Weekend Reading: Boeing's Culture Crisis
By: Stephen J. Scott , Founder & CEO of Starling
This piece first appeared in Starling Insights' newsletter on January 26th, 2024. If you are interested in receiving our thrice weekly newsletter, sign up here.
This week, the US Federal Aviation Administration?blocked Boeing from expanding production of its 737 Max 9 aircraft. This comes on the heels of multiple accidents and findings of unsafe equipment, only a few years after two of the company's 737 Max 8 aircraft fell from the skies killing all aboard. Critics have pointed to Boeing's culture as the prime suspect in this history of failures.
"The American flying public and Boeing line workers deserve a culture of leadership at Boeing that puts safety ahead of profits," barked an irate Senator Maria Cantwell, at a Congressional hearing earlier in the week at which Boeing CEO Dave Calhoun was grilled.
Okay, let's start with a quick quiz. Who was it that said this:
The basic philosophy, spirit, and desire of an organization have far more to do with its relative achievements than do technological or economic resources, organizational structure, innovation, and timing. All these things weigh heavily on success. But they are, I think, transcended by how strongly the people in the organization believe in its basic precepts and how faithfully they carry them out.
We're unsurprised when great inspirational figures like Churchill, Jobs and Lasso point to the spirit, or the culture, of an organization as that which holds the secret of its success. It's less usual when it comes from the head of a staid and stolid company like IBM. And perhaps it seems even a bit quaint and old-fashioned; a distant echo from the era of black and white TVs.
But, thirty years later, renowned leadership scholar John Kotter pointed to Watson's speech early into his 1992 classic, Corporate Culture & Performance, written with fellow Harvard Business School professor James Heskett. They were among the first recognized academics to make culture a topic of serious inquiry and rigorous study, or to argue that it has demonstrable bottom-line impact. Indeed, they found:
"Culture represents an interdependent set of values and ways of behaving that are common in a community and that tend to perpetuate themselves over long periods of time," Kotter and Heskett explained. "This continuity is the product of a variety of social forces that are frequently subtle, bordering on invisible, through which people learn a group's norms and values, are rewarded when they accept them, and are ostracized when they do not."?
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They also observed that firms are unlikely to sport a mono-culture, but that they instead are likely to host many subcultures that typify the working mindsets and habits of different workgroups and business units. Kotter and Heskett also identified three components that typified unhealthy cultures: managers tended to be arrogant; they tended not to truly value customers, employees, or shareholders, in spite of any public posturing to the contrary; and, because they prized order, control and stasis to dynamic change, they clung to outmoded practices.
The scholars also examined firms that performed especially well. "The single most visible factor that distinguishes major cultural changes that succeed from those that fail is competent leadership," Kotter and Heskett wrote, calling attention to a particularly interesting pattern found among the successful leaders they had studied: a majority had come to their role from experience gained in other industries.?
That is, they brought an "outsider" perspective to their leadership role. And not only did this mean that they brought new ideas along with them, it also meant that they were open to new ideas percolating within their new firms which had previously been denied C-Suite airtime. With new ideas came experimentation, and a challenge to the prevailing wisdom and accepted 'truths' that had previously been sacrosanct. In short, these leaders brought culture change, and this drove changed performance.
The ban that the FAA has imposed on Boeing's ability to produce more aircraft is akin to the "asset cap" that banking sector regulators in the US imposed on Wells Fargo in the wake of its false accounts scandal. In both instances, regulators are essentially saying, "We don't want you getting any bigger until you can show me that you've got the cultural drivers behind these issues effectively managed. Eat what's on your plate."?
Leaders at both firms would do well to pick up a copy of Kotter and Heskett's book. And, of course, they can always look to Starling Insights for guidance from a community of peers who are working towards new best practices regarding precisely these challenges. ? Join Starling Insights
From Starling's 2023 Compendium Bookshelf
“Culture represents an interdependent set of values and ways of behaving that are common in a community and that tend to perpetuate themselves, sometimes over long periods of time. This continuity is the product of a variety of social forces that are frequently subtle, bordering on invisible, through which people learn a group’s norms and values, and are rewarded when they accept them, and are ostracized when they do not.”
John Kotter has been invited to contribute to the 2024 Compendium.