What’s Gone Wrong at Boeing

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Written By Pinang Driod

When, last week, a panel called a door plug blew off a Boeing 737 Max 9 plane in mid-flight, leaving a gaping hole in the plane’s fuselage, air travelers everywhere no doubt felt a shudder of horror—even though the aircraft was able to turn around and land safely. But in a sense, the startling thing was how unstartling the news was. In the six years since the Max—an updated version of the long-running 737, Boeing’s most popular plane—made its debut, the aircraft has been plagued by quality problems. The most dramatic of these resulted in two catastrophic crashes, in 2018 and in 2019, which together killed 346 people.

Those crashes, caused by a faulty flight-control system, led to the Max being grounded for almost two years. Even after it returned to service, additional issues cropped up. Last April, deliveries of the Max 8 version of the plane were delayed because of problems with one of Boeing’s key suppliers’ installation of brackets joining the rear of the fuselage to the plane’s tail fin. A few months later, Boeing said it had identified a new concern, over improperly drilled holes on a bulkhead. Then, in December, the Federal Aviation Administration said an overseas airline had found that a bolt on the plane’s rudder-control system was missing a nut—a seemingly elementary fault that now chimes with the door-plug incident, which has led to the grounding of Max 9s: Both Alaska Airlines and United Airlines said that they subsequently discovered loose bolts in some of their aircraft.

Boeing was once among the most respected American companies. It helped NASA put a man on the moon. It built the 747, the most famous passenger airplane of all time. The firm’s reputation for safety and excellence was such that people used to say, “If it’s not Boeing, I’m not going”—and actually mean it. So what went wrong?

The answer that pretty much everyone arrived at after those two fatal crashes was the same: Boeing’s culture had changed. And here, the conventional wisdom is correct. For most of its history, Boeing had what you might call an engineering-centric culture, with power in the company resting in the hands of engineering and design. But in 1997, Boeing bought another aircraft manufacturer, McDonnell Douglas, in what turned out to be a kind of reverse acquisition—executives from McDonnell Douglas ended up dominating and remaking Boeing. They turned it from a company that was relentlessly focused on product to one more focused on profit.

This new orientation was encapsulated by something that Harry Stonecipher, who had been CEO of McDonnell Douglas and was CEO of Boeing from 2003 to 2005, said: “When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm.”

Corporate culture can be a notoriously squishy topic—too readily subject to broad generalizations. And, of course, all big companies are interested in making money and boosting their stock price. But even if corporate cultures are hard to characterize accurately, they’re still real. As the management theorist Edgar Schein defined it, the essence of corporate culture is “the learned, shared, tacit assumptions on which people base their daily behavior.” In the old Boeing, the people who dictated those assumptions were the engineers. In the post-merger Boeing, the people who did so were more likely to be accountants.

For some businesses, a shift to a greater emphasis on bottom-line considerations might not have mattered that much. But manufacturing airliners in large numbers is not one of those businesses. That’s because making big aircraft is an unreasonably difficult thing to do. A plane like the 737 Max has, by some accounts, more than half a million parts. Boeing now outsources much of its production, leaving assembly as its main job, so those parts are made by at least 600 suppliers (many of which, in turn, rely on subcontractors). Supervising the reliability of the manufacturing and quality-control processes at all of those different suppliers, while ensuring the reliability of Boeing’s own assembly processes, requires a maniacal attention to detail, a willingness to spend freely on reliability and safety, and a culture that tolerates the reporting of mistakes and the investment of serious resources in fixing them.

That ethos is hard to instill using only financial incentives or the threat of firing. What’s really needed is a culture of perfectionism—and that’s what Boeing seems to have lost over the past 20 or so years. To take only the most obvious example: The two fatal crashes of the 737 Max were the result of a new flight-control system that depended on data from a single sensor that had no backup. In both cases, the sensor failed, giving the flight-control system the wrong information and precipitating disaster. Designing a system that had a single point of failure violated the canon of aviation engineering, which has always emphasized the need for redundancy in cases where failure would have disastrous consequences. But in the new Boeing, people thought the risk was worth taking—or perhaps the new corporate culture they’d absorbed had simply stopped making them value what the engineers said.

After those two crashes, Boeing vowed to reinvent itself. This latest debacle suggests that it still has a long way to go. Just as public trust in a brand is easier and quicker to lose than to build, restoring a corporate culture that values engineering excellence foremost will take more time and effort. And Boeing needs to get going, because making airplanes is a business where even a single failure can have disastrous consequences for the bottom line—and Airbus, Boeing’s principal international rival, is now selling more aircraft than ever before. Boeing migrated away from an engineering-centric culture in order to boost profits and shareholder value. But over the past five years, while the S&P 500 index has risen by roughly 80 percent, Boeing’s stock price has fallen by about 35 percent; over the past decade, its annual returns have trailed the S&P 500 by almost 6 percent a year.

Putting profit over product has been bad for Boeing’s products. The irony now painfully apparent is that it’s been bad for Boeing’s profits too.

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