – Washington state would have to compete with other jurisdictions, offering tax breaks to secure production lines – suppliers would have to compete with rivals around the world – and workers would discover their positions were precarious
The atmosphere inside Boeing also changed – Sorscher says Boeing engineers received clear cultural messages that identifying problems was thought of by management as making trouble – “If the message is “follow the plan” and you watch co-workers who raised an objection and the problem isn’t taken seriously or are they’re considered troublesome, then that’s a cultural message you pick up,” he said.
However, from a shareholder perspective, Boeing’s approach to its business had been wildly successful – worldwide demand for airplanes was riding a high and Boeing had diverted cash flow into dividends and share buybacks that helped boost the company’s stock – from 2000 to the present, Boeing’s stock price grew from $44 to $356 – indeed, the stock hit a peak of $440 just before the crash of an Ethiopian Airlines Max jet last March
Sorscher’s letter to the editor of The Seattle Times:
Employees come to work to do their jobs. We aren’t usually aware of workplace culture, even over the span of years.
We learn culture from our co-workers and managers when they make decisions and demonstrate problem-solving skills. Leadership messages affect thousands of decisions that add up to success or failure of the organisation.
For many years, Boeing competed with Airbus and other producers for airline customers based on performance of its products. As a recent news report put it, Boeing now competes for investors with Exxon and Apple.
Boeing rose to the top of the airplane business as an engineering company, focused on performance of its products. Boeing made bold decisions that “bet the company,” and prevailed over competitors.
In the 90s, Boeing business culture turned to employee engagement, process improvement, and productivity – adopting the “quality” business culture that made Japanese manufacturers formidable competitors.
In the late 90s Boeing’s business culture shifted again, putting cost-cutting and shareholder interests first.
Some business cultures are well-suited to commodity-like products, but are a bad fit to performance-driven products.
Ask a financial analyst, “Are airplanes commodity-like or performance-driven?”
Business instinct is to cast the question as a market transaction. Airline customers worry about price, delivery dates, training costs, spares, maintenance, and other factors, but overall, those considerations come out very close in the end.
The last major innovation in air travel was the jet engine in the 1950s. A business analyst would say the airplane business is “mature,” the products are standardised, innovation is slow, so airplanes are commodity-like.
Now ask a different question. “Are the design, development, testing, and manufacture of airplanes commodity-like or performance-driven?”
Whoa. Tough question.
Actually, making airplanes is performance-driven.
Success or failure of an airplane program turns on productivity. The first airplanes off the production line sell at a loss. Costs come down over time; the quicker the better.
If your business model emphasises productivity, employee engagement, and process improvement, costs go down faster. This was the essence of the “quality” business model Boeing followed in the mid-90s.
The 777 had the best “learning curve” in the business. On the other hand, if your industry is mature, and your products are commodity-like, business school theory says a cost-cutting model is appropriate.
Wal-Mart perfected its particular version of the cost-cutting business model. Amazon adapted that model to its industry. Boeing has adapted it to high-end manufacturing.
These companies are super-stakeholders with market power over their supply chains. The point of this business model is that the super-stakeholder extracts gains from the subordinate stakeholders for the short-term benefit of investors.
Subordinate stakeholders are made to feel precarious and at-risk.
Each supplier should see other suppliers as rivals. Similarly, each work location should know it competes on cost with rival work locations. Each state or local government should compete for incentives against rival states.
In this model, subordinate stakeholders never say no to the super-stakeholder – not workers, not suppliers, not state legislatures.
This cost-cutting culture is the opposite of a culture built on productivity, innovation, safety, or quality. A high-performance work culture requires trust, coordination, strong problem-solving, open flow of information, and commitment to the overall success of the programme.