The long list of Boeing’s woes seems to have reached its pinnacle in late 2003 with the scandal surrounding the Pentagon deal that alleged inappropriate behavior and the loss of documents by Boeing officials. After his seven-year reign as the head organization, December 2003 saw the eventual resignation of Phil Condit. Many breathed a sigh […]
The long list of Boeing's woes seems to have reached its pinnacle in late 2003 with the scandal surrounding the Pentagon deal that alleged inappropriate behavior and the loss of documents by Boeing officials. After his seven-year reign as the head organization, December 2003 saw the eventual resignation of Phil Condit. Many breathed a sigh of relief at the news. The problems at Boeing were reportedly endless. From a stock price that had decreased by 6.5 % while the company was under his leadership to increasing competitive pressures, the future for Boeing was in doubt, and changes were needed.
For many years Boeing graced American corporate news for its prowess as the leading aircraft manufacturer. However, in 1994 Airbus-their main rival-booked more orders. This shocked the management executives and began a series of changes to overcome the bureaucratic structure, outdated technological systems, and unnecessary processes in a company that had reportedly changed little since World War II.
In 1997, market demand increased dramatically, and Boeing attempted to meet this surplus of orders by doubling their production capabilities instantaneously. A manufacturing crisis ensued, and Boeing's reputation took a dramatic turn for the worse when they were required to halt production of the 747 aircraft for 20 days. The company had "stubbed it toes," according to the then-president of the commercial Airplane group, Ron Woodward, who was dismissed not long after the crisis. The "win at all costs" approach that Boeing supposedly had to do its business dealings and a lack of communication within the organization appeared to have been the source of the problem.
After experiencing these manufacturing difficulties, an attempt was made to revitalize Boeing's operations by streamlining aircraft assembly and increasing the company's efficiency. This was to be done by focusing on production and costs, not on "airy vision statements." Their overall strategy was to update their technology systems, downsize their operations, and re-establish relationships with their suppliers- the only feasible way to cut costs.
Perhaps the first step in recognizing that the cycle of demand for their products caused massive fluctuations in revenues each year and the company needed more stability occurred when Boeing acquired McDonnell Douglas in 1997 to increase its defense contracts. However, this merger brought difficulties in the way of cultural synthesis. While the latter had a strong culture in dealing with government officials for defense contracts, Boeing's family-oriented culture led to integration issues. The merger also had financial implications when investors accused the organization of trickery regarding the merger with McDonnell Douglas, and a payout of $92.5 million was made to the shareholders.
In 2001, Boeing adopted lean manufacturing principles and aimed at rejuvenating its reputation by making production efficient. The object of the project was to implement an automated system of assembly lines. They also hoped to facilitate more accessible communication channels between Boeing's staff and the suppliers. They implemented a web-based procurement system that allowed suppliers to monitor stock levels and replenish supplies when they dipped below a predetermined minimum.
The process of automating the production lines was a struggle for Boeing. Information technology within the company was decentralized, and over 400 systems were used to meet various departments' needs. The lack of collaboration regarding product procurement meant that the same product could be manufactured by Boeing for one aircraft but subcontracted for another. Boeing had chosen to implement a technological platform to regulate product life cycles. This was hoped to cut costs and facilitate the more rapid production of the 7E7. It would do this by standardizing the "use of specifications" engineering rules, operational parameters, and simulation results across its extended enterprise. It was hoped that this new system would "improve collaborations, innovation, product quality, time-to-market, and return-on-investment.
The decision to diversify from the traditional commercial airline industry and the many acquisitions created integration issues for the company. The aim again was to add more stability to the business by diversifying into information services and the space industry- providing services with elevated margins that would reflect on Boeing's bottom line. Condit later admitted that entry into the space industry was an erroneous move. According to the CEO of Airbus, Noel Forgeard, the diversification process was " extremely demoralizing for Boeing employees." Still, Boeing's vice president of marketing, Randy Baseler, claimed that " what affects morale right now is that we are in a down cycle." Regardless of its reasoning, Boeing's employees' morale was at a loss, and this issue needed to be addressed.
According to a BusinessWeek reporter, Boeing was in dire need of a "strong board and a rejuvenated corporate culture based on innovation and competitiveness, not crony capitalism." Boeing's past had led its culture in pieces. After the merger with McDonnell Douglas and many other organizations, the decision was made in 2001 to move the headquarters of their operations from their historic home in Seattle to Chicago. The relocation was said to be the factor that most significantly disturbed the company's culture. The move was instigated to provide a neutral location for diversified Boeing. Having acquired many different organizations, the company severed past connections to the Seattle site. The strategic reason for this move was to help refocus attention on international growth prospects.
Harry Stonecipher, the past head of McDonnell Douglas who had come in as the new chief operating officer of Boeing after the company was acquired, was announced as the new CEO after Condit's resignation. His first important decision was regarding the 7E7 planes, which could be Boeing's first new plane in a decade. On December 16, 2003, Stonecipher announced that Boeing would go ahead with producing the 7E7 jets. Stonecipher promised to work closely with unions to see that the low morale is reversed and that the planes are built quicker and for less money. Despite Stonecipher's best efforts, critics call for an outside leader to come in and take Boeing back to its basics.
A researcher of a shareholder firm claimed that Boeing's problems lay in the fact that they had "overpromised" and "underdelivered." The past has shown that Boeing's inability to react to external pressures has increased its demise. The industry's future will now depend on the ability of either Airbus or Boeing to predict how the market will go. Boeing has set its future on the market, developing a partially for smaller aircraft., like their new 7E7. On the other hand, Airbus projects that the airlines will purchase larger aircraft.
The diagnostic model that would provide a framework that succinctly identifies significant aspects leading to the situation at Boeing is that of organizational change. The reason therein is that the success of a business is based on its capacity to amend the principle of work and implement administration transformation when the environment starts to make pressures for change (Sutevski, n.d.). In this respect, improvements are required in Boeing because its future is in doubt; it is facing growing competitive pressure, and its holdings reduced by 6.5% while under the leadership of Phil Condit. More so, the organization has made few reforms since World War II. Thus, despite being the leading aircraft manufacturer for many years, Airbus, their main competitor, booked more orders in 1994. Consequently, the firm’s management proposes a series of measures to be implemented to overcome unnecessary processes, outdated technological systems, and bureaucratic structures.
The first issue affecting the firm is based on adapting to change. For example, the market demand increased dramatically in 1997, and the company made efforts to attain the reserve of aggregate orders by promptly expanding its construction capacity. However, Boeing’s stature took a dramatic turn for the worse because an industrial predicament ensued when they were obligated to stop the assembly of the 747 Aircraft for 20 days. A lack of communication within the organization and the ‘win at all cost’ strategy they adopted appears to have been the source of that problem.
The second concept revolves around technology. In this regard, although the organization adopted lean manufacturing principles in 2001, intending to make production more efficient and rejuvenate its reputation, it still struggled with automating the fabrication. The information machinery of the firm was also decentralized, and the organization could manufacture the same product for one aircraft while subcontracting for another due to a lack of collaboration within the department. The last problem concerns the cultural implication of diversification. It is of particular concern that the many acquisitions and the decision to diversify from the traditional commercial airline resulted in integration issues for the enterprise. Arguably, such contextual elements have also influenced the behavior of the employees (Carter et al., 2013).
Based on the problems identified, it is evident that Boeing is facing the issue of organizational change, which is a natural, endemic, and ongoing aspect. The process is normal and transpires in different categories of organizations (Sutevski, n.d.). Therefore, business transformation is a necessity to prosper and survive. The fact that the company has made few reforms since World War II implies that it has, for a long time, ceased to embrace modifications; thus, it stayed in a static environment. For this reason, it failed to remain viable – since it was not flexible to quickly adapt and react to the external surroundings’ challenges.
Consequently, the business lost its competitive edge for various reasons. For example, technology affects how they communicate. More so, the customers’ needs grew and evolved, creating demand for new categories of products. All in all there necessitates the incorporation of changes into the institution’s system structures and processes to improve performance (Thomas, 2014)
Organizational diagnosis would be a crucial aspect of the change required in Boeing. The reason therein is that it would enable the management to answer the following critical questions: what (the content of transformation), how (its process), and why (its causes). More so, it is an innovative way of enhancing the firm’s competitive advantage as evolving external forces, including changing technology, globalization, and demographics, require the executive to retool and rethink the management strategies rapidly. In this regard, the most relevant concept is the Burke–Litwin organizational performance and change model. The method is appropriate when a cross-cultural implementation is required and when there is a need to analyze how the adaptation can be influenced. It is also vital in explaining how effectiveness and performance are affected and when a practical utility is required. Based on the strategy, the transformational factors concerning the efficiency and performance of Boeing include the following ones: individual and organizational performance, the company’s culture, leadership, vision, mission, and strategy, as well as the external environment. On the other hand, the transactional ones are as follows: motivation, individual needs and values, task requirements and employees’ skills, departmental climate, policies and procedures, management practices, and structure (Martins & Coetzee, 2009).
Boeing Burke–Litwin model
Source: Martins and Coetzee (2009).
In brief, the proposed approach has numerous strengths that are crucial for the situation experienced by Boeing. For instance, it explains linkages and distinguishes between the role of transactional and transformational dynamics of organizational change and behavior. Furthermore, it shows the cause-and-effect relationships between the company’s external and internal environments. However, its main limitation is that it is complicated based on the obscurity of organizational phenomena. In essence, the Burke–Litwin model is an aspect that would help the company to improve performance outcomes and behavior. Last but not least, it deals with effect (resultant performance) and causes (institutional conditions), serving as a guide for institution diagnosis as well as planned managed structural change (Martins & Coetzee, 2009).
Carter, M. Z., Armenakis, A. A., Feild, H. S., & Mossholder, K. W. (2013). Transformational leadership, relationship quality, and employee performance during continuous incremental organizational change. Journal of Organizational Behavior, 34(7), 942-958.
Martins, N., & Coetzee, M. (2009). Applying the Burke-Litwin model as a diagnostic framework for assessing organizational effectiveness. SA Journal of Human Resource Management, 7(1), 1-13.
Sutevski, D. (n.d.). What is the diagnostic model of organizational change? Retrieved from http://www.entrepreneurshipinabox.com/7281/organzational-change-a-diagnostic-model/.
Thomas, O. O. (2014). Change management and its effects on organizational performance of Nigerian telecoms industries: Empirical insight from Airtel Nigeria. International Journal of Humanities Social Sciences and Education (IJHSSE), 1(11), 170-179.
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