Use the diagnostic model (below) that provides a framework for identifying the k

Question

Use the diagnostic model (below) that provides a framework for identifying the key factors in the Boeing case (Which has been provided to you). Using speaking notes where appropriate, also address these specific points:

Describe the advantages of using a diagnostic model.

Explain why the chosen model is appropriate for this case.

Assess the organization’s readiness for change.

Recommend three “next steps” for Boeing leadership.

Use the speaking notes area, where appropriate, to ensure that you address all aspects of the assignment.

Use this Diagnostic Model:

The Six-Box Organizational Model

1. Purposes: What business are we in?

2. Structure: How do we divide up the work?

3. Rewards: Do all tasks have incentives?

4. Helpful mechanisms: Have we adequate coordinating technologies?

5. Relationships: How do we manage conflict among people? With technologies?

6. Leadership: Does someone keep the boxes in balance?

I have provided the Boeing case study below:

BOEING CASE STUDY

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 at the head of the 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 percent 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 their prowess as the leading manufacturer of aircraft. However, in 1994 Airbus—their main rival—booked more orders. This shocked the management executives and began a series of changes that were implemented to overcome the bureaucratic structure, outdated technological systems, and unnecessary processes in a company that had reportedly changed little since World War II.

THE BEGINNING OF CHANGE AT BOEING

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 its toe,” 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 its business dealings and a lack of communication within the organization appeared to have been the source of this problem. After experiencing these manufacturing difficulties, an attempt was made to revitalize Boeing’s operations by streamlining aircraft assembly and increasing the efficiency of the company. This was to be done by focusing on production and costs, not on “airy vision statements.” 43 Their overall strategy was to update their technology systems, downsize their operations, and reestablish relationships with their suppliers—the only feasible way costs could be cut. Perhaps the first step in recognizing that the cycle of demand for their products caused massive fluctuations in revenue each year and the company needed more stability occurred when Boeing acquired McDonnell Douglas in 1997 to increase its defense contracts. This merger, however, brought with it difficulties in the way of cultural synthesis. McDonnell Douglas had a very strong culture that focused on their dealings with government officials for defense contracts. Combined with Boeing’s family-orientated culture, the merger was not without integration issues. The merger also had financial implications when investors accused the organization of trickery in regard to the merger with McDonnell Douglas and a payout of $92.5 million was made to shareholders.

WHEN TECHNOLOGY BECAME AN ISSUE

In 2001 Boeing adopted the principles of lean manufacturing and aimed to rejuvenate their reputation by making their production more efficient. The object of the project was to implement an automated system of assembly lines. They also hoped to coordinate and facilitate easier channels of communication between Boeing staff and 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 line was a struggle for Boeing. Information technology within the organization was decentralized and over 400 systems were being used to meet the needs of various departments. The lack of collaboration in regard to product procurement meant that the same product could be manufactured by Boeing for one aircraft but subcontracted for another. Boeing had recently 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.” 44 It was hoped that this new system would “improve collaboration, innovation, product quality, time-to-market and return-on-investment.” 45

THE CULTURAL IMPLICATIONSOF DIVERSIFICATION

The decision was made to diversify from the traditional commercial airline industry and the many acquisitions that were made 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 process of diversification was “extremely demoralizing for Boeing employees,” but Boeing’s vice president of marketing, Randy Baseler, claimed that “what affects morale right now is that we are in a down cycle.” 46 Regardless of the reasoning behind it, Boeing’s employee morale was at a low 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.” 47 Boeing’s past had left 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 historical home in Seattle to Chicago. The relocation was said to be the factor that most significantly disturbed the culture of Boeing. The move was instigated to provide a neutral location for the diversified Boeing. Having acquired many different organizations, the past connections to the Seattle site were to be severed. 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 new 7E7 planes, which would be Boeing’s first new plane in a decade. On December 16, 2003, Stonecipher announced that Boeing was to go ahead with the production of the 7E7 jets. Stonecipher promised to work closely with unions to see that the low morale is reversed and that the planes are produced at a quicker pace and for less money. Despite Stonecipher’s best efforts, critics are calling for an outside leader to come in and take Boeing back to basics. A researcher of a shareholding firm claimed that Boeing’s problems lay in the fact that they had “overpromised and under delivered.” 48 The past has shown that Boeing’s inability to react to external pressures has increased their demise. The future of the industry will now depend on the ability of either Airbus or Boeing to predict the way the market will go. Boeing has bet its future on the market developing a partiality for smaller aircraft, like their new 7E7. Airbus, on the other hand, projects that the airlines will purchase larger aircrafts in the future.

Explanation / Answer

The six box organization model:

1. Purposes - Boeing is in the business of making aircrafts. It is trying to accomplish market leadership in the segment and stay ahead of its only competitor - Airbus - in terms of the number of orders received.

2. Structure - The structure of Boeing is not very clear. It is slightly cloudy and hazy. The company, after falling behind Airbus in terms of the number of orders, acquired McDonnell Douglas, for entering into the market of defense contracts. Integration of the combined entity was not proper and the structure was not streamlined. There was no clarity on the future focus area - was it making aircrafts or was it the defense business.

3. Rewards - Clearly, the employees of Boeing were demotivated and their morale was at an all time low. This was due to the death of innovation and competitiveness in the company's culture. Boeing entering into the space industry further demotivated the employees. The culture of Boeing had to be strengthened and spiked with a healthy dose of innovation.

4. Helpful mechanisms - In 2001 Boeing adopted the principles of lean manufacturing. This was done by automating the production line and decentralizing the information technology. However, it was not a success due to lack of collaboration.

5. Relationships - The culture at Boeing is weak due to the absence of innovation and competitiveness. There was an urgent need to revive and rejuvenate the culture.

6. Leadership - It is clear from the case that Boeing had faced leadership crisis. The seven year stint of Phil Condit as the CEO of Boeing was a mess. Competitive pressure increased, market capitalization and stock prices fell down, and the company got involved in regulatory wrong doings in the pentagon deal.

The advantages of using a diagonistic model is that it will help Boeing better understand its strengths and weaknessess. It will eventually help Boeing improve its perfromance.

The chosen model - the six box organizational model - is appropriate here as it helps Boeing analyse its complex web of processes and relationships.

The next steps for Boeing leadership is to focus on its core competency and shy from meaningless diversification. This will increase the financial strength of the company in the long run and increase the employee's morale. Secondly, the leadership will have to revive the culture at Boeing so as to increase employee's morale and hence productivity. Thirdly, Boeing should develop a system and process to better deal with the external opportunities and threats. They will have to be flexible and agile and move as per the market movements.

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