Last month, Boeing parted ways with its CEO Dennis Muilenburg. His successor, David Calhoun, who previously ran GE's jet engine business, will take o
Last month, Boeing parted ways with its CEO Dennis Muilenburg. His successor, David Calhoun, who previously ran GE’s jet engine business, will take on the job so vacated on January 13. This is not the first time that an outsider from GE has taken over the CEO role when Boeing was in crisis. As I wrote in my 2008 book,You Can’t Order Change, the same thing happened when former GE aviation chief, James McNerney, became CEO of Boeing in 2005.
While the challenge facing Calhoun now is different from the one that McNerney had to manage, I think both stemmed from Boeing being diverted from its core values — which I believe center on a commitment to the highest standards of quality in aircraft design, manufacturing, and service.
McNerney became CEO in the wake of long-time CEO Phil Condit’s departure with an initial mandate to clear up ethical problems — including procurement and document scandals — which McNerney settled for $615 million. The details leading to Condit’s departure suggest a fundamental departure from Boeing’s values.
McNerney left Boeing in 2015 in much better shape than when he arrived. For example, during his decade at the helm, Boeing’s stock rose 112 percent while the S&P 500 was up 72 percent. However, he did make the decision to develop the 737 MAX with a design that would not require an extensive FAA review.
He also appointed Muilenburg as his successor who diverted Boeing from its core values. As I see it, Muilenburg lost his job because he put a higher priority on boosting revenues and cutting cost than on quality or service to customers.
He also opted not to require pilots to be trained on what turned out to be its fatal MCAS flight control system, according to the New York Times, (whose misfiring led to two crashes five months apart which cost 346 lives, according to the Wall Street Journal). And after grounding the MAX in March 2019, it seemed to the FAA that he was pushing too hard for regulators to return it to service, according to the Wall Street Journal.
While Wall Street Journal writer Jon Sindreu provided a list of 10 tasks for Calhoun, what follows is my analysis of three of his recommended Calhoun agenda items that could apply to almost any leader in a turnaround situation.
1. Rebuild Trust with Key Stakeholders
When a new CEO comes in to a company in need of a turnaround, the first step should be to meet with key stakeholders and build trust with each. In general, this means listening to questions and concerns of each stakeholder; telling each what you will do to address those concerns; and fulfilling those commitments.
In my view, Calhoun must do this first. More specifically, he should build trust with U.S. and international regulators, politicians, airline executives and suppliers who lost confidence in his predecessor who repeated claims that the 737 MAX would be re-certified in 2019. In general, he will need to listen more and respond
2. Restore Core Values
One of the keys for a startup becoming a large company that changes the world is an effective culture. When such a company gets in trouble, its CEO may have pulled the company away from that culture.
When a turnaround CEO starts work, there is an opportunity to restore that culture by listening to employees, understanding their frustrations, and connecting their goals for the future with the company’s core values.
Boeing traditionally has placed a value of on excellent engineering and customer service. Muilenberg diverted Boeing from those values. Calhoun could follow McNerney’s lead when he took over as CEO by meeting with Boeing employees — particularly its engineers and production people — to reconnect them to the company’s core values.
3. Solve the Most Critical Business Problem
Companies generally do not replace their CEOs when the business is growing and profitable with brighter future prospects. Instead, a turnaround CEO takes the main stage because company faces a threat to its future that the old CEO cannot address.
The turnaround CEO must work with the executive team to plan how to solve the most critical business problem. The CEO should articulate how success will be judged and partner with a chief operating officer who rides herd on the details of solving the myriad interconnected implementation challenges.
As Calhoun begins what investors hope will be a successful turnaround at Boeing, learn from these three lessons that he should apply.
Published on: Jan 7, 2020
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