Faulty corporate culture can collapse a reputable brand
BY RICHARD MILLER
A strong corporate culture develops through correctly channelled leadership. However, it should be noted that corporate culture is not a one-size-fits-all situation. Internal governance in conjunction with strong leadership are instrumental in creating a valuable organisational brand. But this too can change in a dramatically short time as seen in the recent drastic loss by the aircraft manufacturer, Boeing. All over the world, humans tend to quickly adapt to newer technologies, and aerospace is one area that people rarely give a second thought to when considering whether to travel or not. However, when tragedy hits, consciousness rises to high levels and that can be prohibitively costly as customers become acutely aware of faults and poor leadership decisions.
As someone who flew into Jomo Kenyatta International Airport (JKIA) on the morning of March 10 from Dubai, I was personally rattled to hear the news of the Ethiopian Air tragedy. After all, like most people there was little reason to doubt the airline – one of the safest, and one that had a reputation for using the newest airplanes. The airplanes that were being employed and built by the company defined the jet-age. The brand was used as an adjective in advertising with the “Boeing 747”, and “Boeing 707” clearly delineating the brand from others and an industry standard bearer.
What happened to this company? It is not always clear where and when the problems began, but based on problems that Boeing is currently facing, there were obviously serious defects within the company. According to various news reports, cover-ups and a lack of transparency in the manufacturing processes are now coming to light. Usually this indicates that top management – from the boardroom down – is either complacent or are incompetent; either way it is the leadership that is accountable.
The most successful investor, ever, Warren Buffett once stated that “Trust is like air, no one notices when it is there. But everyone notices once it is gone.” Reports are surfacing of compromising quality over productivity in one of Boeing’s plants, (specifically, the one in South Carolina) in order to make up for missed order deadlines and budgets. This usually results from a dangerous mix of unrealistic order commitments, leading to rushed production in airplanes ranging from the 787 Dreamliner to the 737 Max. This is a big misstep for an industry that relies on trust that quality is maintained.
In recent history, the aerospace manufacturer had risen from seemingly impossible situations to the very pinnacle of the industry. This took place in the decade following the terrorist attacks on 9/11 in New York when the very Boeing products were hijacked before being driven into buildings. In the aftermath of that tragedy there were doubts that the company would ever recover. Yet, according to a Forbes article, under the singular leadership of Alan Mulally, who relied on what was called: articulating “a clear and compelling vision for the company, develop a comprehensive strategy to deliver on that vision, and execute on that through a relentless implementation process led by a team of talented people working together” the company not only recovered from the terrorist attacks but built its business to become larger than ever before.
In 2006 he was replaced by Jim McNerney, Jr, whom investors loved because Wall Street was familiar enough with his profit-making talents, at companies such as 3M, General Electric (GE) and Procter & Gamble (P&G). It appears, though, that it was his management who was blamed for dismantling his predecessors work and the company headed down the avenue of what the New York Times referred to as “aggressively prioritising profits”.
Productivity over quality
At first profits grew as the newer CEO saved costs by cutting pensions while transferring manufacturing into places where less skilled workers were paid much less. Additionally, the corporate structure was also set up to outsource much design of the production onto suppliers – so a collection of different parts assembled under the brand name of Boeing. For short-term profitability it is a business model not suited in highly complex industries such as airline manufacturing.
Cover up allegations are filling headlines in the search for answers for the tragedies, and the suspected reasons are business decisions, and corporate blaming of the accidents on pilot error have shocked many. This from the company that has the world’s largest building – The Washington Factory where they manufacture airplanes – and a multi-billion-dollar budget losses so large that it was feared it would affect the national economy. In most countries, companies are considered legal entities – with the same rights and obligations as individuals. A good reminder for corporate responsibility is the old saying “it takes a lifetime to build a reputation, but a split second to destroy it” and due to global interconnectivity with instant communications, that statement is truer today than ever before.
Air travel continues to grow annually, and with that growth comes competition. The latest Boeing tragedies come on the heels of renewed competition from a Japanese air manufacturer, which announced the first airliner to be built. In addition, there are the Chinese makers that have been prolific in growing the industry, potentially handing the next generation of competition a major windfall that could cut years of catching up off. For Boeing to survive, and eventually show profits, changes in corporate culture and leadership will need to take place. But that is cold comfort to those impacted by the tragedy of March 10th.
Richard Miller is a professor at the Department of English at Osaka Jogakuin University in Osaka Japan. He also works for Management University of Africa. Email: firstname.lastname@example.org