Engineering Life-Opinion on the Bloomberg Article Regarding Boeing

Thoughts on the Bloomberg article I read about Boeing

A friend forwarded the article link from Bloomberg, knowing that I had been very skeptical about the Boeing management’s handling of the various misfortunes that had affected the company recently. (https://www.bloomberg.com/opinion/articles/2024-03-25/boeing-needs-to-act-faster-to-find-ceo-calhoun-s-successor?embedded-checkout=true)

This opinion piece by Thomas Black of Bloomberg asserts that Boeing is finally back on the right track because Chief Executive Officer Dave Calhoun and Chief of Commercial Aviation Stan Deal, have taken a golden parachute, and have retired, respectively. In addition, the Chairperson Larry Kellner will not stand for re-election. I differ with Mr. Black, for the cancer is deep and a change in figureheads won’t turn this Titanic, or more recently this Dali, around.

There are many things wrong with this rosy picture that Mr. Black paints.

The CEO, Dave Calhoun, seemingly had the credentials to guide a technology driven company, having graduated from Virginia with a Bachelor of Science degree, but it was in accounting, not in technology. He also worked at GE, but as a bean counter, far away from technology.

Chief of Commercial Aviation Stan Deal has a BS in Aerospace engineering from my alma mater, University of Illinois. His biography touts his “leadership” positions in Boeing while serving in the commercial aviation and logistics functionalities. The four capability areas that he was responsible for before taking over commercial aviation were: Supply Chain; Engineering, Modifications & Maintenance; Digital Solutions & Analytics; and Training & Professional Services.

The intrinsic assumption embedded in the article illustrates the two constants in the traditional American business model. First, as I had written previously, the assumption is that operating a business does not require a body of knowledge nor an intimate understanding of the engineering and manufacturing functions of the backbone product of engineering based businesses; a generic “business background” is all the skill set it takes to run any company, regardless of how the product is designed and manufactured. ( https://thecuriouspolymath.substack.com/p/engineering-life-greatest-fraud-ever)

The other constant is that if anyone demonstrates an acumen for any function, they are plucked from their area of expertise and shunted to a business function as a reward for their excellence. Unfortunately, this mode of operation puts the star performer into a position of least competence, otherwise known as the Peter Principle, a moniker that I obviously despise. American management thus deploys the first assumption about the generic nature of operating a company.

Mr. Black’s solution to Boeing’s woes, which follows along with what I had called the greatest fraud ever perpetrated of the generic business acumen:

The timing for Boeing’s start of its CEO search may be impeccable. Larry Culp, who deserves to be heralded for rescuing General Electric Co., will have completed the heavy lifting of his work next week with the spinoff of GE Vernova, the energy unit of the iconic industrial company that Culp broke into three parts. When Culp took over as CEO of GE in 2019, it seemed as if the industrial giant was sinking under huge debt with little hope of rescue. After paying down more than $100 billion of debt and applying Culp’s continuous improvement philosophy to drastically improve factory operations, the GE companies are now on firm footing.

The advice may be seemingly obvious to many in the business world, but it is tone deaf to the context of Boeing’s problem versus GE’s problem when Culp took charge.

A caveat, I speak about GE and Boeing from a point of view that is only surface deep, I am not well versed in the inner intricacies of either companies, I can only surmise what I surmise from the media reports; but then again, my viewpoint is probably slightly less educated than Mr. Black’s viewpoint since he probably has sources within the companies, and I don’t. From my standpoint, GE’s problem was organizational and financial, whereas Boeings problems is rooted in the cultural transformation that happened in the “merger” of Boeing and McDonnell Douglas in 1997. Or as Jerry Useem put it in his excellent 2019 article in The Atlantic, written in the aftermath of the Boeing 737 Max disaster of 2018. (https://www.theatlantic.com/ideas/archive/2019/11/how-boeing-lost-its-bearings/602188/):

The shift had started three years earlier, with Boeing’s “reverse takeover” of McDonnell Douglas—so-called because it was McDonnell executives who perversely ended up in charge of the combined entity, and it was McDonnell’s culture that became ascendant. “McDonnell Douglas bought Boeing with Boeing’s money,” went the joke around Seattle. 

The article is enlightening and worth a read, my key takeaways are the following:

·       The Boeing board and then CEO Phil Condit were focused on making more money, not an outrageous goal for a publicly traded company, but they weren’t concerned with the unintended consequence of how the great Boeing engineering culture was going to be eroded slowly and surely through the years and eventually cast aside as they pursue the mighty buck to the exclusion of all other metrics.

·       The “losing” CEO of McDonnell Douglas, Harry Stonecipher, clearly won when Condit resigned. It was Stonecipher who was quoted as saying: “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.” That struck the death knell for engineering excellence. Stonecipher was just doing what he did at McDonnell Douglas, run the company into the ground.

·       The article further details how the McDonnell Douglas/Boeing management installed an M.B.A. with a varied background in sales, marketing, and supply-chain management as the head of the commercial aviation division, much like Stan Deal, the outgoing head of commercial aviation, rather than an engineer in engineering design or manufacturing. It makes sense for a business centered culture: sales, marketing, and supply chain management are all metrics that are reflected on the balance sheet.

I don’t know Larry Culp’s background in engineering, although his credentials include operating Danaher Corp. successfully, it is a respected company. Mr. Black emphasizes that Culp has had “experience” in aviation as he had positioned himself as the CEO of the newly spun off GE Aerospace. The problem is that he just stepped into that role, mainly because that is the most profitable of the GE divisions that he had formed out of the remnants of the once great General Electric of Thomas Edison. He may have genuine insight and knowledge about the engineering culture that is necessary to sustain a safety culture that the media is espousing. My question is whether he understands the inner workings of the safety culture? It is one thing to know, it is completely another to understand. My question is: does Larry Culp understand safety culture? His credentials in operating Danaher give me hope that he does, but I am not sure.

The emphasis in Mr. Black’s opinion is to stop the bleeding of trust in Boeing and recovering the faith from the airline customers and the general public. While that is indeed a critical goal in the survival of the company, it is the cultural aspect which Mr. Black’s opinion is ignoring. Rebuilding what Boeing had built in 80 years of existence prior to their merger with McDonnell Douglas will take a very long time, it is a long and difficult row to hoe. It would take someone who is committed to building an engineering culture from the ground up and weeding out and eradicating the bottom-line guarding culture that came with the merger.

Indeed, the emphasis on the so-called safety culture is a head fake, an euphemism for engineering culture, unencumbered by the profit-making bottom-line culture espoused by the business orthodoxy. The founding engineering culture that built Boeing to what it was and that Stonecipher so proudly denigrated and deliberately destroyed in a period of less than 20 years.

The ethos of an engineering culture revolves around making the best decision in the face of uncountably many uncertainties and unknowns. The approach is to be as certain as is reasonable and to make as certain as possible, while also acknowledging that nothing can be completely certain in real life, so the aim is for resiliency. The important point is that practitioners of the engineering sciences not only acknowledges uncertainties in their every activity, they embrace it.

Many engineers learned this lesson their freshman year in college when they were shown the footage of the Tacoma Narrows Bridge collapse in 1940. The lesson was drummed into their psyche: check and re-check calculations, build margins into designs in case something unexpected happens, it is better to be cautious and conservative in making decisions, and the coup de grace, lives depend on their work.

This approach is clearly at loggers’ head with the traditional cost-cutting business approach. The traditional cost-cutting business approach is to view every kind of spending as a target for cutting, any spending is extravagant, any caution taken is too much if it involved expenses. One problem with this world view is that the definition of liability in the traditional cost-cutting business approach is only defined only with certain profits or expenses. In the cases of any potential product liability, the financial liability from defective products are not certain and are not reflected on the balance sheet because the future product liability, it is a hidden liability built into the product by what the company did not spend to thwart any product failure, whether it involved lost lives or not. By focusing on just the present certain expense and not the exposure to uncertain future liability expenses, the traditional cost-cutting business approach is gambling on being lucky and avoiding the unexpected, or assuming that randomness is predictable or so small that the probabilities of non-failure of products are in their favor.

In Nassim Nicholas Taleb’s extensive Incerto Series, (https://www.penguinrandomhouse.com/series/INO/incerto/) he lays out, in his inimitable way, how we foolishly assume that the status quo/steady state conditions will always persist unconditionally; that any transient behavior or randomness is so unlikely that we deem them to be Black Swans; that even in the unlikely event of randomness intruding upon our bucolic fantasies of uneventfulness, a simple, proportional, and linear response is all that is needed to correct any disruption. This belief, in a nutshell, is the traditional cost-cutting business approach. There is a distinct lack of understanding of complex systems, tightly coupled interactions, and nonlinear responses in the traditional cost-cutting business approach.

The mantra is: why change when everything will always be the same. The airplanes are all still flying so why not trim the fat in our production because these safeguards are clearly redundant, and we can make more money if we cut. Persistent spending to make sure the airplanes continue to operate safely became a target for the budget hawks. What they don’t see is what can’t be measured, or as illustrated by survivorship bias, a lesson learned from the statistical analysis of the returning fighter airplanes from bombing enemy targets. (https://worldwarwings.com/the-statistics-that-kept-countless-allied-fighter-planes-in-the-sky/) What you don’t see or measure can many times be more important than what you do see and measure. In this case, it took 20 years for the trimming of necessary procedures, the headlong rush to cut costs, and the complete eradication of engineering culture to make the presence of the unintended consequences known.

There needs to be a convergence of goals when the Boeing board selects their next set of leaders. Stopping the bleeding is necessary for keeping the company solvent and continue to pay the bills, but stopping the bleeding involves more than short term band-aids in PR and assiduously repeating the safety mantra, which is just talking the talk. What needs to happen is to restore the engineering culture that was built throughout Boeing’s proud history, but which was eradicated in the last 20 years by the cost-cutting culture. They need to walk the walk. It took 80 years of being stubborn and disciplined to build it, I don’t know how long it would take to rebuild it. The first step of course is to cut out the cost-cutting cancer from Boeing board and  management’s mindset.