Unresolved crises, like zombies, return with a vengeance

On March 20, 2019, I wrote an article titled "Crisis management: what can we learn from Boeing’s handling of the B737 Max crisis?" , which might be worth re-reading in light of Boeing's latest crisis. At the start of that article, I wrote:

And as we have seen too often, highly visible crises give crisis management and communications consultants a great opportunity to express their views and pass judgement on the actual management of the crisis, often criticizing decisions taken while enjoying the enviable comfort of their seats and benefitting from 48/72 hours hindsight. At times even with little understanding of the industry involved. (...) Personally I have no interest in this kind of exercise (...) I am interested in trying to understand – with the limited information I have – the context that nurtured the crisis management decision making process in Seattle and what, if anything, we can learn from it.

Maintaining this very same philosophy I think it is appropriate to focus once again on what is happening at Boeing to push our crisis management thinking a step further.

Culture seeds crises

In discussing the "defining moment" of the 2018 crisis I wrote:

In crisis management decisions must be constantly taken as scenarios are projected, unfold and need constant re-examination. However, it is one pivotal decision, a single defining moment, in the early stages of the crisis that sets the course. Once that decision is taken, the direction of the crisis is set and the clock cannot be turned back.?

At the time the defining moment for Boeing came (and passed) with the Lion Air crash in Jakarta. It is a this time that Boeing should have asked itself the “what if” question. And that question should have been: “What if we have another crash with the same aircraft?”

I ended my article with a simple question. What prevented the company (culture, procedures, personalities, cognitive biases…) from seeing the potential risk ahead?

Books (Flying Blind: The 737 MAX Tragedy and the Fall of Boeing ), a documentary (Downfall: The Case Against Boeing ), and numerous articles have since linked the two deadly MAX 8 crashes to one fundamental problem at Boeing: culture.

Boeing's culture shift

There is a consensus that Boeing's culture shift from engineering excellence and a safety-first mindset towards a business model heavily emphasizing cost efficiency and rapid production, often at the expense of product quality and safety can be traced back to its late-1990s merger with McDonnell Douglas. In his recently published article Aram Gesar at Airguide.info writes:

The merger between Boeing and McDonnell Douglas in the late 1990s signaled a critical turning point, leading to the gradual erosion of Boeing’s engineering-driven culture. Influenced by McDonnell Douglas’s more commercially oriented and profit-driven approach, this shift precipitated notable changes in Boeing’s priorities and practices, culminating in the 737 Max crisis and a tarnished reputation for a company once synonymous with engineering excellence. (...) the merger introduced a starkly contrasting business philosophy (...) The current challenges Boeing faces trace back to the cultural and philosophical changes post-merger with McDonnell Douglas.

In his opinion piece published by The New York Times, Bill Saporito, an aviation journalist wrote:

We often use the word “iconic” to describe companies such as Xerox, U.S. Steel and General Electric when we really mean “no longer great.” And Boeing no longer is.

Back into the spotlight

The January 5th, 2024, Alaska Airlines mid-air emergency caused by the blowing out of an emergency door panel at 16,000 feet on a Boeing 737 MAX 9 aircraft causing an uncontrolled decompression of the aircraft necessitating an emergency landing in Portland, Oregon has brought Boeing back into the spotlight.

It highlights ongoing safety concerns with the Boeing 737 Max series and the challenges facing Boeing in ensuring the safety and reliability of its aircraft. A comprehensive description of the events is available here .

The incident has caused a reputation crisis for Boeing and the company's chief Dave Calhoun’s leadership is now under scrutiny, writes the FT . The former GE executive is under tremendous pressure from customers, pilots, regulators, and politicians over safety concerns. But in my view, it would be a mistake to simply "frame" it as a "reputation" crisis.

In a fairly extraordinary development for the aviation industry, the incident has led stakeholders to publically vent their frustrations with the plane maker. According to a Jan 24th FT article Inspections carried out by airlines revealed quality problems with the aircraft. Ben Menicucci, chief executive of Alaska Airlines stated ?his airline had found “some loose bolts on many” Max 9s during inspections of the planes. He told NBC News he had held “very tough, candid conversations” with Boeing’s senior leadership. “I’m angry. I’m angry. I’m more than frustrated and disappointed. I am angry,” he said.

United Airlines had to ground its fleet of 79 Boeing 737 Max 9 aircraft following this incident. The financial impact of these groundings and uncertainties around future Boeing aircraft deliveries has led United to consider reducing its orders and exploring alternatives for its fleet expansion. American Airlines chief executive Robert Isom urged unnamed Boeing people to “get their act together” as he threatened to “hold them accountable”.? In a humiliating move, ?Ryanair has doubled the number of its engineers overseeing Boeing’s production lines following the manufacturing problems that have plagued the US plane maker? , wrote the FT.

Lessors also made their voices heard: Boeing cannot “afford another slip-up” with its 737 Max family of aircraft and must set aside financial targets to focus solely on quality and safety, the head of one of the world’s largest aircraft owners has warned, wrote the FT on January 18th .?“Given what has happened with the two fatal crashes and this incident, the financial targets have to take a back seat for Boeing and its supply chain,” said Aengus Kelly, chief executive of the world’s biggest aircraft leasing company AerCap.

The grounding of the Max 9 aircraft has led not only to increased scrutiny of Boeing's production processes and quality control but also to the FAA not allowing Boeing to expand 737 MAX production in the wake of the mid-air emergency on the Alaska Airlines jet.

The bucket stops with Boeing

After initial confusion about who was responsible for the panel's failure, Boeing or its fuselage subcontractor Spirit AeroSystems, the Seattle Times reported that ?The fuselage panel that blew off an Alaska Airlines jet earlier this month was removed for repair then reinstalled improperly by Boeing mechanics on the Renton final assembly line, a person familiar with the details of the work told The Seattle Times. If verified by the National Transportation Safety Board investigation, this would leave Boeing primarily at fault for the accident, rather than its supplier Spirit AeroSystems, which originally installed the panel into the 737 MAX 9 fuselage in Wichita, Kansas?.

According to the Seattle Times, ?an anonymous whistleblower who appears to have access to Boeing’s manufacturing records of the work done assembling the specific Alaska Airlines jet that suffered the blowout — on an aviation website separately provided many additional details about how the door plug came to be removed and then mis-installed?.

Leadership under scrutiny

?Apologies by Calhoun and Stan Deal, Boeing’s head of commercial airplanes, appear to have carried weight with some of the company’s constituents,? writes the FT . Although Calhoun has been credited with a great level of "transparency" compared to his predecessor Dennis Muilenburg ousted for his weak response to the 737MAX 8 crises, leadership changes at Boeing are being called for.

Ron Epstein, industry analyst at Bank of America, quoted by the FT said the Max 9 issues would “only put further pressure on Boeing management”. “We would not be surprised to see regulators, investors and customers push for a turnover in the ranks of senior management and the board of directors”.

In their FT article, Sylvia Pfeifer , Philip Georgiadis and Steff Chávez write:

Calhoun has overseen the Max’s return to service after the two crashes, refreshed its top management team and created a board-level aerospace safety committee. And in a timely boost for Boeing, the plane maker last week delivered its first new Max to a Chinese airline since the grounding of the fleet in 2019. Yet problems on the production lines and quality control issues have persisted, exacerbated by labour shortages coming out of the pandemic. The mis-steps are evidence that Calhoun’s promises to strengthen Boeing’s engineering culture and push through fundamental corporate change have so far not delivered, critics said.

Unresolved crises, like zombies, return with a vengeance

At first sight, it may seem that Boeing is facing today a new crisis, a "reputation" one. But this - in my view - is not an accurate assessment.

The reality is that Boeing is facing the consequences of an unresolved crisis - the MAX 8 crisis - and is now facing a creeping crisis in an even more complex environment. It's what I call the "return with a vengeance" setting.

(ChatGPT) ?In a business context, a creeping crisis refers to a slowly developing situation that can eventually pose a significant threat to the company's reputation, financial health, or operational stability. Such crises often go unnoticed or are inadequately addressed until they reach a critical stage. Examples include:

1. Technological Obsolescence: A company may fail to keep up with technological advancements, gradually losing its competitive edge. This kind of crisis can creep up as the market evolves and consumer preferences shift.

2. Cultural or Ethical Issues: Problems like toxic workplace culture, unethical practices, or lack of diversity can build up over time, leading to employee dissatisfaction, reputational damage, or legal challenges.

3. Financial Decline: Gradual financial deterioration due to increasing debt, declining sales, or poor management decisions can lead to a financial crisis if not addressed in time.

4. Supply Chain Vulnerabilities: Over-reliance on specific suppliers or regions without adequate risk assessment and mitigation strategies can lead to a crisis if disruptions occur.

5. Regulatory Compliance: Failing to keep up with changing regulations can result in legal troubles and fines, damaging the company’s reputation and financial stability.

6. Customer Satisfaction and Loyalty: Slow erosion of customer satisfaction due to declining product quality, poor customer service, or failure to innovate can lead to a loss of market share.

Recognizing and addressing these creeping crises require proactive monitoring, regular reassessment of internal and external environments, and a willingness to adapt strategies and operations. Companies must have effective risk management processes and a culture that encourages vigilance and responsiveness to gradual changes and emerging threats.?

Boeing's complex creeping crisis

Aircraft manufacturing requires decades of design, planning, and prototyping. The market for aircraft above 100 seats is a duopoly between Boeing and Airbus. Airlines don't have a lot of choice in terms of where they can source aircraft. Still, Boeing is facing an existential threat. As Saporito reminds us in his NYT opinion piece: ?Hughes Aircraft, Douglas Aircraft, Northrop, North American, Lockheed? all once American aerospace icons have, for one reason or another, disappeared.

Not only is Boeing challenged by many of the factors previously outlined (almost all of them) but from a commercial standpoint it has a limited range of aircraft on offer to the market and it has lost significant market share to its competitor Airbus in the profitable single-aisle category (Airbus now holds a market share of 62 percent in the narrow-body segment). It has also failed to present a vision for decarbonization and the future of the industry.

According to Bruce McClelland, senior contributing analyst at aerospace consultancy Teal Group quoted by the FT on January 26th ,

"Boeing has a lot of risks out there. Their balance sheet’s a bit heavy in debt,” noting that while a US government bailout may be remote, it is not unthinkable.

The company is saddled with almost $40 billion in debt stemming from the Covid travel slump and the earlier 737 Max safety crisis (appx $20 billion) writes The New York Times . “If you have $40 billion in debt, and a plane that’s your cash cow is grounded because the door blew off, it’s a sign that management is not investing in the future but firefighting today,” said Philip Buller, an aviation analyst at London-based Berenberg Bank adding that "the disruptions that have been affecting the Boeing Max have made it seem as a less reliable aircraft to have in your fleet”.

And because Boeing operates in an interconnected and interdependent world (as we all do), as the FT pointed out in the same January 26th article "If the plane maker continues losing market share to Airbus, there could be consequences for supply chains and airline customers". It's the domino effect of 21st-century crises.

An ironic part of Boeing’s focus on profits is that it has resulted in a company that is?in the worst financial shape in its more than 100-year history, with five years of deep losses already,?and more expected losses ahead.

CNN, 31st January 2024

So Boeing is facing a confidence issue among customers and the industry at large. But that is not all. In an interesting article published today (31st Jan) by CNN, Chris Isidore recaps the situation and also explores workforce issues, mostly stemming from the pandemic: plant closing decisions and layoffs. According to Epstein, Bank of America, quoted in the article:

Although Boeing says it values its worldwide staff, it made deep staff cuts during the economic downturn caused by the pandemic, offering buyouts to more senior workers. The loss of expertise has proven devastating. A key variable is your workforce, you want it to be as experienced as possible. When it’s all said and done, how much do you really save closing the unionized plant?”

Boeing may also be facing governance issues. In this long creeping crisis the Board does not seem to have taken any significant initiative.

Last but not least, from a commercial point of view, it would be a mistake to ignore the long-term threat from China:

Beijing has made no secret of its ambition to take a chunk of the global commercial aviation market and has pumped an estimated $72bn in state-related support to help develop Comac’s single-aisle C919 passenger jet.

Financial Times, January 26th, 2024.

Is organizational transformation a prerequisite for crisis recovery?

That’s the Boeing of today and the last five years. But it wasn’t always that way. It wasn’t that long ago that Boeing’s reputation was that of a staid industrial giant, known for building the safest, most advanced planes in the sky. It helped introduce the world to commercial jet travel. So how in the world did the company whose brand was once synonymous with safety become mired in reputational disaster – to the point where at least one travel site has a feature that allows passengers to avoid Boeing 737 Max planes altogether.

To answer the questions we must not only recognize the nature of Boeing's crisis but also address the issue of organizational transformation in the context of the recovery phase.

Organizational transformation is in my view a fundamental prerequisite for successful recovery from complex, creeping crises. Insufficient time has been spent exploring this aspect of the crisis management cycle.

Here are several points that ChatGPT presents to support my argument:

1. Adaptation to Evolving Challenges: Creeping crises, by their nature, evolve over time and can present new and unforeseen challenges. Organizations that are rigid in their structure and approach may struggle to adapt effectively. Transformation allows for more flexibility and adaptability, enabling an organization to respond to changes in the crisis landscape.
2. Systemic Change for Systemic Problems: Many creeping crises are systemic, arising from deep-rooted issues within the organization or society. Addressing these effectively often requires systemic change, which organizational transformation can facilitate.
3. Learning and Innovation: The process of transformation can foster a culture of learning and innovation, which is crucial in dealing with complex crises. Organizations that continually learn and innovate are better positioned to find effective solutions to the multifaceted problems presented by creeping crises.
4. Collaboration and Networking: Organizational transformation often involves a shift towards greater collaboration and networking, both internally and with external partners. This can be particularly beneficial in the context of creeping crises, where multi-stakeholder engagement is often necessary for effective management and recovery.
5. Resilience Building: Transformation can help build resilience, not just to respond to the current crisis, but also to better prepare for future crises. This is particularly relevant in the context of creeping crises, where the impacts are long-term and can have cumulative effects.
6. Leadership and Vision: Successfully managing a creeping crisis often requires visionary leadership and a willingness to challenge the status quo. Organizational transformation can be a manifestation of this kind of leadership, signaling a commitment to addressing the crisis in a holistic and forward-thinking manner.
7. Resource Reallocation: Creeping crises may require a different allocation of resources – whether it's human, financial, or technological. Organizational transformation can facilitate the effective reallocation of these resources to areas where they are most needed.

The AI adds:

However, it's also important to note that while organizational transformation can be a critical factor in successfully navigating creeping crises, it is not the only one. Other factors, such as external support, public policy, and the nature of the crisis itself, also play significant roles. Moreover, transformation processes are often complex, time-consuming, and resource-intensive, and may not always be feasible for every organization facing a creeping crisis.

Boeing's "changes" not sufficiently far-reaching

According to the FT , Boeing's CEO has introduced changes. During his tenure ?He promised to rebuild trust with regulators, airlines and the flying public, and to bring in greater transparency. Boeing’s engineering and safety processes would be strengthened.

There has been progress. The company created a board-level aerospace safety committee and centralized its safety reporting functions.

Top engineers among business units who previously reported to executives leading those divisions began reporting to the company’s chief engineer, who reported directly to the chief executive. Boeing created a product and services safety group, also reporting to the chief engineer.?

Last year Boeing appointed Howard McKenzie as chief engineer to succeed Greg Hyslop, who retired, taking the role of adviser to the chief executive.

In January 2021 it named Mike Delaney, a vice-president overseeing the digital transformation of Boeing’s production lines, to the newly created role of chief safety officer.

Yet production mis-steps have continued, and while not all manufacturing errors affect safety, they suggest a disconnect between top-level initiatives and the reality on the shop floor?. According to Captain Dennis Tajer, spokesperson for the pilots union for American Airlines, quoted in the same article:

They may have changed the way they’re doing things, but it ain’t working, It doesn’t matter what system you put in place. We’re measuring it on the outcome.”

So why does it appear it has not worked for Boeing?

Timeliness...

The ancient Greeks used two words to describe "time": Chronos and Kairos. These two words are key to understanding decision-making in complex crises.

One term-chronos-expresses the fundamental conception of time as measure, the quantity of duration, the length of periodicity, the age of an object or artifact, and the rate of acceleration as applied to the movements of identifiable bodies, whether on the surface of the earth or in the firmament beyond. The questions relevant to this conception of time are: 'How fast?', 'How frequent?', 'How old?' and the answers to these questions can be given, in principle at least, in cardinal numbers or in terms of limits that approach these numbers. The other term-Kairos-points to a qualitative character of time, to the special position an event or action occupies in a series, to a season when something appropriately happens that can not happen at 'any* time, but only at 'that time', to a time that marks an opportunity which may not recur. The question especially relevant to Kairos time is 'when?', 'At what time?'. Kairos, or the 'right time', as the term is often translated, involves ordinality or the conception of a special temporal position, such that what happens or can happen at 'that time' and its significance are wholly dependent on an ordinal place in the sequences and intersections of events. Kairos is, therefore, peculiarly relevant to historical action and to historical enquiry because it points to the significance and purpose of events and to the idea of constellations of events yielding results which would not have been possible at other times and under other circumstances.

Time, Times, and the 'Right Time'; "Chronos" and "Kairos", John E. Smith, 1967 .

So crisis management is not about making decisions over a timeline. That is emergency management. Crisis management is about making the right decision, or the least worst one, at the "right" time. Correct decisions taken at the wrong or inappropriate times, are either ineffective or counterproductive.

This of course is all simpler said than done.

... and decisiveness.

But crisis management is also about being decisive and resolute in the actions you undertake.

It may very well be that Dave Calhoun, Boeing's CEO, has met great resistance in trying to overhaul Boeing's "Wall Street" culture inherited from the merger with McDonnell Douglas. He may not have been able to move as fast as he had wished due to internal resistance. It must also be noted that responsibilities for managing this creeping crisis also fall on the shoulders of previous CEOs and Board Members going back two decades who instilled a profit-driven culture replacing the engineering culture that had made Boeing an icon beyond the aviation industry.

A range of decisions spanning more than two decades have contributed to the crisis as we now see it. Drastic actions should have been taken in the aftermath of the 737MAX 8 crisis. However, the leadership at the time seemed unwilling to recognize the nature of the problem.

Unless Dave Calhoun accelerates on the "transformation" of Boeing it is unlikely the company he leads will be able to successfully emerge from this crisis.

Timeliness and decisiveness are two key aspects of crisis management. Something to remember when managing complex crises.

Like zombies, unresolved crises return with a vengeance.

What are your thoughts?

Conflict of interest disclosure: in the interest of full transparency, I am disclosing to my readers my 25-year-long relationship with Airbus for whom I manage as an external consultant media relations in Italy. The intent of this article is solely to foster an understanding of crisis management dynamics and practices by looking at a real-world example. Because the best way to practice crisis management is to look at other companies' crises and learn from them.

Where indicated ChatGPT contributed to this article.