Taxpayers around Washington state are trying to understand Boeing’s recent announcement of layoffs, just months after the Legislature met in special session to grant $8.7 billion in tax preferences — the largest such deal in American history.
Our relationship with Boeing has definitely changed.
For decades, Boeing products excelled in the marketplace. The company prospered and the community shared in those gains.
Boeing had developed an extraordinary engineering problem-solving culture, based on communication, coordination, early awareness of problems, and technical judgment to get back on track. Boeing balanced interests among major stakeholders — suppliers, customers, employees, communities, government and shareholders.
The old “stakeholder” concept assumed strong common interest and reciprocity. We worked together and shared in the gains.
At a supplier conference in Lynnwood, a Bombardier supply chain management executive expressed the old values. She told a roomful of suppliers that Bombardier couldn’t succeed unless they all succeeded. Bombardier wanted successful long-term relationships. They would approach problems together and find common solutions.
A Boeing executive told the same group that suppliers’ only priority was to make him happy. They may have contracts with Boeing, but don’t take those too seriously, since he could modify the terms to suit his convenience. His manner and tone were arrogant and dismissive.
The old stakeholder concept has changed. Now, it’s one super-stakeholder, and an array of sub-stakeholders. The super-stakeholder dominates the relationship and repeatedly extracts gains from the other stakeholders.
We see this in Wal-Mart, which has dominant negotiating power over suppliers, communities and workers. Wal-Mart can dictate to Proctor & Gamble details about toothpaste, down to the source of cardboard for the box, and whether to buy mint from Thailand or from ranchers in Montana.
Boeing has refined this business model for high-end manufacturing. Executives contrive moments of maximum leverage over stakeholders, to extract gains. They extract productivity gains from suppliers, then take tax incentives from state and local governments, then demand concessions from workers.
In this business model, leverage is enhanced when stakeholders feel isolated, at risk, contingent, and precarious. The weaker the stakeholder feels, the easier it is to extract gains. Boeing’s recent engineering layoff announcements serve exactly that purpose, by shattering the integrated design and manufacturing community and making workers feel dependent and vulnerable.
This stands in sharp contrast to the old engineering problem-solving culture, where employees were (arguably) the company’s most important assets.
Today’s Boeing executives exercise dominant power to extract gains. That is their unique contribution to the success of the enterprise. Executives will maximize leverage, even at great risk to schedule, cost, and performance of their products.
Their business model depends on compliance, leverage and concessions. The super-stakeholder can’t let any stakeholder say, “No!” Suppliers are disciplined with banishment to a “no-fly list,” frozen out of future work.
Unionized workers have exceptional leverage and the opportunity to say “no” when negotiating a new contract. What super-stakeholder wouldn’t hate that?
Engineers aren’t big haters. More likely, they ask, “What works?
Aerospace products are complex and heavily engineered. Thousands of problems arise over the course of a program. The problem-solving culture produced the best learning curve in the industry on the 777 program. That culture works.
In the Wal-Mart super-stakeholder model, employees see each other as rivals and potential threats. Communication fades, decision-making loses technical judgment, and sub-optimization increases. That culture has dim long-term prospects.
We’re not sharing gains. We can’t count on the long run. In the 2013 special session, we worried too much about Boeing’s interests and not enough about the public’s interest. Boeing takes care of itself. We need to be just as determined to take care of ourselves.